-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, MSJpj/h4Q6VdtU2ac2y4bGQpMMHsMDL+9DmwkxQDzljPMUvdSy9rVQgRkMLgDQPF BsOkmFG/v9RDp2wft9qtYw== 0000891618-94-000125.txt : 19940526 0000891618-94-000125.hdr.sgml : 19940526 ACCESSION NUMBER: 0000891618-94-000125 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 19940525 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ASK GROUP INC CENTRAL INDEX KEY: 0000354797 STANDARD INDUSTRIAL CLASSIFICATION: 7373 IRS NUMBER: 942250034 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: 1934 Act SEC FILE NUMBER: 005-34725 FILM NUMBER: 94530333 BUSINESS ADDRESS: STREET 1: 2880 SCOTT BLVD. CITY: SANTA CLARA STATE: CA ZIP: 95052-8013 BUSINESS PHONE: 408-562-8800 MAIL ADDRESS: STREET 1: P.O. BOX 58013 CITY: SANTA CLARA STATE: CA ZIP: 95052 FORMER COMPANY: FORMER CONFORMED NAME: ASK COMPUTER SYSTEMS INC DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ASK GROUP INC CENTRAL INDEX KEY: 0000354797 STANDARD INDUSTRIAL CLASSIFICATION: 7373 IRS NUMBER: 942250034 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 2880 SCOTT BLVD. CITY: SANTA CLARA STATE: CA ZIP: 95052-8013 BUSINESS PHONE: 408-562-8800 MAIL ADDRESS: STREET 1: P.O. BOX 58013 CITY: SANTA CLARA STATE: CA ZIP: 95052 FORMER COMPANY: FORMER CONFORMED NAME: ASK COMPUTER SYSTEMS INC DATE OF NAME CHANGE: 19920703 SC 14D9 1 SC 14D9 1 [Letterhead of The ASK Group, Inc.] May 25, 1994 Dear Stockholder: As you may be aware, on May 18, 1994, ASK entered into a merger agreement with Computer Associates International, Inc. ("CA") and its wholly owned subsidiary, Speedbird Merge, Inc. ("Speedbird"), pursuant to which CA agreed to commence as promptly as practicable a tender offer for ASK common stock for a cash price of $13.25 per share. The agreement provides that, following completion of the offer, CA will cause Speedbird to merge into ASK and any ASK shares that are not acquired through the tender offer will be converted in the merger into the right to receive the same consideration as is paid in the tender offer. YOUR BOARD HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS. THE BOARD RECOMMENDS THAT YOU ACCEPT THE OFFER AND TENDER YOUR SHARES PURSUANT TO THE OFFER. In arriving at its recommendation, the Board gave careful consideration to a number of factors as described in the enclosed Schedule 14D-9, including the opinion of Bear, Stearns & Co. Inc., ASK's financial advisor, that the consideration to be received pursuant to the merger agreement is fair to ASK's stockholders from a financial point of view. We urge you to read the enclosed Schedule 14D-9 and the related CA tender offer materials carefully. On behalf of ASK's Board of Directors, I thank you for the support you have given to the Company over the years. Sincerely, Paul C. Ely, Jr. Chairman 2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 THE ASK GROUP, INC. (NAME OF SUBJECT COMPANY) THE ASK GROUP, INC. (NAME OF PERSON(S) FILING STATEMENT) COMMON STOCK, $.01 PAR VALUE (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) (TITLE OF CLASS OF SECURITIES) 001903103 (CUSIP NUMBER OF CLASS OF SECURITIES) PAUL C. ELY, JR. CHAIRMAN OF THE BOARD THE ASK GROUP, INC. 2880 SCOTT BLVD. SANTA CLARA, CALIFORNIA 95052 (408) 562-8800 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT) COPY TO: LARRY W. SONSINI, ESQ. DOUGLAS H. COLLOM, ESQ. JOHN A. FORE, ESQ. WILSON, SONSINI, GOODRICH & ROSATI 650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94304-1050 (415) 493-9300 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 3 ITEM 1. SECURITY AND SUBJECT COMPANY The name of the subject company is The ASK Group, Inc., a Delaware corporation (the "Company"), and the address of the principal executive offices of the Company is 2880 Scott Boulevard, Santa Clara, California 95052-8013. The title and the class of equity securities to which this statement relates is the Common Stock, $0.01 par value per share (the "Shares"), including associated Common Stock Purchase Rights (the "Rights") issued pursuant to the Common Shares Rights Agreement, dated as of August 15, 1990, as amended (the "Rights Agreement"), between the Company and The First National Bank of Boston, as Rights Agent. Unless the context indicates otherwise, all references herein to the Shares shall include the associated Rights. ITEM 2. TENDER OFFER OF THE BIDDER This statement relates to the tender offer (the "Offer") disclosed in a Tender Offer Statement on Schedule 14D-1, dated May 25, 1994 (the "Schedule 14D-1"), of Speedbird Merge, Inc. ("Merger Subsidiary"), a Delaware corporation and wholly owned subsidiary of Computer Associates International, Inc., a Delaware corporation (the "Buyer"), to purchase all of the outstanding Shares at a price of $13.25 per Share, net to the Seller in cash without interest, subject to certain conditions set forth therein. The Offer is being made by Merger Subsidiary pursuant to the Agreement and Plan of Merger, dated as of May 18, 1994 (the "Merger Agreement"), among the Company, the Buyer and Merger Subsidiary, a copy of which is filed as Exhibit 1 to this statement and is incorporated herein by reference. Subject to certain terms and conditions of the Merger Agreement, the merger (the "Merger") of Merger Subsidiary and the Company is expected to be consummated as soon as practicable after the expiration of the Offer. The Schedule 14D-1 states that the address of the principal executive offices of the Buyer and Merger Subsidiary is 1 Computer Associates Plaza, Islandia, New York 11788. A copy of the press release issued by the Company and Buyer on May 19, 1994 is filed as Exhibit 2 to this statement and is incorporated herein by reference. ITEM 3. IDENTITY AND BACKGROUND (a) The name and business address of the Company, which is the entity filing this statement, are set forth in Item 1 above. (b) Certain contracts, agreements, arrangements and understandings between the Company and certain of its directors, executive officers and affiliates are described in the Company's Information Statement attached hereto as Annex A which is incorporated herein by reference. Certain contracts, agreements, arrangements and understandings between the Company and certain of its directors, executive officers and affiliates are described on pages 2-13 in sections entitled "Security Ownership of Principal Stockholders, Directors and Executive Officers", "Employee Benefit Plans", "Director Compensation", "Executive Compensation" and "Management Transactions" of the Company's Proxy Statement dated October 22, 1993 for the Annual Meeting of Stockholders held on November 22, 1993, copies of which pages are filed as Exhibit 3 to this statement and are incorporated by reference herein. Certain contracts, agreements, arrangements and understandings relating to the Company's directors, executive officers and affiliates are contained in the Merger Agreement, and certain other agreements affected thereby or to be entered into in connection therewith, are described below under "Merger Agreement," "Stockholder Option Agreement" and "Additional Agreements, Arrangements and Understandings". MERGER AGREEMENT The following summary of the Merger Agreement is qualified in its entirety by reference to the complete text of the Merger Agreement, which is attached hereto as Exhibit 1 and incorporated herein by reference. The Offer is being made pursuant to the Merger Agreement. Pursuant to the Merger Agreement, Buyer has agreed to cause Merger Subsidiary to accept Shares validly tendered pursuant to the Offer as soon as legally permitted and to pay for all such Shares as promptly as practicable thereafter, following the satisfaction or waiver of the conditions to the Offer (which conditions are described below); provided, that Buyer may 4 extend the Offer for a period of time of not more than 15 business days to meet the objective (but not the condition) that there shall be validly tendered, prior to the expiration date of the Offer (as so extended) and not withdrawn a number of Shares, which, together with the Shares then owned by Buyer and Merger Subsidiary, represents at least 90% of the Shares on a fully diluted basis (as defined below). The Merger Agreement provides that the obligation of Merger Subsidiary to purchase Shares tendered pursuant to the Offer shall be subject to there being tendered and not withdrawn a number of Shares such that upon consummation of the Offer, Buyer and Merger Subsidiary would beneficially own, in the aggregate, a majority of the number of outstanding Shares on a fully diluted basis (the "Minimum Condition") and to the other conditions set forth in the Offer. Buyer and Merger Subsidiary expressly reserve the right to waive any of the conditions to the Offer (other than the Minimum Condition) and to make any change in the terms of the Offer; provided, that no change may be made which changes the form of consideration to be paid for the Shares or decreases the price per Share or number of Shares sought in the Offer or which imposes additional conditions to the Offer or which materially adversely (from the holders' of the Shares point of view) changes the conditions to the Offer. For the purposes hereof, "on a fully diluted basis" means the number of outstanding Shares, assuming the exercise of all outstanding options, rights and convertible securities (if any) and the issuance of all Shares that the Company is obligated to issue. Consideration to be Paid in the Merger. The Merger Agreement provides that, following the purchase of Shares pursuant to the Offer and upon the terms (but subject to the conditions) set forth in the Merger Agreement, Merger Subsidiary will be merged with and into the Company (the "Merger"). In the Merger, each outstanding Share not held, directly or indirectly, by Buyer, Merger Subsidiary or any of their respective subsidiaries or by the Company (other than Shares as to which appraisal rights have been exercised pursuant to Section 262 of the Delaware Law ("Dissenting Shares")) will be converted into the right to receive $13.25 in cash. Each share of common stock of Merger Subsidiary issued and outstanding immediately prior to the time of the Merger will be converted into and become one share of common stock of the surviving corporation of the Merger, which will thereupon become a wholly owned subsidiary of Buyer. The Merger Agreement provides that the Merger will be consummated as soon as practicable after the satisfaction or waiver of the conditions to the Merger and shall become effective upon filing of a certificate of merger with the Secretary of State of Delaware or at such later time specified in the certificate (the "Effective Time"). Board Representation. The Merger Agreement provides that, effective upon the acceptance for payment by the Merger Subsidiary pursuant to the Offer of Shares in an amount not less than the Minimum Condition, Buyer shall be entitled to designate the number of directors, rounded up to the nearest whole number, on the Company's Board of Directors, as will make the percentage of the Company's directors designated by Buyer equal to the percentage of outstanding Shares then owned (or accepted for payment) by Buyer and Merger Subsidiary. The Company has agreed that it will take all necessary and appropriate action in accordance with applicable law and its Certificate of Incorporation and By-Laws to cause Buyer's designees to be elected or appointed to the Company's Board of Directors, including increasing the number of directors and seeking and accepting resignations of incumbent directors. Following the appointment of Buyer's designees to the Board, and prior to the Effective Time, any amendment or termination of the Merger Agreement, extension for the performance or waiver of the obligations or other acts of Buyer or Merger Subsidiary or waiver of the Company's rights under the Merger Agreement shall require the approval of a majority of the directors who are neither designees of Buyer nor employees of the Company. The Merger Agreement provides that the directors and officers of Merger Subsidiary immediately prior to the Effective Time will be the initial directors and officers of the surviving corporation, each to hold office until his or her respective successors are duly elected and qualified. As provided in the Merger Agreement, the Certificate of Incorporation of Merger Subsidiary (except for a change in the name of the corporation) and the By-Laws of Merger Subsidiary, as in effect immediately prior to the Effective Time, will be the Certificate of Incorporation and By-Laws of the surviving corporation. Stockholder Meeting. The Merger Agreement provides that, if required by applicable law, the Company will call a meeting of its stockholders to be held as promptly as practicable after the consummation of the Offer for the purpose of obtaining any stockholder approvals required in connection with the transactions contemplated by the Merger Agreement. Under the Merger Agreement, at any such meeting Buyer and 2 5 Merger Subsidiary will vote all Shares acquired or beneficially owned by them in favor of approval of the Merger Agreement and the Merger. If the Minimum Condition is satisfied pursuant to the Offer, Merger Subsidiary will hold at least a majority of the outstanding Shares on a fully diluted basis and will be able to assure that the requisite number of affirmative votes in favor of approval of the Merger Agreement will be received, even if no other stockholder votes in favor thereof. If Merger Subsidiary obtains at least 90% of the outstanding Shares, it may effect the Merger without any notice to and without the authorization of the stockholders of the Company pursuant to the "short-form" merger provisions of Delaware law. Representations and Warranties. The Merger Agreement contains various representations and warranties of the parties thereto. These include representations and warranties by the Company with respect to, among other things, corporate existence and power, corporate authorization, governmental authorization, non-contravention, capitalization, subsidiaries, Securities and Exchange Commission ("SEC") filings, financial statements, disclosure documents, absence of certain changes, material liabilities, litigation, taxes, employee benefits, compliance with laws, finders' fees, environmental matters, material contracts, intellectual property and insurance coverage. Buyer and Merger Subsidiary have also made certain representations and warranties with respect to, among other things, corporate existence and power, corporate authorization, governmental authorization, non-contravention, finders' fees and financing. Conduct of Business Pending the Merger. The Company has agreed that during the period from the date of the Merger Agreement to the Effective Time, except as otherwise provided in the Merger Agreement or consented to by Buyer (which consent shall not be unreasonably withheld), the Company and its subsidiaries will conduct their business in the ordinary course consistent with past practice and will use their best efforts to preserve intact their business organizations and maintain satisfactory relationships with third parties with whom they have business relationships. The Company has further agreed that, until the Effective Time, without prior approval of Buyer (which approval shall not be unreasonably withheld), neither the Company nor any of its subsidiaries will, among other things: (i) except as expressly contemplated by the Merger Agreement, amend or otherwise change its charter or by-laws or the Rights Agreement, (ii) enter into any material commitment or transaction (including, but not limited to, any material borrowing, capital expenditure or sale of assets), other than in the ordinary course of business, (iii) grant any increase in the compensation payable or to become payable by the Company or any of its subsidiaries to any of their officers or employees or any increase in any bonus, insurance, pension or other employee benefit plan, payment or arrangement (including, but not limited to, the granting of stock options, stock appreciation rights or restricted stock awards made to, for or with such officers or employees, (iv) enter into any employment agreement or, except in accordance with the Company's existing written policy, grant any severance or termination pay with or to any officer, director or employee of the Company or any of its subsidiaries, (v) except as expressly contemplated by the Merger Agreement, amend any of its stock option or stock purchase plans, including any options or rights thereunder, (vi) enter into any foreign currency trading transactions, other than in the ordinary course of business consistent with past practices and not, in the aggregate, in excess of $500,000, (vii) enter into any customer sale or license agreements with non-standard terms or at discounts from list prices in excess of 20%, (viii) pay commissions to sales employees except on the basis of executed customer contracts with respect to products actually delivered to customers, (ix) enter into any contracts or series of related contracts involving amounts in excess of $50,000 for any transaction or $150,000 for any series of transactions, (x) enter into any customer agreements providing for product replacements, or (xi) (A) take any action, or agree or commit to take any action that would make any representation and warranty of the Company under the Merger Agreement inaccurate in any respect at, or as of any time prior to, the Effective Time or (B) omit or agree or commit to omit to take any action necessary to prevent any such representation or warrant from being inaccurate in any respect at any such time. The Company has agreed to give Buyer and its representatives full access to the offices, properties, books and records, of the Company and its subsidiaries, and to furnish Buyer with other information concerning its business, properties and personnel as Buyer may reasonably request. 3 6 Subject to the terms and conditions of the Merger Agreement, each of Buyer, Merger Subsidiary and the Company has agreed to use its reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by the Merger Agreement. Agreements With Respect to Employee Matters. The Company has agreed to cause each of its subsidiaries to cause each officer and director of such subsidiary to deliver resignations to such subsidiary effective at the Effective Time. The Company has further agreed under the Merger Agreement to terminate its 1992 Overseas Employee Stock Purchase Plan and its 1993 Employee Stock Purchase Plan and to amend its 401(k) plan prior to the Effective Time to permit employer matching contributions thereunder to be made in cash. In the Merger Agreement, Buyer stated that it intends to terminate or discontinue contributions to the Company's 401(k) plan or merge it into Buyer's 401(k) plan, and that it intends to make its 401(k) plan available after the Effective Time to employees of the Company. Under the Merger Agreement, stock option vesting of Company employee stock options will be treated in two ways. First, with respect to all outstanding stock options granted under the Company's 1991 Stock Plan (including options issued in the Company's previously announced option repricing exchange program, but excluding options under the Company's 1991 United Kingdom Stock Option Plan), options will have their vesting automatically fully accelerated immediately upon the acceptance of Shares pursuant to the Offer. Second, with respect to all outstanding stock options granted under the Company's other option plans, options will only have their vesting accelerated if (i) Buyer directs the Company to cause such options to terminate prior to the Effective Time or (ii) Buyer designates such options as options to be assumed and cashed out upon exercise at a per Share price equal to the excess, if any, of the Merger consideration ($13.25) over the applicable option exercise price, provided that options under the 1991 United Kingdom Stock Option Plan will not in any event have their vesting accelerated. With respect to how the options will be treated by Buyer (other than as to vesting, which is described immediately above), Buyer has three choices with respect to all outstanding stock options granted under the Company's various stock option plans. First, Buyer may designate such options that it will cash out when exercised by making a per Share cash payment equal to the excess, if any, of the Merger consideration over the applicable option exercise price with respect to all Shares subject to such option (without regard to vesting). Second, Buyer may direct the Company to cause such options to terminate prior to the Effective Time in a manner consistent with the provisions of the plan under which such options were granted. Third, Buyer may assume outstanding options. Buyer has agreed, in the Merger Agreement, that all outstanding options not designated by Buyer to be cashed out by Buyer on exercise or terminated will be assumed by converting them into options to buy an amount of common stock of Buyer based on the average closing price of Buyer common stock for the five trading days preceding the Effective Time, while preserving the aggregate exercise price (except that the aggregate exercise price might increase slightly as any exercise price fraction arising from the conversion will be increased to the next whole cent). The Company and Buyer have agreed to take all actions necessary so that the stock options previously granted to Paul C. Ely, Jr., Chairman of the Board of Directors of the Company, for 75,000 Shares, to Robert H. Waterman, Jr., Vice Chairman of the Board of Directors of the Company, for 50,000 Shares, to Gary B. Filler, Executive Vice President of Operations and Chief Financial Officer of the Company, for 250,000 Shares and to Eric D. Carlson, President and Chief Executive Officer of the Company, for 250,000 Shares, will be amended by the Company's Board of Directors (and the 1991 Stock Plan amended by the Company's Board of Directors as necessary) prior to the Effective Time, to provide for their cancellation in exchange for a 1995 cash payment equal to the per Share Merger consideration minus the exercise price relating to such options. Other Offers. Pursuant to the Merger Agreement, the Company has agreed that the Company and its subsidiaries and the officers, directors, employees or other agents of the Company and its subsidiaries will not, directly or indirectly (i) take any action to solicit, initiate or encourage any Acquisition Proposal (as defined below) or (ii) subject to the fiduciary duties of the Board of Directors under applicable law upon the advice of counsel to the Company, and in response to an unsolicited request therefor by a person whom a majority of the 4 7 Company's Board of Directors believes intends to submit a Superior Acquisition Proposal (as defined below), engage in negotiations with, or disclose any nonpublic information relating to the Company or any of its subsidiaries or afford access to the properties, books or records of the Company or any of its subsidiaries to, any person that may be considering making, or has made, an Acquisition Proposal. The Company has agreed to promptly notify Buyer after receipt of any Acquisition Proposal or any indication that any Person is considering making an Acquisition Proposal or any request for nonpublic information relating to the Company or any of its subsidiaries or for access to the properties, books or records of the Company or any of its subsidiaries by any person that may be considering making, or has made, an Acquisition Proposal and has agreed to keep Buyer fully informed of the status and details of any such Acquisition Proposal, indication or request. "Acquisition Proposal" means any offer or proposal for, or any indication of interest in, a merger or other business combination involving the Company or any of its subsidiaries or the acquisition of any equity interest in, or a substantial portion of the assets of, the Company or any of its subsidiaries, other than the transactions contemplated by the Merger Agreement. "Superior Acquisition Proposal" means an Acquisition Proposal which a majority of the disinterested directors determines in its good faith judgment (based on advice of the Company's independent financial advisor) to be more favorable to the Company's stockholders than the Offer or the Merger, and for which financing, to the extent required, is then committed. Nothing in the Merger Agreement shall be deemed to prohibit the Company and its Board of Directors from (i) taking and disclosing a position with respect to a tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act") and (ii) making such disclosures to the Company's stockholders which, in the judgment of and subject to the fiduciary duties of the Board of Directors of the Company, with the advice of counsel to the Company, may be required under applicable law. Under certain circumstances, the Merger Agreement may be terminated and certain fees may be payable by the Company to Buyer if, prior to the purchase of any Shares under the Offer, the Company shall have received any Acquisition Proposal which the Board of Directors of the Company has determined is more favorable to the Company's stockholders than the transactions contemplated by the Merger Agreement. See "Termination" and "Fees and Expenses" below. Agreement With Respect to Director and Officer Indemnification and Insurance. Pursuant to the Merger Agreement, Buyer has agreed, subject to any limitation imposed under applicable law, that all rights to indemnification now existing in favor of the directors and officers of the Company as provided in the Company's Certificate of Incorporation or By-Laws in effect on the date of the Merger Agreement shall survive the Merger and shall continue in effect for a period of six years from the consummation of the Merger. Buyer has further agreed that it will cause the surviving corporation to use its reasonable efforts to maintain in effect for three years after the Effective Time, officers' and directors' liability insurance covering those persons currently covered by the Company's officers' and directors' liability insurance policy on terms with respect to coverage and amount no less favorable than those policies in effect at May 18, 1994 with respect to acts or omissions occurring before the Effective Time, except that the surviving corporation will not be required to pay premiums for any year an amount exceeding the Company's premium cost for its policy for the fiscal year ended June 30, 1993. The foregoing agreements with respect to director and officer indemnification and insurance inure to the benefit of those persons who were or are officers or directors of the Company prior to the Effective Time. Rights Agreement. The Company has amended the Rights Agreement to make it and the Rights thereunder inapplicable to the Offer, the Merger and the Stockholder Option Agreement (as defined below). A copy of the amendment to the Rights Plan is filed as Exhibit 4 to this statement and is incorporated herein by reference. See Item 8 of this statement. The Rights will expire upon consummation of the Merger. Other Agreements. Buyer has agreed that it will take all action necessary to cause Merger Subsidiary to perform its obligations under the Merger Agreement (including providing Merger Subsidiary with sufficient funds to pay the aggregate purchase price of Shares accepted for purchase pursuant to the Offer) and to consummate the Merger on the terms and conditions set forth in the Merger Agreement. In addition, Buyer has agreed to vote all Shares beneficially owned by it in favor of adoption of the Merger Agreement after consummation of the Offer. Buyer also made certain agreements regarding confidentiality, including its 5 8 agreement to hold, and use its best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence (subject to certain exceptions), unless compelled to disclose by judicial or administrative process or by other requirements of law, certain confidential documents and information concerning the Company and its subsidiaries furnished to Buyer in connection with the transactions contemplated by the Merger Agreement. Conditions to the Merger. Pursuant to the Merger Agreement, the respective obligations of each party to consummate the Merger are subject to the satisfaction or waiver, where permissible, at or before the Effective Time of the following conditions: (i) Merger Subsidiary shall have accepted for payment and paid for Shares tendered pursuant to the Offer in an amount equal to at least the Minimum Condition, (ii) the approval of the Merger Agreement by the affirmative vote of the stockholders by requisite vote in accordance with applicable law, if such vote is required by applicable law, (iii) no provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the consummation of the Merger, (iv) the applicable waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or been terminated, and (v) all actions by or in respect of or filing with any governmental body, agency, official or authority required to consummate the Merger shall have been obtained. In addition, the obligations of Buyer and Merger Subsidiary to consummate the Merger are subject to the satisfaction of the further conditions that no court, arbitrator or governmental body, agency or official shall have issued any order, and there shall not be any statute, rule or regulation, restraining or prohibiting the consummation of the Merger or the effective operation of the business of the Company and its subsidiaries after the Effective Time, and no proceeding challenging the Merger Agreement or the transactions contemplated thereby or seeking to prohibit, alter, prevent or materially delay the Merger shall have been instituted by any person before any court, arbitrator or governmental body, agency or official and be pending. Termination. The Merger Agreement may be terminated by (i) the mutual written consent of Buyer and the Company, (ii) by either the Company or Buyer, (A) if the Merger has not been consummated by December 31, 1994, (B) if there shall be any law or regulation that makes consummation of the Merger illegal or otherwise prohibited or if any judgment injunction, order or decree enjoining Buyer or the Company from consummating the Merger is entered and such judgment, injunction, order or decree shall become final and nonappealable, (C) if the Offer expires without any Shares having been purchased promptly thereafter pursuant to the Offer (unless the party proposing to so terminate is in material breach of its representations and warranties, covenants or other obligations under the Merger Agreement) or (D) prior to the purchase of Shares pursuant to the Offer, if there has been a willful breach by the other party of any representation, warranty, covenant or agreement set forth in the Merger Agreement, (iii) by Buyer, upon the occurrence of any Trigger Event (as defined under "Fees and Expenses" below), (iv) by the Company, if Merger Subsidiary shall have failed to commence the Offer in accordance with the Merger Agreement, or (v) by the Company, prior to the purchase of any Shares pursuant to the Offer, if the Company receives an Acquisition Proposal which the Company's Board of Directors determines is more favorable to the Stockholders than the Offer and the Merger. Conditions of the Offer. Notwithstanding any other provision of the Offer, Merger Subsidiary shall not be required to accept for payment or pay for any Shares, and may terminate the Offer, if (i) by the expiration of the Offer, the Minimum Condition shall not have been satisfied, (ii) by the expiration of the Offer, the applicable waiting period (and any extension thereof) under the HSR Act shall not have expired or been terminated or (iii) at any time on or after May 18, 1994 and prior to the acceptance for payment of Shares pursuant to the Offer, any of the following conditions exist: 1. there shall be instituted or pending any action or proceeding by any government or governmental authority or agency, domestic or foreign, or by any other person, domestic or foreign, before any court or governmental authority or agency, domestic or foreign, (i) challenging or seeking to make illegal, to delay materially or otherwise directly or indirectly to restrain or prohibit the acquisition by Merger Subsidiary or any of its affiliates of Shares pursuant to the Stockholder Option Agreement (as defined below), the making of the Offer, the acceptance for payment of or payment for some of or all the Shares by Buyer or Merger Subsidiary or the consummation by Buyer or Merger Subsidiary of the Merger, seeking to obtain material damages or otherwise directly or indirectly relating to the transactions contemplated by the 6 9 Stockholder Option Agreement, the Merger Agreement, the Offer or the Merger, (ii) seeking to restrain or prohibit Buyer's or Merger Subsidiary's ownership or operation (or that of their respective subsidiaries or affiliates) of all or any material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or of Buyer and its subsidiaries, taken as a whole, or to compel Buyer or any of its subsidiaries or affiliates to dispose of or hold separate all or any material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or of Buyer and its subsidiaries, taken as a whole, (iii) seeking to impose or confirm material limitations on the ability of Buyer or any of its subsidiaries or affiliates effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares acquired or owned by Buyer or any of its subsidiaries or affiliates on all matters properly presented to the Company's stockholders, (iv) seeking to require divestiture by Buyer or any of its subsidiaries or affiliates of any Shares, or (v) that otherwise, in the judgment of Buyer, is likely to materially adversely affect the Company and its subsidiaries, taken as a whole, or Buyer and its subsidiaries, taken as a whole; or 2. there shall be any action taken, or any statute, rule, regulation, injunction, order or decree proposed, enacted, enforced, promulgated, issued or deemed applicable to the Stockholder Option Agreement, the Merger Agreement, the Offer or the Merger, by any court, government or governmental authority or agency, domestic or foreign other than the application of the waiting period provisions of the HSR Act to the Stockholder Option Agreement, the Merger Agreement, the Offer or the Merger, that, in the judgment of Buyer, is substantially likely, directly or indirectly, to result in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; or 3. any change shall have occurred or been threatened (or any development shall have occurred or been threatened involving a prospective change) in the business, assets, liabilities, financial condition, capitalization, operations, results of operations or prospects of the Company or any of its subsidiaries that, in the reasonable judgment of Buyer, is or is likely to be materially adverse to the Company and its subsidiaries, taken as a whole; or 4. a tender or exchange offer for some or all of the Shares shall have been publicly proposed to be made or shall have been made by another person, or it shall have been publicly disclosed or Buyer shall have otherwise learned that (i) any person or "group" (as defined in Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire beneficial ownership of more than 25% of any class or series of capital stock of the Company (including the Shares), through the acquisition of stock, the formation of a group or otherwise, or shall have been granted any option, right or warrant, conditional or otherwise, to acquire beneficial ownership of more than 25% of any class or series of capital stock of the Company (including the Shares) other than acquisitions for bona fide arbitrage purposes only and other than as disclosed in a Schedule 13D or 13G on file with the Commission on May 18, 1994, (ii) any such person or group which, prior to May 18, 1994, had filed such a Schedule with the Commission shall have acquired or proposed to acquire beneficial ownership of additional shares of any class or series of capital stock of the Company (including the Shares), through the acquisition of stock, the formation of a group or otherwise, which, together with such ownership as is reflected on such Schedule, shall constitute 25% or more of any such class or series, or shall have been granted any option, right or warrant, conditional or otherwise, to acquire beneficial ownership of additional shares of any class or series of capital stock of the Company (including the Shares) which, together with such ownership as is reflected on such Schedule, shall constitute 25% or more of any such class or series or (iii) any person shall have filed a Notification and Report Form under the HSR Act or made a public announcement reflecting an intent to acquire the Company or any material portion of assets of the Company or securities of the Company which, together with such ownership as is reflected on any such Schedule, shall constitute 25% or more of any such class of securities; or 5. the Company shall have breached or failed to perform in any material respect any of its material covenants or agreements under this Agreement, or any of the material representations and warranties of the Company set forth in this Agreement shall not be true in any material respect when made or at any time prior to consummation of the Offer as if made at and as of such time; or 7 10 6. any party to the Stockholder Option Agreement other than Merger Subsidiary or Buyer shall have breached or failed to perform in any material respect any of its agreements under the Stockholder Option Agreement or any of the representations and warranties of any such party set forth in the Stockholder Option Agreement shall not be true in any material respect, in each case, when made or at any time prior to the consummation of the Offer as if made at and as of such time, or the Stockholder Option Agreement shall have been invalidated or terminated with respect to any Shares subject thereto; or 7. the Merger Agreement or the Stockholder Option Agreement shall have been terminated in accordance with its terms; or 8. the Board of Directors of the Company shall have withdrawn or materially modified in a manner adverse to Buyer or the Merger Subsidiary its approval or recommendation of the Offer, the Merger or the Merger Agreement or its approval of the entry by Buyer into the Stockholder Option Agreement; or 9. the Company shall have entered into, or shall have publicly announced its intention to enter into, an agreement or agreement in principle with respect to any Acquisition Proposal; which, in the sole judgment of Buyer in any such case, and regardless of the circumstances (including any action or omission by Buyer) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. Fees and Expenses. Each party to the Merger Agreement has agreed to pay its own fees and expenses and, except as described below, there are no provisions for payment by the Company of the fees and expenses of Buyer or Merger Subsidiary or vice versa, if the Merger Agreement is terminated. The Company has agreed to pay Buyer a fee in immediately available funds equal to $12,500,000 promptly, but in no event later than two business days, after the termination of the Merger Agreement as a result of the occurrence of any of the following events (each, a "Trigger Event"): (i) the Company shall have entered into, or shall have publicly announced its intention to enter into, an agreement or an agreement in principle with respect to any Acquisition Proposal, (ii) any person or group (as defined in Section 13(d)(3) of the Exchange Act (other than Buyer of any of its affiliates) shall have become the beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act) of at least 25% of the outstanding Shares or shall have acquired, directly or indirectly, at least 25% of the assets of the Company, (iii) any person or group shall have commenced, or shall have publicly announced an intention to commence, a tender or exchange offer for at least majority of the outstanding Shares for a consideration per Share greater than the consideration per Share offered under the Offer, (iv) any representation or warranty made by the Company in, or pursuant to, the Merger Agreement shall not have been true and correct in all material respects when made and any such failures to be true and correct could reasonably be expected to have, individually or in the aggregate, a material adverse effect on the condition (financial or otherwise), business, assets, results of operations or prospects of the Company and its subsidiaries taken as a whole (except that reductions or delays in orders of products in the Company or its subsidiaries due solely to any rumors, speculation or announcement of a potential merger involving the Company or the execution of the Merger Agreement and the Merger shall be excluded for consideration for purposes of the effect of an action or inaction on the Company and its subsidiaries taken as a whole) (a "Modified Material Adverse Effect"), or the Company shall have failed to observe or perform in any material respect any of its obligations under the Merger Agreement, (v) the Board of Directors of the Company shall have withdrawn or materially modified in a manner adverse to Buyer or Merger Subsidiary its approval or recommendation of the Offer, the Merger or the Merger Agreement or its approval of the entry by Buyer into the Stockholder Option Agreement, in any such case whether or not such withdrawal or modification is required by the fiduciary duties of the Board of Directors of the Company, or (vi) prior to the purchase of any Shares under the Offer, the Company shall have received an Acquisition Proposal which the Company's Board of Directors determines is more favorable to the stockholders than the Offer and the Merger, whether or not such determination is required by the fiduciary duties of the Board of Directors of the Company. The Company also has agreed to assume and pay, or reimburse Buyer for, all reasonable fees payable and expenses incurred by Buyer (including the fees and expenses of its counsel and the fees and expenses of 8 11 institutions that are considering making or have made a commitment to provide financing for the transactions contemplated by the Merger Agreement) in connection with the Merger Agreement and the transactions contemplated thereby, in an aggregate amount not to exceed $2,500,000, whether or not the Offer or the Merger is consummated. Timing. The exact timing and details of the Merger will depend upon legal requirements and a variety of other factors, including the number of Shares acquired by Merger Subsidiary pursuant to the Offer. Although Buyer has agreed to cause the Merger to be consummated on the terms set forth above, there can be no assurance as to the timing of the Merger. Delaware Law. The Board of Directors of the Company has approved the Merger Agreement and the transactions contemplated thereby, including the Offer, the Merger and the Stockholder Option Agreement, and the entry by Merger Subsidiary into the Stockholder Option Agreement for purposes of Section 203 of the Delaware General Corporation Law. Accordingly, the restrictions of Section 203 do not apply to the transactions contemplated by the Offer or by the Stockholder Option Agreement. Section 203 of the Delaware General Corporation Law prevents an "interested stockholder" (generally, a stockholder owning 15% or more of a corporation's outstanding voting stock or an affiliate or associate thereof) from engaging in a "business combination" (defined to include a merger and certain other transactions) with a Delaware corporation for a period of three years following the date on which such stockholder became an interested stockholder unless (i) prior to such date the corporation's board of directors approved either the business combination or the transaction which resulted in such stockholder becoming an interested stockholder, (ii) upon consummation of the transaction which resulted in such stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the corporation's voting stock outstanding at the time the transaction commenced (excluding shares owned by certain employee stock plans and persons who are directors and also officers of the corporation) or (iii) on or subsequent to such date the business combination is approved by the corporation's board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock not owned by the interested stockholder. Stockholder Option Agreement The following description of the Stockholder Option Agreement (the "Stockholder Option Agreement") dated as of May 18, 1994 among Merger Subsidiary and the Stockholders named therein (each a "Principal Stockholder") is qualified in its entirety by reference to the complete text of the Stockholder Option Agreement which is filed as Exhibit 5 to this statement and is incorporated herein by reference. The Principal Stockholders, along with the Shares of each subject to the Stockholder Option Agreement as of May 17, 1994, are Electronic Data Systems Corporation ("EDS"), with 4,008,535 Shares; Hewlett-Packard Company ("HP"), with 2,004,268 Shares; Paul C. Ely, Jr., the Company's Chairman of the Board with 5,000 Shares; Eric D. Carlson, the Company's Chief Executive Officer and President, with 10,000 Shares; Robert H. Waterman, Jr., the Company's Vice Chairman of the Board, with 6,000 Shares; and Thomas I. Unterberg, a director on the Company's Board of Directors, with no Shares. In August 1990, each of EDS and HP entered into an agreement to acquire Common Stock of the Company which continues to be in effect. See "Additional Agreements, Arrangements and Understandings" below. Robert N. Sharpe, a director on the Company's Board of Directors, is a Corporate Vice President of EDS. The outstanding Shares held by the Principal Stockholders represent approximately 26% of the Company's outstanding Shares as of May 17, 1994. Under the Stockholder Option Agreement, each Principal Stockholder has granted Merger Subsidiary the option (the "Stock Option") to purchase, subject to the terms and conditions set forth in the Stockholder Option Agreement, such Principal Stockholder's Shares for a price of $13.25 per Share in cash, or to cause to be tendered pursuant to the Offer such Principal Stockholder's Shares. In addition, if the price to be paid by Merger Subsidiary pursuant to the Offer is increased, the purchase price payable upon exercise of the Stock Option shall similarly be increased. The Stockholder Option Agreement also provides that the number and kind of Shares subject to the Stock Option and the purchase price therefor shall be appropriately and equitably adjusted in the event of changes in the Company's capital stock. 9 12 Subject to the terms of the Stockholder Option Agreement, Merger Subsidiary has the right to exercise the Stock Option, in whole or in part, at any time up to 30 business days after the termination of the Merger Agreement. If Merger Subsidiary acquires any Shares pursuant to the Offer, it must purchase all of the Shares subject to the Stockholder Option Agreement. Each Principal Stockholder has also agreed, that upon receipt of instructions from Merger Subsidiary, it will deliver to the depositary designated in the Offer (the "Depositary") (i) a Letter of Transmittal with respect to such Principal Stockholder's Shares complying with the terms of the Offer together with instructions directing the Depositary to make payment for such Shares directly to the Principal Stockholder (but if such Shares are not accepted for payment and are to be returned pursuant to the Offer, to return such Shares to such Principal Stockholder whereupon they shall continue to be held by such Principal Stockholder subject to the terms and conditions of the Stockholder Option Agreement), (ii) the certificates evidencing such Principal Stockholder's Shares and (iii) all other documents or instruments required to be delivered pursuant to the terms of the Offer. Each Principal Stockholder has further agreed that it will not (without prior written notice to Merger Subsidiary) withdraw the tender effected thereby and that any withdrawn Shares shall continue to be held by such Principal Stockholder subject to the terms and conditions of the Stockholder Option Agreement. The Principal Stockholders' obligations to sell their respective Shares (other than tendering pursuant to the Offer) under the Stockholder Option Agreement are subject to satisfaction of the following conditions: (i) the representations and warranties of Merger Subsidiary set forth in the Stockholder Option Agreement shall be true and correct in all material respects on the date of sale, (ii) the applicable waiting period under the HSR Act to the exercise of the Stock Option shall have expired or been terminated, (iii) no provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit or otherwise restrain the exercise of the Stock Option, (iv) Merger Subsidiary shall have commenced the Offer, Merger Subsidiary shall not have materially breached any of its material covenants and agreements in the Merger Agreement, and the Merger Agreement shall not have been terminated, and (v)(A) a tender or exchange offer for any Shares shall have been made or publicly proposed to be made by another person (B) it shall have been publicly disclosed (or Merger Subsidiary shall have learned) that any person, entity or group (as that term is used in Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire more than 25% of the Shares, or shall have granted any option or right, conditional or otherwise, to acquire more than 25% of the Shares, other than acquisitions for bona fide arbitrage purposes, or a group shall have been formed the members of which hold in the aggregate more than 25% of the Shares, (C) any person other than Merger Subsidiary or an affiliate of Merger Subsidiary shall have entered into an agreement in principle providing for a merger, consolidation or other business combination with, or a purchase of all or substantially all the assets of, the Company or of any subsidiary or division of the Company the business of which could constitute a "significant subsidiary" as that term is used in Rule 1.02 of Regulation S-X of the SEC, (D) the Board of Directors of the Company shall have failed to make, or has revoked or modified, its unqualified recommendation in favor of the Offer and the Merger or its approval of the entry by Merger Subsidiary into the Stockholder Option Agreement, or (E) the Company shall have committed a material breach of any provision of the Merger Agreement. Each Principal Stockholder has further agreed to not, directly or indirectly, solicit, initiate or encourage any (i) inquiry, proposal or offer from any person to acquire the business property or capital stock of the Company or any subsidiary thereof, or any acquisition of a substantial equity interest in, or a substantial amount of the assets of, the Company or any subsidiary thereof, or (ii) subject to a Principal Stockholder's fiduciary duty as a director of the Company (if applicable), participate in any discussion or negotiations regarding, or furnish to any other person any information with respect to, or otherwise cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to make or seek any of the foregoing. Each Principal Stockholder has agreed to promptly advise Merger Subsidiary of the terms of any communication it may receive relating to any of the foregoing. In entering into the Stockholder Option Agreement, each Principal Stockholder granted Merger Subsidiary a proxy to vote, express consent or dissent, or otherwise to utilize such voting power, in such manner and upon such matters as Merger Subsidiary shall, in its sole discretion, deem proper with respect to 10 13 such Principal Stockholder's Shares. The proxy will be automatically revoked upon termination of the Stockholder Option Agreement. Additional Agreements, Arrangements and Understandings Indemnification of Directors and Officers. Section 145 of Delaware General Corporation Law authorizes a court to award, or a corporation's Board of Directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933. Further, in accordance with the Delaware General Corporation Law, the Company's Certificate of Incorporation eliminates the liability of a director to the Company or its stockholders for monetary damages for breaches of his or her fiduciary duty of care, provided that such liability does not arise from certain proscribed conduct (including intentional misconduct and breach of duty of loyalty). The Company's By-Laws provide for indemnification of certain officers, directors, employees and other agents to the maximum extent permitted by the Delaware General Corporation Law. In addition, the Company has entered into indemnification agreements with its officers and directors by which the Company provides such persons with the maximum indemnification allowed under applicable law. These agreements also resolve certain procedural and substantive matters which are not covered, or are covered in less detail, in the By-Laws. A copy of a form of such indemnification agreement is filed as Exhibit 6 to this statement and incorporated herein by reference. Eric D. Carlson. In July 1993, Dr. Carlson was granted an option to purchase 20,000 Shares at an exercise price of $10.75 per share, vesting over a period of four years. In February 1994, the Board of Directors of the Company promoted Dr. Carlson to the position of President and Chief Executive Officer of the Company. In connection with the promotion, the Board's Compensation Committee granted to Dr. Carlson options to purchase 250,000 Shares with an exercise price of $7.875 per Share. All of the aforementioned options were granted under the Company's 1991 Stock Plan. All stock options granted under the 1991 Stock Plan would vest in full as a result of the acceptance of Shares pursuant to the Offer. In March 1994, shortly after Dr. Carlson's promotion, the Company entered into an agreement with Dr. Carlson (the "Carlson Severance Agreement") which provided that Dr. Carlson would be entitled, following a change of control of the Company, to full acceleration of vesting with respect to any unvested stock options or restricted stock. The acceptance of Shares pursuant to the Offer will result in a "change of control" for purposes of the Carlson Severance Agreement, and thus, the stock options granted to Dr. Carlson as described above would also vest in full pursuant to the Carlson Severance Agreement as a result of the purchase of Shares pursuant to the Offer. The Carlson Severance Agreement also provides for benefits to Dr. Carlson, if, following a change of control, (i) Dr. Carlson's position is terminated, (ii) his duties and responsibilities are significantly reduced, or (iii) his employment terminates by mutual agreement. In any such event, Dr. Carlson would be eligible to receive a lump sum severance payment equal to one year's salary if the severance occurs within one year following the change of control, nine months' salary if the severance occurs during the second year following the change of control, and six months' salary if the severance occurs thereafter. Dr. Carlson would also then be entitled to receive all benefits for the extent of his severance period as well as executive outplacement counseling. Also, as a result of his promotion, pursuant to an agreement between Dr. Carlson and the Company (the "Carlson Incentive Bonus Agreement"), Dr. Carlson will be entitled to an incentive bonus of $300,000 which can be earned if certain earnings targets are achieved for calendar 1994. As a result of the Offer, such bonus may be payable to Dr. Carlson earlier during calendar 1994 if Dr. Carlson's employment terminates for any reason following the acceptance of Shares pursuant to the Offer. As an inducement for Buyer to enter into the Merger Agreement and the transactions contemplated thereunder, Dr. Carlson entered into an agreement (the "Excise Tax Agreement") with the Company to reduce benefits payable to him to a level such that the golden parachute excise tax provisions of the Internal Revenue Code would not be triggered. A copy of the Carlson Severance Agreement is filed as Exhibit 7 to this statement and is incorporated herein by reference. A copy of the Carlson Incentive Bonus Agreement is filed as Exhibit 8 to this statement and is incorporated herein by reference. A copy of the Excise Tax Agreement is filed as Exhibit 9 to this statement and is incorporated herein by reference. The foregoing summaries of each 11 14 of the Carlson Severance Agreement, the Carlson Incentive Bonus Agreement and the Excise Tax Agreement are qualified in their respective entireties by reference to the complete texts of such agreements. Gary B. Filler. In February 1994, the Board appointed Mr. Filler to the position of Executive Vice President of Operations and Chief Financial Officer of the Company. Pursuant to an offer letter (the "Filler Offer Letter") from the Company to Mr. Filler, Mr. Filler's initial base salary was set at $215,000, together with a target incentive bonus for calendar 1994 of $100,000. One-half of the target bonus will be earned if the Company reports operating income for the quarter ending June 30, 1994; the other half will be earned if the Company attains certain financial performance targets for the first half of fiscal 1995. In addition, Mr. Filler was granted options to purchase a total of 250,000 Shares with an exercise price of $7.875 per Share. Except as a result of the Offer, options to purchase 50,000 of those Shares would not be exercisable unless the Company reports operating income for the quarter ending June 30, 1994. In March 1994, shortly after Mr. Filler's hire, the Company entered into an agreement with Mr. Filler (the "Filler Severance Agreement") providing Mr. Filler with benefits in the event of (i) termination of employment, (ii) termination of employment following a change of control, and (iii) change of control without regard to termination of employment. Under the Filler Severance Agreement, Mr. Filler is entitled, following a change of control, to full acceleration of vesting with respect to any unvested stock options or restricted stock regardless of whether his employment subsequently terminates. For purposes of the Filler Severance Agreement, "change of control" is defined as (i) the acquisition by any person or group of persons of 50% or more of the Company's common stock or (ii) a transaction requiring shareholder approval involving either the sale of all or substantially all of the assets of the Company or the merger of the Company with or into a previously unaffiliated entity. All of the options granted to Mr. Filler were granted under the Company's 1991 Stock Plan and will vest in full as a result of the purchase of Shares pursuant to the Offer. The Filler Severance Agreement also provides that if Mr. Filler is terminated by the Company for any reason other than cause or voluntary resignation he will receive: (i) a severance payment equal to six months' base salary, (ii) six months of health care benefits, and (iii) executive outplacement services. The Filler Severance Agreement also provides for increased benefits if, following a change of control, (i) Mr. Filler's position is terminated, (ii) his duties and responsibilities are significantly reduced, or (iii) his employment terminates by mutual agreement. In any such event, Mr. Filler would be eligible to receive a lump sum severance payment equal to one year's salary if the severance occurs within one year following the change of control, nine months' salary if the severance occurs during the second year following the change of control, and six months' salary if the severance occurs thereafter. Mr. Filler would also then be entitled to receive all benefits for the extent of his severance period as well as executive outplacement counseling. The foregoing summary of the Filler Offer Letter and the Filler Severance Agreement is qualified in its entirety by reference to the complete texts of the Filler Offer Letter and the Filler Severance Agreement, respectively, copies of which are filed as Exhibits 10 and 11, respectively, to this statement and are incorporated herein by reference. Paul C. Ely, Jr. On March 10, 1994, the Board authorized the Company to retain Mr. Ely, the Company's Chairman of the Board since February 1994, as a consultant for the purpose of advising senior management on operational and management issues as the Company developed and implemented a new business plan. Mr. Ely is paid a fee of $13,333.33 per month as compensation for such consulting services. In connection with that engagement, the Board also granted Mr. Ely options to purchase 75,000 Shares pursuant to its 1991 Stock Plan. The options have an exercise price of $8.125 per share and were granted as fully exercisable options. On that date, the Board also increased the annual fee payable to Mr. Ely in his role as Chairman of the Board to $40,000. Such fee is paid in quarterly installments. Robert H. Waterman, Jr. On March 10, 1994, the Board authorized the Company to retain Mr. Waterman, the Company's Vice Chairman of the Board since February 1994, as a consultant for the purpose of advising senior management on operational and management issues as the Company developed and implemented a new business plan. Mr. Waterman is paid a fee of $13,333.33 per month as compensation for such consulting services. In connection with that engagements the Board also granted Mr. Waterman an option to purchase 50,000 Shares pursuant to its 1991 Stock Plan. The options have an exercise price of $8.125 per share and were granted as fully exercisable options. On that date, the Board also increased the annual fee 12 15 payable to Mr. Waterman in his role as Vice Chairman of the Board to $35,000. Such amount is paid in quarterly installments. Thomas I. Unterberg. By letter dated January 27, 1994, the Company engaged Unterberg Harris to serve as the Company's financial advisor in connection with a possible sale of all or a part of the Company. Mr. Unterberg, a director on the Company's Board of Directors, is a principal with Unterberg Harris. See Item 5 of this statement below. Electronic Data Systems Corporation; Hewlett-Packard Company. On August 31, 1990, the Company entered into a Common Stock Purchase Agreement (the "Purchase Agreement") with Electronic Data Systems Corporation, a Texas corporation ("EDS"), and Hewlett-Packard Company, a California corporation ("HP"), a copy of which is filed as Exhibit 12 to this statement and is incorporated by reference herein. Under the Purchase Agreement, EDS and HP acquired 3,710,575 shares and 1,855,288 shares, respectively, of the Company's Common Stock, representing approximately 19.7% and 9.8%, respectively, of the then outstanding voting stock of the Company. The shares were sold to EDS and HP at a cash purchase price of $10.78 per share, for an aggregate purchase price of $60,000,003. The Purchase Agreement contains a number of covenants and agreements of the parties, including (i) the right of each of EDS and HP, upon request, to membership on the Board of Directors of the Company so long as each purchaser maintained a specified minimum level of ownership interest in the Company; (ii) the right of each of EDS and HP to maintain its percentage interest in the Company (the "Right to Maintain") in the event of future sales by the Company of its voting stock at the price specified in the Purchase Agreement relating to such issuance or at the average market price of the stock; (iii) the limitation on ownership by EDS and HP of shares of Common Stock in excess of 22% and 11%, respectively, of the total voting stock of the Company, for a period of seven years from the date of the Purchase Agreement, except on the occurrence of a tender offer for 40% or more, or an acquisition of 20% or more, of the total voting power of the Company; (iv) the voting of the shares held by EDS and HP in accordance with specified requirements; and (v) certain restrictions on transfer of the shares held by each of EDS and HP. Pursuant to the Purchase Agreement, the Company entered into certain marketing and technology sharing agreements with each of EDS and HP. In connection with the transactions contemplated by the Merger Agreement and the Stockholder Option Agreement, the Company consented to EDS and HP entering into the Stockholder Option Agreement; in addition, each of EDS and HP waived its Right to Maintain for so long as the Merger Agreement has not been terminated. Copies of the Company's consents relating to EDS and HP, respectively, are filed as Exhibits 13 and 14, respectively, and are incorporated herein by reference. Copies of the waivers of each of the Rights to Maintain of EDS and HP, respectively, are filed as Exhibits 15 and 16, respectively, and are incorporated herein by reference. Robert N. Sharpe, a director of the Company, is a Corporate Vice President of EDS. Mr. Sharpe has various agreements with EDS relating to compensation, benefits and the like, including provision for indemnification in respect of his service as a director of the Company. Mr. Sharpe serves as EDS' representative on the Board of Directors of the Company pursuant to the rights granted to EDS under the Purchase Agreement. ITEM 4. THE SOLICITATION OR RECOMMENDATION (a) Recommendation. The Board of Directors of the Company (the "Board") at a special meeting held on May 18, 1994 unanimously determined that the Offer is fair to and in the best interest of the Company and its stockholders and recommended that stockholders accept the Offer and (if required by applicable law or otherwise) approve the Merger Agreement and the Merger. A copy of the Company's letter to stockholders dated May 25, 1994 is filed as Exhibit 17 to this statement and is incorporated herein by reference. Reference is made to the Schedule 14D-1 for a summary of Buyer's contacts with the Company leading to the execution of the Merger Agreement. 13 16 (b) Reasons for the Board's Conclusions. In reaching its determination described in paragraph (a) above, the Board considered a number of factors, including, without limitation, the following: (i) The financial condition, results of operations, business and strategic objectives of the Company, as well as the risks involved in achieving those objectives; (ii) The projected financial condition and results of operations of the Company, including projections reflecting the restructuring announced by the Company in April 1994; (iii) A review of the possible alternatives to the Offer and the Merger including the possibility of continuing to operate the Company as an independent entity, various financing alternatives involving the possible sale of the Company's equity or convertible debt securities, the sale of one or more of the Company's businesses, including the sale of the Company as a whole, or entering into a strategic transaction with another company, and, in respect of each alternative, the range of possible benefits to the Company's stockholders of such alternative and the timing and the likelihood of actually accomplishing such alternative; (iv) Reports from Bear, Stearns & Co. Inc. ("Bear Stearns") and Unterberg Harris, financial advisors to the Company, regarding the likelihood of other potential acquirors of the Company and the results of their efforts on behalf of the Company seeking indications of interest; (v) The detailed financial and valuation analyses presented to the Board by Bear Stearns and Unterberg Harris, including market prices and financial data relating to other companies engaged in businesses considered comparable to the Company and the prices and premiums paid in recent selected acquisitions of companies engaged in businesses considered comparable to those of the Company; (vi) The relationship of the Offer price to historical market prices of the Shares and to the Company's book value and net asset value per Share; (vii) The written opinion of Bear Stearns, financial advisor to the Company, that the Offer and the Merger, collectively, are fair, from a financial point of view, to the stockholders of the Company. A copy of the written opinion of Bear Stearns which sets forth the assumptions made, matters considered and basis of their review is attached as Annex B, and filed as Exhibit 18 to this statement; (viii) The terms and conditions of the Merger Agreement and related agreements; (ix) The likelihood that the proposed acquisition would be consummated, including the experience, reputation and financial condition of the Buyer and the risks to the Company if the acquisition were not consummated; and (x) The availability of dissenters' rights in the Merger under applicable law. In view of the wide variety of factors considered in connection with its evaluation of the Offer and the Merger, the Board did not find it practicable to, and did not, quantify or otherwise attempt to assign relative weights to the specific factors considered in reaching its respective determinations. Because of the engagement of Bear Stearns, the Board did not consider it necessary to retain an unaffiliated representative to act solely on behalf of the public stockholders of the Company for the purpose of negotiating the terms of the Merger Agreement. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The Company and Unterberg Harris entered into a letter agreement dated January 27, 1994 (the "Unterberg Harris Engagement Agreement") pursuant to which Unterberg Harris was retained as the Company's exclusive financial advisor in connection with a possible sale of all or part of the Company. Pursuant to the Unterberg Harris Engagement Agreement, the Company has made initial payments to Unterberg Harris totaling $100,000 and has agreed to pay an additional amount equal to 0.65% of the total consideration involved (defined as including any amounts paid to holders of unexercised options or the fair market value of shares or options substituted for Company options) to Unterberg Harris upon consummation of the sale of all or a part of the Company. The scope of Unterberg Harris' engagement included providing 14 17 valuation analyses of the Company, assisting the Company in structuring and negotiating a possible transaction and, if requested, rendering its opinion with respect to the fairness of the consideration to be paid to the Company or its stockholders. In addition to the foregoing compensation, the Company has agreed to reimburse Unterberg Harris for its reasonable out-of-pocket expenses and to indemnify Unterberg Harris against certain claims or liabilities arising from or relating to the services rendered under the Unterberg Harris Engagement Agreement, including those arising under federal securities laws. The Unterberg Harris Engagement Agreement also provides that in the event of a sale of all or a part of the Company during the 18 months following the engagement, Unterberg Harris would receive the same consideration as outlined above (0.65% of the total consideration involved). Based upon the foregoing, if the transactions contemplated by the Merger Agreement are consummated, the Company estimates that in connection therewith a total fee of approximately $2.3 million will be payable to Unterberg Harris. Thomas I. Unterberg, a member of the Board of Directors of the Company, is a principal of Unterberg Harris. A copy of the Unterberg Harris Engagement Letter is filed as Exhibit 19 to this statement. The Company has also entered into a letter agreement dated March 25, 1994 (the "Bear Stearns Engagement Letter") with Bear, Stearns & Co. Inc. ("Bear Stearns") pursuant to which Bear Stearns was retained by the Company to render financial advisory services in connection with a (i) a possible sale of the Company or (ii) a possible sale of assets or operations or capital stock or securities convertible into capital stock of the Company (collectively, a "Transaction"). The engagement letter also obligates the Company to retain Bear Stearns as lead manager of any public or private offering of its capital stock or debt securities within 12 months of the date of the engagement letter. For any privately placed debt or equity securities, the engagement letter provides that Bear Stearns will be paid, with certain exceptions, a fee of 3.0% of the aggregate principal amount of the securities sold, and for any public offered debt or equity securities, the engagement letter will receive customary underwriting fees. The Bear Stearns Engagement Letter provides for payments for an aggregate of $100,000 in connection with the signing of the engagement letter. The Bear Stearns Engagement Letter provides that upon execution by the Company of an agreement with respect to a Transaction, the Company will pay Bear Stearns an additional fee of $250,000, and, that upon rendering a fairness opinion with respect to a Transaction, the Company will pay Bear Stearns a fee of $750,000. In addition, the Bear Stearns Engagement Letter provides that upon consummation of a Transaction, the Company will pay Bear Stearns a fee calculated as a percentage of the total consideration paid by a purchaser in the transaction as follows: (i) 1.5% of the first $75,000,000 of aggregate consideration; plus (ii) 0.75% of the next $125,000,000 of aggregate consideration; plus (iii) 0.5% of the aggregate consideration in excess of $200,000,000 (any such fee to be reduced by any fees paid or payable as described in the preceding sentence). Based on the foregoing, if the transactions contemplated by the Merger Agreement are consummated, the Company estimates that in connection therewith a total fee of approximately $2.8 million (including the $100,000 payable in initial fees already paid) will be payable to Bear Stearns. The Bear Stearns Engagement Letter further provides that irrespective of whether a Transaction is consummated, the Company will reimburse Bear Stearns for all out-of-pocket expenses incurred in connection therewith, including reasonable fees and expenses, and that the Company will indemnify Bear Stearns and certain related persons against certain claims and liabilities, including those arising under federal securities laws. The Company has been advised by Bear Stearns that after payment in full of the fees payable in connection with the transactions contemplated by the Merger Agreement, no further fees will be payable under the Bear Stearns Engagement Letter. The engagement of Bear Stearns may be terminated at any time without liability or continuing obligation upon the part of the Company, provided that the obligations in the Bear Stearns Engagement Letter to retain Bear Stearns as lead manager of any public or private offering of its capital stock or debt securities within 12 months of the date of the engagement letter, the payment provisions described in the previous paragraph and the indemnification and reimbursement provisions referred to in the preceding paragraph will survive any such termination. Unterberg Harris is an investment banking firm that provides a full range of financial advisory services for mergers and acquisitions as well as public and private financings, primarily in the technology industry. 15 18 Bear Stearns, as a customary part of its investment banking business, is engaged in the evaluation of businesses and their securities in connection with mergers and acquisitions, underwriting and secondary distributions of securities, private placements and evaluations for estate, corporate and other purposes. Other than as described in this Item 5, neither the Company nor any person acting on its behalf intends to employ, retain or compensate any other person to make solicitations or recommendations to stockholders on its behalf concerning the Merger or the Offer. ITEM 6. PRESENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES. (a) On April 5, 1994, Thomas Unterberg sold an aggregate of 65,100 Shares for $8.00 per Share. Mr. Unterberg, currently a director of the Company, was not a director at the time of such sale. In addition, in order to induce Buyer to enter the Merger Agreement with the Company, certain stockholders of the Company entered into the Stockholder Option Agreement. See Item 3(b) of this statement. Other than as set forth in this paragraph (a), to the best of the Company's knowledge, no transaction in the Shares has been effected during the past 60 days by the Company or any executive officer, director, affiliate or subsidiary of the Company. (b) Except for Shares subject to the Stockholder Option Agreements as described under Item 3(b) of this statement, to the best of the Company's knowledge, each of the executive officers, directors, affiliates and subsidiaries presently intends to tender all Shares which are held of record or beneficially owned by them pursuant to the Offer, except for those Shares, if any, which if tendered, could cause them to incur liability under the provisions of Section 16(b) of the Exchange Act and except for Shares purchasable upon exercise of the employee stock options to the extent such employee stock options will be cancelled in lieu of cash payments pursuant to the Merger Agreement as referred to in Item 3(b) of this statement. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. (a) No negotiation is underway or is being undertaken by the Company in response to the Offer which relates to or would result in (1) an extraordinary transaction, such as a merger or reorganization, involving the Company or any of its subsidiaries; (2) a purchase, sale or transfer of a material amount of assets by the Company or any of its subsidiaries; (3) a tender offer for or other acquisition of securities by or of the Company; or (4) any material change in the present capitalization or dividend policy of the Company. (b) There is no transaction, board resolution, agreement in principle or signed contract in response to the tender offer than as disclosed in Item 3(b) of this statement, which relates to or would result in (1) an extraordinary transaction, such as a merger or reorganization, involving the Company or any of its subsidiaries; (2) a purchase, sale or transfer of a material amount of assets by the Company or any of its subsidiaries; (3) a tender offer for or other acquisition of securities by or of the Company; or (4) any material change in the present capitalization or dividend policy of the Company. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED Amendment to Rights Plan. Under the terms of the Merger Agreement, the Company's Board of Directors was required to amend the Rights Agreement, concurrently with the execution of the Merger Agreement, to terminate, modify or redeem the Rights so as to make the Rights inapplicable to the Offer, the Merger and the Stockholder Option Agreement. In accordance with this requirement, the Company entered into an Amendment to Common Shares Rights Agreement dated May 18, 1994 (the "Rights Amendment") with the Rights Agent, a copy of which is attached as Exhibit 4 hereto. The Rights Amendment renders the Rights Agreement and the Rights inapplicable to the transactions contemplated by the Offer or the Merger. As long as the Buyer or Merger Subsidiary is not in material breach of the Merger Agreement and the Merger Agreement has not been terminated in accordance with its terms, the provisions of the Rights Amendment may not be amended or modified without the consent of the Buyer and Merger Subsidiary. The discussion of the Rights Plan below describes the Rights Plan without taking into account the effect of the Rights Amendment. 16 19 Rights. On August 14, 1990, the Board of Directors of the Company declared a dividend of one common share purchase right (a "Right") for each outstanding share of Common Stock, $0.01 par value (the "Common Shares"), of the Company. Each Right entitles the registered holder to purchase from the Company one Common Share at a price of $45 (the "Purchase Price"), subject to adjustment. The description and terms of the Rights are set forth in a Common Shares Rights Agreement dated August 15, 1990, as amended (the "Rights Agreement"), between the Company and The First National Bank of Boston, as Rights Agent (the "Rights Agent"), a copy of which is filed as Exhibit 1 to the Company's Current Report on Form 8-A, as filed with the Securities and Exchange Commission on August 17, 1990, as amended by Amendment No. 1 thereto on Form 8, filed on December 3, 1990. The following general description is subject to the terms and conditions of the Rights Agreement, and is qualified in its entirety by reference to the complete text thereof. The Rights will separate from the Common Shares, Rights Certificates will be issued and the Rights will become exercisable upon the earlier of: (i) 10 days (or such later date as may be determined by a majority of the Board of Directors, excluding directors affiliated with the Acquiring Person, as defined below, (the "Continuing Directors")) following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 25% or more of the outstanding Common Shares or (ii) 10 business days (or such later date as may be determined by a majority of the Continuing Directors) following the commencement or announcement of a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 25% or more of the outstanding Common Shares. The earlier of such dates is referred to as the "Distribution Date". As soon as practicable following the Distribution Date, separate Rights Certificates will be mailed to holders of record of the Common Shares as of the close of business on the Distribution Date and such separate Rights Certificates alone will evidence the Rights from and after the Distribution Date. All Common Shares issued prior to the Distribution Date will be issued with Rights. Except as otherwise determined by the Board of Directors, no other Common Shares issued after the Distribution Date will be issued with Rights. The Rights will expire on August 31, 2000 (the "Final Expiration Date"), unless the Final Expiration Date is extended or unless the Rights are earlier redeemed or exchanged by the Company or expire upon consummation of certain mergers, consolidations or sales of assets, as described below. Following the Distribution Date, and until the occurrence of one of the subsequent events described below, holders of the Rights will be entitled to receive, upon exercise and the payment of $45, one Common Share per Right. At any time after an event triggering the flip-in or flip-over rights (as described in the Rights Plan) and prior to the acquisition by such Acquiring Person of 50% or more of the outstanding Common Shares, the Board of Directors of the Company may exchange the Rights (other than Rights owned by the Acquiring Person or its affiliates), in whole or in part, at an exchange ratio of one Common Share per Right (subject to adjustment). Unless the Rights are earlier redeemed or exchanged, in the event that (i) the Company becomes the surviving corporation in a merger with an Acquiring Person and the Common Shares are not changed or exchanged, or (ii) a person becomes the beneficial owner of 25% or more of the Common Shares then outstanding (other than pursuant to a tender offer which is (a) made for all of the outstanding shares of Common Stock and (b) approved by a majority of the Continuing Directors -- referred to herein as a "Permitted Offer") then proper provision will be made so that each holder of a Right which has not theretofore been exercised (other than Rights beneficially owned by the Acquiring Person or its affiliates, which will thereafter be void) will thereafter have the right to receive, upon exercise, Common Shares having a value equal to two times the Purchase Price. In the event that the Company does not have sufficient Common Shares available for all Rights to be exercised, or the Board decides that such action is necessary and not contrary to the interests of Rights holders, the Company may instead substitute cash, assets or other securities for the Common Shares into which the Rights would have otherwise been exchangeable. Similarly, unless the Rights are earlier redeemed or exchanged, in the event that, after there is an Acquiring Person, (i) the Company is acquired in a merger or other business combination, or (ii) 50% or more of the Company's consolidated assets or earning power are sold (other than through transactions in the ordinary course of business), proper provision must be made so that each holder of a Right which has not 17 20 theretofore been exercised (other than Rights beneficially owned by the Acquiring Person or its affiliates, which will thereafter be void) will thereafter have the right to receive, upon exercise, shares of Common Stock of the acquiring or surviving company (as applicable) having a value equal to two times the Purchase Price (unless the transaction satisfies certain conditions and is consummated with a person who acquired shares pursuant to a Permitted Offer, in which case the Rights will expire). ITEM 9. MATERIAL TO BE FILED AS EXHIBITS Exhibit 1 Agreement and Plan of Merger, dated as of May 18, 1994, by and among Buyer, Merger Subsidiary and the Company. Exhibit 2 Form of Press Release issued by the Company and Buyer on May 19, 1994. Exhibit 3 Pages 2-13 of the Company's Proxy Statement, dated October 22, 1993, for the Company's Annual Meeting of Stockholders held on November 18, 1993. Exhibit 4 Amendment to Common Shares Rights Agreement, dated May 18, 1994. Exhibit 5 Stockholder Option Agreement, dated May 18, 1994. Exhibit 6 Form of Indemnity Agreement between the Company and certain of its officers and directors. Exhibit 7 Agreement between Dr. Carlson and the Company, dated March 18, 1994 (the "Carlson Severance Agreement"). Exhibit 8 Agreement between Dr. Carlson and the Company, dated February 26, 1994 (the "Carlson Incentive Bonus Agreement") Exhibit 9 Excise Tax Agreement, dated May 18, 1994. Exhibit 10 Agreement between Mr. Filler and the Company, dated February 26, 1994 (the "Filler Offer Letter") Exhibit 11 Agreement between Mr. Filler and the Company, dated March 3, 1994 (the "Filler Severance Agreement"). Exhibit 12 The Common Stock Purchase Agreement among the Company, EDS and HP, dated August 31, 1990. Exhibit 13 Consent Letter Agreement between the Company and EDS, dated May 18, 1994. Exhibit 14 Consent Letter Agreement between the Company and HP, dated May 18, 1994. Exhibit 15 Waiver Letter Agreement between the Company and EDS, dated May 18, 1994. Exhibit 16 Waiver Letter Agreement between the Company and HP, dated May 18, 1994. Exhibit 17 Form of Letter to Stockholders, dated May 25, 1994.* Exhibit 18 Opinion of Bear, Stearns & Co. Inc., dated May 18, 1994.* Exhibit 19 Engagement Letter between the Company and Unterberg Harris, dated January 27, 1994.
- --------------- * Included in materials being distributed to stockholders of the Company. 18 21 SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. THE ASK GROUP, INC. Dated: May 25, 1994 By: Paul C. Ely, Jr. Chairman of the Board 19 22 ANNEX A [ASK LOGO] THE ASK GROUP, INC. 2880 SCOTT BLVD. SANTA CLARA, CALIFORNIA 95052-8013 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 May 25, 1994 as part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record at the close of business on May 23, 1994 of the Shares. Capitalized terms used and not otherwise defined herein shall have the meaning set forth in the Schedule 14D-9. You are receiving this Information Statement in connection with the possible election of persons designated by Buyer to a majority of the seats on the Board of Directors of the Company. The Merger Agreement requires the Company, effective upon the acceptance for payment by Merger Subsidiary of such number of shares that satisfy the minimum condition (as defined in the Merger Agreement) and at the request of Buyer, to take all action necessary to cause Buyer's designees ("Designees") to be elected to the number of seats on the Board which is proportionate to the number of Shares owned by Buyer. This Information Statement is required by Section 14(f) of 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. Pursuant to the Merger Agreement, on May 25, 1994, Buyer commenced the Offer. The Offer is scheduled to expire on June 22, 1994. Buyer has agreed to cause Merger Subsidiary to accept Shares validly tendered pursuant to the Offer as soon as legally permitted and to pay for all such Shares as promptly as practicable thereafter, following the satisfaction or waiver of the conditions to the Offer; provided, that Buyer may extend the Offer for a period of time of not more than 15 business days to meet the objective (but not the condition) that there shall be validly tendered, prior to the expiration date of the Offer (as so extended) and not withdrawn a number of Shares, which, together with the Shares then owned by Buyer and Merger Subsidiary, represents at least 90% of the Shares on a fully diluted basis. The information contained in this Information Statement (including information incorporated by reference) concerning Buyer, Merger Subsidiary and Designees has been furnished to the Company by Buyer and the Company assumes no responsibility for the accuracy or completeness of such information. BOARD OF DIRECTORS GENERAL The Common Stock, $.01 par value per share ("Common Stock"), is the only class of voting securities of the Company outstanding. Each share of Common Stock has one vote. As of May 17, 1994, there were 23,479,624 shares of Common Stock outstanding. The Board currently consists of four members and there is currently one vacancy on the Board. Each director holds office until his successor is elected and qualified or until his earlier resignation or removal. BUYER DESIGNEES Pursuant to the Merger Agreement, Buyer is entitled to designate the number of directors (the "Designees"), rounded up to the next whole number, on the Board that equals the product of (i) the total A-1 23 number of directors on the Board (giving effect to the election of any additional directors pursuant to the Merger Agreement) and (ii) the percentage that the number of Shares owned by Buyer or Merger Subsidiary (including Shares accepted for payment) bears to the total number of Shares outstanding. Upon the purchase of the Shares pursuant to the Offer, the Company shall take all actions necessary to cause the Designees to be elected or appointed to the Board including, without limitation, increasing the number of directors and seeking and accepting resignations of incumbent directors. Buyer has informed the Company that it will choose the Designees from the directors and executive officers listed in Schedule I to Buyer's Offer to Purchase, a copy of which is being mailed to the Company's stockholders together with this Schedule 14D-9. Buyer has informed the Company that each of the directors and executive officers listed in Schedule I to the Offer to Purchase has consented to act as a director, if so designated. The information on such Schedule I is incorporated herein by reference. The business address of Buyer is One Computer Associates Plaza, Islandia, New York, 11788-7000. It is expected that the Designees may assume office at any time following the purchase by Buyer of a specified minimum number of Shares pursuant to the Offer, which purchase cannot be earlier than June 23, 1994, and that upon assuming office, the Designees will thereafter constitute at least a majority of the Board. DIRECTORS OF THE COMPANY The names of the current directors, their ages as of May 16, 1994 and certain other information about them are set forth below. As indicated above, some of the current directors may resign effective immediately following the purchase of Shares by Buyer pursuant to the Offer.
NAME AGE PRINCIPAL OCCUPATION(S) - ------------------------- --- --------------------------------------- Paul C. Ely, Jr. 62 Partner, Alpha Partners Robert N. Sharpe 50 Corporate Vice President, Electronic Data Systems Corporation Thomas I. Unterberg 63 Partner, Unterberg Harris Robert H. Waterman, Jr. 57 Chairman, The Waterman Group, Inc.
Except as set forth below, each of the directors has been engaged in the principal occupation(s) described above during the past five years. There are no family relationships among any of the directors or executive officers of the Company. Mr. Ely, who serves as the Company's Chairman, is a general partner of Alpha Partners, a venture capital fund. From December 1988 until July 1989, Mr. Ely served as an Executive Vice President and a director of Unisys Corporation, a computer manufacturer. Mr. Ely served as the Chief Executive Officer of Convergent, Inc., a computer manufacturer, from January 1985 until it was acquired by Unisys in December 1988. Mr. Ely is also a director of Parker Hannifin Corporation and Tektronix Inc. Mr. Sharpe is a Corporate Vice President of EDS and has served as its Vice President, Business Development since October 1989. He has been employed by EDS in various management capacities since 1972. Pursuant to the Common Stock Purchase Agreement among the Company, EDS and Hewlett-Packard, Mr. Sharpe is EDS' designee to ASK's Board of Directors. Mr. Unterberg is a managing director of the investment banking firm of Unterberg Harris. From January 1987 to January 1989, Mr. Unterberg was an executive officer of the investment banking firm of Shearson Lehman Hutton Inc. Mr. Unterberg is also a director of AES Corporation, Electronics for Imaging, Inc., Systems and Computer Technology Corporation, Tandem Computers Corporation, and Xyvision, Inc. Mr. Waterman, who serves as the Company's Vice Chairman, is the chairman of The Waterman Group, Inc., a research, writing, consulting and venture management company he started in 1986. He is the co-author of In Search of Excellence, and is the author of The Renewal Factor and Adhocracy: The Power to Change. Mr. Waterman also serves on the boards of AES Corporation, Boise Cascade Corporation, Inc. and McKesson, Inc. A-2 24 BOARD MEETINGS, COMMITTEES AND COMPENSATION The Board held a total of 7 meetings and took one action by unanimous written consent during the fiscal year ended June 30, 1993. All members of the Board attended at least 75% of all meetings of the Board (held during the period for which each was a director) and of each of the committees of the Board on which he served (during the periods that each served) during fiscal 1993. The Company has both standing Audit and Compensation Committees. There is no nominating committee nor any committee performing such function. The Audit Committee of the Board consisting of Mr. Paul C. Ely, Jr., Mr. Robert N. Sharpe and Mr. Thomas I. Unterberg, met twice during the fiscal year ended June 30, 1993. Among the committee's functions are recommending engagement of the Company's independent auditors and meeting with such auditors to consider the scope and results of the annual audit, and to receive and consider the auditors' comments on internal controls, accounting staff and similar matters. The Board's Compensation Committee, consisting of Mr. Ely and Mr. Robert H. Waterman, Jr., held one meeting and took 13 actions by unanimous written consent during the fiscal year ended June 30, 1993. Ms. Sandra L. Kurtzig was a member of the Compensation Committee from June 1993 until her resignation as Chairman of the Company in September 1993. Effective March 10, 1994, the Company pays non-management members of the Board the following annual fees: Chairman, $40,000; Vice Chairman, $30,000; other directors, $17,500. Directors are also eligible for reimbursement in accordance with Company policy for their expenses incurred in connection with attending meetings of the Board of Directors and the Audit and Compensation Committees. In 1986, the Company adopted a stock option plan under which options for a total of 150,000 shares of Common Stock may be granted to non-employee directors of the Company. Options granted under this plan are issued as nonstatutory options at a price equal to the fair market value on the date of grant and generally have a term of six years. Options are generally exercisable over five years from the grant date. Deferred Compensation Plan for Directors: In August 1981, the Board of Directors adopted the Deferred Compensation Plan for Directors. Pursuant to this plan, directors' fees otherwise payable to a participating director are placed in an account under the plan for such director. At the end of each quarter, the amount in the director's account is converted into an equivalent number of stock units based upon the fair market value of the Company's Common Stock on the last business day of the quarter. Distributions of Common Stock from the director's account to the director are generally to be made in ten equal annual installments commencing within 60 days after the close of the first fiscal year after the earliest of the date such person ceases to be a director of the Company, the date such person retires or otherwise ceases to engage in his or her principal occupation, or the date of termination of the plan. At the election of the participant made at least six months prior to the occurrence of an event triggering distribution, the participant may receive distributions in five equal annual installments. Furthermore, the Company may at its option make a single distribution and/or distribute cash representing the fair market value of the Common Stock corresponding to the stock units in the participant's account, in lieu of making a distribution of Common Stock. The plan may at any time be amended or terminated by the Board of Directors, but may not affect amounts previously credited to a participant's deferred compensation account. As of September 27, 1993, there were 8,884 share units in the account established under the plan for Mr. Unterberg. 1986 Director Option Plan. The Company's 1986 Director Option Plan (the "1986 Plan") was adopted by the Board of Directors in October 1986 and was approved by the stockholders of the Company at the 1987 Annual Meeting. A total of 150,000 shares of Common Stock have been reserved for issuance thereunder. The 1986 Plan generally provides that each director who is not also an employee of the Company (a "Non-Employee Director") shall automatically be granted an option to purchase 10,000 shares of the Company's Common Stock when such Non-Employee Director first becomes a director of the Company. At the time of adoption of the 1986 Plan, existing Non-Employee Directors who had been directors continuously since January 1, 1986, received options for 6,000 shares and other Non-Employee Directors received options to purchase 10,000 shares. During each year following the initial grants described above, each Non-Employee Director will automatically be granted an additional option to purchase 3,000 shares under the 1986 Plan. The exercise price of the options granted under the 1986 Plan is equal to the fair market value of the Company's A-3 25 Common Stock on the date of grant. During the fiscal year ended June 30, 1993, options covering 3,000 shares having an exercise price of $12.875 were granted to each of Messrs. Ely, Sharpe, Unterberg and Waterman under the 1986 Plan. Mr. Unterberg was the only director to exercise options granted under the 1986 Plan during the fiscal year ended June 30, 1993 and he purchased 16,600 shares on such exercise with an aggregate Value Realized of $245,738. The term "Value Realized" is the difference between the fair market value of the Company's Common Stock on the date of exercise and the exercise price. As of June 30, 1993, there were 52,200 shares covered by options outstanding under the 1986 Plan held by four non-employee directors with an average weighted exercise price of $7.9037 per share. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Directors Ely and Waterman are the two present members of the Compensation Committee of the Company's Board of Directors. Sandra L. Kurtzig was a member of the Compensation Committee from June 1993 until her resignation as Chairman of the Company in September 1993. During Ms. Kurtzig's tenure as a member of the Compensation Committee, no matters came before the Committee regarding her compensation. No interlocking relationship exists between the Company's Board of Directors or Compensation Committee and the board of directors or compensation committee of any other company. EXECUTIVE OFFICERS OF THE COMPANY The following individuals currently serve as executive officers of the Company:
AGE EMPLOYMENT HISTORY ---- ------------------------------------------------------ Eric D. Carlson 49 Dr. Carlson has held a number of senior executive President and Chief positions within the Company since joining the Company Executive Officer in 1990. He has been serving since February 1994 as its President and Chief Executive Officer. Prior to that he served as an Executive Vice President in charge of the two principal product businesses of the Company -- Ingres relational database and development tools and ASK manufacturing information systems application software. From 1988 until joining the Company, Dr. Carlson served as vice president and general manager of the UNIX Systems Group of Unisys Corporation. For eight years before that, he was employed by Convergent Technologies, Inc. in senior management roles, most recently as senior vice president and general manager of its Distributed Systems Division. Gary B. Filler 53 Mr. Filler joined the Company as its Executive Vice Executive Vice President of Operations and Chief Financial Officer in President of Operations February 1994. During 1991 and 1992, Mr. Filler served and Chief Financial as Chairman of Seagate Technology, Inc., a disk drive Officer manufacturer. During 1988 and 1989, he was Executive Vice President of Mountain Computer, a manufacturer of computer tape back-up systems. From 1972 through 1987, Mr. Filler was employed by Xidex Corporation, a microfilm and floppy disk manufacturer, in a variety of senior financial management positions.
A-4 26 SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the beneficial ownership of Common Stock of the Company as of May 17, 1994 by (i) each person known by the Company to be the beneficial owner of more than 5% of the Company's Common Stock, (ii) each current director, (iii) each current executive officer, and (iv) all current directors and executive officers as a group as of May 17, 1994:
NAME OF INDIVIDUAL OR GROUP PERCENTAGE OF (NUMBER IN GROUP) NUMBER OF SHARES(1) COMMON STOCK(1) -------------------------------------- -------------------- ---------------- Electronic Data Systems Corporation 4,008,535(2) 17.1% 7171 Forest Lane Dallas, TX 75230 The Capital Group, Inc. 2,271,000(3) 9.7% 333 South Hope Street Los Angeles, CA 90071 Hewlett-Packard Company 2,004,268(2) 8.5% 3000 Hanover Street Palo Alto, CA 94304 Paul C. Ely, Jr. 90,400 * Eric D. Carlson 88,815 * Robert H. Waterman, Jr. 66,400 * Thomas I. Unterberg 12,821 * Robert N. Sharpe 6,600(4) * Gary B. Filler 0 All current directors and executive 265,136(4) 1.1% officers as a group (6 persons)
- --------------- * Less than 1 percent. (1) Includes the following Shares subject to outstanding options which were exercisable at May 17, 1994 or within 60 days of such date: Mr. Ely, 85,400; Dr. Carlson, 78,437; Mr. Waterman, 60,400; Mr. Unterberg, 3,000; Mr. Sharpe, 6,600; all current directors and executive officers as a group, 233,837. Also includes 378 shares held in trust for Dr. Carlson under the Company's 401(k) Plan and 9,821 Shares held in a deferred compensation account for Mr. Unterberg by the Company. Does not include shares subject to outstanding options which may become exercisable as a result of a change of control upon the acceptance of Shares pursuant to the Offer. (2) Pursuant to a Common Stock Purchase Agreement entered into in August 1990 between the Company, Electronic Data Systems Corporation ("EDS") and Hewlett-Packard Company ("HP"), EDS and HP have rights to maintain their respective percentage ownership interests in the Company, to nominate a person to the Board and to have shares acquired pursuant to the agreement registered for sale under applicable securities laws. In addition, that agreement gives the Company a right of first refusal to purchase any of these shares and the right to approve or reject a proposed sale of all or part of such shares. In connection with the Merger, EDS and HP have waived their rights to maintain their percentage ownership and each has given Buyer an option to purchase the shares owned by each of EDS and HP. The Company has waived its rights under the Common Stock Purchase Agreement as to these options. (3) Based on a Schedule 13G filed for the calendar year ended December 31, 1993, in which it reported sole dispositive power as to 2,271,000 shares. Represents shares owned by accounts under the discretionary investment management of one or more of six investment management companies of which The Capital Group, Inc. is the parent company. The Capital Group, Inc. has disclaimed beneficial ownership of these shares. (4) Excludes 4,008,535 shares owned by EDS. Mr. Sharpe is a corporate officer of EDS; in that capacity he does not have sole, but may have shared, investment or voting power with respect to the shares. Mr. Sharpe disclaims beneficial ownership as to such shares. A-5 27 In connection with the Merger Agreement certain stockholders of the Company (each, a "Principal Stockholder") entered into a Stockholder Option Agreement with Merger Subsidiary. The Principal Stockholders, along with the Shares of each subject to the Stockholder Option Agreement as of May 17, 1994, are EDS, with 4,008,535 Shares; HP, with 2,004,268 Shares; Paul C. Ely, Jr., the Company's Chairman of the Board with 5,000 Shares; Eric D. Carlson, the Company's Chief Executive Officer and President, with 10,000 Shares; Robert H. Waterman, Jr., the Company's Vice Chairman of the Board, with 6,000 Shares; and Thomas I. Unterberg, a director on the Company's Board of Directors, with no Shares. The outstanding Shares held by the Principal Stockholders represent approximately 26% of the Company's outstanding Shares as of May 17, 1994. Under the Stockholder Option Agreement, each Principal Stockholder has granted Merger Subsidiary the option (the "Stock Option") to purchase, subject to the terms and conditions set forth in the Stockholder Option Agreement, such Principal Stockholder's Shares for a price of $13.25 per Share in cash, or to cause to be tendered pursuant to the Offer such Principal Stockholder's Shares. In addition, if the price to be paid by Merger Subsidiary pursuant to the Offer is increased, the purchase price payable upon exercise of the Stock Option shall similarly be increased. The Stockholder Option Agreement also provides that the number and kind of Shares subject to the Stock Option and the purchase price therefor shall be appropriately and equitably adjusted in the event of changes in the Company's capital stock. In April 1994, a derivative lawsuit was filed by a holder of 100 Shares in the Superior Court of California against ten current and former directors and executive officers of the Company, including Messrs. Carlson, Ely, Sharpe, Unterberg and Waterman. Because a derivative suit is an action filed on behalf of and for the benefit of the Company, the Company is required to be a party and was, therefore, named as a "nominal defendant." The plaintiff claims that, during the period from October 22, 1992 through April 2, 1993, the individual defendants breached their fiduciary duties, mismanaged the Company, unjustly enriched themselves and violated California's insider trading laws by selling Shares during the period. The Company has notified its directors' and officers' liability carriers of the claim and has retained counsel, and anticipates filing a response to the complaint within the next thirty days. The complaint does not seek damages or any form of relief from the Company. EMPLOYEE BENEFIT PLANS EMPLOYEE BENEFIT PLANS The following is a brief summary of certain plans in effect during the fiscal year ended June 30, 1993 under which officers and employees of the Company received benefits. Incentive Bonus Plan. The Board has adopted an incentive bonus plan pursuant to which officers and other key employees can earn annual cash bonuses, conditional on achievement of specified Company and business unit goals as well as personal and departmental objectives. Employee Stock Option Plans. The Company's 1982 Incentive Stock Option Plan (the "1982 Plan") was adopted by the Board and approved by the stockholders in 1982. A total of 3,400,000 shares of Common Stock were reserved for issuance upon exercise of options. As a result of the expiration of the 1982 Plan in August 1992, no further options may be granted thereunder. In connection with the 1990 acquisition of Ingres Corporation ("Ingres"), the Company assumed all of the options granted to employees of Ingres and its subsidiaries pursuant to Ingres' 1984 Incentive Stock Option Plan and 1986 Supplemental Stock Option Plan (collectively, the "Ingres Plans"). In August 1991, the Board adopted the 1991 Stock Plan (the "1991 Plan") under which the Board or its designated committee is authorized to grant incentive or nonstatutory stock options, stock appreciation rights, restricted stock, stock bonus or long-term performance stock awards to employees and consultants of the Company and its subsidiaries. Stockholders of the Company approved the 1991 Plan in November 1991. A total of 3,200,000 shares have been reserved under this plan. The grant of options or other awards under the 1991 Plan to employees is subject to the discretion of the administrator of the Plan (i.e., the Board or its Compensation Committee). As of the date hereof, there has been no determination by the Administrator with A-6 28 respect to future awards under the 1991 Plan. Non-employee directors are not eligible to participate in the 1991 Plan. The following table sets forth information with respect to the grant of options to (i) the persons who were executive officers of the Company as of June 30, 1993 named in the Summary Compensation Table below (the "Named Executive Officers"), (ii) all then current executive officers as a group, and (iii) to all employees as a group, during the fiscal year ended June 30, 1993. Since June 30, 1993, Messrs. Falotti, Wright and Laven have terminated their employment with the Company. Their respective termination dates were: Mr. Falotti, February 8, 1994, Mr. Wright, May 2, 1994 and Mr. Laven, January 31, 1994.
WEIGHTED AVERAGE EXERCISE PRICE NAME OF INDIVIDUAL OR PER SHARES IDENTITY OF GROUP AND POSITION OPTIONS GRANTED(#) ($/SH) ------------------------------------------------- ------------------- ---------------- Pier Carlo Falotti, President and CEO............ 250,000 $ 10.000 Leslie E. Wright, Executive VP and Chief Financial and Administrative Officer........... 30,000 12.875 Eric D. Carlson, Executive VP.................... 25,000 12.875 Michael A. Laven, Executive VP................... 25,000 12.875 All then current executive officers as a group... 330,000 10.697 All other employees as a group................... 677,200 14.148
Under each of these option plans, options are granted at exercise prices equal to the fair market value on the date of grant, have 10-year terms and generally become exercisable over a four-year period. Under all of these plans, as of June 30, 1993, options to purchase an aggregate of 2,843,080 shares of Common Stock had been exercised, options to purchase 2,907,722 shares were outstanding (including 573,171 shares covered by options assumed by the Company in the Ingres acquisition) and held by 1,406 employees at exercise prices ranging from $0.4247 to $23.75, and 458,234 shares remained available for future grant. On April 26, 1994, the Board granted all holders of options on that date (other than executive officers and directors) with an exercise price greater than $8.625 per share the right to cancel such options and to receive new options covering two-thirds the number of unexercised shares under the canceled option with an exercise price of $8.625 per share. The new options will have the same vesting commencement date as the canceled options, and were granted under the 1991 Stock Plan. Employee Stock Purchase Plans. In May 1990, the Board adopted the 1990 Employee Stock Purchase Plan (the "1990 ESPP"). Stockholders approved the 1990 ESPP in November 1990. Under the 1990 ESPP, 750,000 shares were reserved for issuance. The 1990 ESPP permitted a participant to purchase shares of the Company's Common Stock at 85% of the lesser of (i) the fair market value of such stock at the beginning of a two-year offering period or (ii) the fair market value of such stock at the end of each six-month purchase period within the two-year offering period. Generally, all full-time officers and employees of the Company and any of its U.S. subsidiaries are eligible to participate in the 1990 ESPP. The 1990 ESPP terminated on May 31, 1993 as all shares authorized for issuance thereunder had been issued. In March 1993, the Board adopted the 1993 Employee Stock Purchase Plan (the "1993 Plan"). Stockholders approved the 1993 Plan in November 1993. The 1993 Plan, under which 500,000 shares have been reserved for issuance, is identical to the 1990 Plan except that offering periods are only six months in duration and are coincident with purchase periods. As a result, the purchase price is reset every six months. As of June 30, 1993, approximately 1,374 persons were eligible to participate in the 1993 Plan, of whom 658 were participating. In January 1992, the Board adopted the 1992 Overseas Employee Stock Purchase Plan (the "1992 ESPP"). Stockholder approval was not required for the 1992 ESPP. The 1992 ESPP is now in all material respects identical to the 1993 Plan, except that only persons who are employees of the Company's foreign subsidiaries at the time of enrollment are eligible to participate. At June 30, 1993, 938 persons were eligible to participate in the 1992 ESPP, of whom 154 were participating. A-7 29 Participation in the 1992 ESPP and the 1993 Plan is voluntary and is dependent on each eligible employee's election to participate and his or her determination as to the level of payroll deductions. Accordingly, neither future purchasers nor purchases under the 1993 Plan are determinable. Non-employee directors are not eligible to participate in the 1993 Plan. No purchases were made under the 1993 Plan during the fiscal year ended June 30, 1993. Purchases were made under the 1990 ESPP, which was a similar plan. The following table sets forth certain information regarding shares purchased under the 1990 ESPP during the fiscal year ended June 30, 1993 and the payroll deductions accumulated at the end of that fiscal year in accounts under the 1993 Plan for each of the Named Executive Officers who participated in the 1990 ESPP or the 1993 Plan, for all then current executive officers as a group and for all other employees who participated in either of the purchase plans as a group during that fiscal year:
PAYROLL NUMBER DEDUCTIONS NAME OF INDIVIDUAL OR OF SHARES DOLLAR AS OF FISCAL IDENTITY OF GROUP AND POSITION PURCHASED(#) VALUE($)(1) YEAR END($) --------------------------------------------------- ------------ ----------- ------------ Pier Carlo Falotti, President and CEO.............. 131 $ 228 $ 7,500 David Sohm, Vice President......................... 631 6,722 1,000 All then current executive officers as a group..... 762 6,950 8,500 All other employees as a group..................... 280,340 2,418,644 290,952
The Board has agreed to terminate the 1992 ESPP and the 1993 Plan effective for any offering period starting after May 31, 1994 prior to the Effective Time of the Merger. The ASK Group 401(k) Plan: The Company has established The ASK Group 401(k) Plan (the "401(k) Plan") which is a qualified profit sharing plan and salary deferral program under the Federal tax laws and is administered by the Company. All employees of the Company (except certain specifically excluded classifications as defined in the plan) are eligible to participate after meeting certain minimum employment conditions. Participants may defer up to 15% of their eligible salary and contribute to the 401(k) Plan through payroll deductions. At the end of each quarter starting with the quarter ended March 31, 1992, the Company has agreed to contribute shares of its Common Stock to the plan. For the 1992 calendar year, shares of Common Stock were contributed in an amount equal to 50% of the first 3% of each participant's compensation contributed to the plan, up to a maximum Company contribution of $1,500 per participant per plan year. Effective January 1, 1993, the Company contributes shares of Common Stock having a value equal to 50% of a participant's contribution to the 401(k) Plan, up to a number of shares having a maximum value of $1,500 per participant per plan year. The Company contribution to a participant's 401(k) Plan account vests over the five-year period starting from his or her hire date; however, Company contributions made from January 1, 1992 through June 30, 1992 are fully vested. Each participant is fully vested in the portion of his or her account which he or she contributed. The Board has agreed to amend the 401(k) Plan prior to the Effective Time of the Merger to provide that employer matching contributions may be made in cash. A-8 30 EXECUTIVE COMPENSATION CASH COMPENSATION The following table shows, as to the Chief Executive Officer and each of the four other most highly compensated executive officers whose salary plus bonus exceeded $100,000 in fiscal 1993, information concerning compensation paid for services to the Company in all capacities during the fiscal year ended June 30, 1993, as well as total compensation paid to each such individual for the Company's two previous fiscal years (if such person was the Chief Executive Officer or an executive officer, as the case may be, during any part of such fiscal year). The principal positions are those held by the named individual as a corporate officer of the Company on June 30, 1993. Since June 30, 1993, Messrs. Falotti, Wright and Laven have terminated their employment with the Company. Their respective termination dates were: Mr. Falotti, February 8, 1994, Mr. Wright, May 2, 1994 and Mr. Laven, January 31, 1994. SUMMARY COMPENSATION TABLE(1)
ANNUAL COMPENSATION --------------------------------------------- LONG-TERM COMPENSATION OTHER -------------------------------------- ANNUAL AWARDS RESTRICTED ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) STK($) COMPENSATION - ---------------------------------- ---- --------- -------- --------------- ---------- ---------- ------------ Pier Carlo Falotti................ 1993 $500,000 $100,000 $42,000(2) 250,000 $1,750,000(3) $861,500(4) President and Chief Executive Officer Leslie E. Wright.................. 1993 209,167 0 N/A 30,000 N/A Executive Vice President........ 1992 200,000 0 20,000 -- and Chief Financial and......... 1991 186,875 60,000 50,000 -- Administrative Officer Eric D. Carlson................... 1993 220,001 0 1,421 25,000 N/A Executive Vice President........ 1992 200,000 0 20,000 N/A 1991 195,960 60,000 200,000(6) N/A -- Michael A. Laven.................. 1993 198,000 42,000 34,490(7) 25,000 N/A Executive Vice President David Sohm........................ 1993 148,000 0 57,498(8) 0 N/A Vice President.................. 1992 147,000 0 -- 10,000 N/A 1991 134,167 35,000 -- 27,500 N/A
- --------------- (1) Information for fiscal 1992 and 1991 is excluded from the "Other Annual Compensation" and "All Other Compensation" columns pursuant to the SEC's transition rules. (2) Other Annual Compensation represents reimbursements for automobiles outside the Company's standard relocation policy as agreed to in Mr. Falotti's offer of employment. See also "Certain Relationships, Transactions and Arrangements" below. (3) At June 30, 1993, Mr. Falotti held 175,000 shares of restricted stock having a value of $1,881,250. Such shares vest in five equal annual installments on the anniversary of the date of grant. Accordingly, of such shares, 70,000 will vest in under three years from their date of grant. Restricted stock is entitled to receive any dividends paid to holders of Common Stock generally, which dividends are held in escrow until the related shares vest. See also "Certain Relationships, Transactions and Arrangements" below. (4) "All Other Compensation" represents $1,500 in value of Common Stock contributed by the Company pursuant to its 401(k) Plan and $860,000 as the aggregate amount the Company has agreed to provide Mr. Falotti under his employment offer over the first five years of his employment to partially cover the cost of obtaining certain disability and retirement benefits similar to those provided him by his prior employer and related taxes. See also "Certain Relationships, Transactions and Arrangements" below. (5) Represents $1,500 in value of Common Stock contributed by the Company pursuant to its 401(k) Plan. (6) Includes options to purchase 100,000 shares that were granted and canceled in fiscal 1991 in connection with a regrant. (7) Represents provisions of certain amounts and reimbursements of certain expenses (including property management fees) outside the Company's standard relocation policy in connection with Mr. Laven's relocation to the U.S. A-9 31 (8) Represents (i) $40,450 in reimbursements of certain mortgage payment obligations of Mr. Sohm and his wife outside the Company's standard relocation policy and (ii) tax reimbursement payments on his relocation assistance. COMPENSATION PURSUANT TO PLANS The following table sets forth, as to the Named Executive Officers named in the compensation table above and all executive officers at June 30, 1993, as a group, information with respect to options to purchase shares of Common Stock granted and exercised during the fiscal year ended June 30, 1993. As noted above, Messrs. Falotti, Wright and Laven terminated employment with the Company on February 8, 1994, May 2, 1994 and January 31, 1994, respectively. Eric D. Carlson and Gary B. Filler have been granted options since June 30, 1993.
INDIVIDUAL GRANTS(1) ------------------------------------------------ POTENTIAL REALIZABLE % OF TOTAL VALUE AT ASSUMED OPTIONS ANNUAL RATES OF STOCK GRANTED TO PRICE APPRECIATION OPTIONS EMPLOYEES IN EXERCISE FOR OPTION TERM(2) GRANTED FISCAL PRICE EXPIRATION ----------------------- NAME (#) YEAR(3) ($/SH)(4) DATE 5%($) 10%($) - ------------------------------ ------- ------------- --------- ---------- ---------- ---------- Pier Carlo Falotti............ 250,000 24.8% 10.000 07/09/02 $1,572,250 $3,984,250 Leslie E. Wright.............. 30,000 3.0 12.875 07/30/02 242,911 615,583 Eric D. Carlson............... 25,000 2.5 12.875 07/30/02 202,425 512,986 Michael A. Laven.............. 25,000 2.5 12.875 07/30/02 202,425 512,986
- --------------- (1) The material terms of the options described in this table are as follows: The exercise price is determined by the Board of Directors or its Compensation Committee (the "Administrator") and may not be less than 100% of the fair market value of the Common Stock on the date the option is granted. The term of the option is 10 years from the grant date and may be exercised only while the optionee is an employee or a consultant to the Company and for 30 days after termination of the employment or consulting agreement (six months or one year after termination if termination is due to the optionee's permanent disability or death, respectively). The option becomes exercisable as to 25% of the shares covered by the option on the first anniversary of the grant date and as to the balance in 36 monthly installments thereafter. The option becomes fully vested and exercisable in the event of a "change of control", unless the Administrator determines otherwise. A "change of control," for the purposes of this footnote, occurs if a "person" as defined in the Securities Exchange Act of 1934 becomes the direct or indirect beneficial owner of 50% or more of the outstanding Common Stock or the stockholders approve the sale of all or substantially all of the assets of the Company or the merger of the Company with or into another corporation. (2) 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 the future Common Stock price. (3) Based on options to purchase an aggregate of 1,007,200 shares of Common Stock granted during fiscal 1993 to all employees. (4) The Administrator of the Option Plan has broad discretion to amend or exchange outstanding options, including repricing options. The following table shows, as to the Named Executive Officers, information concerning stock options exercised during the fiscal year ended June 30, 1993. As noted above, Messrs. Falotti, Wright and Laven terminated employment with the Company on February 8, 1994, May 2, 1994 and January 31, 1994, respectively. A-10 32 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
SHARES ACQUIRED NUMBER OF VALUE OF UNEXERCISED ON VALUE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT EXERCISE REALIZED(1) FISCAL YEAR-END(#) FISCAL YEAR-END($)(2): --------- ----------- --------------------------- --------------------------- NAME ($) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------------------------ --------- ----------- ----------- ------------- ----------- ------------- Pier Carlo Falotti............ 0 N/A 0 250,000 $ 0 $ 187,500 Leslie E. Wright.............. 29,000 $ 512,750 46,927 50,073 238,960 94,165 Eric D. Carlson............... 27,000 396,563 42,688 60,312 214,321 165,304 Michael A. Laven.............. 23,900 421,112 11,724 51,464 35,971 81,271 David Sohm.................... 15,000 166,250 64,271 13,229 282,911 36,933
- --------------- (1) Value realized is equal to the fair market value of the Company's Common Stock on the date of exercise, minus the exercise price. (2) Value of unexercised options is equal to the fair market value of the Company's Common Stock at the end of fiscal 1993 ($10.75 per share) minus the exercise price. On May 20, 1994, the closing sales price reported on the Nasdaq National Market for a share of the Company's Common Stock was $12.9375. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's officers and directors, and persons who own more than ten percent of the Company's Common Stock, to file reports of initial ownership on Form 3 and changes in ownership on Form 4 or 5 with the Securities and Exchange Commission (the "SEC"). Such officers, directors and ten percent stockholders are also required by SEC rules to furnish the Company with copies of all such forms that they file. The Company has historically prepared and filed the Section 16(a) forms for its officers and directors, based on responses to informational requests sent to such officers and directors at the end of each month. Based on a review of the copies of the Section 16(a) forms received by the Company and written representations from certain officers and directors that no Form 5 was required, the Company believes that, during the period July 1, 1992 through June 30, 1993, all Section 16(a) filing requirements applicable to the Company's officers and directors were complied with, except that the Company filed the following forms late on behalf of the identified officer and director: the Form 4 required of Eric Carlson for the month of November 1992 reporting six transactions was filed two days late; and the Form 4 for Paul C. Ely, Jr. for the month of December 1992 reporting one transaction was filed 17 days late. CERTAIN RELATIONSHIPS, TRANSACTIONS AND ARRANGEMENTS Pier Carlo Falotti: In June 1992, the Company gave Pier Carlo Falotti an employment offer letter pursuant to which he would become the President and Chief Executive Officer of the Company. Until such time as Mr. Falotti obtained U.S. work permits, he provided services as a consultant. Under the employment arrangement, Mr. Falotti was to be paid as follows: $600,000 base annual salary and a $200,000 bonus during his first year of employment (payable $100,000 in fiscal 1993 on his first day of employment and $100,000 at the end of his first year of employment which occurred in fiscal 1994); minimum $800,000 base annual salary and bonus during his second year of employment; and a minimum combined base annual salary and bonus of $700,000 during his third and subsequent years of employment. Under the Company's 1991 Stock Plan, the Board granted Mr. Falotti 175,000 shares of the Company's Common Stock as a stock bonus award (the "Restricted Shares") and options to purchase 250,000 shares of Common Stock. The Restricted Shares vest in five equal annual installments on each of the first five anniversary dates of the grant. The options have standard vesting; i.e., they vest and become exercisable to the extent of 25% of the shares on the first anniversary of the grant, with the balance vesting in 36 monthly installments thereafter. Mr. Falotti was A-11 33 entitled to participate in all of the Company's benefit plans, including its employee stock purchase plan, medical programs and relocation packages. In addition, the Company provided Mr. Falotti interim housing and paid him $42,000 as a one-time automobile allowance. The Company also agreed to provide Mr. Falotti with a payment of $172,000 for each of the first five years of his employment with the Company toward the costs of obtaining disability and retirement benefits similar to those provided under his prior employer's defined benefit pension program and related taxes. The Company also agreed to pay Mr. Falotti an additional sum to reimburse him for the additional U.S. and California income taxes incurred as a result of the reimbursement of relocation expenses and the automobile allowance. The Company agreed that if Mr. Falotti's employment with the Company (or a subsidiary of the Company) is terminated other than by his voluntary resignation and other than within one year following a change of control, it would pay severance on regular pay dates at a rate based on the average of the prior two years' annual base salary and incentive bonus (such average referred to as the "Severance Base"). These severance payments would continue from the date of such termination until the earlier of the date he becomes reemployed or the following anniversaries of his employment termination date: the third anniversary, if termination occurs during his first year of employment; the second anniversary, If termination occurs during his second or third year of employment; and the first anniversary, If the termination occurs thereafter. If Mr. Falotti's employment is terminated within a year following a change of control, the Company, or its successor, will pay him the Severance Base. In addition, in the event of a change of control, the Restricted Shares and the Stock Options will be fully vested on the date of the change of control. A "change of control" for purposes of the arrangements with Mr. Falotti, and for Messrs. Wright and Carlson described below, is defined as the acquisition by a person or group of 50% or more of the Company's Common Stock or a transaction requiring stockholder approval and involving either the sale of all or substantially all of the assets of the Company or the merger of the Company with or into another company. Mr. Falotti resigned from the Company in February 1994. The Company made no severance payments to Mr. Falotti and cancelled 140,000 Restricted Shares, which represented all of the unvested Restricted Shares. Leslie Wright: In November 1989, the Board agreed that all options granted and to be granted to Mr. Wright would become fully exercisable in the event of a change of control. Mr. Wright's employment with the Company terminated on May 2, 1994. No severance payments were made to Mr. Wright. Eric Carlson: In July 1993, Dr. Carlson was granted an option covering 20,000 shares at an exercise price of $10.75, vesting over a period of four years. In February 1994, the Board promoted Dr. Carlson to the position of President and Chief Executive Officer. Pursuant to this promotion, the Board established a $300,000 target incentive bonus for calendar 1994 which would be earned if the Company was profitable. The incentive bonus will be earned earlier during calendar 1994 if Dr. Carlson's employment terminates other than voluntarily or for cause, or if it terminates for any reason following a change of control. For purposes of these arrangements, a change of control means (i) the acquisition by any person or group of persons of 50% or more of the Company's Common Stock, (ii) a transaction requiring shareholder approval and involving either the sale of all or substantially all of the assets of the Company or the merger, consolidation or other combination of the Company with or into a previously unaffiliated entity. The purchase of at least 50% of the Shares pursuant to the Offer will result in a change of control for this purpose. The targeted bonus will also be earned if the Company sells either its Ingres or MANMAN businesses, in which event 50% or 100%, respectively, of the targeted bonus will be earned. Pursuant to his promotion, Dr. Carlson was also granted a stock option covering 250,000 shares with an exercise price of $7.875 per share. This option will vest, on the earliest of (i) March 7, 1999, (ii) on the attainment of certain market valuation or earnings per share levels, or (iii) as to 50% or 100% of the previously unexercised shares upon the sale of Ingres or MANMAN business, respectively. All options described above were granted under the Company's 1991 Stock Plan. In March 1994, shortly after Dr. Carlson's promotion, the Company entered into an agreement (the "Carlson Severance Agreement") with Dr. Carlson, providing benefits in the event of (i) termination of employment, (ii) termination of employment following a change of control, and (iii) change of control without regard to termination of employment. The Carlson Severance Agreement provides that if Dr. Carlson is terminated by the Company for any reason other than cause or voluntary resignation he will receive: (i) a A-12 34 severance payment equal to six months' base salary, (ii) six months of health care benefits, and (iii) executive outplacement services. The Carlson Severance Agreement also provides for increased benefits if, following a change of control, (i) Dr. Carlson's position is terminated, (ii) his duties and responsibilities are significantly reduced, or (iii) his employment terminates by mutual agreement. In such event, Dr. Carlson is eligible to receive a lump sum severance payment equal to one year's salary if the severance occurs within one year following the change of control, nine months' salary if the severance occurs during the second year following the change of control, and six months' salary if the severance occurs thereafter. Dr. Carlson is also then entitled to receive all benefits for the extent of his severance period as well as executive outplacement counseling. Under the Carlson Severance Agreement, Dr. Carlson is also entitled, following a change of control, to full acceleration of vesting with respect to any unvested stock options or restricted stock regardless of whether his employment subsequently terminates. For purposes of the Carlson Severance Agreement, "change of control" is defined as (i) the acquisition by any person or group of persons of 50% or more of the Company's Common Stock or (ii) a transaction requiring shareholder approval involving either the sale of all or substantially all of the assets of the Company or the merger of the Company with or into a previously unaffiliated entity. Because the purchase of at least 50% of the shares of the Company's Common Stock pursuant to the Offer will result in a change of control for purposes of the Carlson Severance Agreement, the stock options granted to Dr. Carlson as described above will vest in full as a result of the purchase of shares of the Company's Common Stock pursuant to the Offer. As an inducement for the Buyer to enter into the Merger Agreement and the transactions contemplated thereunder, Dr. Carlson entered into an agreement with the Company to reduce benefits payable to him by virtue of the Carlson Severance Agreement to a level such that the severance excise tax provisions of the Internal Revenue Code will not be triggered. David Sohm: In fiscal 1993, the Company paid Mr. Sohm $43,556 of relocation expense reimbursement and resettlement allowances associated with a relocation to manage the Company's Data 3 business unit; these payments were in accordance with standard employee relocation policy. In addition, the Company reimbursed Mr. Sohm $57,498 of certain mortgage payment obligations of Mr. Sohm and his wife on the mortgage of his prior residence and on a second mortgage on his new residence and of federal and state taxes resulting from the relocation assistance. During fiscal 1993, the Company stopped the reimbursement of those mortgage payments when it loaned Mr. Sohm $375,000. Mr. Sohm used the proceeds of the loan to repay the second mortgage on his new residence. The $375,000 loan, which bore interest at 5% and matured no later than December 31, 1993, was repaid in full in April 1993 when Mr. Sohm's prior residence was sold. Mr. Sohm ceased being an executive officer of the Company in fiscal 1994. Sandra Kurtzig: In August 1992, the Board fully vested all stock options granted to Ms. Kurtzig when she stepped down as the Company's President and Chief Executive Officer. At that time, the Board also agreed to provide to Ms. Kurtzig and her sons during her lifetime all medical, dental and vision care benefits provided generally to employees of the Company. Ms. Kurtzig has entered into a noncompete agreement with the Company for a two-year period ending August 31, 1994. In September 1993, Ms. Kurtzig resigned from the Board and relinquished her position as Chairman. In September 1993, the Board agreed to provide Ms. Kurtzig at the Company's expense with a secretary and an office at a mutually agreeable location for at least three years. Dennis McGinn: Mr. McGinn was an executive officer of the Company until his employment termination in June 1993. In connection with his termination, the Company paid him six months' base salary and forgave the balance of principal ($80,000) and accrued interest under a five-year $120,000 loan bearing interest at the rate of 8.5% made to him as part of the Company's employment offer in December 1990. The largest amount outstanding under this loan during fiscal 1993 was $80,000. Michael Laven: Mr. Laven's employment with the Company was terminated in January 1994. In connection with the termination, the Company agreed to (a) pay him severance equal to 6 months salary less advances, (b) forgive all principal and interest under his $40,000 note to the Company, (c) continue to reimburse through August 1994 certain of his mortgage interest payments, and (d) continue medical, dental and vision benefits through August 3, 1994. A-13 35 Paul C. Ely, Jr.: On March 10, 1994, the Board authorized the Company to retain Mr. Ely, the Company's Chairman of the Board since February 1994, as a consultant for the purpose of advising senior management on operational and management issues as the Company developed and implemented its new business plan. Mr. Ely is paid a fee of $13,333.33 per month as compensation for such consulting services. In connection with that engagement the Board also granted Mr. Ely an option to purchase 75,000 shares of the Company's Common Stock pursuant to its 1991 Stock Plan. The options have an exercise price of $8.125 per share and were granted as fully exercisable options. On that date, the Board also increased the annual fee payable to Mr. Ely in his role as Chairman to $40,000, payable in quarterly installments. Robert H. Waterman, Jr.: On March 10, 1994, the Board authorized the Company to retain Mr. Waterman, the Company's Vice Chairman of the Board since February 1994, as a consultant for the purpose of advising senior management on operational and management issues as the Company developed and implemented its new business plan. Mr. Waterman is to be paid a fee of $13,333.33 per month as compensation for such consulting services. In connection with that engagement the Board also granted Mr. Waterman an option to purchase 50,000 shares of the Company's Common Stock pursuant to its 1991 Stock Plan. The options have an exercise price of $8.125 per share and were granted as fully exercisable options. On that date, the Board also increased the annual fee payable to Mr. Waterman in his role as Vice Chairman to $30,000, payable in quarterly installments. Gary B. Filler: In February 1994, the Board appointed Mr. Filler to the position of Executive Vice President of Operations and Chief Financial Officer. Mr. Filler's initial base salary was set at $215,000 and he was approved a target incentive bonus for calendar 1994 of $100,000. One-half of the targeted bonus will be earned if the Company reports operating income for the quarter ending June 30, 1994; the other half will be earned if the Company attains certain financial performance targets for the first half of fiscal 1995. In addition, Mr. Filler was granted two stock options (one covering 200,000 shares, the other covering 50,000 shares) covering a total of 250,000 shares with an exercise price of $7.875 per share. These options were scheduled to vest on the earliest of (i) March 7, 1999, (ii) on the attainment of certain market valuation or earnings per share levels, or (iii) as to 50% or 100% of the previously unexercised shares upon the sale of MANMAN or Ingres business, respectively. Except as a result of the Offer, the stock option covering 50,000 shares will not be exercisable unless the Company reports at least one dollar of operating income for the quarter ending June 30, 1994. In March 1994, shortly after Mr. Filler's hire, the Company entered into an agreement with Mr. Filler (the "Filler Severance Agreement") providing Mr. Filler with benefits in the event of (i) termination of employment, (ii) termination of employment following a change of control, and (iii) change of control without regard to termination of employment. The Filler Severance Agreement provides that if Mr. Filler is terminated by the Company for any reason other than cause or voluntary resignation he will receive: (i) a severance payment equal to six months' base salary, (ii) six months of health care benefits, and (iii) executive outplacement services. The Filler Severance Agreement also provides for increased benefits if, following a change of control, (i) Mr. Filler's position is terminated, (ii) his duties and responsibilities are significantly reduced, or (iii) his employment terminates by mutual agreement. In such event, Mr. Filler is eligible to receive a lump sum severance payment equal to one year's salary if the severance occurs within one year following the change of control, nine months' salary if the severance occurs during the second year following the change of control, and six months' salary if the severance occurs thereafter. Mr. Filler is also then entitled to receive all benefits for the extent of his severance period as well as executive outplacement counseling. Under the Filler Severance Agreement, Mr. Filler is also entitled, following a change of control, to full acceleration of vesting with respect to any unvested stock options or restricted stock regardless of whether his employment subsequently terminates. For purposes of the Filler Severance Agreement, "change of control" is defined as (i) the acquisition by any person or group of persons of 50% or more of the Company's Common Stock or (ii) a transaction requiring shareholder approval involving either the sale of all or substantially all of the assets of the Company or the merger of the Company with or into a previously unaffiliated entity. All of the options granted to Mr. Filler were granted under the Company's 1991 Stock Plan and will vest in full as a result of the purchase of at least 50% of the shares of the Company's Common Stock pursuant to the Offer described in this Information Statement. A-14 36 Thomas I. Unterberg: Unterberg Harris, one of the Company's investment banking firms, will be entitled to a fee of .65% of the total consideration paid by Buyer in connection with the Offer and the Merger. Mr. Unterberg, a director on the Company's Board of Directors, is a principal in Unterberg Harris. Electronic Data Systems Corporation ("EDS"): The Company has entered into an agreement with EDS pursuant to which EDS provides the Company and its subsidiaries with certain information systems services. Each of the Company and Ingres have also entered into agreements pursuant to which each gives EDS the right to relicense certain software products in return for the payment of license fees. Hewlett-Packard Company ("HP"): The Company and HP have entered into agreements permitting the Company to resell certain hardware and software products of HP in conjunction with the license by the Company of certain of its MANMAN software products. REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS During fiscal 1993, directors Ely and Waterman served on the Compensation Committee of the Board of Directors (the "Committee"). Neither was an employee of the Company. Ms. Kurtzig served on the Committee from June 1993 until her resignation as Chairman of the Company in September 1993. Acting under authority of the Board of Directors, the Committee is responsible for: - Determining compensation levels for the Company's chief executive officer ("CEO") and the other executive officers. - Establishing the Company's general compensation policy for all executive officers. - Administering the various stock plans of the Company, including the grant of stock options and other securities under those plans. - Administering the Company's Incentive Bonus Plan for the Company's U.S.-based employees (the "Bonus Plan"), including approving target bonus amounts, performance criteria and actual payment of bonuses to the Company's officers. The objectives of the Company's executive compensation program are to motivate senior employees to perform at optimal levels to achieve and exceed Company goals, to align the interests of executive officers with successful performance by the Company, and to attract and retain highly productive and qualified personnel. The Committee believes that the compensation of the CEO and other executive officers should be significantly influenced by performance. Accordingly, a substantial portion of each executive's compensation is contingent on attainment of certain internal financial targets by the Company and the particular business unit for which the executive officer is responsible, as well as on meeting specific performance goals. COMPENSATION OF EXECUTIVE OFFICERS For fiscal 1993, the Company's compensation program for executive officers was comprised of base salary, annual cash bonuses, stock options under the Company's 1991 Stock Plan and various other benefits, including benefits generally available to all employees of the Company. See "Information Concerning the Company -- Employee Benefit Plans" above. This program provided an overall level of compensation designed to be competitive within the high technology industry. At the start of fiscal 1993, the Company's human resources department, with the assistance of an independent consulting firm selected by the Company's human resources department, gathered and analyzed executive compensation data for a group of companies in the same industry segment and with similar revenue levels to those of the Company. Executive level positions for the Company were matched to comparable survey positions and competitive market levels were determined for base salary, targeted incentives and targeted total cash compensation. The CEO and human resources management personnel reviewed that competitive market data, together with each executive's performance and contribution during the prior fiscal year, his performance targets for fiscal 1994 and the performance by the Company and individual business units against targets for the prior fiscal year. A-15 37 The Bonus Plan for fiscal 1993 was reviewed with the full Board of Directors. For fiscal 1994, the Bonus Plan was reviewed by the Committee. The Bonus Plan is designed to provide a direct incentive to executive officers and other participants to achieve the fiscal year financial goals established for the Company and their respective business units, together with their respective individual performance objectives (e.g., meeting specific product release schedules). Individual performance objectives are weighted by relative importance and have minimum performance thresholds which must be met before any portion of the bonus for that objective will be paid. For fiscal 1993, the Company and business unit performance measures were based on operating income and gross margin targets. At the beginning of fiscal 1993, the CEO recommended base salaries and target bonus levels for each executive officer (other than the CEO) to the Board of Directors. The Board reviewed the recommendations, performance and market data and established base salary levels and target bonuses for each executive officer. (A similar process was followed with respect to fiscal 1994, except that the Committee reviewed and established the base salary and targets.) At the close of fiscal 1993, the CEO evaluated the performance of each executive officer against the officer's objectives and recommended to the Committee the amount of the bonus based on attainment of those objectives. During fiscal 1993, the Committee granted stock options to the executive officers pursuant to the Company's 1991 Stock Plan. Some options were granted at the beginning of the fiscal year in connection with establishing the officer's compensation package for fiscal 1993, some were granted as a result of the promotion of an officer and others were granted at the end of fiscal 1993 during the Committee's review of fiscal 1993 performance. The 1991 Stock Plan is designed to further align the interests of executives and stockholders by creating a link between executive compensation and stockholder return and to give optionees the opportunity to develop an ownership position in the Company's Common Stock. Factors considered in determining whether to grant an option to an executive officer and the size of the grant include practices of the Company's competitors, the performance, contribution and responsibility levels of the executive officer, the level of vested and unvested options held by that person before and after the grant, and the estimated value of the options as a percent of the overall compensation package for the executive officer. Stock options are exercisable at a price equal to the fair market value of the Company's Common Stock at the date of grant, generally vest 25% on the first anniversary of the grant date and the balance monthly thereafter, are fully exercisable on the fourth anniversary of the grant date and have a maximum term of ten years. CEO COMPENSATION Mr. Falotti's compensation for fiscal 1993 was established pursuant to an offer letter executed in July 1993 and approved by the Board of Directors. The offer provided that his fiscal 1993 compensation included a base salary at the annual rate of $600,000 and a $200,000 hiring bonus; the bonus was payable one-half on his first day of employment by the Company and the balance on the last day of his first year of employment. Pursuant to the offer, Mr. Falotti received 175,000 shares of Common Stock and options to purchase 250,000 shares of Common Stock, both under the 1991 Stock Plan. The 175,000 restricted shares are subject to vesting at the rate of 20% on each anniversary of their grant. Mr. Falotti was also provided certain assistance in connection with the relocation of him and his family from Switzerland to the United States, including interim housing allowances and the provision of $42,000 for automobiles. Pursuant to the offer letter, Mr. Falotti was to have been paid an additional $172,000 during each of his first five years of employment by The ASK Group. This additional amount was to partially cover the cost of obtaining certain disability and retirement benefits similar to those provided him by his prior employer and related taxes. In accordance with the offer letter, Mr. Falotti's compensation package for fiscal 1994 was to have been a $600,000 annual base salary plus an incentive bonus. The incentive bonus has quarterly and annual elements. Mr. Falotti could earn up to $100,000 in quarterly bonuses, depending on the number of quarters in which specified minimum operating income levels are met. In addition, Mr. Falotti was to have been paid 5% of the Company's fiscal 1994 operating A-16 38 income in excess of a specified minimum level. In accordance with his offer letter, Mr. Falotti was guaranteed to be paid a minimum of $200,000 of these incentive bonuses for fiscal 1994. MEMBERS OF THE COMPENSATION COMMITTEE Paul C. Ely, Jr. Robert H. Waterman, Jr. DATED: September 24, 1993 COMPANY STOCK PRICE PERFORMANCE GRAPH The following graph shows a five-year comparison of cumulative total stockholder return, calculated on a dividend reinvested basis, for The ASK Group, Inc., the NASDAQ Composite (U.S. only) index, and the NASDAQ (Computer & Data Processing Stocks). The graph assumes that $100 was invested in the Company's Common Stock and in the other two indices on June 30, 1988 (the last trading day of fiscal 1988). The stock price performance shown on the graph following is not necessarily indicative of future price performance. In accordance with the provisions of Section 232.304 of Regulation S-T, a paper copy of the stock price performance graph which appears here has been furnished to the SEC under cover of Form SE dated May 25, 1994. A-17 39 EXHIBIT INDEX
EXHIBIT PAGE NO. EXHIBIT NAME NO. - ------------ ------------------------------------------------------------------------- ----- Exhibit 1 Agreement and Plan of Merger, dated as of May 18, 1994, by and among Buyer, Merger Subsidiary and the Company................................. Exhibit 2 Form of Press Release issued by the Company and Buyer on May 19, 1994.... Exhibit 3 Pages 2-13 of the Company's Proxy Statement, dated October 22, 1993, for the Company's Annual Meeting of Stockholders held on November 18, 1993... Exhibit 4 Amendment to Common Shares Rights Agreement, dated May 18, 1994.......... Exhibit 5 Stockholder Option Agreement, dated May 18, 1994......................... Exhibit 6 Form of Indemnity Agreement between the Company and certain of its officers and directors................................................... Exhibit 7 Agreement between Dr. Carlson and the Company, dated March 18, 1994 (the "Carlson Severance Agreement")........................................... Exhibit 8 Agreement between Dr. Carlson and the Company, dated February 26, 1994 (the "Carlson Incentive Bonus Agreement") Exhibit 9 Excise Tax Agreement, dated May 18, 1994................................. Exhibit 10 Agreement between Mr. Filler and the Company, dated February 26, 1994 (the "Filler Offer Letter") Exhibit 11 Agreement between Mr. Filler and the Company, dated March 3, 1994 (the "Filler Severance Agreement")............................................ Exhibit 12 The Common Stock Purchase Agreement among the Company, EDS and HP, dated August 31, 1990.......................................................... Exhibit 13 Consent Letter Agreement between the Company and EDS, dated May 18, 1994..................................................................... Exhibit 14 Consent Letter Agreement between the Company and HP, dated May 18, 1994..................................................................... Exhibit 15 Waiver Letter Agreement between the Company and EDS, dated May 18, 1994..................................................................... Exhibit 16 Waiver Letter Agreement between the Company and HP, dated May 18, 1994... Exhibit 17 Form of Letter to Stockholders, dated May 25, 1994*...................... Exhibit 18 Opinion of Bear, Stearns & Co. Inc., dated May 18, 1994*................. Exhibit 19 Engagement Letter between the Company and Unterberg Harris, dated January 27, 1994.................................................................
- --------------- * Included in materials being distributed to stockholders of the Company. 40 ANNEX B May 18, 1994 Board of Directors The ASK Group, Inc. 2880 Scott Boulevard Santa Clara, California 95050 Dear Sirs: We understand that Computer Associates International, Inc. ("Computer Associates") has offered to acquire all of the outstanding shares of common stock (the "Shares") of The ASK Group, Inc. ("ASK"). You have provided us with the merger agreement among ASK, Computer Associates, and Speedbird Merge, Inc. ("Merger Subsidiary") in substantially final form (the "Merger Agreement"). Pursuant to the Merger Agreement, Merger Subsidiary will promptly commence a tender offer for all of the Shares at a cash price of $13.25 per share, to be followed as promptly as practical by a cash merger at the same price (collectively, the "Transaction"). You have asked us to render our opinion as to whether the Transaction is fair, from a financial point of view, to the shareholders of ASK. In the course of our analysis for rendering this opinion, we have: 1. reviewed the Merger Agreement; 2. reviewed ASK's Annual Reports to Shareholders and Annual Reports on Form 10-K for the years ended June 30, 1991 through 1993, and its Quarterly Reports on Form 10-Q for the periods ended September 30, 1993, December 31, 1993, and March 31, 1994; 3. reviewed certain operating and financial information, including projections, provided to us by ASK's management relating to its business prospects; 4. met with certain members of ASK's senior management to discuss its operations, historical financial statements and future prospects; 5. considered our discussions with certain potential buyers for all or part of ASK; 6. met with certain members of ASK's senior management to discuss the contacts made by Unterberg Harris and ASK to potential buyers for all or part of ASK; 7. reviewed historical market prices and trading volume of the Shares; 8. reviewed publicly available financial information and stock market performance data of other publicly held companies which we deemed generally comparable to ASK; 9. reviewed the financial terms of certain other recent acquisitions of companies which we deemed generally comparable to ASK; and 10. conducted such other studies, analyses, inquiries and investigations as we deemed appropriate. In the course of our review, we have relied upon and assumed, without independent verification, the accuracy and completeness of the financial data and other information provided to us by ASK, and we have further relied upon the assurances of management of ASK that they are unaware of any facts that would make the information provided to us incomplete or misleading. In arriving at our opinion, we have not performed or obtained any independent appraisal of the assets of ASK. Based on the foregoing, it is our opinion that the Transaction is fair, from a financial point of view, to the shareholders of ASK. Very truly your, BEAR, STEARNS & CO. INC. By: /s/ Michael Grimes
EX-1 2 EX-1 1 [EXECUTION COPY] Exhibit 1 ________________________________________________________________________________ AGREEMENT AND PLAN OF MERGER dated as of May 18, 1994 among THE ASK GROUP, INC. COMPUTER ASSOCIATES INTERNATIONAL, INC. and SPEEDBIRD MERGE, INC. ________________________________________________________________________________ 2 TABLE OF CONTENTS
PAGE ARTICLE I - THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2. Company Action . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3. Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE II - THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.1. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.2. Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . 4 2.3. Surrender and Payment . . . . . . . . . . . . . . . . . . . . . . . 4 2.4. Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.5. Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE III - THE SURVIVING CORPORATION . . . . . . . . . . . . . . . . . . . . . . . 7 3.1. Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . 7 3.2. Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.3. Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . 7 4.1. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . 7 4.2. Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . 8 4.3. Governmental Authorization . . . . . . . . . . . . . . . . . . . . . 8 4.4. Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.5. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.6. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.7. SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.8. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 10 4.9. Disclosure Documents . . . . . . . . . . . . . . . . . . . . . . . . 11 4.10. Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . 11 4.11. No Undisclosed Material Liabilities . . . . . . . . . . . . . . . . 13 4.12. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.13. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.14. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.15. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . 15 4.16. Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-i- 3
PAGE 4.17. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . 16 4.18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . 16 4.19. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . 17 4.20. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 17 4.21. Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . 18 5.1. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . 18 5.2. Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . 18 5.3. Governmental Authorization . . . . . . . . . . . . . . . . . . . . . 18 5.4. Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 18 5.5. Disclosure Documents . . . . . . . . . . . . . . . . . . . . . . . . 19 5.6. Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 5.7. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE VI - COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . 19 6.1. Conduct of the Company . . . . . . . . . . . . . . . . . . . . . . . 19 6.2. Stockholder Meeting; Proxy Material . . . . . . . . . . . . . . . . 21 6.3. Access to Information . . . . . . . . . . . . . . . . . . . . . . . 21 6.4. Other Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 6.5. Notices of Certain Events . . . . . . . . . . . . . . . . . . . . . 22 6.6. Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 22 6.7. Fair Price Structure . . . . . . . . . . . . . . . . . . . . . . . . 22 6.8. Subsidiary Officers and Directors . . . . . . . . . . . . . . . . . 23 6.9. Employee Stock Purchase Plans . . . . . . . . . . . . . . . . . . . 23 ARTICLE VII - COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . 23 7.1. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 23 7.2. Obligations of Merger Subsidiary . . . . . . . . . . . . . . . . . . 24 7.3. Voting of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 24 7.4. Director and Officer Liability . . . . . . . . . . . . . . . . . . . 24 7.5. Assumed Options . . . . . . . . . . . . . . . . . . . . . . . . . . 25 ARTICLE VIII - COVENANTS OF BUYER AND THE COMPANY . . . . . . . . . . . . . . . . . . 25 8.1. Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 25 8.2. Certain Filings . . . . . . . . . . . . . . . . . . . . . . . . . . 25 8.3. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . 26 8.4. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 26 8.5. Section 16 Stock Options . . . . . . . . . . . . . . . . . . . . . . 26
-ii- 4
PAGE ARTICLE IX - CONDITIONS TO THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . 26 9.1. Conditions to the Obligations of Each Party . . . . . . . . . . . . 26 9.2. Conditions to the Obligations of Buyer and Merger Subsidiary . . . . 27 ARTICLE X - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 10.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 10.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . 28 ARTICLE XI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 11.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 11.2. Survival of Representations and Warranties . . . . . . . . . . . . . 29 11.3. Amendments; No Waivers . . . . . . . . . . . . . . . . . . . . . . . 29 11.4. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 30 11.5. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 31 11.6. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 11.7. Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . . 31 ANNEX I Conditions
-iii- 5 AGREEMENT AND PLAN OF MERGER, dated as of May 18, 1994, among The ASK Group, Inc., a Delaware corporation (the "Company"), Computer Associates International, Inc., a Delaware corporation ("Buyer"), and Speedbird Merge, Inc., a Delaware corporation and a wholly owned subsidiary of Buyer ("Merger Subsidiary"). The parties hereto agree as follows: ARTICLE I THE OFFER SECTION 1.1. The Offer. (a) Provided that nothing shall have occurred that would result in a failure to satisfy any of the conditions set forth in Annex I hereto, Merger Subsidiary shall, and Buyer shall cause Merger Subsidiary to, as promptly as practicable after the date hereof, but in no event later than five business days following the public announcement of the terms of this Agreement, commence an offer (the "Offer") to purchase any and all of the outstanding shares of common stock, $0.01 par value (the "Shares"), including the associated Rights (as defined in Section 4.5), of the Company at a price of $13.25 per Share (including such associated Rights), net to the seller in cash. The Offer shall be subject to the condition that there shall be validly tendered in accordance with the terms of the Offer prior to the expiration date of the Offer and not withdrawn a number of Shares which, together with the Shares then owned by Buyer and Merger Subsidiary, represents at least a majority of the total number of outstanding Shares, assuming the exercise of all outstanding options, rights and convertible securities (if any) and the issuance of all Shares that the Company is obligated to issue (such total number of outstanding Shares being hereinafter referred to as the "Fully Diluted Shares") (the "Minimum Condition") and to the other conditions set forth in Annex I hereto. Buyer and Merger Subsidiary expressly reserve the right to waive any of the conditions to the Offer (other than the Minimum Condition) and to make any change in the terms or conditions of the Offer; provided that no change may be made which changes the form of consideration to be paid or decreases the price per Share or the number of Shares sought in the Offer or which imposes conditions to the Offer in addition to those set forth in Annex I or which materially adversely (from the holders of the Shares' point of view) changes the conditions to the Offer set forth in Annex I. Assuming the prior satisfaction or waiver of the conditions to the Offer, Buyer shall cause Merger Subsidiary to accept for payment, in accordance with the terms of the Offer, all Shares tendered pursuant to the Offer as soon as legally permitted after the commencement thereof and to pay for all such Shares as promptly as practicable after acceptance; provided, however, that Buyer may extend the Offer for a period of time of not more than 15 Business Days to meet the objective (but not the condition) that there shall be validly tendered, in accordance with the terms of the Offer, prior to the expiration date of the Offer (as so extended) and not withdrawn a number of Shares, which, together with Shares then owned by Buyer and Merger Subsidiary, represents at least 90% of the Fully Diluted Shares. (b) As soon as practicable on the date of commencement of the Offer, Buyer and Merger Subsidiary shall file with the SEC (as defined in Section 4.7) a Tender Offer Statement on 6 Schedule 14D-l with respect to the Offer which will contain the offer to purchase and form of the related letter of transmittal (together with any supplements or amendments thereto, collectively the "Offer Documents"). Buyer, Merger Subsidiary and the Company each agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect. Buyer and Merger Subsidiary agree to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-l prior to its being filed with the SEC. Buyer and Merger Subsidiary agree to provide the Company and its counsel with any comments that Buyer or Merger Subsidiary or their counsel may receive from the SEC or the staff of the SEC with respect to such document promptly after receipt thereof. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Merger Subsidiary will purchase by accepting for payment and will pay for Shares validly tendered and not properly withdrawn, as promptly as practicable after the expiration date of the Offer. SECTION 1.2. Company Action. (a) The Company hereby consents to the Offer and represents that its Board of Directors, at a meeting duly called and held and acting on the unanimous recommendation of the Board of Directors of the Company, has (i) unanimously determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger (as defined in Section 2.1) and the Stockholder Option Agreement dated as of May 18, 1994 (the "Stockholder Option Agreement") among the Stockholders of the Company that are named therein (the "Stockholders"), are fair to and in the best interest of the Company's stockholders, (ii) unanimously approved this Agreement and the transactions contemplated hereby, including the Offer and the Merger and the Stockholder Option Agreement, which approval satisfies in full the requirements of the General Corporation Law of the State of Delaware (the "Delaware Law"), and (iii) unanimously resolved to recommend acceptance of the Offer and approval and adoption of this Agreement and the Merger by its stockholders. The Company further represents that Bear, Stearns & Co. Inc. has delivered to the Company's Board of Directors its written opinion that the Offer and the Merger, collectively, are fair from a financial point of view, to the shareholders of the Company. The Company has been advised that all of its directors and executive officers intend either to tender their Shares (other than Shares subject to the Stockholder Option Agreement) pursuant to the Offer (unless to do so would subject such person to liability under Section 16(b) of the Exchange Act) or to vote in favor of the Merger. The Company will promptly furnish Buyer and Merger Subsidiary with a list of its stockholders, mailing labels and any available listing or computer file containing the names and addresses of all record holders of Shares and lists of securities positions of Shares held in stock depositories, in each case true and correct as of the most recent practicable date, and will provide to Buyer and Merger Subsidiary such additional information (including, without limitation, updated lists of stockholders, mailing labels and lists of securities positions) and such other assistance as Buyer or Merger Subsidiary may reasonably request in connection with the Offer. (b) As soon as practicable on the day that the Offer is commenced, the Company will file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") which shall reflect the recommendations of the Company's Board of Directors referred to above. The Company, Buyer and Merger Subsidiary each agrees promptly to correct any -2- 7 information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect. The Company agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. Buyer and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 prior to its being filed with the SEC. The Company agrees to provide Buyer and Merger Subsidiary and their counsel with any comments that the Company or its counsel may receive from the SEC or the staff of the SEC with respect to such document promptly after receipt thereof. SECTION 1.3. Directors. (a) Effective upon the acceptance for payment by Merger Subsidiary of such number of Shares which satisfies the Minimum Condition, Buyer shall be entitled to designate the number of directors, rounded up to the next whole number, on the Company's Board of Directors that equals the product of (i) the total number of directors on the Company's Board of Directors (giving effect to the election of any additional directors pursuant to this Section) and (ii) the percentage that the number of Shares owned by Buyer or Merger Subsidiary (including Shares accepted for payment) bears to the total number of Shares outstanding, and the Company shall take all action necessary to cause Buyer's designees to be elected or appointed to the Company's Board of Directors, including, without limitation, increasing the number of directors, and seeking and accepting resignations of incumbent directors. At such times, the Company will use its best efforts to cause individuals designated by Buyer to constitute the same percentage as such individuals represent on the Company's Board of Directors of (x) each committee of the Board (other than any committee of the Board established to take action under this Agreement), (y) each board of directors of each Subsidiary (as defined in Section 4.6) and (z) each committee of each such board. Notwithstanding the foregoing, until such time as Buyer or Merger Subsidiary acquires a majority of the outstanding Shares on a fully diluted basis, the Company shall use its best efforts to ensure that all of the members of the Board of Directors and such boards and committees as of the date hereof who are not employees of the Company shall remain members of the Board of Directors and such boards and committees until the Effective Time (as defined in Section 2.1). Following the election or appointment of Buyer's designees pursuant to this Section 1.3 and prior to the Effective Time, any amendment or termination of this Agreement, extension for the performance or waiver of the obligations or other acts of Buyer or Merger Subsidiary or waiver of the Company's rights hereunder, shall require the approval of a majority of the directors who are neither designees of Buyer nor employees of the Company. (b) The Company's obligations to appoint designees to the Board of Directors shall be subject to Section 14(f) of the Exchange Act (as defined in Section 4.3) and Rule 14f-l promulgated thereunder. The Company shall promptly take all actions required pursuant to Section 14(f) and Rule 14f-l in order to fulfill its obligations under this Section and shall include in the Schedule 14D-9 such information with respect to the Company and its officers and directors as is required under Section 14(f) and Rule 14f-l to fulfill its obligations under this Section 1.3. Buyer will supply to the Company in writing and be solely responsible for any information with respect to itself and its nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1. -3- 8 ARTICLE II THE MERGER SECTION 2.1. The Merger. (a) At the Effective Time, Merger Subsidiary shall be merged (the "Merger") with and into the Company in accordance with the Delaware Law, whereupon the separate existence of Merger Subsidiary shall cease, and the Company shall be the surviving corporation (the "Surviving Corporation"). At the election of Buyer, the Merger may be structured so that the Company shall be merged with and into Merger Subsidiary with the result that Merger Subsidiary shall be the "Surviving Corporation". (b) As soon as practicable after satisfaction or, to the extent permitted hereunder, waiver of all conditions to the Merger, the Company and Merger Subsidiary will file a certificate of merger with the Secretary of State of the State of Delaware and make all other filings or recordings required by Delaware Law in connection with the Merger. The Merger shall become effective at such time as the certificate of merger is duly filed with the Secretary of State of the State of Delaware or at such later time as is specified in the certificate of merger (the "Effective Time"). (c) From and after the Effective Time, the Surviving Corporation shall possess all the rights, privileges, powers and franchises and be subject to all of the restrictions, disabilities and duties of the Company and Merger Subsidiary, all as provided under Delaware Law. SECTION 2.2. Conversion of Shares. At the Effective Time: (a) each Share held by the Company as treasury stock or owned, directly or indirectly, by Buyer, Merger Subsidiary or any subsidiary of either of them immediately prior to the Effective Time shall be cancelled, and no payment shall be made with respect thereto; (b) each share of common stock of Merger Subsidiary outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation with the same rights, powers and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation; and (c) each Share outstanding immediately prior to the Effective Time shall, except as otherwise provided in Section 2.2(a) or as provided in Section 2.4 with respect to Shares as to which appraisal rights have been exercised, be converted into the right to receive $13.25 in cash or any higher price paid for each Share in the Offer, without interest (the "Merger Consideration"). SECTION 2.3. Surrender and Payment. (a) Prior to the Effective Time, Buyer shall appoint an agent (the "Exchange Agent") for the purpose of exchanging certificates representing Shares for the Merger Consideration. Buyer will make available to the Exchange Agent, as needed, the Merger Consideration to be paid in respect of the Shares. For purposes of determining the -4- 9 Merger Consideration to be made available, Buyer shall assume that no holder of Shares will perfect his right to appraisal of his Shares. Promptly after the Effective Time, Buyer will send, or will cause the Exchange Agent to send, to each holder of Shares at the Effective Time a letter of transmittal for use in such exchange (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the certificates representing Shares to the Exchange Agent). (b) Each holder of Shares that have been converted into a right to receive the Merger Consideration, upon surrender to the Exchange Agent of a certificate or certificates representing such Shares, together with a properly completed letter of transmittal covering such Shares and such other documents as may be requested, will be entitled to receive the Merger Consideration payable in respect of such Shares. Until so surrendered, each such certificate shall, after the Effective Time, represent for all purposes, only the right to receive such Merger Consideration. No interest shall be paid or accrue on the Merger Consideration. (c) If any portion of the Merger Consideration is to be paid to a Person other than the registered holder of the Shares represented by the certificate or certificates surrendered in exchange therefor, it shall be a condition to such payment that the certificate or certificates so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such payment shall pay to the Exchange Agent any transfer or other taxes required as a result of such payment to a Person other than the registered holder of such Shares or establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable. For purposes of this Agreement, "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or any agency or instrumentality thereof. (d) After the Effective Time, there shall be no further registration of transfers of Shares. If, after the Effective Time, certificates representing Shares are presented to the Surviving Corporation, they shall be cancelled and exchanged for the consideration provided for, and in accordance with the procedures set forth, in this Article II. (e) Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 2.3(a) that remains unclaimed by the holders of Shares six months after the Effective Time shall be returned to Buyer, upon demand, and any such holder who has not exchanged his Shares for the Merger Consideration in accordance with this Section prior to that time shall thereafter look only to Buyer for payment of the Merger Consideration in respect of his Shares. Notwithstanding the foregoing, Buyer shall not be liable to any holder of Shares for any amount paid to a public official pursuant to applicable abandoned property laws. Any amounts remaining unclaimed by holders of Shares two years after the Effective Time (or such earlier date immediately prior to such time as such amounts would otherwise escheat to or become property of any governmental entity) shall, to the extent permitted by applicable law, become the property of Buyer free and clear of any claims or interest of any Person previously entitled thereto. -5- 10 (f) Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 2.3(a) to pay for Shares for which appraisal rights have been perfected shall be returned to Buyer, upon demand. SECTION 2.4. Dissenting Shares. Notwithstanding Section 2.2, Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Shares in accordance with Section 262 of the Delaware Law ("Dissenting Shares") shall not be converted into a right to receive the Merger Consideration, but instead (unless such holder fails to perfect or withdraws or otherwise loses his right to appraisal) the holders of Dissenting Shares shall be entitled to receive such consideration as shall be determined pursuant to Section 262 of the Delaware Law. If after the Effective Time such holder fails to perfect or withdraws or loses his right to appraisal, such Shares shall be treated as if they had been converted as of the Effective Time into a right to receive the Merger Consideration. The Company shall give Buyer prompt notice of any demands received by the Company for appraisal of Shares, and Buyer shall have the right to participate in all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Buyer, make any payment with respect to, or settle or offer to settle, any such demands. SECTION 2.5. Stock Options. (a) The Company agrees to cause stock options under its 1991 United Kingdom Stock Option Plan not to become exercisable as to Optioned Stock (within the meaning of such plan) not yet exercisable as of the date of the notification prescribed in Rule 12(c) of such plan. Upon the acceptance of shares in the Offer, stock options and stock purchase rights under its 1991 Stock Plan shall accelerate and become vested in full. Upon Buyer's written request, the Company agrees to cause stock options and stock purchase rights under its 1991 Stock Plan not to be terminated in exchange for a cash payment. (b) Prior to the Effective Time, Buyer shall designate in writing to the Company those employee and director stock options and stock purchase rights to purchase Shares ("Plan Options"), or portions thereof, that Buyer desires be terminated prior to the Effective Time. Buyer's designation of options or portions thereof to be so terminated shall be by uniform classification on the basis of the particular plan under which the option was granted. To the extent so designated by Buyer, the Company will exercise any rights under its stock option or compensation plans or arrangements to accelerate then outstanding Plan Options and cause them to expire prior to the Effective Time consistent with the plans under which such Plan Options were granted. (c) With respect to Plan Options which the Buyer does not designate for termination pursuant to Section 2.5(b), the Company shall take such action as shall be necessary to provide for the Buyer's assumption of such options as set forth in Section 7.5 hereof. -6- 11 ARTICLE III THE SURVIVING CORPORATION SECTION 3.1. Certificate of Incorporation. The certificate of incorporation of Merger Subsidiary in effect at the Effective Time shall be the certificate of incorporation of the Surviving Corporation until amended in accordance with applicable law, except that the name of the Surviving Corporation shall be changed to the name of the Company. SECTION 3.2. Bylaws. The bylaws of Merger Subsidiary in effect at the Effective Time shall be the bylaws of the Surviving Corporation until amended in accordance with applicable law. SECTION 3.3. Directors and Officers. From and after the Effective Time, until successors are duly elected or appointed and qualified in accordance with applicable law, (i) the directors of Merger Subsidiary at the Effective Time shall be the directors of the Surviving Corporation, and (ii) the officers of the Company at the Effective Time shall be the officers of the Merger Subsidiary. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Buyer that except, in the case of any representation and warranty below, to the extent described under a caption identifying such representation and warranty in the Company Disclosure Letter dated the date of this Agreement and furnished by the Company to Buyer on the date of this Agreement (the "Company Disclosure Letter"): SECTION 4.1. Corporate Existence and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on the condition (financial or otherwise), business, assets, results of operations or prospects of the Company and the Subsidiaries (as defined in Section 4.6) taken as a whole except that occurrences due solely to a disruption of the Company's or its Subsidiary's businesses solely as a result of any rumors, speculation, or announcement of a potential merger involving the Company or the execution of this Agreement and the Merger shall be excluded from consideration for purposes of the effect of an action or inaction on the Company and its Subsidiaries, taken as a whole (a "Material Adverse Effect"). The Company has heretofore delivered -7- 12 to Buyer true and complete copies of the certificate of incorporation and bylaws as currently in effect of the Company and each of its Subsidiaries. SECTION 4.2. Corporate Authorization. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby are within the Company's corporate powers and, except for any required approval by the Company's stockholders in connection with the consummation of the Merger, have been duly authorized by all necessary corporate action. This Agreement constitutes a valid and binding agreement of the Company. SECTION 4.3. Governmental Authorization. The execution, delivery and performance by the Company of this Agreement and the consummation of the Merger by the Company require no action by or in respect of, or filing with, any federal, state, local or foreign governmental body, agency, official or authority other than (i) the filing of a certificate of merger in accordance with Delaware Law; (ii) compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"); (iii) compliance with any applicable requirements of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder (the "Exchange Act"); and (iv) such notices, reports, registrations, declarations, filings, waivers, consents, approvals, orders, or authorizations, the absence of which would not, individually or in the aggregate, have a Material Adverse Effect or adversely affect Buyer or its subsidiaries. SECTION 4.4. Non-Contravention. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby do not and will not (i) contravene or conflict with the certificate of incorporation or bylaws of the Company, (ii) assuming compliance with the matters referred to in Section 4.3, contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to the Company or any Subsidiary, (iii) constitute a default under or give rise to a right of termination, cancellation or acceleration of any right or obligation of the Company or any Subsidiary or to a loss of any benefit to which the Company or any Subsidiary is entitled under any provision of any agreement, contract or other instrument binding upon the Company or any Subsidiary or any license, franchise, permit or other similar authorization held by the Company or any Subsidiary, or (iv) result in the creation or imposition of any Lien on any asset of the Company or any Subsidiary (other than in the case of clauses (iii) and (iv) above and with respect to agreements, instruments, contracts, permits or similar authorizations (other than debt instruments or agreements, licenses of assets to the Company or any Subsidiary, exclusive licenses or distribution agreements or arrangements, or licenses or distribution agreements or arrangements which, by their terms, provide for payments to the Company or any Subsidiary of $2,000,000 or more per annum), such defaults, breaches, losses, rights of termination, cancellation or acceleration, or Liens as to which requisite waivers have been obtained or which individually or in aggregate could not reasonably be expected to have a Material Adverse Effect). For purposes of this Agreement, "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. -8- 13 SECTION 4.5. Capitalization. The authorized capital stock of the Company consists of 40,000,000 shares of Common Stock, par value of $0.01 per share ("Common Stock"). As of May 17, 1994, 23,479,624 shares of Common Stock are issued and outstanding, including associated Common Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of August 15, 1990, as amended (the "Rights Agreement"), between the Company and Bank of Boston, as Rights Agent. As of the date hereof, (A) 3,400,000 shares are reserved for issuance pursuant to the 1982 Stock Option Plan (the "1982 Option Plan"), of which options to purchase 594,299 shares are outstanding and no shares remain available for future grant; (B) 3,200,000 shares are reserved for issuance pursuant to the 1991 Stock Plan (the "1991 Stock Plan"), of which options to purchase 1,827,012 shares are outstanding and 1,337,307 shares remain available for future grant; (C) 150,000 shares are reserved for issuance to non-employee directors of the Company pursuant to the 1986 Directors Stock Option Plan (the "1986 Director Plan"), of which options to purchase 64,200 shares are outstanding and options to purchase 49,800 shares remain available for future grant; (D) 500,000 shares are reserved for issuance pursuant to the 1993 Employee Stock Purchase Plan (the "1993 ESPP"), of which 344,567 shares remain available for future grant; (E) 250,000 shares are reserved for issuance pursuant to the 1992 Overseas Employee Stock Purchase Plan (the "1992 ESPP"), of which 133,179 shares remain available for future grant; and (F) options to purchase 437,754 shares are outstanding under the Ingres Option Plans and no shares remain available for future grant. All outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable. Except as set forth in this Section and except for changes since May 17, 1994 resulting from the exercise of employee stock options outstanding on such date, there are outstanding (i) no shares of capital stock or other voting securities of the Company, (ii) no securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company, and (iii) no options or other rights to acquire from the Company, and no obligation of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company (the items in clauses (i), (ii) and (iii) being referred to collectively as the "Company Securities"). There are no outstanding obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any Company Securities. SECTION 4.6. Subsidiaries. (a) Each Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. For purposes of this Agreement, "Subsidiary" means any domestic or foreign corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are directly or indirectly owned by the Company. All Subsidiaries and their respective jurisdictions of incorporation are identified in the Company's annual report on Form 10-K for the fiscal year ended June 30, 1993 (the "Company 10-K"). -9- 14 (b) All of the outstanding capital stock of, or other ownership interests in, each Subsidiary, is owned by the Company, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests). There are no outstanding (i) securities of the Company or any Subsidiary convertible into or exchangeable for shares of capital stock or other voting securities or ownership interests in any Subsidiary, and (ii) options or other rights to acquire from the Company or any Subsidiary, and no other obligation of the Company or any Subsidiary to issue, any capital stock, voting securities or other ownership interests in, or any securities convertible into or exchangeable for any capital stock, voting securities or ownership interests in, any Subsidiary (the items in clauses (i) and (ii) being referred to collectively as the "Subsidiary Securities"). There are no outstanding obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any outstanding Subsidiary Securities. SECTION 4.7. SEC Filings. (a) The Company has filed with the Securities and Exchange Commission (the "SEC") all required reports, schedules, forms, statements and other documents from April 1, 1991 through the date hereof, including (i) the annual reports on Form 10-K for its fiscal years ended June 30, 1991, 1992, and 1993, (ii) its quarterly reports on Form 10-Q for its fiscal quarters September 30, 1993, December 31, 1993 and March 31, 1994, (iii) its proxy or information statements relating to meetings of, or actions taken without a meeting by, the stockholders of the Company held since April 1, 1991, and (iv) all of its other reports, statements, schedules and registration statements filed with the Securities and Exchange Commission (the "SEC") since April 1, 1991. (b) As of its filing date, each such report or statement filed pursuant to the Exchange Act did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. (c) Each such registration statement, as amended or supplemented, if applicable, filed pursuant to the Securities Act of 1933 as of the date such statement or amendment became effective did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. SECTION 4.8. Financial Statements. The audited consolidated financial statements and unaudited consolidated interim financial statements of the Company included in its annual reports on Form 10-K and the quarterly reports on Form 10-Q referred to in Section 4.7 fairly present, in conformity with generally accepted accounting principles applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal year-end adjustments in the case of any unaudited interim financial statements, none of which would be materially adverse). For purposes of this Agreement, "Balance Sheet" means the consolidated balance sheet of the Company as of June 30, 1993 set forth in the Company 10-K and "Balance Sheet Date" means June 30, 1993. -10- 15 SECTION 4.9. Disclosure Documents. (a) Each document required to be filed by the Company with the SEC in connection with the transactions contemplated by this Agreement (the "Company Disclosure Documents"), including, without limitation, the Schedule 14D-9, the proxy or information statement of the Company (the "Company Proxy Statement"), if any, to be filed with the SEC in connection with the Merger, and any amendments or supplements thereto will, when filed, comply as to form in all material respects with the applicable requirements of the Exchange Act. (b) At the time the Company Proxy Statement or any amendment or supplement thereto is first mailed to stockholders of the Company, at the time such stockholders vote on adoption of this Agreement and at the Effective Time, the Company Proxy Statement, as supplemented or amended, if applicable, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. At the time of the filing of any Company Disclosure Document other than the Company Proxy Statement and at the time of any distribution thereof, such Company Disclosure Document will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 4.9(b) will not apply to statements or omissions included in the Company Disclosure Documents based upon information furnished to the Company in writing by Buyer or Merger Subsidiary specifically for use therein. (c) The information with respect to the Company or any Subsidiary that the Company furnishes to Buyer or Merger Subsidiary in writing specifically for use in the Offer Documents will not, at the time of the filing thereof, at the time of any distribution thereof and at the time of the consummation of the Offer, 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 made therein, in the light of the circumstances under which they were made, not misleading. SECTION 4.10. Absence of Certain Changes. Since the Balance Sheet Date (or, in the case of clauses (d) and (e) below, since March 31, 1994), the Company and Subsidiaries have conducted their business in the ordinary course consistent with past practice and there has not been: (a) any event, occurrence or development of a state of circumstances or facts which has had or reasonably could be expected to have a Material Adverse Effect; (b) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock of the Company, or any repurchase, redemption or other acquisition by the Company or any Subsidiary of any outstanding shares of capital stock or other securities of, or other ownership interests in, the Company or any Subsidiary; (c) any amendment of any material term of any outstanding security of the Company or any Subsidiary; -11- 16 (d) any incurrence, assumption or guarantee by the Company or any Subsidiary of any indebtedness for borrowed money other than in the ordinary course of business and in amounts and on terms consistent with past practices, but in no event in the amount of more than $50,000 in any one transaction or $150,000 in the aggregate; (e) any creation or assumption by the Company or any Subsidiary of any Lien on any material asset other than in the ordinary course of business consistent with past practices but in no event in respect of any obligation of more than $50,000 in any one transaction or $150,000 in the aggregate; (f) any making of any loan, advance or capital contributions to or investment in any Person other than (i) loans, advances or capital contributions to or investments in Subsidiaries made in the ordinary course of business consistent with past practices and (ii) investments in cash equivalents made in the ordinary course of business consistent with past practices; (g) any damage, destruction or other casualty loss (whether or not covered by insurance) affecting the business or assets of the Company or any Subsidiary which, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect; (h) any transaction or commitment made, or any contract or agreement entered into, by the Company or any Subsidiary relating to its assets or business (including the acquisition or disposition of any assets) or any relinquishment by the Company or any Subsidiary of any contract or other right, in either case, material to the Company and the Subsidiaries taken as a whole, other than transactions and commitments in the ordinary course of business consistent with past practice and those contemplated by this Agreement, but in no event representing commitments on behalf of the Company or any Subsidiary of more than $50,000 for any transaction or $150,000 for any series of transactions; (i) any change in any method of accounting or accounting practice by the Company or any Subsidiary, except for any such change required by reason of a concurrent change in generally accepted accounting principles; (j) any (i) grant of any severance or termination pay to any director, officer or employee of the Company or any Subsidiary, (ii) entering into of any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director, officer or employee of the Company or any Subsidiary, (iii) increase in benefits payable under any existing severance or termination pay policies or employment agreements or (iv) increase in compensation, bonus or other benefits payable to directors, officers or employees of the Company or any Subsidiary, other than in the ordinary course of business consistent with past practice; or (k) any labor dispute, other than routine individual grievances, or any activity or proceeding by a labor union or representative thereof to organize any employees of the Company or any Subsidiary, which employees were not subject to a collective bargaining agreement at the Balance Sheet Date, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by or with respect to such employees. -12- 17 SECTION 4.11. No Undisclosed Material Liabilities. There are no liabilities of the Company or any Subsidiary of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability, other than: (i) liabilities disclosed in the Company Disclosure Letter under the caption "Section 4.11"; (ii) liabilities disclosed or provided for in the Balance Sheet; (iii) liabilities incurred in the ordinary course of business consistent with past practice, which could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; and (iv) liabilities under this Agreement. SECTION 4.12. Litigation. Except as set forth in the quarterly reports on Form 10-Q for the quarter ended March 31, 1994, there is no action, suit, investigation or proceeding (or any basis therefor) pending against, or to the knowledge of the Company threatened against or affecting, the Company or any Subsidiary or any of their respective properties before any court or arbitrator or any governmental body, agency or official which, if determined or resolved adversely to the Company or any Subsidiary in accordance with the plaintiff's demands, would reasonably be expected to have a Material Adverse Effect or which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Offer or the Merger or any of the other transactions contemplated hereby. SECTION 4.13. Taxes. (a) The Company and each Subsidiary have timely filed all material tax returns, statements, reports and forms required to be filed with any tax authority ("Tax Returns") and have paid when due all taxes owed by the Company and any Subsidiary (whether or not shown on any such Tax Returns). There are no liens on any of the assets of the Company or any Subsidiary that arose in connection with any failure (or alleged failure) to pay any tax except for liens that would in the aggregate not have a Material Adverse Effect. (b) No dispute or claim concerning any tax liability of the Company or any Subsidiary has been claimed or raised by any authority in writing. (c) Neither the Company nor any Subsidiary has waived any statute of limitations in respect of taxes or agreed to any extension of time with respect to a tax assessment or deficiency. (d) Neither the Company nor any Subsidiary has filed a consent under Section 341(f) of the Internal Revenue Code of 1986, as amended ("the Code") concerning collapsible corporations. Neither the Company nor any Subsidiary has any liability for the taxes of any person (other than the Company and any Subsidiary) under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise. -13- 18 (e) As of the Balance Sheet Date, the unpaid income taxes of the Company and Subsidiaries did not exceed the liability for income taxes (rather than any reserve for deferred taxes established to reflect timing differences between book and tax income) set forth on the face of the Balance Sheet. SECTION 4.14. ERISA. (a) The Company has provided Buyer with a list identifying each "employee benefit plan", as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which (i) is subject to any provision of ERISA and (ii) is maintained, administered or contributed to by the Company or any affiliate (as defined below) and covers any employee or former employee of the Company or any affiliate or any beneficiary of such employee or former employee or under which the Company or any affiliate has any liability. Copies of such plans (and, if applicable, related trust agreements) and all amendments thereto and written interpretations thereof have been made available to Buyer together with (x) the three most recent annual reports (Form 5500 including, if applicable, Schedule B thereto) prepared in connection with any such plan and (y) the most recent actuarial valuation report prepared in connection with any such plan. Such plans are referred to collectively herein as the "Employee Plans". For purposes of this Section, "affiliate" of any Person means any other Person which, together with such Person, would be treated as a single employer under Section 414 of the Code. The only Employee Plans which individually or collectively would constitute an "employee pension benefit plan" as defined in Section 3(2) of ERISA (the "Pension Plans") are identified as such in the list referred to above. (b) No Employee Plan constitutes a "multiemployer plan", as defined in Section 3(37) of ERISA (a "Multiemployer Plan"), no Employee Plan is maintained in connection with any trust described in Section 501(c)(9) of the Code and no Employee Plan is subject to Title IV of ERISA (a "Retirement Plan"). The Company knows of no "reportable event", within the meaning of Section 4043 of ERISA, and no event described in Section 4041, 4041A, 4042, 4062, 4063, or 4064 of ERISA has occurred in connection with any Employee Plan, other than a "reportable event" that will not have a Material Adverse Effect. Nothing done or omitted to be done and no transaction or holding of any asset under or in connection with any Employee Plan has or will make the Company or any Subsidiary, any officer or director of the Company or any Subsidiary subject to any liability under Title I of ERISA or liable for any tax pursuant to Section 4975 or Section 4980B of the Code that could have a Material Adverse Effect. (c) Each Employee Plan which is intended to be qualified under Section 401(a) of the Code is so qualified and has been so qualified during the period from its adoption to date, and each trust forming a part thereof is exempt from tax pursuant to Section 501(a) of the Code. Each such Plan has been determined by the Internal Revenue Service in writing to be so qualified, no such determination letter has been withdrawn and the Company has made available to the Buyer copies of the most recent Internal Revenue Service determination letters with respect to each such Plan. To the Company's knowledge, each Employee Plan has been maintained in compliance with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations, including but not limited to ERISA and the Code, which are applicable to such Plan. -14- 19 (d) There is no contract, agreement, plan or arrangement covering any employee or former employee of the Company or any affiliate that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to the terms of Sections 162(a)(1), 162(m), 162(n) or 280G of the Code. (e) The Company has provided Buyer with a list of each employment, severance or other similar contract, arrangement or policy and each plan or arrangement (written or oral) providing for insurance coverage (including any self insured arrangements), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits or for deferred compensation, profit-sharing, bonuses, stock options, stock appreciation or other forms of incentive compensation or post-retirement insurance, compensation or benefits which (i) is not an Employee Plan, (ii) is entered into, maintained or contributed to, as the case may be, by the Company or any of its affiliates and (iii) covers any employee or former employee of the Company or any of its affiliates or any beneficiary of such employee. Such contracts, plans and arrangements as are described above, copies or descriptions of all of which have been furnished previously to Buyer are referred to collectively herein as the "Benefit Arrangements". To the Company's knowledge each Benefit Arrangement has been maintained in substantial compliance with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations that are applicable to such Benefit Arrangement. (f) The excess of the present value of the projected liability in respect of post-retirement health and medical benefits for retired employees of the Company and its affiliates, determined using assumptions that are reasonable in the aggregate, over the fair market value of any fund, reserve or other assets segregated for the purpose of satisfying such liability (including for such purposes any fund established pursuant to Section 401(h) of the Code) does not in the aggregate exceed $200,000. Except as required by law or individual contract no condition exists that would prevent the Company or any Subsidiary from amending or terminating any Employee Plan or Benefit Arrangement providing health or medical benefits in respect of any active employee of the Company or any Subsidiary. (g) Except as disclosed in writing to Buyer prior to the date hereof, there has been no amendment to, written interpretation or announcement (whether or not written) by the Company or any of its affiliates relating to, or change in employee participation or coverage under, any Employee Plan or Benefit Arrangement which would increase materially the expense of maintaining such Employee Plan or Benefit Arrangement above the level of the expense incurred in respect thereof for the fiscal year ended on the Balance Sheet Date. (h) Neither the Company nor any Subsidiary is a party to a collective bargaining agreement. No labor union has been certified or has commenced proceedings for certification by the National Labor Relations Board to represent employees of the Company or any Subsidiary. No work stoppage has commenced or been threatened by employees of the Company or any Subsidiary. SECTION 4.15. Compliance with Laws. Neither the Company nor any Subsidiary (a) is in violation of, or has violated, any applicable provisions of any laws, statutes, ordinances or regulations or (b) has received any notice from any governmental body, agency, official or authority -15- 20 or any other person that either the Company or any Subsidiary is in violation of, or has violated, any applicable provisions of any laws, statutes, ordinances or regulations except for violations which, individually or in the aggregate, do not and insofar as reasonably can be foreseen in the future would not have a Material Adverse Effect. SECTION 4.16. Finders' Fees. Except for fees to Bear, Stearns & Co., Inc. and Unterberg Harris in respect of the Offer and Merger, a copy of whose engagement agreement has been provided to Buyer, there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf, of the Company or any Subsidiary who might be entitled to any fee or commission from the Company, any Subsidiary, Buyer or any of Buyer's affiliates upon consummation of the transactions contemplated by this Agreement or thereafter. SECTION 4.17. Other Information. None of the documents or information delivered to Buyer in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein not misleading. SECTION 4.18. Environmental Matters. Neither the Company nor any Subsidiaries, nor any of their respective officers, employees, representatives or agents, nor, to the best of their knowledge, any other Person, has treated, stored, processed, discharged, spilled, or otherwise disposed of, any substance defined as hazardous or toxic by any applicable federal, state or local law, rule, regulation, order or directive, or any waste or by-product thereof, at any real property or any other facility owned, leased or used by the Company or any Subsidiaries, in violation of any applicable statutes, regulations, ordinances or directives of any governmental authority or court, which violations may result in liability to the Company or any Subsidiaries or any of their respective officers, employees, representatives, agents or shareholders in an amount exceeding $5,000,000 (net of any insurance proceeds received by the Company with respect to such violations or of any amounts received by the Company under any indemnification rights of the Company with respect to such violations) for all such violations; and the unresolved violations set forth in the Company Disclosure Letter under the caption "Section 4.18" will not result in liability to the Company or any Subsidiaries or any of their respective officers, employees, representatives, agents or shareholders in an amount exceeding $5,000,000 (net of any insurance proceeds received by the Company with respect to such violations or of any amounts received by the Company under any indemnification rights of the Company with respect to such violations) for all such unresolved violations. No employee or other Person has ever made a claim or demand against the Company or any Subsidiaries based on alleged damage to health caused by any such hazardous or toxic substance or by any waste or by-product thereof; and the unsatisfied claims or demands against the Company or any Subsidiaries set forth in the Company Disclosure Letter under the caption "Section 4.18" will not result in uninsured liability to the Company or any Subsidiaries or any of their respective officers, employees, representatives, agents or shareholders in an amount exceeding $5,000,000 (net of any insurance proceeds received by the Company with respect to such claims or demands or of any amounts received by the Company under any indemnification rights of the Company with respect to such claims or demands) for all such unsatisfied claims or demands. Neither the Company nor any Subsidiaries has been charged by any governmental authority with improperly using, handling, storing, discharging or disposing of any such hazardous or toxic -16- 21 substance or waste or by-product thereof or with causing or permitting any pollution of any body of water; and the outstanding charges set forth in the Company Disclosure Letter under the caption "Section 4.18" will not result in liability to the Company or any Subsidiaries or any of their respective officers, employees, representatives, agents or shareholders in an amount exceeding $5,000,000 (net of any insurance proceeds received by the Company with respect to such charges or of any amounts received by the Company under any indemnification rights of the Company with respect to such charges) for all such outstanding charges. SECTION 4.19. Intellectual Property. (a) The Company or a Subsidiary has exclusive ownership of or rights to use each material patent, patent application, trademark (whether or not registered), trademark application, trade name, service mark, copyright and other trade secret or proprietary intellectual property (collectively "Intellectual Property") owned by or used in and material to the business of the Company and the Subsidiaries, taken as a whole, and the current use by a Company or Subsidiary of such Intellectual Property does not infringe the rights of any other person, except for any such infringements that could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. To the knowledge of the Company and the Subsidiaries, no other person is infringing the rights of the Company or any Subsidiary in any such Intellectual Property, except for any such infringements that could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. SECTION 4.20. Material Contracts. (a) Except for agreements, contracts, plans, leases, arrangements or commitments disclosed in the Company's SEC filings referred to in Section 4.7, neither the Company nor any Subsidiary is a party to or subject to: (i) any contract or other document that substantially limits the freedom of the Company or any Subsidiary to compete in any line of business or with any person or in any area or which would so limit the freedom of the Company or any Subsidiary after the Effective Time; or (ii) any other contract or any commitment not made in the ordinary course of business which is material to the Company and the Subsidiaries taken as a whole. (b) All agreements, contracts, plans, leases, arrangements and commitments disclosed in the Company's SEC filings referred to in Section 4.7 (the "Material Contracts") are valid and binding agreements of the Company or a Subsidiary, are in full force and effect (other than those that have expired in accordance with their terms in the ordinary course of business, which expirations have not had and could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect), and neither the Company, any Subsidiary nor, to the knowledge of the Company, any other party thereto is in default under the terms of any such agreement, contract, plan, lease, arrangement or commitment, except for any such defaults that have not had and could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Neither the Company nor any Subsidiary is in default under the terms of any exclusive license or distribution agreement or arrangement, any license of assets to the Company or any Subsidiary, any distribution agreement or arrangement that, by its terms, provides for payments to the Company or any Subsidiary of $2,000,000 or more per annum or any other material license or distribution -17- 22 agreement or arrangement, true and complete copies or descriptions of all of which have been delivered to Buyer. SECTION 4.21. Insurance Coverage. The properties and the conduct of the business of the Company and its Subsidiaries are insured by insurers of recognized responsibility in such amounts and against such risks and losses as are adequate for such business in accordance with customary industry practices. ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to the Company that: SECTION 5.1. Corporate Existence and Power. Each of Buyer and Merger Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 5.2. Corporate Authorization. The execution, delivery and performance by Buyer and Merger Subsidiary of this Agreement and the consummation by Buyer and Merger Subsidiary of the transactions contemplated hereby are within the corporate powers of Buyer and Merger Subsidiary and have been duly authorized by all necessary corporate action. This Agreement constitutes a valid and binding agreement of Buyer and Merger Subsidiary. SECTION 5.3. Governmental Authorization. The execution, delivery and performance by Buyer and Merger Subsidiary of this Agreement and the consummation by Buyer and Merger Subsidiary of the transactions contemplated by this Agreement require no action by or in respect of, or filing with, any governmental body, agency, official or authority other than (i) the filing of a certificate of merger in accordance with Delaware Law, (ii) compliance with any applicable requirements of the HSR Act; (iii) compliance with any applicable requirements of the Exchange Act and (iv) compliance with applicable requirements of state or foreign securities laws. SECTION 5.4. Non-Contravention. The execution, delivery and performance by Buyer and Merger Subsidiary of this Agreement and the consummation by Buyer and Merger Subsidiary of the transactions contemplated hereby do not and will not contravene or conflict with the certificate of incorporation or bylaws of Buyer or Merger Subsidiary, (ii) assuming compliance with the matters referred to in Section 5.3, contravene or conflict with any provision of law, regulation, judgment, order or decree binding upon Buyer or Merger Subsidiary, or (iii) constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of Buyer or Merger Subsidiary or to a loss of any benefit to which Buyer or Merger Subsidiary is entitled under any agreement, contract or other instrument binding upon Buyer or Merger Subsidiary. -18- 23 SECTION 5.5. Disclosure Documents. (a) The information with respect to Buyer and its subsidiaries that Buyer furnished to the Company in writing specifically for use in any Company Disclosure Document will not contain, any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading (i) in the case of the Company Proxy Statement at the time the Company Proxy Statement or any amendment or supplement thereto is first mailed to stockholders of the Company, at the time the stockholders vote on adoption of this Agreement and at the Effective Time, and (ii) in the case of any Company Disclosure Document other than the Company Proxy Statement, at the time of the filing thereof and at the time of any distribution thereof and at the expiration of the Offer. (b) The Offer Documents, when filed, will comply as to form in all material respects with the applicable requirements of the Exchange Act and will not at the time of the filing thereof, at the time of any distribution thereof or at the time of consummation of the Offer, contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, provided, that this representation and warranty will not apply to statements or omissions in the Offer Documents based upon information furnished to Buyer or Merger Subsidiary in writing by the Company. SECTION 5.6. Finders' Fees. There is no investment banker, broker, finder or other intermediary engaged by or on behalf of Buyer or Merger Affiliate who might be entitled to any fee or commission from the Company upon consummation of the transactions contemplated by this Agreement. SECTION 5.7. Financing. Buyer has or has available to it sufficient funds to purchase all of the Shares outstanding and to pay all related fees and expenses on a fully diluted basis pursuant to the Offer. ARTICLE VI COVENANTS OF THE COMPANY The Company agrees that: SECTION 6.1. Conduct of the Company. Except as disclosed in the Company Disclosure Letter under the caption "Section 6.1," and except for such actions as to which Buyer shall have given its consent (which consent shall not be unreasonably withheld) from the date hereof until the Effective Time, the Company and the Subsidiaries shall conduct their business in the ordinary course consistent with past practice and shall use their best efforts to preserve intact their business organizations and maintain satisfactory relationships with third parties having business relationships with them and to keep available the services of their present officers and employees. Without limiting the generality of the foregoing, from the date hereof until the Effective Time, -19- 24 neither the Company nor any of its Subsidiaries will, without the prior approval (which approval shall not be unreasonably withheld) of Buyer: (a) except as expressly contemplated by this Agreement, amend or otherwise change its certificate of incorporation or bylaws or, in the case of the Company, the Rights Plan (as defined in Section 6.6); (b) enter into any material commitment or transaction (including, but not limited to, any material borrowing, capital expenditure or sale of assets), other than in the ordinary course of business; (c) grant any increase in the compensation payable or to become payable by the Company or any of its Subsidiaries to any of their officers or employees or any increase in any bonus, insurance, pension or other employee benefit plan, payment or arrangement (including, but not limited to, the granting of stock options, stock appreciation rights or restricted stock awards) made to, for or with such officers or employees; (d) enter into any employment agreement or, except in accordance with the Company's existing written policy, a copy of which has previously been delivered by the Company to Buyer, grant any severance or termination pay with or to any officer, director or employee of the Company or any of its Subsidiaries; (e) except as expressly contemplated by this Agreement, amend any of its stock option or stock purchase plans, including any options or rights thereunder; (f) enter into any foreign currency trading transactions, other than in the ordinary course of business consistent with past practices and not, in the aggregate, in excess of $500,000; (g) enter into any customer sale or license agreements with non-standard terms or at discounts from list prices in excess of 20%; (h) pay commissions to sales employees except on the basis of executed customer contracts with respect to products actually delivered to customers; (i) enter into any contracts or series of related contracts involving amounts in excess of $50,000 for any transaction or $150,000 for any series of transactions; (j) enter into any customer agreements providing for product replacements; or (k) (i) take any action, or agree or commit to take any action that would make any representation and warranty of the Company hereunder inaccurate in any respect at, or as of any time prior to the Effective Time or (ii) omit or agree or commit to omit to take any action necessary to prevent any such representation or warrant from being inaccurate in any respect at any such time. -20- 25 SECTION 6.2. Stockholder Meeting; Proxy Material. (a) The Company shall cause a meeting of its stockholders (the "Company Stockholder Meeting") to be duly called and held as soon as reasonably practicable after consummation of the Offer for the purpose of voting on the approval and adoption of this Agreement and the Merger unless a vote of stockholders of the Company is not required by Delaware Law. The Directors of the Company shall, subject to their fiduciary duties as advised by counsel, recommend approval and adoption of this Agreement and the Merger by the Company's stockholders. In connection with such meeting, after consummation of the Offer the Company (i) will promptly prepare and file with the SEC, will use its reasonable efforts to have cleared by the SEC and will thereafter mail to its stockholders as promptly as practicable the Company Proxy Statement and all other proxy materials for such meeting, (ii) will use its reasonable efforts to obtain the necessary approvals by its stockholders of this Agreement and the transactions contemplated hereby and (iii) will otherwise comply with all legal requirements applicable to such meeting. (b) Notwithstanding the foregoing, in the event that Merger Subsidiary shall acquire at least ninety percent (90%) of the outstanding Shares, the parties hereto agree, at the request of Merger Subsidiary, subject to Article IX, to take all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such acquisition (subject to Section 2.5(b)), without a meeting and without a vote of the Company's stockholders, in accordance with the Delaware Law. SECTION 6.3. Access to Information. From the date hereof until the Effective Time, the Company will give Buyer, its counsel, financial advisors, auditors and other authorized representatives full access to the offices, properties, books and records of the Company and the Subsidiaries, will furnish to Buyer, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information as such Persons may reasonably request and will instruct the Company's and the Subsidiaries' employees, counsel and financial advisors to cooperate with Buyer in its investigation of the business of the Company and the Subsidiaries; provided that no investigation pursuant to this Section shall affect any representation or warranty given by the Company to Buyer hereunder. SECTION 6.4. Other Offers. (a) From the date hereof until the termination hereof, the Company and the Subsidiaries and the officers, directors, employees or other agents of the Company and the Subsidiaries will not, directly or indirectly, (i) take any action to solicit, initiate or encourage any Acquisition Proposal or (ii) subject to the fiduciary duties of the Board of Directors under applicable law upon the advice of Wilson, Sonsini, Goodrich & Rosati, P.C., counsel to the Company, and in response to an unsolicited request therefor by a person who a majority of the Company's Board of Directors believes intends to submit a Superior Acquisition Proposal, engage in negotiations with, or disclose any nonpublic information relating to the Company or any Subsidiary or afford access to the properties, books or records of the Company or any Subsidiary to, any Person that may be considering making, or has made, an Acquisition Proposal. The Company will promptly notify Buyer after receipt of any Acquisition Proposal or any indication that any Person is considering making an Acquisition Proposal or any request for nonpublic information relating to the Company or any Subsidiary or for access to the properties, books or records of the Company or any Subsidiary by any Person that may be considering making, or has made, an -21- 26 Acquisition Proposal and will keep Buyer fully informed of the status and details of any such Acquisition Proposal, indication or request. For purposes of this Agreement, "Acquisition Proposal" means any offer or proposal for, or any indication of interest in, a merger or other business combination involving the Company or any Subsidiary or the acquisition of any equity interest in, or a substantial portion of the assets of, the Company or any Subsidiary, other than the transactions contemplated by this Agreement. "Superior Acquisition Proposal" means an Acquisition Proposal which a majority of the disinterested directors determines in its good faith judgment (based on advice of the Company's independent financial advisor) to be more favorable to the Company's stockholders than the Offer or the Merger, and for which financing, to the extent required, is then committed. Nothing in this Section 6.4 shall be deemed to prohibit the Company and its Board of Directors from (i) taking and disclosing a position with respect to a tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act and (ii) making such disclosures to the Company's stockholders which, in the judgment of and subject to the fiduciary duties of the Board of Directors of the Company, with the advice of Wilson, Sonsini, Goodrich & Rosati, P.C., counsel to the Company, may be required under applicable law. SECTION 6.5. Notices of Certain Events. The Company shall, within 24 hours, notify Buyer of: (i) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; (ii) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement; and (iii) any actions, suits, claims, investigations or proceedings commenced or, to the best of its knowledge threatened against, relating to or involving or otherwise affecting the Company or any Subsidiary which, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 4.12 or 4.14 or which relate to the consummation of the transactions contemplated by this Agreement. SECTION 6.6. Rights Agreement. Effective upon execution of this Agreement, the Board of Directors of the Company shall have amended the Rights Agreement on terms satisfactory to Buyer to terminate, modify or redeem the Rights issued thereunder so as to make the Rights inapplicable to the Offer or the Merger or the Stockholder Option Agreement. After such amendment and assuming that neither Buyer nor Merger Subsidiary is in material breach of this Agreement, the Company will not thereafter amend the Rights Plan so as to make the Rights applicable to the Offer or the Merger. SECTION 6.7. Fair Price Structure. If any "fair price" or "control share acquisition" statute or other similar statute or regulation or any state "blue sky" statute shall become applicable to the transactions contemplated hereby or by the Stockholder Option Agreement, the Company and the members or the Board of Directors of the Company shall grant such approvals and take such actions as are necessary so that the transactions contemplated hereby and thereby may be -22- 27 consummated as promptly as practicable on the terms contemplated hereby and thereby and otherwise act to minimize the effects of such statute or regulation on the transactions contemplated hereby or thereby. SECTION 6.8. Subsidiary Officers and Directors. The Company will cause each Subsidiary to cause each officer and director of such Subsidiary to tender resignations to the respective Subsidiary effective upon the Effective Date. SECTION 6.9. Employee Stock Purchase Plans. The Company agrees to terminate its 1992 ESPP and 1993 ESPP prior to the Effective Time. The Company agrees to amend Section 4.2(a) of the Company's 401(k) Plan prior to the Effective Time to permit Employer Matching Contributions (as defined therein) in cash. Buyer intends to terminate or discontinue contributions to the Company's 401(k) Plan or merge it into the Buyer's 401(k) Plan and intends that thereafter employees of the Company will be eligible to participate in Buyer's 401(k) Plan. ARTICLE VII COVENANTS OF BUYER Buyer agrees that: SECTION 7.1. Confidentiality. (a) Prior to the Effective Time and after any termination of this Agreement, Buyer will hold, and will use its best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning the Company and the Subsidiaries furnished to Buyer in connection with the transactions contemplated by this Agreement, including, without limitation, the stockholder lists furnished by the Company pursuant to Section 1.2, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Buyer, (ii) in the public domain through no fault of Buyer or (iii) later lawfully acquired by Buyer from sources other than the Company; provided that Buyer may disclose such information to its officers, directors, employees, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by this Agreement and to its lenders in connection with obtaining the financing for the transactions contemplated by this Agreement so long as such Persons are informed by Buyer of the confidential nature of such information and are directed by Buyer to treat such information confidentially. Buyer's obligation to hold any such information in confidence shall be satisfied if it exercises the same care with respect to such information as it would take to preserve the confidentiality of its own similar information. It is agreed that such information has been and is being provided solely for the purposes of the Offer and the Merger and not to affect, in any way, the parties' competitive position relative to each other or to other entities. If this Agreement is terminated, Buyer will, and will use its best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors and agents to, destroy or deliver to the Company, upon request, all documents and other materials, and all copies thereof, obtained by Buyer or on its behalf from the Company in connection with this Agreement that are subject to such -23- 28 confidence. This confidentiality provision supersedes and replaces in its entirety, any prior confidentiality agreements signed by Buyer or any affiliate of Buyer in favor of the Company or any Subsidiary. (b) In the event that Buyer or Merger Subsidiary is requested or required (by oral questions, interrogatories, requests for information or documents in legal proceedings, subpoena, civil investigative demand or other similar process to disclose any of the information required to be kept confidential under paragraph (a), such party shall provide the Company with prompt notice of any such request or requirement so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this paragraph. If, in the absence of a protective order or other remedy or the receipt of a waiver by Company, the party requested or required to make the disclosure should nonetheless, in the opinion of counsel, disclose such information, the party requested or required to make the disclosure may, without liability hereunder, disclose only that portion of the information which such counsel advises is legally required to be disclosed, provided that the party requested or required to make the disclosure exercises its reasonable efforts to preserve the confidentiality of the information, including, without limitation, by cooperating with the Company to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the information. SECTION 7.2. Obligations of Merger Subsidiary. Buyer will take all action necessary to cause Merger Subsidiary to perform its obligations under this Agreement (including providing Merger Subsidiary with sufficient funds to pay the aggregate purchase price of Shares accepted for purchase pursuant to the Offer) and to consummate the Merger on the terms and conditions set forth in this Agreement. SECTION 7.3. Voting of Shares. Buyer agrees to vote all Shares beneficially owned by it in favor of adoption of this Agreement at the Company Stockholder Meeting. SECTION 7.4. Director and Officer Liability. For six years after the Effective Time, Buyer will cause the Surviving Corporation to indemnify and hold harmless the officers and directors of the Company in respect of acts or omissions occurring prior to the Effective Time to the extent provided under the Company's certificate of incorporation and bylaws in effect on the date hereof; provided that such indemnification shall be subject to any limitation imposed from time to time under applicable law. For three years after the Effective Time, Buyer will cause the Surviving Corporation to use its reasonable efforts to provide officers' and directors' liability insurance in respect of acts or omissions occurring prior to the Effective Time covering each such Person currently covered by the Company's officers' and directors' liability insurance policy on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date hereof, provided that in satisfying its obligation under this Section, Buyer shall not be obligated to cause the Surviving Corporation to pay premiums in excess of the amount per annum the Company paid in its last full fiscal year, which amount has been disclosed to Buyer. This Section 7.4 shall inure to the benefit of those Persons who were or are officers and directors of the Company prior to the Effective Time. -24- 29 SECTION 7.5. Assumed Options. (a) Buyer agrees to take such actions as shall be necessary to assume the Plan Options, if any, specified in Section 2.5(c). Prior to the Effective Time, the Buyer shall designate in writing those Plan Options which it desires to assume at the Effective Time by agreeing to pay the amount of the Merger Consideration with respect to the full amount of Shares subject to each option (without regard to vesting) (without interest) in lieu of issuing Shares. All other Plan Options assumed by Buyer shall be converted into stock options ("Buyer Options") to purchase from Buyer the number of shares of common stock of Buyer ("Buyer Common Stock") equal to the product obtained by multiplying the number of shares of Company common stock subject to each Company Option by the quotient arrived at by dividing the Merger Consideration per Share by the average of the closing sales prices for the Buyer Common Stock on the New York Stock Exchange for the five (5) trading days ending on the trading day immediately prior to the date of the Effective Time (such quotient being referred to herein as the "Exchange Ratio") rounded down to the nearest whole integer, and the exercise price per share for Buyer Common Stock under each option so assumed shall be the original exercise price per share of the Company Option divided by the Exchange Ratio, rounded up to the nearest whole cent, all in accordance with Section 424(a) of the Code and the regulations promulgated thereunder, without regard to whether the Company Option qualifies as an incentive stock option within the meaning of Section 422 of the Code. (b) The provisions of Section 7.5(a) may be amended as reasonably required so that the assumption of Company Options thereunder complies with the requirements of Section 424(a) of the Code and the regulations promulgated thereunder. After the Effective Time, Buyer will deliver to each holder of a Company Option a document evidencing the foregoing assumption by the Buyer. Buyer will take all corporate and other action necessary to reserve and make available sufficient shares of Buyer Common Stock for issuance upon the exercise of the Buyer Options, will prepare and file with the SEC registration statements on the appropriate forms (or amendments to existing registration statements) relating to the issuance of Buyer Common Stock upon exercise of the Buyer Options and will use its reasonable efforts to have registration statements declared effective as of, or a reasonable time after, the Effective Time and shall maintain the effectiveness of such registration statements until exercise or termination of all Buyer Options. ARTICLE VIII COVENANTS OF BUYER AND THE COMPANY The parties hereto agree that: SECTION 8.1. Reasonable Efforts. Subject to the terms and conditions of this Agreement, each party will use its reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by this Agreement. SECTION 8.2. Certain Filings. The Company and Buyer shall cooperate with one another (a) in connection with the preparation of the Company Disclosure Documents and the Offer -25- 30 Documents, and (b) in determining whether any action by or in respect of, or filing with, any governmental body, agency or official, or authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and (c) in seeking any such actions, consents, approvals or waivers or making any such filings, furnishing information required in connection therewith or with the Company Disclosure Documents or the Offer Documents and seeking timely to obtain any such actions, consents, approvals or waivers. SECTION 8.3. Public Announcements. Buyer, Merger Subsidiary and the Company will consult with each other before issuing any press release or making any public statement with respect to this Agreement and the transactions contemplated hereby and, except as may be required by applicable law or any listing agreement with any national securities exchange, will not issue any such press release or make any such public statement prior to such consultation. SECTION 8.4. Further Assurances. At and after the Effective Time, the officers and directors of the Surviving Corporation will be authorized to execute and deliver, in the name and on behalf of the Company or Merger Subsidiary, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Merger Subsidiary, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets of the Company acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger. SECTION 8.5. Section 16 Stock Options. The Company and Buyer agree to take all actions necessary, notwithstanding Section 2.5(a) and Section 7.5 of this Agreement, so that the stock options previously granted to Paul C. Ely for 75,000 Shares, to Robert H. Waterman, Jr. for 50,000 Shares, to Gary B. Filler for 250,000 Shares and to Eric D. Carlson for 250,000 Shares shall be amended by the Company's Board of Directors (and the 1991 Stock Plan amended by the Company's Board of Directors as necessary) prior to the Effective Date, to be cancelled in exchange for a cash payment equal to the Merger Consideration per Share minus the exercise price relating to such options. The Buyer shall make such payment on the later of (i) the date six months and one day following the amendment of the option agreements, or (ii) January 5, 1995. ARTICLE IX CONDITIONS TO THE MERGER SECTION 9.1. Conditions to the Obligations of Each Party. The obligations of the Company, Buyer and Merger Subsidiary to consummate the Merger are subject to the satisfaction of the following conditions: (i) if required by Delaware Law, this Agreement shall have been adopted by the stockholders of the Company in accordance with such Law; -26- 31 (ii) any applicable waiting period (and any extension thereof) under the HSR Act relating to the Merger shall have expired; (iii) no provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the consummation of the Merger; (iv) Buyer shall have purchased Shares in an amount equal to at least the Minimum Condition pursuant to the Offer; and (v) all actions by or in respect of or filings with any governmental body, agency, official, or authority required to permit the consummation of the Merger including those set forth in Sections 4.3 and 5.3 shall have been obtained. SECTION 9.2. Conditions to the Obligations of Buyer and Merger Subsidiary. The obligations of Buyer and Merger Subsidiary to consummate the Merger are subject to the satisfaction of the further conditions that no court, arbitrator or governmental body, agency or official shall have issued any order, and there shall not be any statute, rule or regulation, restraining or prohibiting the consummation of the Merger or the effective operation of the business of the Company and the Subsidiaries after the Effective Time, and no proceeding challenging this Agreement or the transactions contemplated hereby or seeking to prohibit, alter, prevent or materially delay the Merger shall have been instituted by any Person before any court, arbitrator or governmental body, agency or official and be pending. ARTICLE X TERMINATION SECTION 10.1. Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (notwithstanding any approval of this Agreement by the stockholders of the Company): (a) by mutual written consent of the Company and Buyer; (b) by either Buyer or the Company, (i) if the Offer shall expire without any Shares having been purchased promptly thereafter pursuant to the Offer; provided, however, that a party shall not be entitled to terminate this Agreement pursuant to this Section 10.1(b)(i) if it is in material breach of its representations and warranties, covenants or other obligations under this Agreement; or (ii) prior to the purchase of Shares pursuant to the Offer, if there has been a willful breach by the other party of any representation, warranty, covenant or agreement set forth in the Agreement; or -27- 32 (iii) if the Merger has not been consummated by December 31, 1994; or (iv) if there shall be any law or regulation that makes consummation of the Merger illegal or otherwise prohibited or if any judgment, injunction, order or decree enjoining Buyer or the Company from consummating the Merger is entered and such judgment, injunction, order or decree shall become final and nonappealable; (c) by the Company, if Merger Subsidiary shall have failed to commence the Offer in accordance with Section 1.1(a); (d) by Buyer, upon the occurrence of any Trigger Event described in clauses (i) through (vi) of Section 11.4(b); or (e) by the Company, upon the occurrence of the Trigger Event described in clause (vi) of Section 11.4(b). SECTION 10.2. Effect of Termination. If this Agreement is terminated pursuant to Section 10.1, this Agreement shall become void and of no effect with no liability on the part of any party hereto, except that the agreements contained in Sections 7.1 and 11.4, and any claim for breach of this Agreement prior to such termination, shall survive the termination hereof. ARTICLE XI MISCELLANEOUS SECTION 11.1. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given, if to Buyer or Merger Subsidiary, to: Computer Associates International, Inc. 1 Computer Associates Plaza Islandia, NY 11788 Attn: President Telecopy: (516) 342-4866 with a copy to: John P. Gourary Howard, Darby & Levin 1330 Avenue of the Americas New York, NY 10019 Telecopy: (212) 841-1010 -28- 33 if to the Company, to: The ASK Group, Inc. 2880 Scott Boulevard Santa Clara, CA 95052-8013 Attn: Legal Department Telecopy: (408) 562-8810 with a copy to: Larry W. Sonsini Wilson, Sonsini, Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, CA 94304 Telecopy: (415) 496-4084 or such other address or telecopy number as such party may hereafter specify for the purpose by notice to the other parties hereto. Each such notice, request or other communication shall be effective when delivered at the address specified in this Section. SECTION 11.2. Survival of Representations and Warranties. The representations and warranties and agreements contained herein and in any certificate or other writing delivered pursuant hereto shall not survive the Effective Time or the termination of this Agreement except for the representations, warranties and agreements set forth in Sections 7.1 and 11.4. SECTION 11.3. Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived prior to the Effective Time if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Company, Buyer and Merger Subsidiary or in the case of a waiver, by the party against whom the waiver is to be effective; provided that after the adoption of this Agreement by the stockholders of the Company, no such amendment or waiver shall, without the further approval of such stockholders, alter or change (i) the amount or kind of consideration to be received in exchange for any shares of capital stock of the Company, (ii) any term of the certificate of incorporation of the Surviving Corporation or (iii) any of the terms or conditions of this Agreement if such alteration or change would adversely affect the holders of any shares of capital stock of the Company. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. -29- 34 SECTION 11.4. Fees and Expenses. (a) Except as otherwise provided in this Section, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. No professional fees and expenses payable by the Company in connection with the transactions contemplated hereby (other than the finder fees described in Section 4.16) shall be based on terms other than regular hourly rates and actual out-of-pocket expenses. (b) The Company agrees to pay the Buyer a fee in immediately available funds equal to $12,500,000 promptly, but in no event later than two business days, after the termination of this Agreement as a result of the occurrence of any of the events set forth below (a "Trigger Event"): (i) the Company shall have entered into, or shall have publicly announced its intention to enter into, an agreement or an agreement in principle with respect to any Acquisition Proposal; (ii) any person or group (as defined in Section 13(d)(3) of the 1934 Act) (other than Buyer or any of its affiliates) shall have become the beneficial owner (as defined in Rule 13d-3 promulgated under the 1934 Act) of at least 25% of the outstanding Shares or shall have acquired, directly or indirectly, at least 25% of the assets of the Company; (iii) any person or group shall have commenced, or shall have publicly announced an intention to commence, a tender or exchange offer for at least majority of the outstanding Shares for a consideration per Share greater than the consideration per Share offered under the Offer; (iv) any representation or warranty made by the Company in, or pursuant to, this Agreement shall not have been true and correct in all material respects when made and any such failures to be true and correct could reasonably be expected to have, individually or in the aggregate, a material adverse effect on the condition (financial or otherwise), business, assets, results of operations or prospects of the Company and the Subsidiaries taken as a whole (except that reductions or delays in orders of products of the Company or the Subsidiaries due solely to any rumors, speculation or announcement of a potential merger involving the Company or the execution of this Agreement and the Merger shall be excluded for consideration for purposes of the effect of an action or inaction on the Company and its Subsidiaries taken as a whole (a "Modified Material Adverse Effect"), or the Company shall have failed to observe or perform in any material respect any of its obligations under this Agreement; (v) the Board of Directors of the Company shall have withdrawn or materially modified in a manner adverse to Buyer or Merger Subsidiary its approval or recommendation of the Offer, the Merger or this Agreement or its approval of the entry by Buyer into the Stockholder Option Agreement, in any such case whether or not such withdrawal or modification is required by the fiduciary duties of the Board of Directors; or -30- 35 (vi) prior to the purchase of any Shares under the Offer, the Company shall have received any Acquisition Proposal which the Board of Directors has determined is more favorable to the Company's shareholders than the transactions contemplated by this Agreement, whether or not such determination is required by the fiduciary duties of the Board of Directors. (c) The Company shall assume and pay, or reimburse Buyer for, all reasonable fees payable and expenses incurred by Buyer (including the fees and expenses of its counsel and the fees and expenses of institutions that are considering making or have made a commitment to provide financing for the transactions contemplated hereby) in connection with this Agreement and the transactions contemplated hereby, in an aggregate amount not to exceed $2,500,000, whether or not the Offer or the Merger is consummated. SECTION 11.5. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto except that Merger Subsidiary may transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase shares pursuant to the Offer, but any such transfer or assignment will not relieve Merger Subsidiary of its obligations under the Offer or prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. SECTION 11.6. Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of New York. SECTION 11.7. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. -31- 36 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. THE ASK GROUP, INC. By /s/ Paul C. Ely, Jr. Name: Paul C. Ely, Jr. Title: Chairman of the Board By /s/ Robert H. Waterman, Jr. Name: Robert H. Waterman, Jr. Title: Vice Chairman of the Board By /s/ Eric D. Carlson Name: Eric D. Carlson Title: Chief Executive Officer and President COMPUTER ASSOCIATES INTERNATIONAL, INC. By /s/ Belden A. Frease Name: Belden A. Frease Title: Senior Vice President and Secretary SPEEDBIRD MERGE, INC. By /s/ Belden A. Frease Name: Belden A. Frease Title: Vice President and Secretary -32- 37 ANNEX 1 Conditions Notwithstanding any other provision of the Offer, Merger Subsidiary shall not be required to accept for payment or pay for any Shares, and may terminate the Offer, if (i) by the expiration of the Offer, the Minimum Condition shall not have been satisfied, (ii) by the expiration of the Offer, the applicable waiting period (and any extension thereof) under the HSR Act shall not have expired or been terminated or (iii) at any time on or after May 18, 1994 and prior to the acceptance for payment of Shares pursuant to the Offer, any of the following conditions exist: (a) there shall be instituted or pending any action or proceeding by any government or governmental authority or agency, domestic or foreign, or by any other person, domestic or foreign, before any court or governmental authority or agency, domestic or foreign, (i) challenging or seeking to make illegal, to delay materially or otherwise directly or indirectly to restrain or prohibit the acquisition by Merger Subsidiary or any of its affiliates of Shares pursuant to the Company Stock Option Agreement or the Stockholder Option Agreement, the making of the Offer, the acceptance for payment of or payment for some of or all the Shares by Buyer or Merger Subsidiary or the consummation by Buyer or Merger Subsidiary of the Merger, seeking to obtain material damages or otherwise directly or indirectly relating to the transactions contemplated by the Stockholder Option Agreement, this Agreement, the Offer or the Merger, (ii) seeking to restrain or prohibit Buyer's or Merger Subsidiary's ownership or operation (or that of their respective subsidiaries or affiliates) of all or any material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or of Buyer and its subsidiaries, taken as a whole, or to compel Buyer or any of its subsidiaries or affiliates to dispose of or hold separate all or any material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or of Buyer and its subsidiaries, taken as a whole, (iii) seeking to impose or confirm material limitations on the ability of Buyer or any of its subsidiaries or affiliates effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares acquired or owned by Buyer or any of its subsidiaries or affiliates on all matters properly presented to the Company's stockholders, (iv) seeking to require divestiture by Buyer or any of its subsidiaries or affiliates of any Shares, or (v) that otherwise, in the judgment of Buyer, is likely to materially adversely affect the Company and its subsidiaries, taken as a whole, or Buyer and its subsidiaries, taken as a whole; or (b) there shall be any action taken, or any statute, rule, regulation, injunction, order or decree proposed, enacted, enforced, promulgated, issued or deemed applicable to the Stockholder Option Agreement, this Agreement, the Offer or the Merger, by any court, government or governmental authority or agency, 38 domestic or foreign other than the application of the waiting period provisions of the HSR Act to the Stockholder Option Agreement, this Agreement, the Offer or the Merger, that, in the judgment of Buyer, is substantially likely, directly or indirectly, to result in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; or (c) any change shall have occurred or been threatened (or any development shall have occurred or been threatened involving a prospective change) in the business, assets, liabilities, financial condition, capitalization, operations, results of operations or prospects of the Company or any of its subsidiaries that, in the reasonable judgment of Buyer, is or is likely to be materially adverse to the Company and its subsidiaries, taken as a whole; or (d) a tender or exchange offer for some or all of the Shares shall have been publicly proposed to be made or shall have been made by another person, or it shall have been publicly disclosed or Buyer shall have otherwise learned that (i) any person or "group" (as defined in Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire beneficial ownership of more than 25% of any class or series of capital stock of the Company (including the Shares), through the acquisition of stock, the formation of a group or otherwise, or shall have been granted any option, right or warrant, conditional or otherwise, to acquire beneficial ownership of more than 25% of any class or series of capital stock of the Company (including the Shares) other than acquisitions for bona fide arbitrage purposes only and other than as disclosed in a Schedule 13D or 13G on file with the Commission on May 18, 1994, (ii) any such person or group which, prior to May 18, 1994, had filed such a Schedule with the Commission shall have acquired or proposed to acquire beneficial ownership of additional shares of any class or series of capital stock of the Company (including the Shares), through the acquisition of stock, the formation of a group or otherwise, which, together with such ownership as is reflected on such Schedule, shall constitute 25% or more of any such class or series, or shall have been granted any option, right or warrant, conditional or otherwise, to acquire beneficial ownership of additional shares of any class or series of capital stock of the Company (including the Shares) which, together with such ownership as is reflected on such Schedule, shall constitute 25% or more of any such class or series or (iii) any person shall have filed a Notification and Report Form under the HSR Act or made a public announcement reflecting an intent to acquire the Company or any material portion of assets of the Company or securities of the Company which, together with such ownership as is reflected on any such Schedule, shall constitute 25% or more of any such class of securities; or (e) the Company shall have breached or failed to perform in any material respect any of its material covenants or agreements under this Agreement, or any of the material representations and warranties of the Company set forth in this Agreement shall not be true in any material respect when made or at any time prior to consummation of the Offer as if made at and as of such time; or -2- 39 (f) any party to the Stockholder Option Agreement other than Merger Subsidiary or Buyer shall have breached or failed to perform in any material respect any of its agreements under the Stockholder Option Agreement or any of the representations and warranties of any such party set forth in the Stockholder Option Agreement shall not be true in any material respect, in each case, when made or at any time prior to the consummation of the Offer as if made at and as of such time, or the Stockholder Option Agreement shall have been invalidated or terminated with respect to any Shares subject thereto; or (g) this Agreement or the Stockholder Option Agreement shall have been terminated in accordance with its terms; or (h) the Board of Directors of the Company shall have withdrawn or materially modified in a manner adverse to Buyer or the Merger Subsidiary its approval or recommendation of the Offer, the Merger or this Agreement or its approval of the entry by Buyer into the Stockholder Option Agreement; or (i) the Company shall have entered into, or shall have publicly announced its intention to enter into, an agreement or agreement in principle with respect to any Acquisition Proposal; which, in the sole judgment of Buyer in any such case, and regardless of the circumstances (including any action or omission by Buyer) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. -3-
EX-2 3 EX-2 1 EXHIBIT 2 Contacts: Bob Gordon, (CA), 516-342-2391 Deborah Coughlin, (CA), 516-342-2173 Margaret Epperheimer, (ASK), 408-562-8545 Gary Filler, (ASK), 408-562-8472 COMPUTER ASSOCIATES TO ACQUIRE THE ASK GROUP ISLANDIA, N.Y., May 19, 1994 -- Computer Associates International, Inc. and The ASK Group, Inc. have entered into a definitive agreement providing for CA's acquisition of the ASK Group through a cash tender offer. A wholly-owned subsidiary of CA will offer to purchase all outstanding shares of The ASK Group Group's common stock at $13.25 per share. The definitive agreement has been unanimously approved by the Boards of Directors of the ASK Group and Computer Associates. The tender offer, which will commence shortly, will involve the offer to purchase an amount of shares such that, upon consummation, CA will own at least a majority of the outstanding shares. It will also be conditioned, among other things, on the expiration or termination of any applicable antitrust waiting period and the receipt of all regulatory approvals. "We're excited to have the opportunity to include the ASK people, products and clients in the CA family," said CA Chairman and CEO Charles B. Wang. "Not only will it add to our own rapidly-growing client/server offerings, but we expect the product synergy to pay real dividends to all our clients and shareholders." "The thousands of customers committed to the ASK products, including Open INGRES, Open ROAD, ManMan/X, and SIM/400 manufacturing software, will now have the assurance of an association with the leading force in mission-critical client/server computing," said ASK CEO Eric Carlson, "The ASK/CA combination is the best possible outcome for the employees, shareholders and customers of ASK, and we look forward to working with CA." Following completion of the tender offer, it is expected that the subsidiary of CA will be merged into the ASK Group and all of the ASK Group's shares not owned by CA will be converted into the right to receive $13.25 per share in cash. In entering into the definitive agreement, the ASK Group has amended its outstanding stockholder rights plan to provide that the acquisition can be completed without causing outstanding stock purchase rights to become exercisable. The rights will be acquired by CA as part of the $13.25 per share price. (more) 2 Computer Associates To Acquire The ASK Group, page 2 EDS and Hewlett-Packard, the two largest shareholders of the ASK Group, have agreed to tender their shares, representing an aggregate of 27 percent of the outstanding shares, to CA. Computer Associates International, Inc. (NYSE: CA), with 7,000 employees around the world, is the leading software company for integrated systems, database management, business applications and application development solutions. These programs operate across a full spectrum of mainframe, midrange and desktop computers. Founded in 1976, CA became a public company in 1981 and now serves most of the world's major business, government, research and educational organizations. Calendar year 1993 revenues exceeded $2 billion. The ASK Group, Inc. is the leading developer and integrator of strategic business software, providing corporations with the technologies to build, connect, manage and maintain information systems. With revenues of $426 million for the fiscal year ended June 30, 1993, the company employs 2,000 people in 82 offices who serve customers worldwide. ### All referenced product names are trademarks of their respective companies. EX-3 4 EX-3 1 Exhibit 3 INFORMATION CONCERNING THE COMPANY SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the beneficial ownership of Common Stock of the Company by (i) each person known by the Company to be the beneficial owner of more than 5% of the Company's Common Stock, (ii) each current director, (iii) each executive officer named in the Summary Compensation Table below, and (iv) all current directors and executive officers as a group as of September 27, 1993:
Percent of Name of Individual or Group (Number in Group) Number of Shares(1) Outstanding(1) --------------------------------------------- ------------------- -------------- Electronic Data Systems Corporation . . . . . . . . . . . 4,008,535(2) 17.5% 7171 Forest Lane Dallas, TX 75230 Hewlett-Packard Company . . . . . . . . . . . . . . . . . 2,004,268(2) 8.7% 3000 Hanover Street Palo Alto, CA 94304 The Capital Group, Inc. . . . . . . . . . . . . . . . . . 1,322,000(3) 5.8% 333 South Hope Street Los Angeles, CA 90071 Sandra L. Kurtzig . . . . . . . . . . . . . . . . . . . . 1,181,394(4) 5.1% 2440 W. El Camino Real Mt. View, CA 94039-7640 Pier Carlo Falotti . . . . . . . . . . . . . . . . . . . 263,464(5) * Thomas I. Unterberg . . . . . . . . . . . . . . . . . . . 117,500(6) * David Sohm . . . . . . . . . . . . . . . . . . . . . . . 76,675 * Eric D. Carlson . . . . . . . . . . . . . . . . . . . . . 67,787 * Leslie E. Wright . . . . . . . . . . . . . . . . . . . . 65,090 * Michael A. Laven . . . . . . . . . . . . . . . . . . . . 26,240 * Paul C. Ely, Jr. . . . . . . . . . . . . . . . . . . . . 14,800 Robert H. Waterman, Jr. . . . . . . . . . . . . . . . . . 13,800 Robert N. Sharpe . . . . . . . . . . . . . . . . . . . . 4,600(7) All current directors and executive officers as a group (10 persons) . . . . . . . . . . . . . . . . 1,831,350(4,5,6,7)
- ------------------------ * Less than 1 percent. (1) Includes the following shares subject to outstanding options which were exercisable at September 27, 1993 or within 60 days of such date: Mr. Falotti, 83,333; Mr. Unterberg, 2,400; Mr. Sohm, 68,959; Dr. Carlson, 60,605; Mr. Wright, 64,896; Mr. Laven, 260,036; Mr. Ely, 9,800; Mr. Waterman, 7,800; Mr. Sharpe, 4,600; all current directors and executive officers as a group, 328,429. Also includes 2 shares held in trust pursuant to the Company's 401(k) Plan as follows: Ms. Kurtzig, 182; Mr. Falotti, 78; Mr. Sohm, 209; Mr. Wright, 195; Mr. Carlson, 182; Mr. Laven, 204. (2) Pursuant to a Common Stock Purchase Agreement entered into in August 1990 between the Company, Electronic Data Systems Corporation ("EDS") and Hewlett-Packard Company ("HP"), EDS and HP have the rights to maintain their respective percentage ownership interests in the Company, to nominate a person to the Company's Board of Directors and to have these shares registered for sale under applicable securities laws. In addition, that agreement gives the Company a right of first refusal to purchase any of these shares and the right to approve or reject a proposed sale of all or part of those shares. (3) Based on a Schedule 13G filed for the calendar year ended December 31, 1992. Represents shares owned by accounts under the discretionary investment management of one or more of six investment management companies of which The Capital Group, Inc. is the parent company. The Capital Group, Inc. has disclaimed beneficial ownership of these shares. (4) Includes 48,656 shares held in custodial accounts or trusts for her sons and 35,600 shares held in a foundation trust, as to which shares Ms. Kurtzig disclaims beneficial ownership. (5) Includes 175,000 shares granted in July 1992 as a stock bonus award pursuant to the Company's 1991 Stock Plan. These shares are subject to vesting at the rate of 20% per year on each anniversary of the date he became a consultant of the Company (July 9, 1992); however all shares become fully vested if, within one year following a change of control, Mr. Falotti's employment is involuntarily terminated or there is a significant reduction in his job responsibilities or compensation. Unvested shares are subject to reacquisition by the Company at no cost to the Company on termination of Mr. Falotti's employment prior to vesting. (6) Includes 3,000 shares owned by Mr. Unterberg's spouse, as to which shares he disclaims beneficial ownership. (7) Excludes 4,008,535 shares owned by EDS. Mr. Sharpe is a corporate officer of EDS; in that capacity he does not have sole, but may have shared, investment or voting power with respect to the shares. Mr. Sharpe disclaims beneficial ownership as to such shares. EMPLOYEE BENEFIT PLANS The following is a brief summary of certain plans in effect during the fiscal year ended June 30, 1993 under which officers and employees of the Company received benefits. Incentive Bonus Plan. The Board of Directors has adopted an incentive bonus plan pursuant to which officers and other key employees can earn annual cash bonuses, conditioned on achievement of specified Company and business unit goals as well as personal and departmental objectives. Employee Stock Option Plans. The Company's 1982 Incentive Stock Option Plan (the "1982 Plan") was adopted by the Board of Directors and approved by the stockholders in 1982. A total of 3,400,000 shares of Common Stock were reserved for issuance upon exercise of options. As a result of the expiration of the 1982 Plan in August 1992, no further options may be granted thereunder. In connection with the 1990 acquisition of Ingres Corporation ("Ingres"), the Company assumed all of the options granted to employees of Ingres and its subsidiaries pursuant to Ingres' 1984 Incentive Stock Option Plan and 1986 Supplemental Stock Option Plan (collectively, the "Ingres Plans"). In August 1991, the Board adopted the 1991 Stock Plan (the "1991 Plan") under which the Board or its designated committee is authorized to grant incentive or nonstatutory stock options, stock appreciation rights, 3 restricted stock, stock bonus or long-term performance stock awards to employees and consultants of the Company and its subsidiaries. Stockholders of the Company approved the 1991 Plan in November 1991. A total of 3,200,000 s hares have been reserved under this plan, including the 1,200,000 shares for which stockholder approval is being sought at this meeting. The grant of options or other awards under the 1991 Plan to employees, including the executive officers named in the Summary Compensation Table appearing in this Proxy Statement (the "Named Officers"), is subject to the discretion of the administrator of the Plan (i.e., the Board of Directors or its Compensation Committee). As of the date of this Proxy Statement, there has been no determination by the Administrator with respect to future awards under the 1991 Plan. Non-employee directors are not eligible to participate in the 1991 Plan. The following table sets forth information with respect to the grant of options to the Named Officers, to all current executive officers as a group and to all employees as a group during the fiscal year ended June 30, 1993:
Name of Individual or Weighted Average Exercise Price Identity of Group and Position Options Granted(#) Per Share ($/sh) --------------------------------------------------- ------------------ ------------------------------- Pier Carlo Falotti, President and CEO . . . . . . . 250,000 $10,000 Leslie E. Wright, Executive VP and Chief Financial $12,875 and Administrative Officer . . . . . . . . . . . . 30,000 Eric D. Carlson, Executive VP . . . . . . . . . . . 25,000 $12,875 Michael A. Laven, Executive VP . . . . . . . . . . 25,000 $12,875 All current executive officers as a group . . . . . 330,000 $10,697 All other employees as a group . . . . . . . . . . 677,200 $14,148
Under each of these option plans, options are granted at exercise prices equal to the fair market value on the date of grant, have 10-year terms and generally become exercisable over a four-year period. Under all of these plans, as of June 30, 1993, options to purchase an aggregate of 2,843,080 shares of Common Stock had been exercised, options to purchase 2,907,722 shares were outstanding (including 573,171 shares covered by options assumed by the Company in the Ingres acquisition) and held by 1,406 employees at exercise prices ranging from $0.4247 to $23.75, and 458,234 shares remained available for future grant. Employee Stock Purchase Plans. In May 1990, the Board adopted the 1990 Employee Stock Purchase Plan (the "1990 ESPP"). Stockholders approved the 1990 ESPP in November 1990. Under the 1990 ESPP, 750,000 shares were reserved for issuance. The 1990 ESPP permitted a participant to purchase shares of the Company's Common Stock at 85% of the lessor of (i) the fair market value of such stock at the beginning of a two-year offering period or (ii) the fair market value of such stock at the end of each six-month purchase period within the two-year offering period. Generally, all full-time officers and employees of the Company and any of its U.S. subsidiaries are eligible to participate in the 1990 ESPP. The 1990 ESPP terminated on May 31, 1993 as all shares authorized for issuance thereunder had been issued. In March 1993, the Board adopted the 1993 Employee Stock Purchase Plan (the "1993 Plan"), subject to stockholder approval (which approval is being sought at this meeting). The 1993 Plan, under which 500,000 shares have been reserved for issuance, is identical to the 1990 Plan except that offering periods are only six months in duration and are coincident with purchase periods. As a result, the purchase price is reset every six months. As of June 30, 1993, approximately 1,374 persons were eligible to participate in the 1993 Plan, of whom 658 were participating. -3- 4 In January 1992, the Board adopted the 1992 Overseas Employee Stock Purchase Plan (the "1992 ESPP"). Stockholder approval was not required for the 1992 ESPP. The 1992 ESPP is now in all material respects identical to the 1993 Plan, except that only persons who are employees of the Company's foreign subsidiaries at the time of enrollment are eligible to participate. At June 30, 1993, 938 persons were eligible to participate in the 1992 ESPP, of whom 154 were participating. Participation in the 1993 Plan is voluntary and is dependent on each eligible employee's election to participate in his or her determination as to the level of payroll deductions. Accordingly, future purchases under the 1993 Plan are not determinable. Non-employee directors are not eligible to participate in the 1993 Plan. No purchases have been made under the 1993 Plan since its adoption by the Board. Purchases were made under the 1990 ESPP, which was a similar plan. The following table sets forth certain information regarding shares purchased under the 1990 ESPP during the last fiscal year and the payroll deductions accumulated at the end of the last fiscal year in accounts under the 1993 Plan for each of the Named Officers who participated in the 1990 ESPP or the 1993 Plan, for all current executive officers as a group and for all other employees who participated in either of the purchase plans as a group:
Name of Individual or Number of Shares Dollar Payroll Deductions at Identity of Group and Position Purchased(#) Values($)(1) of Fiscal Year End($) ----------------------------------------------- ---------------- --------------- --------------------- Pier Carlo Falotti, President and CEO . . . . . 131 $ 228 $ 7,500 David Sohm, Vice President . . . . . . . . . . 631 $ 6,722 $ 1,000 All current executive officers as a group . . . 762 $ 6,950 $ 8,500 All other employees as a group . . . . . . . . 280,340 $2,418,644 $290,952
The ASK Group 401(k) Plan: The Company has established The ASK Group 401(k) Plan (the "401(k) Plan") which is a qualified profit sharing plan and salary deferral program under the Federal tax laws and is administered by the Company. All employees of the Company (except certain specifically excluded classifications as defined in the plan) are eligible to participate after meeting certain minimum employment conditions. Participants may defer up to 15% of their eligible salary and contributes to the 401(k) Plan through payroll deductions. At the end of each quarter starting with the quarter ended March 31, 1992, the Company has agreed to contribute shares of its Common Stock to the plan. For the 1992 calendar year, shares of Common Stock were contributed in an amount equal to 50% of the first 3% of each participant's compensation contributed to the plan, up to a maximum Company contribution of $1,500 per participant per plan year. Effective January 1, 1993, the Company contributes shares of Common Stock having a value equal to 50% of a participant's contribution to the 401(k) Plan, up to a number of shares having a maximum value of $1,500 per participant per plan year. The Company contribution to a participant's 401(k) Plan account vests over the five-year period starting from his or her hire date; however, Company contributions made from January 1, 1992 through June 30, 1992 are fully vested. Each participant is fully vested in the portion of his or her account which he or she contributed. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's officers and directors, and persons who own more than ten percent of the Company's Common Stock, to file reports of initial ownership on Form 3 and changes in ownership on Form 4 or 5 with the Securities and Exchange Commission (the -4- 5 "SEC"). Such officers, directors and ten percent stockholders are also required by SEC rules to furnish the Company with copies of all such forms that they file. The Company has historically prepared and filed the Section 16(a) forms for its officers and directors, based on responses to informational requests sent to such officers and directors at the end of each month. Based on a review of the copies of the Section 16(a) forms received by the Company and written representations from certain officers and directors that no Form 5 was required, the Company believes that, during the period July 1, 1992 through June 30, 1993, all Section 16(a) filing requirements applicable to the Company's officers and directors were complied with, except that the Company filed the following forms late on behalf of the identified officer and director: the Form 4 required of Eric Carlson for the month of November 1992 reporting six transactions was filed two days late; and the Form 4 for Paul C. Ely, Jr. for the month of December 1992 reporting one transaction was filed 17 days late. -5- 6 PROPOSAL NO. 1 ELECTION OF DIRECTORS A Board of five directors is to be elected at the meeting. Unless otherwise instructed, the proxy holders will vote the Proxies received by them for the Company's five nominees named below, all of whom are presently directors of the Company. In the event that any nominee of the Company is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by the present Board of Directors to fill the vacancy. In the event that additional persons are nominated for election as directors, the proxy holders intend to vote all proxies received by them in such a manner in accordance with cumulative voting as will assure the election of as many of the nominees listed below as possible, and, in such event, the specific nominees to be voted for will be determined by the proxy holders. The Company is not aware of any nominee who will be unable or will decline to serve as a director. The term of office of each person elected as a director will continue until the next Annual Meeting of Stockholders or until his or her successor has been elected and qualified. Vote Required. The five nominees for director receiving the highest number of affirmative votes of the shares present or represented and entitled to be voted for them shall be elected as directors, whether or not such affirmative votes constitute a majority of the shares voted. Votes withheld from any director are counted for purposes of determining the presence or absence of a quorum for the transaction of business, but have no other legal effect under Delaware law. Nominees. The names of the nominees, and certain information about them, are set forth in the following table.
Director Name of Nominee Principal Occupation Since --------------- -------------------- -------- Paul C. Ely, Jr. . . . . . . . . . . . Partner, Alpha Partners 1989 Pier Carlo Falotti . . . . . . . . . . President and Chief Executive Officer, The ASK 1992 Group Robert N. Sharpe . . . . . . . . . . . Corporate Vice President, Electronic Data Systems 1991 Corporation Thomas I. Unterberg . . . . . . . . . . Partner, Unterberg Harris 1980 Robert H. Waterman, Jr. . . . . . . . . Chairman, The Waterman Group, Inc. 1990
The following is a summary of the principal occupations of each nominee during the past five years. There is no family relationship between any director or executive officer of the Company. In September 1992, Mr. Falotti became President and Chief Executive Officer of the Company. For more than 23 years before joining The ASK Group, Mr. Falotti, 51, worked for Digital Equipment Corporation's European operations, where he served for the last nine years as the President and Chief Executive Officer of Digital Equipment Corporation International -- Europe, a major computer manufacturer. -6- 7 Mr. Ely, 61, is a general partner of Alpha Partners, a venture capital fund. From December 1988 until July 1989, Mr. Ely served as an Executive Vice President and a director of Unisys Corporation, a computer manufacturer. Mr. Ely served as the Chairman and Chief Executive Officer of Convergent, Inc., a computer manufacturer, from October 1986 until it was acquired by Unisys in December 1988. Mr. Ely is also a director of Parker Hannifin Corporation and Tektronix Inc. Mr. Sharpe, 49, is a Corporate Vice President of EDS and has served as its Vice President, Business Development since October 1989. He has been employed by EDS in various management capacities since 1972. Pursuant to the Common Stock Purchase Agreement among ASK, EDS and Hewlett-Packard, Mr. Sharpe is EDS' designee to ASK's Board of Directors. Mr. Unterberg, 62, is a managing director of the investment banking firm of Unterberg Harris. From January 1987 to January 1989, Mr. Unterberg was an executive officer of the investment banking firm of Shearson Lehman Hutton Inc. Mr. Unterberg is also a director of AES Corporation, Electronics for Imaging, Inc., Systems and Computer Technology Corporation, Tandem Computers Corporation, and Xyvision, Inc. Mr. Waterman, 56, is the chairman of The Waterman Group, Inc., a research, writing, consulting and venture management company he started in 1986. He is the co-author of In Search of Excellence, and is the author of The Renewal Factor and Adhocracy: The Power to Change. Mr. Waterman also serves on the boards of AES Corporation, Boise Cascade Corporation, Inc. and McKesson, Inc. BOARD AND COMMITTEE MEETINGS The Board of Directors held a total of seven meetings and took one action by unanimous written consent during the fiscal year ended June 30, 1993. The Board of Directors has two committees: the Audit Committee and the Compensation Committee. The Audit Committee of the Board of Directors currently consists of Messrs. Ely, Sharpe and Unterberg. The Audit Committee met twice during the fiscal year ended June 30, 1993. The Audit Committee recommends engagement of the Company's independent accountants, and is primarily responsible for approving the scope of the services performed by such accountants, as well as reviewing and evaluating the Company's accounting principles and its system of internal accounting controls. The Compensation Committee of the Board of Directors, currently consisting of Messrs. Ely and Waterman, held one meeting and took 13 actions by unanimous written consent during the fiscal year ended June 30, 1993. The Compensation Committee grants options and other benefits under the Company's stock plans and makes recommendations to the Board of Directors regarding annual compensation levels for each of the Company's executive officers. No director served during the 1993 fiscal year attended fewer than 75% of the aggregate number of meetings of the Board of Directors and of the committees of the Board on which he served. DIRECTOR COMPENSATION Standard Fees: Directors who are not employees of the Company are paid a fee of $1,500 per meeting attended and an annual retainer of $17,500 paid in quarterly installments. -7- 8 Deferred Compensation Plan for Directors: In August 1981, the Board of Directors adopted the Deferred Compensation Plan for Directors. Pursuant to this plan, directors' fees otherwise payable to a participating director are placed in an account under the plan for such director. At the end of each quarter, the amount in the director's account is converted into an equivalent number of stock units based upon the fair market value of the Company's Common Stock on the last business day of the quarter. Distributions of Common Stock from the director's account to the director are generally to be made in ten equal annual installments commencing within 60 days after the close of the first fiscal year after the earliest of the date such person ceases to be a director of the Company, the date such person retires or otherwise ceases to engage in his or her principal occupation, or the date of termination of the plan. At the election of the participant made at least six months prior to the occurrence of an event triggering distribution, the participant may receive distributions in five equal annual installments. Furthermore, the Company may at its option make a single distribution and/or distribute cash representing the fair market value of the Common Stock corresponding to the stock units in the participant's account, in lieu of making a distribution of Common Stock. The plan may at any time be amended or terminated by the Board of Directors, but may not affect amounts previously credited to a participant's deferred compensation account. As of September 27, 1993, there are 8,884 share units in the account established under the plan for Mr. Unterberg. 1986 Director Option Plan. The Company's 1986 Director Option Plan (the "1986 Plan") was adopted by the Board of Directors in October 1986 and was approved by the stockholders of the Company at the 1987 Annual Meeting. A total of 150,000 shares of Common Stock have been reserved for issuance thereunder. The 1986 Plan generally provides that each director who is not also an employee of the Company (a "Non- Employee Director") shall automatically be granted an option to purchase 10,000 shares of the Company's Common Stock when such Non-Employee Director first becomes a director of the Company. At the time of adoption of the 1986 Plan, existing Non-Employee Directors who had been directors continuously since January 1, 1986, received options for 6,000 shares and other Non-Employee Directors received options to purchase 10,000 shares. During each year following the initial grants described above, each Non-Employee Director will automatically be granted an additional option to purchase 3,000 shares under the 1986 Plan. The exercise price of the options granted under the 1986 Plan is equal to the fair market value of the Company's Common Stock on the date of grant. During the fiscal year ended June 30, 1993, options covering 3,000 shares having an exercise price of $12.875 were granted to each of Messrs. Ely, Sharpe, Unterberg and Waterman under the 1986 Plan. Mr. Unterberg was the only director to exercise options granted under the 1986 Plan during the fiscal year ended June 30, 1993 and he purchased 16,600 shares on such exercise with an aggregate Value Realized of $245,738. The term "Value Realized" is the difference between the fair market value of the Company's Common Stock on the date of exercise and the exercise price. As of June 30, 1993, there were 52,200 shares covered by options outstanding under the 1986 Plan held by four non-employee directors with an average weighted exercise price of $7.9037 per share. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Directors Paul C. Ely, Jr. and Robert H. Waterman, Jr. are the two present members of the Compensation Committee of the Company's Board of Directors. Sandra L. Kurtzig was a member of the Compensation Committee from June 1993 until her resignation as Chairman of the Company in September 1993. During Ms. Kurtzig's tenure as a member of the Compensation Committee, no matters came before the Committee regarding her compensation. No interlocking relationship exists between the Company's Board of Directors or Compensation Committee and the board of directors or compensation committee of any other company. -8- 9 PROPOSAL NO. 2 RATIFICATION OF THE 1993 EMPLOYEE STOCK PURCHASE PLAN In March 1993, the Board of Directors adopted the 1993 Employee Stock Purchase Plan (the "1993 Plan") under which 500,000 shares of Common Stock were reserved for issuance. The Plan took effect on June 1, 1993 and is designed to replace the Company's 1990 Employee Stock Purchase Plan, which terminated on May 31, 1993. The Board of Directors believes that the 1993 Plan is important to attract, motivate and retain domestic employees essential for the success of the Company and its subsidiaries, particularly in an industry whose participants continue to expand and develop innovative benefits programs. An employee stock purchase plan is a common employee benefit program which all of the Company's principal competitors offer to their respective employees and the Board believes that the 1993 Plan, together with the other benefit programs the Company offers it eligible employees, provides a competitive benefits program. Vote Required: The affirmative vote of a majority of the Votes Cast on this proposal is required to ratify the adoption of the 1993 Plan. Summary of the Provisions of the 1993 Plan. The provisions of the 1993 Plan and the federal income tax consequences relating to the 1993 Plan are summarized in Appendix A to this Proxy Statement. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" ADOPTION OF THE 1993 EMPLOYEE STOCK PURCHASE PLAN. PROPOSAL NO. 3 APPROVAL OF INCREASE IN SHARES RESERVED UNDER THE 1991 STOCK PLAN In August 1991, the Board of Directors adopted the 1991 Stock Plan (the "1991 Plan"). The Company's stockholders approved the 1991 Plan in November 1991. In July 1993, the Board amended the 1991 Plan to increase the number of shares reserved for issuance thereunder by 1,200,000. The Board is seeking stockholder approval of this increase. Vote Required: The affirmative vote of a majority of the Votes Cast on this proposal is required to ratify the increase in the shares reserved under the 1991 Plan. Summary of the Provisions of the 1991 Plan: Summaries of the provisions of the 1991 Plan and of the federal income tax consequences relating to the plan are set forth in Appendix B to this Proxy Statement. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" APPROVAL OF THE INCREASE TO THE SHARES RESERVED UNDER THE 1991 STOCK PLAN. -9- 10 PROPOSAL NO. 4 APPROVAL OF AUTOMATIC ANNUAL INCREASE IN SHARES RESERVED UNDER THE 1991 STOCK PLAN The Board of Directors approved an amendment to the 1991 Plan in July 1993 by which the number of shares reserved for issuance under the 1991 Plan will automatically increase on July 1 of each year commencing with July 1, 1996, by a number of shares equal to 4% of the Company's outstanding shares on the immediately preceding June 30. All of the additional shares will be eligible for issuance as incentive stock options, nonstatutory options or other awards under the 1991 Plan. The purpose of this amendment is to provide a mechanism to ensure the availability of sufficient shares for options and other grants under the 1991 Plan in order to attract and retain qualified employees. The Board believes that the share increase under Proposal No. 3, together with the shares remaining available for grant under the 1991 Plan as of the date hereof, are sufficient to cover the expected use of shares through fiscal 1996. Summary of the Provisions of the 1991 Stock Plan: The essential features of the 1991 Plan (other than the automatic increase which is the subject of this Proposal No. 4) are set forth in Appendix B to this Proxy Statement. Vote Required: The affirmative vote of a majority of the Votes Cast on this proposal is required to ratify the adoption of the 1993 Plan. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" APPROVAL OF THE AUTOMATIC ANNUAL INCREASE IN THE SHARE RESERVE UNDER THE 1991 STOCK PLAN. PROPOSAL NO. 5 APPOINTMENT OF INDEPENDENT AUDITORS The Board of Directors has selected Ernst & Young to act as its independent auditors with respect to the financial statements of the Company for the fiscal year ending June 30, 1994. Representatives of Ernst & Young are expected to be present at the meeting with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions. The affirmative vote of the holders of a majority of the Votes Cast on this proposal is required to ratify the appointment of Ernst & Young. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPOINTMENT OF ERNST & YOUNG AS INDEPENDENT AUDITORS. -10- 11 COMPENSATION OF EXECUTIVE OFFICERS EXECUTIVE COMPENSATION The Securities and Exchange Commission has promulgated new rules significantly changing the disclosure requirements relating to executive compensation since the Company's last proxy statement. Therefore, the following tables and narrative description of executive compensation are substantially different from those contained in the Company's previous proxy statements. The following table shows, as to the Chief Executive Officer and each of the four other most highly compensated executive officers whose salary plus bonus exceeded $100,000 in fiscal 1993, information concerning compensation paid for services to the Company in all capacities during the fiscal year ended June 30, 1993, as well as total compensation paid to each such individual for the Company's two previous fiscal years (if such person was the Chief Executive Officer or an executive officer, as the case may be, during any part of such fiscal year). The principal positions are those held by the named individual as a corporate officer of The ASK Group, Inc. on June 30, 1993. SUMMARY COMPENSATION TABLE(1)
Annual Compensation Compensation ----------------------------------------- ------------------------- Other Annual Awards Restricted All Other Name and Principal Position Year Salary($) Bonus($) Compensation($) Options(#) Stk($) Compensation($) ---------------------------- ---- --------- ---------- --------------- ---------- ------------- ---------------- Pier Carlo Falotti . . . . 1993 $500,000 $100,000 $42,000(2) 250,000 $1,750,000(3) $861,500(4) President and Chief Executive Officer Leslie E. Wright . . . . . 1993 $209,167 $ 0 N/A 30,000 N/A $ 1,500(5) Executive Vice President 1992 $200,000 $ 0 -- 20,000 N/A -- and Chief Financial 1991 $186,875 $ 60,000 -- 50,000 N/A -- Administrative Officer Eric D. Carlson . . . . . . 1993 $220,001 $ 0 $ 1,421 25,000 N/A $ 1,500(5) Executive Vice President 1992 $200,000 $ 0 -- 20,000 N/A -- 1991 $195,960 $ 60,000 -- 200,000(6) N/A -- Michael A. Laven . . . . . 1993 $198,000 $ 42,490 $34,490(7) 25,000 N/A $ 1,500(5) Executive Vice President David Sohm . . . . . . . . 1993 $148,000 $ 0 $57,498(8) 0 N/A $ 1,500(5) Vice President 1992 $147,000 $ 0 -- 10,000 N/A -- 1991 $134,167 $ 35,000 -- 27,500 N/A --
(1) Information for fiscal 1992 and 1991 is excluded from the "Other Annual Compensation" and "All Other Compensation" columns pursuant to the SEC's transition rules. (2) Other Annual Compensation represents reimbursements for automobiles outside the Company's standard relocation policy as agreed to in Mr. Falotti's offer of employment. See also "Management Transactions" below. -11- 12 (3) At June 30, 1993, Mr. Falotti held 175,000 shares of restricted stock having a value of $1,881,250. Such shares vest in five equal annual installments on the anniversary of the date of grant. Accordingly, of such shares, 70,000 will vest in under three years from their date of grant. Restricted stock is entitled to receive any dividends paid to holders of Common Stock generally, which dividends are held in escrow until the related shares vest. See also "Management Transactions" below. (4) "All Other Compensation" represents $1,500 in value of Common Stock contributed by the Company pursuant to its 401(k) plan and $860,000 as the aggregate amount the Company has agreed to provide Mr. Falotti under his employment offer over the first five years of his employment to partially cover the cost of obtaining certain disability and retirement benefits similar to those provided him by his prior employer and related taxes. See also "Management Transactions" below. (5) Represents $1,500 in value of Common Stock contributed by the Company pursuant to its 401(k) plan. (6) Includes options to purchase 100,000 shares that were granted and canceled in fiscal 1991 in connection with a regrant. (7) Represents provisions of certain amounts and reimbursements of certain expenses (including property management fees) outside the Company's standard relocation policy in connection with Mr. Laven's relocation in the U.S. (8) Represents (i) $40,450 in reimbursements of certain mortgage payment obligations of Mr. Sohm and his wife outside the Company's standard relocation policy and (ii) tax reimbursement payments on his relocation assistance. The Company's 1991 Stock Plan provides for the grant of options to employees and consultants of the Company. The following table shows, as to the individuals named in the Summary Compensation Table above who were granted options during the fiscal year ended June 30, 1993, information concerning stock options granted during that fiscal year. OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(1) ------------------------------------------------------ % of Total Options Granted to POTENTIAL REALIZABLE VALUE AT ASSUMED Employees Exercise ANNUAL RATES OF STOCK PRICE Options in Fiscal Price Expiration APPRECIATION FOR OPTION TERM(2) Name Granted (#) Year(3) ($/Sh)(4) Date 5%($) 10%($) ----------------------- ------------ ------------ ----------- ------------ ------------------- --------------- Pier Carlo Falotti . . 250,000 24.8% 10,000 07/09/02 $1,572,250 $3,984,250 Leslie E. Wright . . . 30,000 3.0% 12,875 07/30/02 $ 242,911 $ 615,583 Eric D. Carlson . . . . 25,000 2.5% 12,875 07/30/02 $ 202,425 $ 512,986 Michael A. Laven . . . 25,000 2.5% 12,875 07/30/02 $ 202,425 $ 512,986
(1) The material terms of the options described in this table are as follows: The exercise price is determined by the Board of Directors or its Compensation Committee (the "Administrator") and may not be less than 100% of the fair market value of the Common Stock on the date the option is granted. The term of the option is 10 years from the grant date and may be exercised only while the optionee is an employee or a consultant to the Company and for 30 days after termination of the employment or consulting -12- 13 arrangement (six months or one year after termination if termination is due to the optionee's permanent disability or death, respectively). The option becomes exercisable as to 25% of the shares covered by the option on the first anniversary of the grant date and as to the balance in 36 monthly installments thereafter. The option becomes fully vested and exercisable in the event of a "change of control", unless the Administrator determines otherwise. A "change of control" occurs if a person as defined in the Securities Exchange Act of 1934 becomes the direct or indirect beneficial owner of 50% or more of the outstanding Common Stock or the stockholders approve the sale of all or substantially all of the assets of the Company or the merger of the Company with or into another corporation. (2) 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 the future Common Stock price. (3) Based on options to purchase an aggregate of 1,077,200 shares of Common Stock granted during fiscal 1993 to all employees. (4) The Administrator of the Option Plan has broad discretion to amend or exchange outstanding options, including repricing options. The following table shows, as to the individuals named in the Summary Compensation Table above, information concerning stock options exercised during the fiscal year ended June 30, 1993: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Shares Value of Unexercised Acquired Value Number of Unexercised In-the-Money Options at on Exercise Realized(1) Options at Fiscal Year-End(#) Fiscal Year-End($)(2): ------------- ------------ ----------------------------- --------------------------- Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable -------------------- ------------- ------------ ----------- ------------- ----------- ------------- 0 N/A 0 250,000 $ 0 $187,500 Leslie E. Wright . . 29,000 $512,750 46,927 53,073 $238,960 $ 94,165 Eric D. Carlson . . 27,000 $396,563 42,688 60,312 $214,321 $165,304 Michael A. Laven . . 23,900 $421,112 11,724 51,464 $ 35,971 $ 81,271 David Sohm . . . . . 15,000 $166,250 64,271 13,229 $282,911 $ 36,933
(1) Value realized is equal to the fair market value of the Company's Common Stock on the date of exercise, minus the exercise price. (2) Value of unexercised options is equal to the fair market value of the Company's Common Stock at the end of fiscal 1993 ($10.75 per share) minus the exercise price. MANAGEMENT TRANSACTIONS Pier Carlo Falotti: In June 1992, the Company gave Pier Carlo Falotti an employment offer letter pursuant to which he would become the President and Chief Executive Officer of The ASK Group. Until such time as Mr. Falotti obtained U.S. work permits, he provided services as a consultant. Under the employment arrangement, Mr. Falotti was to be paid as follows: $600,000 base annual salary and a $200,000 bonus during his first year of employment (payable $100,000 in fiscal 1993 on his first day of employment and $100,000) at the end of his first year of employment which occurred in fiscal 1994); -13- 14 minimum $800,000 base annual salary and bonus during his second year of employment; and a minimum combined base annual salary and bonus of $700,000 during his third and subsequent years of employment. Under the Company's 1991 Stock Plan, the Board granted Mr. Falotti 175,000 shares of the Company's Common Stock as a stock bonus award (the "Restricted Shares") and options to purchase 250,000 shares of Common Stock. The Restricted Shares vest in five equal annual installments on each of the first five anniversary dates of the grant. The options have standard vesting; i.e., they vest and become exercisable to the extent of 25% of the shares on the first anniversary of the grant, with the balance vesting in 36 monthly installments thereafter. Mr. Falotti is entitled to participate in all of the Company's benefit plans, including its employee stock purchase plan, medical programs and relocation packages. In addition, the Company provided Mr. Falotti interim housing and paid him $42,000 as a one-time automobile allowance. The Company has also agreed to provide Mr. Falotti with a payment of $172,000 for each of the first five years of his employment with The ASK Group toward the costs of obtaining disability and retirement benefits similar to those provided under his prior employer's defined benefit pension program and related taxes. The Company also will pay Mr. Falotti an additional sum to reimburse him for the additional U.S. and California income taxes incurred as a result of the reimbursement of relocation expenses and the automobile allowance. The Company has agreed that if Mr. Falotti's employment with the Company (or a subsidiary of the Company) is terminated other than by his voluntary resignation and other than within one year following a change of Control, it will pay severance on regular pay dates at a rate based on the average of the prior two years' annual base salary and incentive bonus (such average referred to as the "Severance Base"). These severance payments will continue from the date of such termination until the earlier of the date he becomes reemployed or the following anniversaries of his employment termination date: the third anniversary, if termination occurs during his first year of employment; the second anniversary, if termination occurs during his second or third year of employment; and the first anniversary, if the termination occurs thereafter. If Mr. Falotti's employment is terminated within a year following a Change of Control, the Company, or its successor, will pay him the Severance Base. In addition, in the event of a Change of Control, the Restricted Shares and the Stock Options will be fully vested on the date of the Change of Control. A "Change of Control" for purposes of the arrangements with Mr. Falotti, and for Messrs. Wright and Carlson described below, is defined as the acquisition by a person or group of 50% or more of the Company's Common Stock or a transaction requiring stockholder approval and involving either the sale of all or substantially all of the assets of the Company or the merger of The ASK Group with or into another company. Leslie Wright: In November 1989, the Board agreed that all options granted and to be granted to Mr. Wright would become fully exercise in the event of a Change of Control. Eric Carlson: Under the employment offer letter to Eric D. Carlson, the Company has agreed to pay him the greater of six months' salary or the severance amount then in effect for executive officers if termination occurs other than following a Change of Control. If termination occurs within one year following a Change of Control because the position is eliminated or the officer's duties and responsibilities are significantly reduced, the officer will receive twelve months' salary. If a Change of Control occurs, the stock options granted Dr. Carlson will become fully vested and exercisable. -14- 15 David Sohm: In Fiscal 1993, the Company paid Mr. Sohm $43,556 of relocation expense reimbursement and resettlement allowances associated with his move to Santa Rosa to manage the Company's Data 3 business unit; these payments were in accordance with standard employee relocation policy. In addition, the Company reimbursed Mr. Sohm $57,498 of certain mortgage payment obligations of Mr. Sohm and his wife on the mortgage of his prior residence and on a second mortgage on his new residence and of federal and state taxes resulting from the relocation assistance. During fiscal 1993, the Company stopped the reimbursement of those mortgage payments when it loaned Mr. Sohm $375,000. Mr. Sohm used the proceeds of the loan to repay the second mortgage on his new residence. The $375,000 loan, which bore interest at 5% and matured no later than December 31, 1993, was repaid in full in April 1993 and Mr. Sohm's prior residence was sold. Sandra Kurtzig: In August 1992, the Board fully vested all stock options granted to Ms. Kurtzig when she stepped down as the Company's president and chief executive officer. At that time, the Board also agreed to provide to Ms. kurtzig and her sons during her lifetime all medical, dental and vision care benefits provided generally to employees of the Company. Ms. Kurtzig has entered into a noncompete agreement with the Company for a two-year period ending August 31, 1994. In September 1993, Ms. Kurtzig resigned from the Board of Directors and relinquished her position as Chairman. In September 1993, the Board agreed to provide Ms. Kurtzig at the Company's expense with a secretary and an office at a mutually agreeable location for at least three years. Dennis McGinn: Mr. McGinn was an executive officer of the Company until his employment termination in June 1993. In connection with his termination, the Company paid him six months' base salary and forgave the balance of principal ($80,000) and accrued interest under a five- year $120,000 loan bearing interest at the rate of 8.5% made to him as part of the Company's employment offer in December 1990. The largest amount outstanding under the loan during fiscal 1993 was $80.000. REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS During fiscal 1993, directors Ely and Waterman served on the Compensation Committee of the Board of Directors (the "Committee"). Neither were employees of the Company. Ms. Kurtzig served on the Committee from June 1993 until her resignation as Chairman of the Company in September 1993. Acting under authority of the Board of Directors, the Committee is responsible for: . Determining compensation levels for the Company's chief executive officer (CEO") and the other executive officers. . Establishing the Company's general compensation policy for all executive officers. -15-
EX-4 5 EX-4 1 Exhibit 4 AMENDMENT TO COMMON SHARES RIGHTS AGREEMENT This Amendment (the "Amendment") is made effective as of May 18, 1994 to the Common Shares Rights Agreement (the "Agreement") dated as of August 15, 1990, as amended November 15, 1990, between ASK Group, Inc., a Delaware corporation (the "Company"), and The First National Bank of Boston (the "Rights Agent"). The Company has entered into an Agreement and Plan of Merger (the "Merger Agreement") dated as of May 18, 1994 among the Company, Computer Associates International, Inc., a Delaware corporation ("Parent") and Speedbird Merge, Inc., a Delaware corporation ("Purchaser"), pursuant to which it is proposed that Purchaser shall make a cash tender offer (the "Offer") to acquire all of the issued and outstanding shares of Common Stock of the Company, including the associated Common Stock purchase rights (the "Rights") issued pursuant to the Agreement (all issued and outstanding shares of Common Stock of the Company together with the Rights being referred to herein collectively as the "Shares") for $13.25 per Share. In furtherance of such acquisition, the Boards of Directors of Parent, Purchaser and the Company have each approved the merger of Purchaser with and into the Company or, at the election of Purchaser and Parent, the merger of the Company with and into Purchaser (the "Merger") following consummation of the Offer. 2 In connection with its approval of the Offer and the Merger, the Company's Board of Directors, on May 18, 1994, authorized the taking of such action by the Company as is necessary to make the provisions of the Agreement inapplicable to the Offer, the Merger and the Stockholder Option Agreement, dated as of May 18, 1994 among Purchaser and certain stockholders of the Company with respect to 6,098,903 shares of Common Stock of the Company (the "Stockholder Option Agreement"). Accordingly, the Company and the Rights Agent desire to amend the Agreement as set forth herein in accordance with Section 27 of the Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby amend the Agreement and agree as follows: 1. Amendment to Section 1(c). Section 1(c) of the Agreement is hereby amended to add an additional paragraph immediately following subparagraph (iii) thereof: "Notwithstanding anything in this Section 1(c) to the contrary, Parent, Purchaser and their Affiliates and Associates shall not be deemed the "Beneficial Owner" of or to "beneficially own" pursuant to Sections 1(c)(i), 1(c)(ii), 1(c)(iii) above any securities which any of them may acquire, or may have or be deemed to have the right to acquire or vote, or as a result of any action taken, pursuant to or in compliance with, and on or after the date of, the Merger Agreement and the Stockholder Option Agreement." 2. Amendment to Section 1(s). Section 1(s) of the Agreement is hereby amended to add the following clause at the end thereof: -2- 3 ", other than the Merger (as defined in the Merger Agreement)." 3. Amendment to Add Sections 1(y), 1(z), 1(aa) and (bb). Section 1 of the Agreement is hereby amended to add additional subsections (y), (z), and (aa) to read in their entirety as follows: "(y) "Merger Agreement" shall mean the Agreement and Plan of Merger dated as of May 18, 1994 among Parent, Purchaser and the Company, as the same may hereafter be amended. (z) "Parent" shall mean Computer Associates International, Inc., a Delaware corporation. (aa) "Purchaser" shall mean Speedbird Merge, Inc., a Delaware corporation and a wholly owned subsidiary of Parent." (bb) "Stockholder Option Agreement" shall mean the Stockholder Option Agreement dated as of May 18, 1994 among Purchaser and certain stockholders of the Company with respect to 6,098,903 shares of Common Stock of the Company, as the same may hereafter be amended. 4. Amendment to Add Section 13(g). Section 13 of the Agreement is hereby amended to add additional subsection (g) to read in its entirety as follows: "(g) Notwithstanding anything in this Agreement to the contrary, Section 13 shall not be applicable to the Merger (as defined in the Merger Agreement). Upon consummation of the Merger, all Rights hereunder shall expire." -3- 4 5. Consent Required to Amend. As long as neither Parent nor Purchaser is in material breach of the Merger Agreement and the Merger Agreement has not been terminated in accordance with its terms, the provisions of this Amendment and their substantive effect may not be amended or modified without the consent of Parent and Merger Subsidiary. 6. Effect of Amendment. Except as expressly modified herein, the Agreement shall remain in full force and effect. 7. Counterparts. This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed, all as of the day and year first above written. ASK GROUP, INC. a Delaware corporation By: ________________________________ Title: _____________________________ THE FIRST NATIONAL BANK OF BOSTON By: ________________________________ Title: _____________________________ -4- EX-5 6 EX-5 1 EXHIBIT 5 STOCKHOLDER OPTION AGREEMENT AGREEMENT, dated as of May 18, 1994 among Speedbird Merge, Inc., a Delaware corporation ("Buyer"), and the holders (the "Stockholders") of the shares of common stock, $0.01 par value (the "Shares") of The ASK Group, Inc., a Delaware corporation (the "Company"), listed on the signature pages hereof. In order to induce Buyer and certain of its affiliates to enter into an agreement and plan of merger (the "Merger Agreement") with the Company, Buyer has requested the Stockholders, and the Stockholders have agreed, to enter into this Agreement. The parties hereto agree as follows: ARTICLE I STOCK OPTION SECTION 1.1. Grant of Stock Option. Each of the Stockholders hereby grants to Buyer an irrevocable option (the "Option") to purchase all Shares (including the associated Rights, as defined in Section 4.5 of the Merger Agreement) presently owned by them as set forth on the signature pages hereto and any additional Shares (including such associated Rights) acquired by such Stockholder (whether by purchase or otherwise) after the date of this Agreement (such "Stockholder's Shares" and, collectively, the "Stockholder Shares") at a purchase price of $13.25 per Stockholder Share (including such associated Rights) (as adjusted pursuant to Section 1.5, the "Purchase Price"). SECTION 1.2. Exercise of Option. (a) Subject to the conditions set forth in Section 1.4 hereof, the Option may be exercised by Buyer, in whole or in part, at any time or from time to time after the date hereof and prior to the 30th business day after the termination of the Merger Agreement in accordance with the terms thereof. In the event Buyer wishes to exercise the Option for all or some of the Stockholder Shares other than pursuant to the Offer (as defined in the Merger Agreement), Buyer shall send a written notice (the "Exercise Notice") to the Stockholders specifying the total number of Stockholder Shares it wishes to purchase pursuant to such exercise (and the corresponding number of each such Stockholder's Shares) and the place, the date (not less than one nor more than 20 business days from the date of the Exercise Notice), and the time for the closing of such purchase, provided that such date and time may be earlier than one day after the Exercise Notice if reasonably practicable. Each closing of a purchase of Stockholder Shares pursuant to this Section 1.2(a) (a "Closing") shall take place at the place, on the date and at the time designated by Buyer in its Exercise Notice, provided that if, at the date of the Closing herein provided for, the conditions set forth in Section 1.4 shall not have been satisfied (or waived), Buyer may postpone the Closing until a date within five business days after such conditions are satisfied. (b) Upon receipt of instructions from the Buyer, each Stockholder shall deliver to the depositary (the "Depositary") designated in the Offer (i) a letter of transmittal with respect to such 2 Stockholder's Shares complying with the terms of the Offer together with instructions directing the Depositary to make payment for such Shares directly to the Stockholder (but if such Shares are not accepted for payment and are to be returned pursuant to the Offer, to return such Shares to such Stockholder whereupon they shall continue to be held by such Stockholder subject to the terms and conditions of this Agreement), (ii) the Certificates and (iii) all other documents or instruments required to be delivered pursuant to the terms of the Offer (such documents in clauses (i) through (iii) collectively being hereinafter referred to as the "Tender Documents"). (c) Each Stockholder will deliver (x) the Certificates to the Buyer (in accordance with Buyer's instructions) upon receipt of the notice provided for paragraph (a) above or (y) the Tender Documents to the Depositary upon receipt of the instructions provided for in paragraph (b) above and will not (without prior written notice to the Buyer) withdraw the tender effected thereby, in each case in accordance with this Section 1.2. Any withdrawn Shares shall continue to be held by such Stockholder subject to the terms and conditions of this Agreement. (d) Except to the extent otherwise provided in Section 1.2(e) below, Buyer shall not be under any obligation to deliver any Exercise Notice and may allow the Option to terminate without purchasing any Stockholder Shares hereunder; provided however that once Buyer has delivered to the Stockholders an Exercise Notice, subject to the terms and conditions of this Agreement, Buyer shall be bound to effect the purchase as described in such Exercise Notice. (e) Buyer agrees that, if Buyer shall have accepted Shares for payment and purchased Shares pursuant to the Offer, Buyer shall, within ten business days of such purchase, exercise the Option in its entirety (or any remaining portion of the Option). This paragraph (e) shall inure to the benefit of the Company. SECTION 1.3. Closing. At the Closing, (a) each Stockholder shall deliver to Buyer (in accordance with Buyer's instructions) a certificate or certificates (the "Certificates") representing such Stockholder's Shares, duly endorsed or accompanied by stock powers duly executed in blank and (b) Buyer shall deliver to such Stockholder a certified or bank cashier's check or checks payable to or upon the order of such Stockholder in an amount equal to (i) the number of such Stockholder's Shares being purchased at such Closing multiplied by (ii) the Purchase Price (the "Purchase Amount"). SECTION 1.4. Conditions. The obligation of each Stockholder to sell Stockholder Shares at any Closing is subject to the following conditions: (i) The representations and warranties of Buyer contained in Article IV shall be true and correct in all material respects on the date thereof as if made on such date. (ii) All waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the "HSR Act") applicable to such exercise of the Option shall have expired or been terminated. (iii) There shall be no preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or -2- 3 administrative agency or commission, nor any statute, rule, regulation or order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining such exercise of the Option. (iv) The Buyer shall have commenced the Offer, the Buyer shall not have materially breached any of its material covenants and agreements in the Merger Agreement, and the Merger Agreement shall not have been terminated. (v) (A) A tender or exchange offer for any Shares shall have been made or publicly proposed to be made by another person, (B) it shall have been publicly disclosed (or Buyer shall have learned) that any person, entity or group (as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) shall have acquired or proposed to acquire more than 25% of the Shares, or shall have granted any option or right, conditional or otherwise, to acquire more than 25% of the Shares, other than acquisitions for bona fide arbitrage purposes, or a group shall have been formed the members of which hold in the aggregate more than 25% of the Shares, (C) any person other than Buyer or an affiliate of Buyer has entered into an agreement or an agreement in principle providing for a merger, consolidation or other business combination with, or a purchase of all or substantially all the assets of, the Company or of any subsidiary or division of the Company the business of which could constitute a "significant subsidiary" as that term is used in Rule 1.02 of Regulation S-X of the Securities and Exchange Commission, (D) the Board of Directors of the Company has failed to make, or has revoked or modified, its unqualified recommendation in favor of the Offer and the Merger or its approval of the entry by Buyer into this Agreement, or (E) the Company has committed a material breach of any provision of the Merger Agreement. SECTION 1.5. Adjustment Upon Changes in Capitalization or Merger. (a) In the event of any change in the Company's capital stock by reason of stock dividends, stock splits, mergers, consolidations, recapitalizations, combinations, conversions, exchanges of shares, extraordinary or liquidating dividends, or other changes in the corporate or capital structure of the Company which would have the effect of diluting or changing the Buyer's rights hereunder, the number and kind of shares or securities subject to the Option and the purchase price per Stockholder Share (but not the total purchase price) shall be appropriately and equitably adjusted so that the Buyer shall receive upon exercise of the Option the number and class of shares or other securities or property that the Buyer would have received in respect of the Stockholder Shares purchasable upon exercise of the Option if the Option had been exercised immediately prior to such event. Each Stockholder shall take such steps in connection with such consolidation, merger, liquidation or other such action as may be necessary to assure that the provisions hereof shall thereafter apply as nearly as possible to any securities or property thereafter deliverable upon exercise of the Option. (b) In the event the consideration per Share to be paid by Buyer pursuant to the Offer is increased, the Purchase Price shall be similarly increased and in the event the Closing hereunder shall have occurred, Buyer shall promptly pay to each Stockholder the product of the amount of such increase in the Purchase Price multiplied by the number of such Stockholder's Shares as to which the Option has been exercised. -3- 4 ARTICLE II GRANT OF PROXY Each Stockholder hereby revokes any and all previous proxies granted with respect to such Stockholder's Shares. By entering into this Agreement, each Stockholder hereby grants a proxy appointing Buyer as such Stockholder's attorney-in-fact and proxy, with full power of substitution, for and in such Stockholder's name, to vote, express consent or dissent, or otherwise to utilize such voting power in such manner and upon such matters as Buyer or its proxy or substitute shall, in Buyer's sole discretion, deem proper with respect to such Stockholder's Shares. The proxy granted by each Stockholder pursuant to this Article II is irrevocable and is granted in consideration of Buyer's entering into this Agreement and the Merger Agreement; provided, however, that such proxy shall be revoked upon termination of this Agreement in accordance with its terms. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS Each of the Stockholders severally represents and warrants to the Buyer that: SECTION 3.1. Valid Title. Such Stockholder is the sole, true, lawful and beneficial owner of such Stockholder's Shares with no restrictions on such Stockholder's voting rights or rights of disposition pertaining thereto. At any Closing, such Stockholder will convey good and valid title to such Stockholder's Shares being purchased free and clear of any and all claims, liens, charges, encumbrances and security interests. None of such Stockholder's Shares is subject to any voting trust or other agreement or arrangement with respect to the voting of such Shares. SECTION 3.2. Non-Contravention. The execution, delivery and performance by such Stockholder of this Agreement and the consummation of the transactions contemplated hereby (i) are within such Stockholder's powers, have been duly authorized by all necessary action (including any consultation, approval or other action by or with any other person), (ii) require no action by or in respect of, or filing with, any governmental body, agency, official or authority (except as required under the HSR Act), and (iii) do not and will not contravene or constitute a default under, or give rise to a right of termination, cancellation or acceleration of any right or obligation of such Stockholder or to a loss of any benefit of such Stockholder under, any provision of applicable law or regulation or of any agreement, judgment, injunction, order, decree, or other instrument binding on such Stockholder or result in the imposition of any lien on any asset of such Stockholder. SECTION 3.3. Binding Effect. This Agreement has been duly executed and delivered by such Stockholder and is the valid and binding agreement of such Stockholder, enforceable against such Stockholder in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. If this -4- 5 Agreement is being executed in a representative or fiduciary capacity, the person signing this Agreement has full power and authority to enter into and perform such Agreement. SECTION 3.4. Total Shares. Except as disclosed under Section 4.5 of the Company Disclosure Letter that accompanies the Merger Agreement, the number of Shares set forth on the signature pages hereto are the only Shares beneficially owned by such Stockholder and, except as set forth on such signature pages, the beneficial owner or owners of such Stockholder's Shares own no options to purchase or rights to subscribe for or otherwise acquire any securities of the Company and has or have no other interest in or voting rights with respect to any securities of the Company. SECTION 3.5. Finder's Fees. No investment banker, broker or finder is entitled to a commission or fee from Buyer or the Company in respect of this Agreement based upon any arrangement or agreement made by or on behalf of such Stockholder. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER The Buyer represents and warrants to each of the Stockholders: SECTION 4.1. Corporate Power and Authority. Buyer has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution, delivery and performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby have been duly authorized by the board of directors of Buyer and no other corporate action on the part of Buyer is necessary to authorize the execution, delivery or performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Buyer and is a valid and binding agreement of Buyer, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 4.2. Acquisition for Buyer's Account. Any Stockholder Shares to be acquired upon exercise of the Option will be acquired by Buyer for its own account and not with a view to the public distribution thereof and will not be transferred except in compliance with the Securities Act of 1933. -5- 6 ARTICLE V COVENANTS OF THE STOCKHOLDERS Each of the Stockholders hereby covenants and agrees that: SECTION 5.1. No Proxies for or Encumbrances on Stockholder Shares. Except pursuant to the terms of this Agreement, such Stockholder shall not, without the prior written consent of Buyer, directly or indirectly, (i) grant any proxies or enter into any voting trust or other agreement or arrangement with respect to the voting of any Shares or (ii) acquire, sell, assign, transfer, encumber or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the direct or indirect acquisition or sale, assignment, transfer, encumbrance or other disposition of, any Shares during the term of this Agreement. Such Stockholder shall not seek or solicit any such acquisition or sale, assignment, transfer, encumbrance or other disposition or any such contract, option or other arrangement or assignment or understanding and agrees to notify Buyer promptly and to provide all details requested by Buyer if such Stockholder shall be approached or solicited, directly or indirectly, by any person with respect to any of the foregoing. SECTION 5.2. No Shopping. Such Stockholder shall not directly or indirectly (i) solicit, initiate or encourage (or authorize any person to solicit, initiate or encourage) any inquiry, proposal or offer from any person to acquire the business, property or capital stock of the Company or any direct or indirect subsidiary thereof, or any acquisition of a substantial equity interest in, or a substantial amount of the assets of, the Company or any direct or indirect subsidiary thereof, whether by merger, purchase of assets, tender offer or other transaction or (ii) subject to the fiduciary duty of such Stockholder as a director of the Company under applicable law (if such Stockholder is such a director), participate in any discussion or negotiations regarding, or furnish to any other person any information with respect to, or otherwise cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek any of the foregoing. Such Stockholder shall promptly advise Buyer of the terms of any communications it may receive relating to any of the foregoing. SECTION 5.3. Conduct of Stockholders. Such Stockholder will not (i) take, agree or commit to take any action that would make any representation and warranty of such Stockholder hereunder inaccurate in any respect as of any time prior to the termination of this Agreement or (ii) omit, or agree or commit to omit, to take any action necessary to prevent any such representation or warranty from being inaccurate in any respect at any such time. -6- 7 ARTICLE VI MISCELLANEOUS SECTION 6.1. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. SECTION 6.2. Further Assurances. In the event the Buyer exercises the Option, the Buyer and the Stockholders will each execute and deliver or cause to be executed and delivered all further documents and instruments and use its best efforts to secure such consents and take all such further action as may be reasonably necessary in order to consummate the transactions contemplated hereby or to enable the Buyer and any assignee to exercise and enjoy all benefits and rights of the Stockholders with respect to the Option and the Stockholder Shares. SECTION 6.3. Additional Agreements. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations and which may be required under any agreements, contracts, commitments, instruments, understandings, arrangements or restrictions of any kind to which such party is a party or by which such party is governed or bound, to consummate and make effective the transactions contemplated by this Agreement. SECTION 6.4. Specific Performance. The parties hereto agree that the Buyer may be irreparably damaged if for any reason any Stockholder failed to sell such Stockholder's Shares (or other securities deliverable pursuant to Section 1.5) upon exercise of the Option or to perform any of its other obligations under this Agreement, and that the Buyer would not have an adequate remedy at law for money damages in such event. Accordingly, the Buyer shall be entitled to specific performance and injunctive and other equitable relief to enforce the performance of this Agreement by each Stockholder. This provision is without prejudice to any other rights that the Buyer may have against any Stockholder for any failure to perform its obligations under this Agreement. SECTION 6.5. Notices. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by telecopy, or by registered or certified mail (postage prepaid, return receipt requested) to such party at its address set forth on the signature page hereto. SECTION 6.6. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Stockholder Shares. SECTION 6.7. Amendments; Termination. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. This Agreement may be terminated by any of the parties hereto upon written notice to the other parties hereto on or after the 30th business day after the termination of the Merger Agreement in accordance with its terms. -7- 8 SECTION 6.8. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided that Buyer may assign its rights and obligations to any affiliate of Buyer and provided, further, that no Stockholder may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the Buyer. SECTION 6.9. Governing Law. This Agreement shall be construed in accordance with and governed by the law of New York without giving effect to the principles of conflicts of laws thereof. SECTION 6.10. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. -8- 9 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. SPEEDBIRD MERGE, INC. By /s/ Belden A. Frease --------------------------- One Computer Associates Plaza Islandia, NY 11788-7000 ELECTRONIC DATA SYSTEMS CORPORATION Class of Shares Stock Owned By /s/ Robert N. Sharpe ------- ------ --------------------------- Vice President common 4,008,535 7117 Forest Lane Dallas, TX 75230 HEWLETT-PACKARD COMPANY Class of Shares Stock Owned By /s/ D. Craig Nordlund ------- ------ --------------------------- Associate General Counsel and Secretary common 2,004,268 3000 Hanover Street Palo Alto, CA 94304 THOMAS I. UNTERBERG Class of Shares Stock Owned /s/ Thomas I. Unterberg ------- ------ ------------------------------ common 0 c/o The ASK Group, Inc. 2880 Scott Boulevard Santa Clara, CA 95052
-9- 10 ROBERT H. WATERMAN, JR. Class of Shares Stock Owned /s/ Robert H. Waterman, Jr. ------- ------ ----------------------------- common 6,000 c/o The ASK Group, Inc. 2880 Scott Boulevard Santa Clara, CA 95052 PAUL C. ELY, JR. Class of Shares Stock Owned /s/ Paul C. Ely, Jr. ------- ------ ----------------------------- common 5,000 c/o The ASK Group, Inc. 2880 Scott Boulevard Santa Clara, CA 95052 ERIC CARLSON Class of Shares Stock Owned /s/ Eric Carlson ------- ------ ----------------------------- common 10,000 c/o The ASK Group, Inc. 2880 Scott Boulevard Santa Clara, CA 95052
-10-
EX-6 7 EX-6 1 EXHIBIT 6 INDEMNIFICATION AGREEMENT This Indemnification Agreement ("Agreement") is effective as of this ____day of , 199_ by and between The ASK Group, Inc., a Delaware corporation (the "Company"), and ___________________________________ ("Indemnitee"). WHEREAS, the Company and Indemnitee recognize the continued difficulty in obtaining directors' and officers' liability insurance, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance; WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting officers and directors to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited; WHEREAS, Indemnitee does not regard the current protection available as adequate under the present circumstances, and the Indemnitee and other officers and directors of the Company may not be willing to continue to serve as officers and directors without additional protection; WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve as officers and directors of the Company and to indemnify its officers and directors so as to provide them with the maximum protection permitted by law; and WHEREAS, in view of the considerations set forth above, Indemnitee shall be indemnified by the Company as set forth herein. NOW THEREFORE, the Company and Indemnitee hereby agree as follows: 1. Indemnification. (a) Third Party Proceedings. The Company shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while serving as a director, officer, employee or agent or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgements, fines and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by Indemnitee in connection with such action, suit or proceeding, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee's conduct was 2 unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal action or proceeding, that Indemnitee had reasonable cause to believe that Indemnitee's conduct was unlawful. (b) Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company or any subsidiary of the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while serving as a director, officer, employee or agent, or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) and, to the fullest extent permitted by law, amounts paid in settlement, in each case to the extent actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such action or suit, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit is brought shall determine upon application that, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper. (c) Mandatory Payment of Expenses. To the extent that Indemnitee has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections (1) (a) or (b) hereof or in the defense of any claim, issue or matter therein, Indemnitee shall be indemnified against expenses (including attorney's fees) actually and reasonably incurred by Indemnitee in connection therewith. 2. Agreement to Serve. In consideration of the protection afforded by this Agreement, if Indemnitee is a director of the Company, Indemnitee agrees to serve at least for the balance of the current term as a director and not to resign voluntarily during such period without the written consent of a majority of the Board of Directors. In Indemnitee is an officer of the Company not serving under under an employment contract, he agrees to serve in such capacity at least for the balance of the current fiscal year of the Company and not to resign voluntarily during such period without the written consent of a majority of the Board of Directors. Following the applicable period set forth above, Indemnitee agrees to continue to serve in such capacity at the will of the Company (or under separate agreement, if such agreement exists) so long as Indemnitee is duly appointed or elected and qualified in accordance with the applicable provisions of the Bylaws of the Company or any subsidiary of the Company or until such time as -2- 3 Indemnitee tenders Indemnitee's resignation in writing. Nothing contained in this Agreement is intended to create in Indemnitee any right to continued employment. 3. Expenses; Indemnification Procedure. (a) Advancement of Expenses. The Company shall advance all expenses incurred by Indemnitee and to the fullest extent permitted by law, amounts paid in settlement by Indemnitee in connection with the investigation, defense, settlement or appeal of any civil or criminal action, suit or proceeding referenced in Sections 1(a) or (b) hereof. Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company as authorized hereby. The advances to be made hereunder shall be paid by the Company to Indemnitee within twenty (20) days following delivery of a written request therefor by Indemnitee to the Company. (b) NOTICE/Cooperation by Indemnitee. Indemnitee shall, as a condition precedent to his right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief Executive Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). Notice shall be deemed received three business days after the date postmarked if sent by domestic certified or registered mail, properly addressed; otherwise notice shall be deemed received when such notice shall actually be received by the Company. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power. (c) Procedure. Any Indemnification and advances provided for in Section 1 and this Section 3 shall be made no later than forty-five (45) days after receipt of the written request of Indemnitee. If a claim under this Agreement, under any statute, or under any provision of the Company's Certificate of Incorporation or Bylaws providing for indemnification, is not paid in full by the Company within forty-five (45) days after a written request for payment thereof has first been received by the Company, Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 13 of this Agreement, Indemnitee shall also be entitled to be paid for the expenses (including attorneys' fees) of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any action, suit or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Company and Indemnitee shall be entitled to receive interim payments of expenses pursuant to Section 3(a) unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists. It is the parties' intention that if the Company contests Indemnitee's right to indemnification, the question of Indemnitee's right to indemnification shall be for the court to decide, and neither the failure of the Company (including its Board of Directors, any committee -3- 4 or subgroup of the Board of Directors, independent legal counsel, or its stockholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct. (d) Notice to Insurers. If, at the time of the receipt of a notice of a claim pursuant to Section 3(b) hereof, the Company has officers' and directors' liability insurance in effect, the Company shall give prompt notice of the commencement of any action, suit or proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such action, suit or proceeding in accordance with the terms of such policies. (e) Selection of Counsel. In the event the Company shall be obligated under Section 3(a) hereof to pay the expenses of any action, suit or proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such action, suit or proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee of written notice of its election so to do. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same action, suit or proceeding, provided that (i) Indemnitee shall have the right to employ Indemnitee's counsel in any such action, suit or proceeding at Indemnitee's expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not, in fact, have employed counsel to assume the defense of such action, suit or proceeding, then the fees and expenses of Indemnitee's counsel shall be at the expense of the Company. 4. Additional Indemnification Rights; Nonexclusivity. (a) Scope. Notwithstanding any other provision of this Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company's Certificate of Incorporation, the Company's Bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its board of directors or an officer, such change shall be, ipso facto, within the purview of Indemnitee's rights and the Company's obligations under this Agreement. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder. -4- 5 (b) Nonexclusivity. The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company's Certificate of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested Directors, the General Corporation Law of the State of Delaware, or otherwise, both as to action in Indemnitee's official capacity and as to action in another capacity while holding such office. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though Indemnitee may have ceased to serve in such capacity at the time of any covered action, suit or proceeding. 5. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines or settlement payments actually or reasonably incurred by him in the investigation, defense, appeal or settlement of any civil or criminal action, suit or proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments, fines or settlement payments to which Indemnitee is entitled. 6. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge that in certain instances, Federal Law or applicable public policy may prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company's right under public policy to indemnify Indemnitee. 7. Officers' and Directors' Liability Insurance. The Company shall, from time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses from wrongful acts, or to ensure the Company's performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage. In all policies of officers' and directors' liability insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company's directors, if Indemnitee is a director; or of the Company's officers, if Indemnitee is not a director of the Company but is an officer; or of the Company's key employees, if Indemnitee is not an officer or director but is a key employee. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if the Company determines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionate to the amount of coverage provided, if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or if Indemnitee is covered by similar insurance maintained by a subsidiary or parent of the Company. -5- 6 8. Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company's inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 8. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms. 9. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement: (a) Claims Initiated by Indemnitee. To indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145 of the Delaware General Corporation Law, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors finds it appropriate; or (b) Lack of Good Faith. To indemnify Indemnitee for any expenses incurred by the Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous; or (c) Insured Claims. To indemnify Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) which have been paid directly to Indemnitee by an insurance carrier under a policy of officers' and directors' liability insurance maintained by the Company; or (d) Claims Under Section 16(b). To indemnify Indemnitee for expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute. 10. Construction of Certain Phrases. (a) For purposes of this Agreement, references to the "Company" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that if Indemnitee is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, -6- 7 officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued. (b) For purposes of this Agreement, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to "serving at the request of the Company" shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or its beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Agreement. 11. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original. 12. Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns, and shall inure to the benefit of Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns. 13. Attorneys' Fees. In the event that any action is instituted by Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys' fees, incurred by Indemnitee with respect to such action, unless as a part of such action the court of competent jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys' fees, incurred by Indemnitee in defense of such action (including costs and expenses incurred with respect to Indemnitee's counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee's material defenses to such action were made in bad faith or were frivolous. 14. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by the party addressee, on the date of such receipt, or (ii) if mailed by domestic certified or registered mail with postage prepaid, on the third business day after the date postmarked. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice. 15. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of California for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree -7- 8 that any action instituted under this Agreement shall be brought only in the state courts of the State of California. 16. Choice of Law. This Agreement shall be governed by and its provisions construed in accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. THE ASK GROUP, INC. INDEMNITEE By:________________________________ __________________________________ Signature Printed: __________________________ __________________________________ Title: ____________________________ __________________________________ (Address) Address: 2880 Scott Boulevard Santa Clara, CA 95052-8013 -8- EX-7 8 EX-7 1 Exhibit 7 ASK Group Telephone: 408-562-8200 Facsimile: 408-562-8282 The ASK Group, Inc. 2880 Scott Boulevard P.O. Box 58013 Santa Clara, CA 95052-8013 March 3, 1994 Eric Carlson 109 Vista Del Campo Los Gatos, CA 95032 Dear Eric: Your contribution is essential to our success as we continue to work to restore our business to profitability. To held ensure your focused attention, we are pleased to tell you that you will participate in the following Executive Retention Program. This program defines severance eligibility, in termination situations where no Change of Control is involved, as well as severance and Stock Option treatment where a "Change of Control" in the ownership of the ASK Group, Inc. (the "ASK Group") occurs. This letter will confirm and detail these arrangements. For the purposes of this letter "Company" means the ASK Group or its subsidiary which employs you. (a) Termination (No Change of Control). If your employment is terminated for any reason other than Cause or voluntary resignation, you shall be entitled to receive a severance payment from the Company in an amount equal to six month's base salary. Health Care Benefits will continue for the length of your severance period. Executive outplacement service will also be provided. For purposes of this Program "Cause" shall mean those items set out in the Company's policies including, without limitation, your willful misconduct, conviction of a felony, or repeated failure to diligently carry out your employment duties, provided the Company has complied with its usual and customary policies, procedures and practices regulating employee discipline and termination. (b) Change of Control. In the event of a Change of Control (defined below), all unvested Stock Options and Restricted Stock (if any) will become fully vested and exercisable. All Benefits will continue for the length of your severance period. Executive outplacement service will also be provided. In addition, if within one year of a Change of Control (i) your position is terminated or (ii) your duties and responsibilities are significantly reduced or (iii) your employment terminates by mutual agreement, you shall be entitled to receive a lump sum severance payment from the Company in an amount equal to one year's salary; nine month's base salary if termination occurs during the second year of employment; and six month's base salary after the second year of employment. 2 For this purpose, the term "Change of Control" of the ASK Group means (i) the acquisition by any person or persons of 50% or more of the ASK Group's Common Stock, or (ii) a transaction that requires shareholder approval and involves the sale of all or substantially all the assets of the ASK Group or the merger of the ASK Group with or into another previously unaffiliated corporation. (c) Severance. Any severance payment to which you become entitled under Section (a) or (b) above (The "Severance Payment") will be subject to applicable tax withholding and will be paid a lump sum. The Severance Payment shall be in lieu of any further payments to you. The Severance Payment may be subject to a U.S. excise tax (currently 20%) or to a reduction in the minimum amount as the Company believes is necessary to avoid such excise tax. Notwithstanding the foregoing, the Severance Payment will not reduce or offset any benefits you may be entitled to under the specific terms of any Company benefits plans during the severance payment period. (d) Successors. The Company will require any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform the Company's obligations hereunder in the same manner and to the same extent as if no such succession had taken place. (e) Entire Agreement. No agreements, representations or understandings (whether oral or written and whether expressed or implied) which are not expressly set forth in this letter have been made or entered into by either party with respect to the subject matter hereof. We are pleased to present you with this package. We know we can count on your continued contribution and support. Sincerely, /s/ Scott Neely ____________________________________ Scott Neely Vice President & General Counsel -2- EX-8 9 EX-8 1 Exhibit 8 ASK Group Telephone: 408-562-8200 Facsimile: 408-562-8282 The ASK Group, Inc. 2880 Scott Boulevard P.O. Box 58013 Santa Clara, CA 95052-8013 February 26, 1994 Eric D. Carlson 109 Vista Del Campo Los Gatos, CA 95032 Dear Eric: This will confirm the compensation arrangement recently agreed to by the Board of Directors for you in your new role as president and chief executive officer of The ASK Group, Inc. (the "Company"). 1. ANNUAL BASE SALARY: Your annual base salary will continue to be $225,000. This salary will be adjusted on the earlier of the date (i) the executive staff salary cut instituted in February 1994 ends and (ii) your fiscal 1995 base salary to be approved by the Company's Board of Directors or Compensation Committee becomes effective. 2. INCENTIVE BONUS TARGET FOR CALENDAR 1994: Your target incentive bonus for calendar 1994 will be $300,000 and will be payable as follows: (a) 50% if the Company is profitable for the quarter ending June 30, 1994 and 50% if the Company is profitable for the 6 months ending December 31, 1994. Profitability will be determined as $1.00 or more of operating income determined in accordance with generally accepted accounting principles; (b) 100% if, during calendar 1994, your employment is terminated other than for cause or voluntarily or if your employment is terminated for any reason following a Change of Control; Because the Board recognizes that the ability to meet operating income targets can be negatively impacted by the sale of certain of its businesses and to reflect the importance of certain aspects of the Company business to you, the Board has agreed that 50% and 100% of the target incentive bonus will be earned if, during calendar 1994 all or substantially all of the shares of stock or assets of the entity or entities representing the INGRESS database, connectivity and tools business or the MANMAN application software business, respectively, are sold to a previously unaffiliated third party. The remaining 50% of the bonus would be earned as provided in 2(a) and (b) above. 2 3. Stock Option Grant: You will be recommended for a grant of stock options to purchase 250,000 shares of the Company's common stock. The option will vest as follows: (i) in full on the fifth anniversary of the grant date, or (ii) earlier based on the achievement of the same Company market valuation and/or net income targets which serve as the basis for excelerating the vesting of the options granted to Gary Filler in connection with his joining the Company. The detailed provisions of the options will be contained in related agreements to be sent to you following the option grant. 4. Change of Control: For purposes of this letter, a Change of Control means (i) the acquisition by any person or persons of 50% or more of the Company's common stock or (ii) a transaction that requires shareholder approval and involves the sale of all or substantially all of the Company's assets or the merger, consolidation or other combination of the ASK Group with or into another previously unaffiliated entity. The other terms of your employment shall be governed by your offer letter, the Company's policies and procedures from time to time in effect and such other agreements as from time to time may be made between you and the Company and approved by the Board of Directors. Sincerely, /s/ Paul C. Ely Paul C. Ely Chairman -2- EX-9 10 EX-9 1 Exhibit 9 AGREEMENT AGREEMENT, dated May 18, 1994, between Eric D. Carlson (the "Employee") and The ASK Group, Inc., a Delaware corporation, (the "Company") (hereinafter the "Agreement"). To induce Computer Associates International, Inc. (the "Buyer") to enter into certain agreements and transactions with the Company of even date, the Employee and the Company agree, for the benefit of the Buyer, as follows: 1. In the event that any payment, property, or benefit received or to be received by the Employee from the Company or from any corporation which is a member of the Company's affiliated group (a "Related Corporation") within the meaning of Section 280G(d)(5) of the Internal Revenue Code of 1986, as amended (the "Code"), would (i) constitute a "parachute payment" within the meaning of Section 280G of the Code and (ii) but for this Agreement, be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then such payment, property, or benefit (hereinafter collectively referred to as the "Parachute Payments") shall be reduced or otherwise adjusted to the largest amount that would result in no portion of the Parachute Payments being subject to the Excise Tax. Such adjustment shall be determined, as set forth herein, promptly after the signing of this Agreement, and the parties hereto shall use their best efforts to ensure that such 2 adjustment shall be made prior to any change in control of the Company. 2. If, notwithstanding the reduction or adjustment, if any, described in Section 1 hereof, the Internal Revenue Service (the "IRS") determines that the Employee is liable for the Excise Tax as a result of the receipt of a Parachute Payment, then the Employee shall, subject to the provisions of this Agreement, be obligated to pay to the Company (the "Repayment Obligation") an amount of money equal to the "Repayment Amount." The Repayment Amount with respect to a Parachute Payment shall be the smallest amount, if any, as shall be required to be repaid to the Company so that the Excise Tax imposed on such Parachute Payment shall be eliminated. Notwithstanding the foregoing, the Repayment Amount with respect to a Parachute Payment shall be zero if performance of the Repayment Obligation would not eliminate the Excise Tax imposed on such Parachute Payment. If the Excise Tax is not eliminated through the performance of the Repayment Obligation, the Employee shall pay the Excise Tax. The Repayment Obligation shall be performed within 90 days of either: (i) the Employee's entering into a binding agreement with the IRS as to the amount of the Employee's Excise Tax liability or (ii) a final determination by the IRS or a court decision requiring the Employee to pay the Excise Tax with respect to such a Parachute Payment from which no appeal is available or is timely taken. Except for the Employee's Repayment Obligation, neither the Company nor any Related Corporation shall have any -2- 3 claim against the Employee on account of a disallowance of any income tax deduction on account of a Parachute Payment. The Employee shall have no claim against the Buyer, the Company or any Related Corporation on account of any Excise Tax imposed on the Employee. 3. Unless the Company and the Employee otherwise agree in writing, the determination of (i) the amount of any required reduction or other adjustment in a Parachute Payment pursuant to this Agreement, and (ii) the amount of any Repayment Obligation shall be made in writing by Ernst & Young whose determination shall be conclusive and binding upon the Employee, the Company, and any Related Corporation for all purposes. Provided that Ernst & Young determines that such choice is consistent with the elimination of any Excise Tax on Parachute Payments, the Employee shall have the right to choose which specific Parachute Payments shall be reduced or adjusted. The payor of a Parachute Payment shall reduce or otherwise adjust a Parachute Payment in accordance with this Agreement only upon written notice to the Employee indicating such reduction or adjustment, if any, and (if applicable) enclosing a copy of the written determination described in the immediately preceding sentence. The Company and the Employee shall furnish to Ernst & Young such information and documents as Ernst & Young reasonably requests in order to make a determination under this Agreement. -3- 4 4. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, (including, without limitation, any employee compensation, stock option, stock purchase, pension, or benefit plan) relating to the subject matter hereof. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective upon its execution by each of the Employee and the Company. This Agreement may be amended only by means of a writing signed by both parties hereto and by the Buyer. 5. This Agreement is for the benefit of, and may be enforced by, the Buyer. -4- 5 6. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. Employee: /s/ Eric D. Carlson ________________________________ Date: _______________ Eric D. Carlson The ASK Group, Inc. /s/ Scott Neeley ________________________________ Date: _______________ Signature Vice President & General Counsel ________________________________ Print Name and Title -5- EX-10 11 EX-10 1 February 26, 1994 Exhibit 10 Mr. Gary Filler 45 Chestnut Place Danville, CA 94506 Dear Gary: I am pleased to confirm our offer to you for the position of Executive Vice President, Operations and Chief Financial Officer reporting to me. Your starting salary will be $215,000 per year. Your current base salary will increase to $235,000 when the current Executive Salary Reduction program is rescinded, which is currently anticipated to occur on 7/1 94. Pay periods are semi-monthly. You will be eligible for a Bonus, at the rate of $50,000, payable at the end of Q4 '94 and $50,000 at the end of 1H '95 based upon the achievement of certain performance criteria to be determined by the Chairman and CEO within two weeks of your start date. The Board will review your compensation package at the beginning of FY '95, when other Executives are reviewed as part of our Executive Salary Review Program. You will be recommended for stock options covering 200,000 and 50,000 shares of ASK Group common stock. The exercise price per share will be the closing price of ASK Group common stock on the NASD National Market System on the date of grant, which generally occurs within one month following your start date. These stock options will vest as follow: (i) in full on the fifth anniversary of the grant date or, (ii) earlier based on the achievement of certain ASK Group market valuation and/or net income target which targets will be established by the Board or its Compensation Committee at the time the options are granted. Additionally, the 50,000 share option will not be exercisable at all unless the ASK Group has $1.00 or more of Operating Income (determined in accordance with GAAP) for the quarter ending June 30, 1994. Annually, The ASK Group, Inc. has a Focal Option Review in which employees' stock option positions are reviewed. As long as your employment is not terminated due to a violation of Company policies, or otherwise for cause, or due to your voluntary termination, you will be entitled to receive payment equal to six months of your base salary, as of your date of termination. As an employee of the The ASK Group, Inc. you will participate in a benefits program which includes Company paid medical, dental, vision and life insurance for you. In addition, you will participate in a short-term disability program, receive Company paid long-term disability insurance, ten days of vacation, and ten days of sick leave per year. Detailed information regarding The ASK Group's employee benefits including the application forms to join the programs will be provided at your orientation. 2 You are eligible to participate in the Company's 401(k) Plan as of your first day of employment. This plan includes a Company matching contribution, which is effective immediately upon enrollment. New employees with funds from another qualified plan may roll these funds into The ASK Group 401(k) Plan (to be sent under separate cover). Your employment with The ASK Group, Inc. is contingent with your compliance with the Federal Immigration Control and Reform Act of 1986. This act requires that we, as an employer, verify the employment eligibility of all new employees within your first three (3) days of employment with us. A copy of The ASK Group's Proprietary Agreement will be sent to you for your review and signature. Please return this with your offer letter. In addition, an employee benefits brochure which highlights the many benefits of working at The ASK Group, Inc., including a prospectus in our Employee Stock Purchase Plan will be mailed to you. This offer letter sets forth the entire agreement between you and The ASK Group, Inc., concerning your employment. Neither you nor The ASK Group Inc. shall be bound by any term or condition of your employment, other than as expressly provided in this letter or in writing dated subsequent to the date of this letter and signed by you and an officer of The ASK Group, Inc.. This offer constitutes employment at-will, which may be terminated at any time by you ar The ASK Group, Inc. for any reason , with or without cause. This offer of employment is contingent upon your ability to provide satisfactory proof that you are authorized for employment in the United States as required by Federal Law. Gary, I recognize this is an important decision for you in your career. I believe that the position is an excellent opportunity for you, and we are confident that The ASK Group will provide you with the challenges and opportunities that you seek. The enclosed copy of this letter is for your personal records. Should you have any questions, please do not hesitate to call me or Ron Rudolph, Vice President, Human Resources at 408-562-8750. Sincerely, /s/ Eric D. Carlson Eric D. Carlson President & Chief Executive Officer I am pleased to accept this offer. I will report to work on 2/28/94. /s/ Gary Filler EX-11 12 EX-11 1 Exhibit 11 Signature: /s/ Gary Filler Date: 3/28/94 --------------------------- --------- March 3, 1994 Gary Filler 45 Chestnut Place Black Hawk, CA 94506 Dear Gary: Your contribution is essential to our success as we continue to restore our business to profitability. To help ensure your focused attention, we are pleased to tell you that you will participate in the following Executive Retention Program. This program defines severance edibility, in termination situations where no Change of Control is involved, as well as severance and Stock Option treatment where a "Change of Control" in the ownership of the ASK Group, Inc. ("the ASK Group") occurs. This letter will confirm and detail these arrangements. For the purpose of this letter "Company" means the ASK Group or its subsidiary which employs you. (a) Termination (No Change of Control). If your employment is terminated for any reason other than Cause or voluntary resignation, you shall be entitled to receive a severance payment from the Company in an amount equal to sic month's base salary. Health Care Benefits will continue for the length of your severance period. Executive outplacement service will also be provided. For purposes of this program "Cause" shall mean those items set out in the Company's policies including, without limitation, your willful misconduct, conviction of a felony, or repeated failure to diligently carry out your employment duties, provided the Company has complied with its usual and customary policies, procedures and practices regulating employee discipline and termination. (b) Change of Control. In the event of a Change of Control (defined below), all unvested Stock Options and Restricted Stock (if any) will become fully vested and exercisable. All Benefits will continue for the length of your severance period. Executive outplacement service will also be provided. In addition, if within one year of a Change in Control (i) your position is terminated or (ii) your duties and responsibilities are significantly reduced of (iii) your employment terminates by mutual agreement, you shall be entitled to receive a lump sum severance payment from the Company in an amount equal to one year's salary; nine month's base salary if termination occurs during the second year of employment; and six month's base salary after the second year of employment. 2 For this purpose, the term "Change of Control" of the ASK Group means (i) the acquisition by any person or persons of 50% or more of the ASK Group's Common Stock, or (ii) a transaction that requires shareholder approval and involves the sale of all or substantially all the assets of the ASK Group or the merger of the ASK Group with or into another previously unaffiliated corporation. (c) Severance. Any severance payment to which you become entitled under Section (a) or (b) above (the "Severance Payment") will be subject to applicable tax withholding and will be paid as a lump sum. The Severance Payment shall be in lieu of any further payments to you. The Severance Payment may be subject to a U.S. excise tax (currently 20%) or to a reduction in the minimum amount as the Company believes is necessary to avoid such excise tax. Notwithstanding the foregoing, the Severance Payment will not reduce or offset any benefits you may be entitled to under the specific terms of any Company benefits plans during the severance payment. (d) Successors. The Company will require any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform the Company's obligations hereunder in the same manner and to the same extent as if no such succession had taken place. (e) Entire Agreement. No agreements, representations or understandings (whether oral or written and whether expressed or implied) which are not expressly set forth in this letter have been made or entered into by either party with respect to the subject matter hereof. We are pleased to present you with this package. We know we can continue on your continued contribution and support. Sincerely, /s/ Eric D. Carlson - --------------------------------- Eric D. Carlson President & CEO EX-12 13 EX-12 1 Exhibit 12 ____________________________________ COMMON STOCK PURCHASE AGREEMENT Dated as of August 31, 1990 Among ASK COMPUTER SYSTEMS, INC., ELECTRONIC DATA SYSTEMS CORPORATION and HEWLETT-PACKARD COMPANY ___________________________________ 2 TABLE OF CONTENTS
Page SECTION 1 - Initial Sale of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ---------------------------- 1.1 Sale of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.4 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2 - Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . 3 2.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.4 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.5 Accuracy of Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.6 Financial Statements and Changes . . . . . . . . . . . . . . . . . . . . . . 7 2.7 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.8 Governmental Consent, etc . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.9 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.10 Amendment to Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 3 - Representations and Warranties of the Purchasers . . . . . . . . . . . . . . . . . 10 3.1 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.2 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.4 Government Consents, etc . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.5 Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.6 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 4 - Conditions to Obligations of Purchasers . . . . . . . . . . . . . . . . . . . . . 13 4.1 Representations and Warranties Correct . . . . . . . . . . . . . . . . . . . 13 4.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.3 Opinion of Company's Counsel . . . . . . . . . . . . . . . . . . . . . . . . 13 4.4 No Order Pending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.5 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.6 No Law Prohibiting or Restricting Such Sale . . . . . . . . . . . . . . . . . 14 4.7 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.8 Notification Regarding Contingent Event . . . . . . . . . . . . . . . . . . . 15 SECTION 5 - Conditions to Obligations of Company . . . . . . . . . . . . . . . . . . . . . . . 15 5.1 Representations and Warranties Correct . . . . . . . . . . . . . . . . . . . 15 5.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 5.3 No Order Pending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-i- 3 5.4 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 5.5 No Law prohibiting or Restricting Such Sale . . . . . . . . . . . . . . . . . 16 5.6 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 6 - Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 6.1 No Objection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 6.2 Notice of Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 6.3 Sale of Additional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 18 6.4 Membership on the Board of Directors . . . . . . . . . . . . . . . . . . . . 18 6.5 Equity Method Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . 20 6.6 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 7 - Covenants of the Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 7.1 Limitation on Ownership of Voting Stock . . . . . . . . . . . . . . . . . . . 23 7.2 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 7.3 Voting Trust, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 7.4 Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 7.5 Acts in Concert with Others . . . . . . . . . . . . . . . . . . . . . . . . . 27 7.6 Restrictions on Transfer of Voting Stock . . . . . . . . . . . . . . . . . . 27 7.7 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . 28 7.8 Right to Maintain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 7.9 Acquisition of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 8 - Company Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . 36 8.1 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 8.2 Tender Offer Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.3 Assignment of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 9 - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 9.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 9.2 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 44 9.4 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 9.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 9.6 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 9.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 9.8 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 47 9.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 9.10 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 9.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 9.12 Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 9.13 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 9.14 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 9.15 No Third Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 9.16 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
-ii- 4 TABLE OF CONTENTS (continued)
Page ---- Exhibits A Registration Rights Agreement B Opinion of Wilson, Sonsini, Goodrich & Rosati C Company Compliance Certificate D Purchaser's Compliance Certificate
-iii- 5 COMMON STOCK PURCHASE AGREEMENT THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made as of this 31st day of August, 1990, among ASK Computer Systems, Inc., a Delaware corporation (the "Company"), and Electronic Data Systems Corporation, a Texas corporation ("EDS" or "Purchaser"), and Hewlett-Packard Company, a California corporation ("HP" or "Purchaser") (collectively, the "Purchasers"). SECTION 1 Initial Sale of Common Stock 1.1 Sale of Common Stock. Subject to the terms and conditions hereof, the Company will issue and sell to EDS and HP, and EDS and HP will purchase from the Company, at the Closing as defined below, 3,710,575 shares (the "EDS Shares") and 1,855,288 shares (the "HP Shares"), respectively, of Common Stock, $.01 par value, of the Company (the "Common Stock") for an aggregate of 5,565,863 shares (the "Shares") at a purchase price of $10.78 per share, for a purchase price of $39,999,998.50 for the EDS Shares and a purchase price of $20,000,004.64 for the HP Shares, and an aggregate purchase price of $60,000,003.14; provided, however, that if the notification to be delivered by the Company to the Purchasers pursuant to Section 4.8 states that the Contingent Event will not occur, (i) the Company shall have no obligation to sell to HP, and HP shall have no obligation to purchase, the HP Shares, and (ii) the Company shall have the obligation to sell to EDS, and EDS shall have the right (but not the obligation) to purchase, up to one-half of the EDS Shares, which right must be exercised (if at 6 all) by written notice to the Company within sixty (60) days following the Company's notification with respect to the Contingent Event. In the event EDS provides such notice of exercise, the sale and purchase of shares contemplated thereby shall take place no later than five (5) days following delivery of such notice. For purposes of this Agreement, "EDS Shares" shall mean the number of shares of Common Stock actually purchased by EDS under this Section 1.1. 1.2 Closing Date. The closing of the purchase and sale of the Shares (the "Closing") shall be held at the law offices of Wilson, Sonsini, Goodrich & Rosati, P.C., Two Palo Alto Square, Suite 900, Palo Alto, California at 10:00 a.m. on the third business day following expiration or early termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and satisfaction of all closing conditions set forth in Sections 4 and 5 hereof or at such other time and place upon which the Company and the Purchasers shall mutually agree (the date of the Closing is hereinafter referred to as the "Closing Date"). 1.3 Delivery. At the Closing, the Company will deliver to each of the Purchasers a certificate or certificates representing that portion of the Shares purchased by such Purchasers, against payment of the purchase price therefor, by wire transfer in same day funds. 1.4 Legend. The certificate or certificates for the Shares shall be subject to a legend restricting transfer under the Securi- -2- 7 ties Act of 1933, as amended (the "Securities Act"), and referring to restrictions on transfer and rights of first refusal herein, such legend to be substantially as follows: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933. Such shares may not be sold or transferred in the absence of such registration or an opinion of counsel satisfactory to the Company as to the availability of an exemption from registration. "The shares represented by this certificate are subject to restrictions on transfer, including any sale, pledge or other hypothecation, and rights of first refusal set forth in an agreement dated as of August 31, 1990 among the Company and the other parties identified therein, a copy of which agreement may be obtained at no cost by written request made by the holder of record of this certificate to the secretary of the Company at the Company's principal executive offices." SECTION 2 Representations and Warranties of the Company. The Company hereby represents and warrants to each of the Purchasers as follows: 2.1 Organization. The Company is a corporation duly organized and validly existing under the laws of the State of Delaware and is in good standing under such laws. The Company has all requisite corporate power and authority to own, lease and operate its properties and assets, and to carry on its business as presently conducted and as proposed to be conducted. The Company is qualified to do business as a foreign corporation in each jurisdiction in which the ownership of its property or the nature of its business requires such qualification, except where failure to so qualify would not have a material adverse effect on the Company. The Company has furnished to the Purchasers true and correct copies -3- 8 of its Certificate of Incorporation and By-laws, as amended, and will furnish upon request to the Purchasers true and correct copies of any amendments thereto through the term of this Agreement. 2.2 Capitalization. The authorized capital stock of the Company consists of 40,000,000 shares of Common Stock, $.01 par value, of which at August 23, 1990, 13,274,107 shares were issued and outstanding. All such issued and outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable. As of August 23, 1990, the Company has reserved a total of 3,152,537 shares of its Common Stock for issuance under its 1982 Incentive Stock Option Plan, of which 2,868,139 shares are reserved for issuance upon exercise of outstanding options; a total of 149,400 shares for issuance under its 1986 Director Option Plan, of which 68,600 shares are reserved for issuance upon exercise of outstanding options; a total of 250,000 shares for issuance under its 1990 Employee Stock Purchase Plan; and a total of 6,314 shares for issuance under its 1981 Deferred Compensation Plan for Directors. On August 14, 1990, the Company entered into a Common Shares Rights Agreement (the "Rights Agreement") with The First National Bank of Boston, and has announced the distribution of rights under the Rights Agreement to all stockholders of record as of August 31, 1990. Except as provided or described in this Agreement, there are no other options, warrants, conversion privileges or other contractual rights presently outstanding to purchase or otherwise acquire any authorized but unissued shares of the Company's capital stock or other securities. -4- 9 2.3 Authorization. The Company has all corporate right, power and authority to enter into this Agreement and the Registration Rights Agreement set forth in Exhibit A hereto and to consummate the transactions contemplated hereby and thereby. All corporate action on the part of the Company, its directors and stockholders (other than stockholder approval, if required, under the requirements of the National Association of Securities Dealers, Inc. (the "NASD") for the issuance of the Shares where the only effect of the failure to obtain stockholder approval is a loss of status of the Voting Stock as a National Market System-designated security) necessary for the authorization, execution, delivery and performance of this Agreement and the Registration Rights Agreement by the Company, the authorization, sale, issuance and delivery of the Shares and the performance of the Company's obligations hereunder and under the Registration Rights Agreement has been taken. This Agreement and the Registration Rights Agreement have been duly executed and delivered by the Company and constitute legal, valid and binding obligations of the Company enforceable in accordance with their respective terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy as they may apply to Section 4 of the Registration Rights Agreement. Upon their issuance and delivery pursuant to this Agreement, the Shares will be validly issued, fully paid and nonassessable. The issuance and sale of the Shares will not give rise to any preemp- -5- 10 tive rights or rights of first refusal on behalf of any person in existence either on the date hereof or immediately prior to the Closing. 2.4 No Conflict. Subject to compliance with the HSR Act, and except for the failure to obtain stockholder approval, if required, of the issuance of the Shares in accordance with the policies of the NASD, the execution and delivery of this Agreement and the Registration Rights Agreement do not, and the consummation of the transactions contemplated hereby and thereby will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit, under, any provision of the Certificate of Incorporation or By-laws of the Company or any mortgage, indenture, lease or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company, its properties or assets, the effect of which would have a material adverse effect on the Company or materially impair or restrict its power to perform its obligations as contemplated hereby or thereby. 2.5 Accuracy of Reports. All reports (the "SEC Reports") required to be filed by the Company during the period from June 30, 1989 to the date of this Agreement under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), copies of which have been furnished to the Purchasers, have been duly filed, were in substantial compliance with the requirements of their respective -6- 11 forms, were complete and correct in all material respects as of the dates at which the information was furnished, and none contained (as of such dates) any untrue statement of a material fact nor omitted to state a material fact necessary in order to make the statements made therein, in light of the circumstances in which made, not misleading. 2.6 Financial Statements and Changes. The Company has delivered to the Purchasers consolidated balance sheets as of June 30, 1989 and 1990 and the related statements of operations, stockholders' equity and changes in financial position and notes thereto for the fiscal years ended on June 30, 1988, 1989 and 1990, all of which are accompanied by the related audit opinion of the Company's independent certified public accountants, Ernst & Young (or its predecessor) (collectively, the "Financial Statements"). The Financial Statements, with the notes thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the fiscal years covered by such statements (except as may be stated in the notes to such statements or the related report of independent accountants) and present fairly the Company's financial condition and results of operations and changes in financial position as of the dates and for the fiscal years indicated. Except as otherwise disclosed herein, in the Financial Statements or in the SEC Reports, since June 30, 1990, there has not been: (a) any change in the assets, liabilities, financial condition or operations of the Company from that reflected in the -7- 12 Financial Statements except changes in the ordinary course of business which have not been, either in any individual case or in the aggregate, materially adverse; (b) any change, except in the ordinary course of business, in the contingent obligations of the Company, whether by way of guaranty, endorsement, indemnity, warranty or otherwise; (c) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the properties or business of the Company; (d) any declaration or payment of any dividend (other than the rights distribution described in Section 2.2 hereof) or other distribution of the assets of the Company; (e) any labor organization activity; or (f) to the best of the Company's knowledge, any other event or condition of any character which has materially and adversely affected the Company's assets, liabilities, financial condition or operations. 2.7 Registration Rights. Except as set forth in this Agreement or the Registration Rights Agreement, and except for the continuing practice of the Company to register its employee stock plans on Form S-8, the Company is not under any obligation to register any of its presently outstanding securities or any of its securities which may hereafter be issued. 2.8 Governmental Consent, etc. No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Company is required in -8- 13 connection with the valid execution and delivery of this Agreement, or the offer, sale or issuance of the Shares, or the consummation of any other transaction contemplated hereby, except the filing of such forms with the United States Department of Justice and the Federal Trade Commission as shall be required by the HSR Act and the expiration of any waiting periods thereunder and such filings as may be required to be made with the Securities and Exchange Commission ("SEC") and the NASD and filings, if any, to be made in compliance with applicable blue sky requirements. 2.9 Disclosure. No representation or warranty of the Company contained in this Agreement or the exhibits attached hereto (when read together and taken as a whole) contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. 2.10 Amendment to Rights Agreement. All action required under the Rights Agreement to amend the Rights Agreement has been taken (or will have been taken prior to the Closing) so that the issuance of the Shares shall not cause either of the Purchasers to become an "Acquiring Person" or cause a "Shares Acquisition Date", "Distribution Date" or "Triggering Event" to occur (each as defined in the Rights Agreement). SECTION 3 Representations and Warranties of the Purchasers -9- 14 Each of the Purchasers hereby represents and warrants to the Company, as to itself alone and not jointly with the other Purchaser, as follows: 3.1 Investment. The Purchaser will acquire the Shares and any other shares purchased from the Company pursuant to this Agreement for investment for its own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof. Purchaser understands that the Shares and any other shares purchased by it from the Company pursuant to this Agreement have not been, and will not be, registered (unless sold in connection with a public offering by the Company) under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the Purchaser's investment intent and the accuracy of the Purchaser's representations as expressed herein. 3.2 Organization. The Purchaser is a corporation duly organized and validly existing and in good standing under the laws of the state of its incorporation, with all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted and as proposed to be conducted. 3.3 Authority. The Purchaser has all corporate right, power and authority to enter into this Agreement and the Registration Rights Agreement and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement -10- 15 and the Registration Rights Agreement by the Purchaser and the consummation by the Purchaser of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on behalf of the Purchaser. This Agreement and the Registration Rights Agreement have been duly executed and delivered by the Purchaser and constitute legal, valid and binding obligations of the Purchaser, enforceable in accordance with their respective terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy as they may apply to Section 4 of the Registration Rights Agreement. Subject to compliance with the HSR Act and such filings as may be required to be made with the SEC and any exchange or quotation system on which the Purchaser's securities are listed or designated, the execution and delivery of this Agreement and the Registration Rights Agreement do not, and the consummation of the transactions contemplated hereby and thereby will not, conflict with or result in any violation of any obligation under any provision of the Certificate or Articles of Incorporation or By-laws of the Purchaser or any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Purchaser. 3.4 Government Consents, etc. No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Purchaser is required in connection with the valid execution and delivery of this Agreement, -11- 16 or the offer, sale or issuance of the Shares or the consummation of any other transaction contemplated hereby, except the filing of such forms with the United States Department of Justice and the Federal Trade Commission as shall be required by the HSR Act and the expiration of any waiting periods thereunder and such filings as may be required to be made with the SEC and any exchange or quotation system on which the Purchaser's securities are listed or principally traded. 3.5 Investigation. The Purchaser has had a reasonable opportunity to discuss the Company's business, management and financial affairs with the Company's management and the Purchaser has received satisfactory responses from management of the Company to the Purchaser's inquiries. 3.6 Financing. The Purchaser has the funds, or has written commitments from responsible financial institutions, to provide the Company with the funds necessary to consummate the transactions to occur at the Closing. SECTION 4 Conditions to Obligations of Purchasers The obligation of each Purchaser to purchase its portion of the Shares at the Closing is subject to the fulfillment on or prior to the Closing Date of the following conditions, any or all of which may be waived at the option of such Purchaser: 4.1 Representations and Warranties Correct. The representations and warranties made by the Company in Section 2 hereof shall be true and correct in all material respects when made, and shall -12- 17 be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date. 4.2 Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Closing Date shall have been performed or complied with in all material respects. 4.3 Opinion of Company's Counsel. Each of the Purchasers shall have received from Wilson, Sonsini, Goodrich & Rosati, P.C., counsel to the Company, an opinion addressed to it, dated the Closing Date, in substantially the form of Exhibit B. 4.4 No Order Pending. There shall not then be in effect any order enjoining or restraining the transactions contemplated by this Agreement. 4.5 HSR Act. The Purchasers and the Company shall have filed such forms with the United States Department of Justice and the Federal Trade Commission as shall be required by the HSR Act and the applicable waiting periods under such HSR Act shall have expired without notice from such governmental agencies that additional inquiries are being made. 4.6 No Law Prohibiting or Restricting Such Sale. There shall not be in effect any law, rule or regulation prohibiting or restricting such sale, or requiring any consent or approval of any person which shall not have been obtained to issue the Shares (except as otherwise provided in this Agreement). -13- 18 4.7 Compliance Certificate. The Company shall have delivered to each of the Purchasers a certificate in the form of Exhibit C hereto, executed on behalf of the Company by the Chief Executive Officer of the Company, dated the Closing Date, and certifying to the fulfillment of the conditions specified in Sections 4.1 and 4.2. 4.8 Notification Regarding Contingent Event. The Company shall have provided written notice to each of the Purchasers stating that the Contingent Event either will or will not occur. SECTION 5 Conditions to Obligations of Company The Company's obligation to sell and issue the Shares at the Closing is subject to the fulfillment on or prior to the Closing Date of the following conditions, any or all of which may be waived at the option of the Company: 5.1 Representations and Warranties Correct. The representations and warranties made by the Purchasers in Section 3 hereof shall be true and correct in all material respects when made, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date. 5.2 Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Purchasers on or prior to the Closing Date shall have been performed or complied with in all material respects. -14- 19 5.3 No Order Pending. There shall not then be in effect any order enjoining or restraining the transactions contemplated by this Agreement. 5.4 HSR Act. The Purchasers and the Company shall have filed such forms with the United States Department of Justice and the Federal Trade Commission as shall be required by the HSR Act and the applicable waiting periods under such HSR Act shall have expired without notice from such governmental agencies that additional inquiries are being made. 5.5 No Law prohibiting or Restricting Such Sale. There shall not be in effect any law, rule or regulation prohibiting or restricting such sale, or requiring any consent or approval of any person which shall not have been obtained to issue the Shares (except as otherwise provided in this Agreement). 5.6 Compliance Certificate. Each of the Purchasers shall have delivered to the Company a certificate in the form of Exhibit D hereto, executed on behalf of each of the Purchasers by a Vice President of such Purchaser, dated the Closing Date, and certifying to the fulfillment of the conditions specified in Section 5.1 and 5.2 of this Agreement. SECTION 6 Covenants of the Company Until the termination of this Agreement in accordance with Section 9.2 hereof or the particular covenant, as the case may be: -15- 20 6.1 No Objection. In the case of either Purchaser, provided the Purchaser is in compliance with and has performed all covenants, agreements and conditions contained in this Agreement to be performed by the Purchaser, the Company shall not interpose any objection or take any legal action as a plaintiff in connection with the acquisition by the Purchaser of such number of shares of Common Stock as is permitted to be owned by the Purchaser pursuant to this Agreement. 6.2 Notice of Acquisition. (a) The Company shall give the Purchasers prompt notice of the receipt by the Company of (i) any written notice from any person or group couched in such terms as to put the Company reasonably on notice of the likelihood that such person or group has acquired or is proposing to acquire any shares of Voting Stock which results in, or, if successful, would result in, such person or group owning or having the right to acquire more than 5% of the Total Voting Power of the Company, (ii) any notice under the HSR Act, and (iii) any statement on Schedule 13D or Schedule 14D-1 (or any successor schedule or form to such schedules) under the Exchange Act. (b) In the event the Company should engage or propose to engage in any significant discussions of any proposed offer from any person relating to any merger, consolidation or acquisition involving the sale or transfer of all or substantially all of the assets of, or any substantial equity interest in, the Company, the Company will advise the Purchaser of such discussions at the -16- 21 earliest opportunity, but only to the extent the giving of such advice, in the opinion of legal counsel to the Company, is not inconsistent with the fiduciary obligations of the Company's Board of Directors. 6.3 Sale of Additional Shares. The Company shall take such action as is reasonably necessary, subject to compliance with applicable law, to issue and sell to the Purchasers any additional shares which the Purchasers shall be entitled to purchase from the Company pursuant to this Agreement. 6.4 Membership on the Board of Directors. (a) Upon the Closing of the transactions contemplated hereby, the Company shall permit each of the Purchasers, upon its request, to have an observer designated by the Purchaser, reasonably satisfactory to the Company, present at all meetings of the Company's Board of Directors, including any meetings of any committee designated by the Board. The Company's obligation to so permit an observer designated by a Purchaser shall terminate if such Purchaser's percentage interest in the Total Voting Power of the Company, after adjustment for the exercise, or failure to exercise, of the right to maintain by such Purchaser pursuant to Section 7.8 below (except in the event of a delaying notice pursuant to Section 7.8(e)), is less than 5% (even if such Purchaser's percentage interest should subsequently increase for any reason to 5% or more). A Purchaser may not exercise its right to representation on the Company's Board of Directors under paragraph (b) below for so -17- 22 long as the Purchaser shall have designated an observer as permitted herein. (b) Upon the Closing of the transactions contemplated hereby, the Company shall cause to be appointed to the Company's Board of Directors, upon the request of a Purchaser, any person designated by such Purchaser and approved by the Company, which approval shall not unreasonably be withheld. Any such person shall serve until his successor has been duly elected and qualified. Thereafter, the Company shall include in the slate of nominees recommended by the Company's Board of Directors or management to stockholders for election as directors at each annual meeting of stockholders of the Company any person designated pursuant to this paragraph, or such substitute as may be designated by a Purchaser and who is reasonably acceptable to the Company, and the Company shall use its best efforts to cause the shares for which the Company's management or directors hold proxies or are otherwise entitled to vote to be voted in favor of the election of such designee to the extent necessary to ensure his election assuming that all Voting Stock beneficially owned by the Purchaser is voted for such designee. In the event that any such designee shall cease to serve as a director for any reason, the Company shall use its best efforts to fill such vacancy by a designee of the Purchaser reasonably acceptable to the Company. The Company shall not unreasonably withhold its acceptance of any such designee. Notwithstanding the foregoing, the Company's obligation under this paragraph shall terminate as to a Purchaser if the percentage -18- 23 interest of such Purchaser in the Total Voting Power of the Company, after adjustment for the exercise, or failure to exercise, of the right to maintain by such Purchaser pursuant to Section 7.8 below (except in the event of a delaying notice pursuant to Section 7.8(e)) is less than 8% (even if such Purchaser's percentage interest should subsequently increase for any reason to 8% or more). A Purchaser may not exercise its right to have an observer attend meetings of the Company's Board of Directors under paragraph (a) above for so long as the Purchaser shall have exercised the right to Board representation as permitted herein. (c) Any designee of a Purchaser, whether acting as an observer or as a director on the Board of Directors, shall be entitled to except himself from all discussions and deliberations of the Board of Directors of the Company (or any committee constituted by the Board) concerning competitors of the Purchaser or relationships between the Company and either of the Purchasers. Upon notice to a Purchaser's designee, the Company may refrain from sending or providing to the Purchaser, or the Purchaser may refuse to receive, any information otherwise disseminated to the directors of the Company concerning competitors of the Purchaser or relationships between the Company and either of the Purchasers. The Company shall not be obligated to compensate a designee-director of a Purchaser on the same terms as other outside directors (except for any designee-director of the other Purchaser) but shall provide all rights and benefits of indemnity to such designee-director as are provided such other directors. -19- 24 6.5 Equity Method Accounting. If either of the Purchasers desires at some date after the Closing to account for its investment in the Company pursuant to the equity method, the Company shall furnish to such Purchaser all information that is required by generally accepted accounting principles to enable such Purchaser so to account, to the extent reasonably available to the Company. To the extent requested by such Purchaser, the Company shall provide information, to the extent reasonably available, regarding the Company to, and otherwise cooperate with, such Purchaser so as to enable such Purchaser to prepare financial statements in accordance with generally accepted accounting principles and to comply with its reporting requirements under applicable United States securities laws and regulations. 6.6 Registration Rights. The Company will comply with the provisions regarding registration rights contained in the Registration Rights Agreement attached as Exhibit A hereto. 6.7 HP Marketing Agreement. On or before the execution date hereof, the Company will have entered in to a marketing agreement with HP on terms mutually acceptable to the Company and HP. 6.8 EDS Agreements. On or before the execution date hereof, "the Company shall have executed and delivered to EDS an amendment to that certain Software License and Services Agreement dated March 29, 1990 between the Company and EDS on terms mutually acceptable to the Company and EDS, which amendment will include agreements regarding EDS' designation by the Company as a preferred systems integrator of Company software products. In addition, the Company -20- 25 and EDS agree to continue negotiating in good faith and expeditiously the terms of a facilities management contract as contemplated by that certain letter of intent dated August 8, 1990 between the Company and EDS, it being understood that such contract will be executed by October 15, 1990. 6.9 Inspection Rights. (a) Between the date hereof and the Closing, upon the request of a Purchaser, the Company shall permit the Purchaser and any of its authorized agents, at the Purchaser's expense, to visit and inspect any of the properties of the Company, to examine its books of account and records relating to the business and affairs of the Company, and to discuss the affairs, finances and accounts with the Company's officers and other principal executives, all at such reasonable times as may be reasonably requested. (b) Until the termination of this Agreement in accordance with Section 9.2 hereof, the Company shall furnish to each of the Purchasers, promptly upon filing thereof with the SEC, copies of all reports and documents required to be filed by the Company with the SEC (other than preliminary material) under the Securities Act and Exchange Act and the rules and regulations thereunder. SECTION 7 Covenants of the Purchasers Until the termination of this Agreement in accordance with Section 9.2 hereof: -21- 26 7.1 Limitation on Ownership of Voting Stock. Neither of the Purchasers shall (and neither Purchaser shall permit any of its subsidiaries to) acquire, directly or indirectly, beneficial ownership of any Voting Stock, any securities convertible into or exchangeable for Voting Stock, or any other right to acquire Voting Stock (except, in any case, as provided herein or by way of stock dividends or other distributions or offerings made available to holders of any Voting Stock generally) or authorize or make a tender, exchange or other offer, without the written consent of the Company, if the effect of such acquisition or offer would be to increase the Voting Power of all Voting Stock then owned by such Purchaser or which it has a right to acquire to more than the percentage of the Total Voting Power of the Company which such Purchaser is entitled to hold at such time as provided in this Section 7.1: (a) EDS and HP shall be entitled to hold Voting Stock up to, and not to exceed except as permitted by this Agreement, 22% and 11%, respectively, of the Total Voting Power of the Company. Subject to such limitation, shares of Voting Stock not acquired by a Purchaser from the Company under Section 7.8 may be acquired by such Purchaser in the open market or from third parties. (b) Either of the Purchasers may acquire Voting Stock without regard to the limitations in this Section 7.1 if a tender offer is made (as evidenced by the filing with the SEC of a Schedule 14D-1 (or any successor schedule or form promulgated or adopted for such purpose by the SEC) and the actual dissemination -22- 27 of tender offer materials to security holders) by another person or group to purchase or exchange for cash or other consideration any Voting Stock which, if successful, would result in such person or group owning or having the right to acquire shares of Voting Stock with aggregate Voting Power of at least 40% of the Total Voting Power of the Company then in effect; provided, however, that this provision shall not be effective until such time as the Purchaser in the exercise of the reasonable judgment of its Board of Directors, after consultation with its investment bankers and those of the Company (who shall make themselves promptly available) shall reasonably conclude that such tender offeror can finance such tender offer. If an offer or proposed acquisition is made by any person or group which pursuant to this Section 7.1(b) releases a Purchaser from the limitations set forth herein, which offer or proposed acquisition subsequently expires, is enjoined or terminated prior to any purchases thereunder or is otherwise withdrawn, then the limitations of this Section 7.1(b) shall be reimposed, except that the Purchaser shall not be obligated to dispose of any Voting Stock acquired of record or beneficially during the pendency of such offer or proposed acquisition. (c) Either of the Purchasers may acquire Voting Stock (or rights to acquire Voting Stock) without regard to the limitations in this Section 7.1 if it is publicly disclosed or such Purchaser otherwise learns that another person or group has acquired any Voting Stock (or rights to acquire Voting Stock), without the affirmative support of the Company's Board of Direc- -23- 28 tors, which results in such person or group owning or having the right to acquire Voting Stock with Total Voting Power of not less than 20%; provided, however, that the Purchasers shall have no rights under this paragraph if the person acquiring Voting Stock (or rights to acquire Voting Stock) is the Affiliate. (d) No Purchaser will be obligated to dispose of any shares of Voting Stock if the aggregate percentage ownership of such Purchaser in the Total Voting Power of the Company is increased as a result of a recapitalization of the Company or a repurchase of securities by the Company or any other action taken by the Company or its affiliates, but the Purchasers shall not acquire any additional Voting Stock unless such acquisition would otherwise be permitted under this Agreement. If, after either or both of the Purchasers have acquired Voting Stock in response to the acquisition of Voting Stock by another person or group, as permitted by this Section 7.1, then such Purchasers shall not be obligated to dispose of any shares of Voting Stock if the aggregate percentage ownership of such third party or group is thereafter reduced. 7.2 Voting. Each Purchaser shall take such action as may be required so that all shares of Voting Stock owned by the Purchasers are voted for nominees to the Board of Directors of the Company in accordance with the recommendation of the Board of Directors consistent with the provisions of Section 6.4. Unless the Company otherwise consents in writing, each Purchaser shall take such action as may be required so that all shares of Voting Stock owned -24- 29 by the Purchaser are voted in accordance with the recommendations of the Board of Directors on all other matters to be voted on by holders of Voting Stock in not less than the same proportion as the votes cast by the other holders of Voting Stock (other than the other Purchasers) with respect to such matters; provided, however, that Voting Stock owned by a Purchaser may be voted as the Purchaser determines in its sole discretion on any Significant Event (as defined in Section 9.1 below) presented to be voted on by the holders of Voting Stock. Each Purchaser, as the holder of shares of Voting Stock, shall be present, in person or by proxy, at all meetings of stockholders of the Company so that all shares of Voting Stock beneficially owned by the Purchasers may be counted for the purposes of determining the presence of a quorum at such meetings. 7.3 Voting Trust, etc. No Purchaser shall deposit any shares of Voting Stock in a voting trust or, except as otherwise provided herein, subject any Voting Stock to any arrangement or agreement with respect to the voting of such Voting Stock. 7.4 Solicitation of Proxies. Without the Company's prior written consent, no Purchaser shall solicit proxies with respect to any Voting Stock, or become a "participant" in any "election contest" (as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act relating to the election of directors of the Company); provided, however, that a Purchaser shall not be deemed to be a "participant" by reason of the exercise of any right permitted by Section 6.4. -25- 30 7.5 Acts in Concert with Others. No Purchaser shall join a partnership, limited partnership, syndicate or other group, or otherwise act in concert with any third person, for the purpose of acquiring, holding, or disposing of Voting Stock. 7.6 Restrictions on Transfer of Voting Stock. No Purchaser shall, directly or indirectly, sell or transfer any Voting Stock except (i) to the Company or any person or group approved by the Company; or (ii) to any subsidiary of the Purchaser, all of the Voting Stock of which is owned by the Purchaser (a "Wholly Owned Subsidiary"); or (iii) pursuant to a bona fide public offering (which shall be structured to distribute such shares or rights through an underwriter or otherwise in such a manner, to the best ability of the Purchaser or Purchasers, as will not result in a sale or sales, by either or both of the Purchasers, of beneficial ownership of Voting Stock with aggregate Voting Power of 5% or more of the Total Voting Power of the Company then in effect being transferred to a single person or group) registered under the Securities Act of either Voting Stock or securities exchangeable or exercisable for Voting Stock or pursuant to a rights offering or a dividend or other ratable distribution to shareholders of the Purchaser; or (iv) pursuant to Rule 144 under the Securities Act (but only to the extent the sale or transfer of Voting Stock at any time is in compliance with the volume limitations under paragraph (e) thereunder); or (v) subject to the Company's right of first refusal as set forth in Section 8.1 hereof, in transactions not otherwise described herein so long as such transactions do not, -26- 31 directly or indirectly, result, to the best knowledge of the Purchaser, after reasonable inquiry, in any single person or group owning or having the right to acquire Voting Stock with aggregate Voting Power of 5% or more of the Total Voting Power of the Company then in effect; or (vi) in response to (1) an offer to purchase or exchange for cash or other consideration any Voting Stock (a) which is made by or on behalf of the Company or (b) which is made by another person or group and is not opposed by the Board of Directors of the Company within the time such Board is required, pursuant to regulations under the Exchange Act, to advise the Company's stockholders of such Board's position on such offer, or (2) subject to the Company's right of first refusal as set forth in Section 8.2, any other offer made by another person or group to purchase or exchange for cash or other consideration any Voting Stock which, if successful, would result in such person or group owning or having the right to acquire Voting Stock with aggregate Voting Power of more than 40% of the Total Voting Power of the Company then in effect. 7.7 Confidential Information. The Company may from time to time pursuant to this Agreement (including pursuant to Section 6.4 hereof) disclose to a Purchaser certain strategic, technical, financial or other information which the Company deems to be confidential. The Purchaser agrees that all such confidential information will be kept confidential unless such information (i) is already lawfully in the Purchaser's possession, (ii) becomes generally available to the public other than as a result of a -27- 32 disclosure by the Purchaser or any of its directors, officers, employees, agents or advisors, (iii) becomes available to the Purchaser on a non-confidential basis from a source other than the Company or its advisors, provided that such source is not known to the Purchaser to be bound by a confidentiality agreement with or other obligation of secrecy to the Company or another party, (iv) is required to be disclosed by the Purchaser by operation of law, (v) is disclosed by the Purchaser with the Company's prior written approval, or (vi) has been held by the Purchaser for not less than three (3) years from the date of receipt, provided, that the confidentiality of confidential information furnished to an individual designated by the Purchaser as an observer or director on the Company's Board of Directors (and not additionally furnished to other representatives of the Purchaser) shall not lapse by virtue of this clause. Notwithstanding anything to the contrary, the Purchaser may disclose such confidential information to its directors, officers, employees, agents or advisors so long as it takes appropriate measures to protect the confidentiality thereof, which measures shall include at least the same degree of care that the Purchaser uses to protect its own confidential information of a similar nature. In the event that a Purchaser or any of its representatives is requested or required to disclose any of the confidential information referred to above, the Purchaser will provide the Company with prompt notice of such request or requirement so that the Company may seek a protective order or waive the Purchaser's compliance with this Section 7.7, as -28- 33 appropriate. Each Purchaser further acknowledges and understands that any information so obtained which may be considered "insider" non-public information will not be utilized by the Purchaser in connection with purchases and/or sales of the Company's securities except in compliance with applicable state and federal securities laws. 7.8 Right to Maintain. (a) If the percentage interest of a Purchaser in the Total Voting Power of the Company is at or less than the Standstill Limit and is reduced as a result of an issuance by the Company of any Voting Stock (including any issuance following conversion of any security convertible into or exchangeable for Voting Stock or upon exercise of any option, warrant or other right to acquire any Voting Stock), the Purchaser shall have the right to purchase from the Company for cash upon the terms set forth in this Section 7.8 that number of shares of Voting Stock which, if purchased by the Purchaser, would result in the Purchaser's retaining the percentage interest in the Total Voting Power of the Company held by the Purchaser immediately prior to such reduction of the Purchaser's interest. (b) The purchase price per share at which the Purchaser shall be entitled to purchase Voting Stock under this Section 7.8 shall be determined as follows: (i) If the event giving rise to the Purchaser's rights is one or more issuances of Voting Stock (including any issuance resulting from the conversion or exercise of any security -29- 34 or other right to acquire Voting Stock) pursuant to the Company's present or future stock option, stock purchase or other stock plans for the benefit of employees, directors, consultants or others, the price shall be the Average Market Price per share of Voting Stock determined as of the date of the issuance and sale of such Voting Stock. (ii) If the event giving rise to the Purchaser's rights is a sale or issuance of Voting Stock for cash or property, including without limitation, for securities or assets or by way of merger in connection with the acquisition of another company, and is not treated under paragraph 7.8(b)(i) above, the price shall be the price per share specified in the agreement relating to such issuance or, if no such price is specified, the Average Market Price per share of Voting Stock determined as of the date of issuance and sale of such Voting Stock; (iii) If the event giving rise to the Purchaser's right is an issuance of Common Stock upon conversion of any security convertible into or exchangeable for Common Stock or upon exercise of any option, warrant or right to acquire any Common Stock, and is not treated under paragraph 7.8(b)(i) or (ii) above, the price shall be the Average Market Price per share of Common Stock determined as of the date of such conversion or exercise. (iv) If the event giving rise to the Purchaser's rights is an underwritten public offering or an institutional private placement, the price shall be the price per share at which the Voting Stock was sold by the Company. -30- 35 (v) In all other cases, the price shall be the Average Market Price per share of Voting Stock determined as of the date of the issuance and sale of such Voting Stock. (c) The Company shall notify the Purchaser by written, dated notice not later than ten (10) business days after an issuance giving rise to the Purchaser's rights under this Section 7.8 and, if such offer is accepted in writing within thirty (30) days of such offer (except as provided in the next sentence), effect the sale of the securities to the Purchaser in accordance with this paragraph. If the event giving rise to the Purchaser's rights is an underwritten public offering or an institutional private placement of securities by the Company, and if the Company gives the Purchaser notice of such offering at least fifteen (15) days in advance of the effective date of the offering, then unless the Purchaser notifies the Company of its irrevocable acceptance of such offer within the first ten (10) days of such 15-day period (for the purpose of permitting the Company to disclose the fact of the Purchaser's intention in the prospectus relating to such underwritten public offering or institutional private placement), the Company shall be under no obligation to sell securities to the Purchaser under this Section 7.8 as a result of such underwritten public offering or institutional private placement. (d) The purchase and sale of any shares of Voting Stock pursuant to any offer made under this Section 7.8 that is accepted by the Purchaser shall take place at 10:00 a.m. on the third business day following the expiration or early termination of all -31- 36 waiting periods imposed on such purchase and sale by the HSR Act and the receipt of all other applicable regulatory approvals, or, if no waiting period is imposed on such purchase and sale by the HSR Act, on the third business day following the Purchaser's acceptance of such offer and compliance with applicable laws and regulations, at the offices of the Company located at the address set forth in this Agreement, or at such other time and place as the Company and the Purchaser may agree. The purchase price shall be payable by wire transfer in same day funds. The Company and the Purchaser shall comply with all federal and state laws and regulations and requirements of the NASD (subject to the right of the Company to elect to decline to comply with any applicable stockholder approval requirement if the only effect thereof is a loss of status of the Voting Stock as a National Market System-designated security), or any securities exchange on which the Company's securities may then be listed, applicable to any purchase and sale of shares of Voting Stock under this Section 7.8. (e) Notwithstanding the foregoing, if any issuance of securities requiring the Company to make an offer of Voting Stock to a Purchaser under this Section 7.8 shall be for a number of securities representing less than 2% of the Total Voting Power of the Company immediately following such issuance, the Company shall have the right to delay giving the notice otherwise required by Section 7.8(c) until the earlier of (i) the next issuance which, together with all issuances after which notice was delayed pursuant to this sentence, shall represent an aggregate of 2% or more of the -32- 37 Total Voting Power of the Company then in effect or (ii) the 45th calendar day preceding the last day of the Company's fiscal year for accounting purposes, and, thereupon, the Company shall give such notice with respect to all shares of Voting Stock which it shall be obligated to offer to sell to the Purchaser at the price determined in Section 7.8(b) hereof and which shall not have been the subject of a previous notice pursuant to Section 7.8(c); provided, however, that the Purchaser shall have the right to request the purchase of all shares of Voting Stock which the Purchaser has a right to acquire under this Section 7.8 at any time (a) if a bona fide tender or exchange offer is made by another person or group to purchase or exchange for cash or other consideration any Voting Stock from the Company's stockholders generally, or (b) upon the Company's publication or setting of a record date of its stockholders; and, in either such event and upon the receipt of such request, the Company shall use its reasonable efforts to issue all such shares to the Purchaser pursuant to the provisions of this Section 7.8. (f) If a Purchaser sells any Voting Stock, or fails to exercise its right to acquire additional Voting Stock as permitted in this Section 7.8 within the time period prescribed, the percentage ownership in the Total Voting Power of the Company which such Purchaser is then entitled to maintain under this Section 7.8 shall be reduced to the Purchaser's percentage ownership that results immediately following such sale or failure to exercise. -33- 38 (g) The Purchaser shall forfeit all rights under this Section 7.8 if at any time the Purchaser's Voting Stock represents less than five percent (5%) (inclusive of the shares the Purchaser is entitled to purchase under an outstanding offer pursuant to this Section 7.8) of the Total Voting Power the Company (even if such Purchaser's percentage interest should subsequently increase for any reason to 5% or more). 7.9 Acquisition of Stock. Each Purchaser shall advise management of the Company as to the Purchaser's general plans to acquire any additional shares of Voting Stock, or rights thereto, reasonably in advance of any such acquisitions; provided, however, that if advance notice of acquisitions of Voting Stock, or rights thereto, in the open market is not reasonably practicable, notice of any such acquisition shall be made promptly following such acquisition. All of such Purchaser's purchases of Voting Stock shall be in compliance with applicable laws and regulations and the provisions of this Agreement. SECTION 8 Company Right of First Refusal 8.1 Right of First Refusal. Prior to making any sale or transfer of Voting Stock of the Company pursuant to Section 7.6(v), each Purchaser shall give the Company the opportunity to purchase such Voting Stock in the following manner: (a) The Purchaser shall give notice (the "Transfer Notice") to the Company in writing of such intention specifying the -34- 39 names of the proposed purchasers or transferees, the amount of Voting Stock proposed to be sold or transferred, the proposed price per share therefor (the "Transfer Price") and the other material terms upon which such disposition is proposed to be made. (b) The Company shall have the right, exercisable by written notice given by the Company to the Purchaser within twenty (20) days after receipt of such Transfer Notice, to purchase all but not part (unless otherwise agreed) of the Voting Stock specified in such Transfer Notice for cash per share equal to the Transfer Price. (c) If the Company exercises its right of first refusal hereunder, the closing of the purchase of the Voting Stock with respect to which such right has been exercised shall take place within ninety (90) days after the Company gives notice of such exercise, which period of time shall be extended if necessary to comply with applicable securities laws and regulations. Upon exercise of its right of first refusal, the Company and the Purchaser shall be legally obligated to consummate the purchase contemplated thereby and shall use their best efforts to secure any approvals required in connection therewith. (d) If the Company does not exercise its right of first refusal hereunder within the time specified for such exercise, the Purchaser shall be free, during the period of 90 days following the expiration of such time for exercise, to sell the Voting Stock specified in such Transfer Notice on terms no less favorable to the Purchaser than the terms specified in such Transfer Notice. The -35- 40 transferee shall acquire such Voting Stock free from any of the provisions of this Agreement, provided, however, such Voting Stock shall be subject to any restrictions imposed under applicable securities laws and regulations. 8.2 Tender Offer Sale. Prior to making any sale or exchange of Voting Stock pursuant to Section 7.6(vi)(2) in response to a tender or exchange offer, each Purchaser shall give the Company the opportunity to purchase such Voting Stock in the following manner: (a) The Purchaser shall give notice (the "Tender Notice") to the Company in writing of such intention no later than ten (10) days prior to the latest time (as the same may be extended) by which Voting Stock must be tendered in order to be accepted pursuant to such offer or to qualify for any proration applicable to such offer (the "Tender Date"), specifying the amount of Voting Stock proposed to be tendered. For purposes hereof, a tender offer to purchase Voting Stock shall be deemed to be an offer at the price specified therein, without regard to any provisions thereof with respect to proration or conditions to the offeror's obligation to purchase (assuming such conditions are not impossible of performance when the offer is made, without giving effect to the Company's right of first refusal). (b) If the Tender Notice is given, the Company shall have the right, exercisable by giving notice (the "Purchase Notice") to the Purchaser at least three (3) business days prior to the Tender Date, to purchase all but not part of the Voting Stock specified in the Tender Notice for cash. If the Company exercises -36- 41 such right by giving such notice, the closing of the purchase of such Voting Stock shall take place on the fifth business day after the tender offer is consummated, or such earlier time as the Company shall agree; provided that the Company's obligation to purchase such shares of Voting Stock following delivery of any Purchase Notice shall be contingent on consummation of the tender offer referred to in the corresponding Tender Notice. As a condition to the effectiveness of any exercise by the Company of its rights to purchase under this Section 8.2, at the time the Company delivers a Purchase Notice, it shall have provided for the payment to the Purchaser of the purchase price for such shares by an escrow of funds, letter of credit facility, bank guarantee or similar arrangement reasonably acceptable to the Purchaser. If the purchase price specified in the tender offer includes any property other than cash, the value of any property included in the purchase price, for purposes of determining the amount to be provided for by the Company pursuant to the preceding sentence only, shall be determined by a nationally recognized investment banking firm selected by the Company. Upon exercise of the right of first refusal (including provision for payment as described above), the Company and the Purchaser shall be legally obligated to consummate the purchase contemplated thereby and shall use their best efforts to secure any approvals required in connection therewith, subject only to consummation of the tender offer referred to in the corresponding Tender Notice. -37- 42 (c) The purchase price to be paid by the Company pursuant to this Section 8.2, if such tender offer is consummated, shall be the purchase price that the Purchaser would have received if it had tendered the Voting Stock purchased by the Company and all such Voting Stock had been purchased in such tender offer, including any increases in the price paid by the tender offeror after exercise by the Company of its right of first refusal hereunder. If the purchase price paid by the tender offeror includes any property other than cash, the value of such property shall be jointly determined by a nationally recognized investment banking firm selected by the Company and the Purchaser or, in the event such firms are unable to agree, a third nationally recognized investment banking firm to be selected by such two firms. The Company and the Purchaser shall use their best efforts to cause any determination of the value of any such property included in the purchase price to be made within two (2) business days after consummation of the tender offer. If the firms selected by the Company and the Purchaser are unable to agree upon the value of any such securities within such 2-day period, the firms shall promptly select a third firm whose determination shall be made promptly and shall be conclusive. The Company and the Purchaser shall each bear the cost of its own investment banking firm and shall share equally the costs of any third firm selected hereunder. (d) If the Company does not exercise such right by giving such notice or fails to complete the purchase, then the -38- 43 Purchaser shall be free to accept the tender offer with respect to which the Tender Notice was given. 8.3 Assignment of Rights. In the event that the Company elects to exercise a right of first refusal under this Section 8, the Company may specify prior to closing such purchase another person as its designee to purchase all or part of the Voting Stock to which such notice relates. Any such designee shall be subject to the approval of the Purchaser proposing to sell or tender, as the case may be, any of its Shares, which approval shall not unreasonably be withheld. If the Company shall designate another person as the purchaser pursuant to this Section 8, the giving of notice of acceptance of the right of first refusal by the Company shall constitute a legally binding obligation of the Company to complete such purchase if such person shall fail to do so. SECTION 9 Miscellaneous. 9.1 Certain Definitions. As used in this Agreement: (a) The term "Total Voting Power of the Company" means the total number of votes which may be cast in the election of directors of the Company at any meeting of stockholders of the Company if all securities entitled to vote in the election of directors of the Company were present and voted at such meeting (other than votes that may be cast only upon the happening of a contingency). -39- 44 (b) The term "Voting Stock" means the Common Stock and any other securities issued by the Company having the ordinary power to vote in the election of directors of the Company (other than securities having such power only upon the happening of a contingency). (c) The term "Significant Event" means (i) any proposed amendment to the Certificate of Incorporation or By-laws of the Company (other than a proposal to create an authorized class of Preferred Stock or increase the number of authorized shares of Common Stock or Preferred Stock, provided such creation or increase is not contrary to clauses (v) or (vi) of this Section 9.1(c)), (ii) disposition of the Company (by way of merger, disposition of all or substantially all assets or otherwise), (iii) recapitalization, (iv) liquidation or dissolution, (v) any vote pursuant to any provision of law or the Company's Certificate of Incorporation or By-laws requiring or permitting stockholders to approve any business combination proposed by or with another person or its affiliates which have acquired a certain percentage of the Company's shares or to grant voting rights to such person or to waive or adopt provisions requiring such a vote, or (vi) any action, including a change in the size, structure or membership of the Company's Board of Directors which the Purchaser, in its sole discretion, determines would be materially adverse to the Purchaser's interest in the Company (other than actions contemplated by this Agreement). -40- 45 (d) The term "Contingent Event" means the payment (including the incurrence of an unconditional obligation to make payment) by the Company of such consideration as may be agreed to acquire (whether by way of offer to purchase outstanding shares or statutory merger) a controlling position in Ingres Corporation. (e) The term "Affiliate" means Sandra L. Kurtzig, including any family members or trusts for the benefit of such members, but only for so long as Ms. Kurtzig continues as a director or employee of the Company. (f) "Average Market Price" of the Voting Stock at any date shall be the average, based on the 20 consecutive trading days ending on the trading date last preceding the date of determination of such price (the "Average"), of the closing prices for a share of such security on the principal national securities exchange on which such security is listed, or, if such security is not listed on any national securities exchange, the Average of the closing prices for a share of such security on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or, if such closing prices shall not be reported on NASDAQ, the Average of the mean between the closing bid and asked prices of a share of such security in such case as reported by The Wall Street Journal, or, if such prices shall not be so reported, as the same shall be reported by the National Quotation Bureau Incorporated, or, in all other cases, the value as determined by a single nationally recognized investment banking firm jointly selected by the Company and the Purchaser or Purchasers. For this purpose, the parties shall -41- 46 use their best efforts to cause any determination of the value to be made within ten (10) business days after the date on which the value is to be measured. The determination by the investment banking firm selected in the manner set forth above shall be conclusive. (g) The terms "beneficial ownership" or "beneficial owner" refer to the meaning of such terms as provided in Rule 13d-3 promulgated under the Exchange Act. References to the acquiring, holding or ownership of Voting Stock hereunder mean beneficial ownership. (h) The term "group" shall have the meaning comprehended by Section 13(d)(3) of the Exchange Act and the rules and regulations promulgated thereunder. (i) The term "person" shall mean any person, individual, corporation, partnership, trust or other nongovernmental entity or any governmental agency, court, authority or other body (whether foreign, federal, state, local or otherwise). 9.2 Termination of Agreement. This Agreement may be terminated at any time: (a) As to EDS, by the mutual consent of the Company and EDS, or as to HP, by the mutual consent of the Company and HP; (b) As to either Purchaser, by the Company, if such Purchaser violates any of the covenants or agreements of the Purchaser under this Agreement; provided, however, that the Company shall not be entitled to terminate this Agreement pursuant to this sentence unless it shall have delivered written notice of such default to -42- 47 the Purchaser and such default shall not have been cured within thirty (30) days after delivery of such notice; (c) As to the Company, by either Purchaser, if the Company violates or fails to perform any of the covenants or agreements of the Company under this Agreement; provided, however, that the Purchaser may not terminate this Agreement pursuant to this sentence unless it shall have delivered written notice of such default to the Company and such default shall not have been cured within thirty (30) days after delivery of such notice; (d) As to either of the Purchasers and the Company, by such Purchaser or the Company if the Closing shall not have taken place on or before December 31, 1990; (e) As to either of the Purchasers and the Company, by the Company or such Purchaser if the Purchaser at any time after the Closing owns less than five percent (5%) of the Total Voting Power of the Company; (f) As to either of the Purchasers, by such Purchaser in the event of the sale of all or substantially all of the Company's assets to another party, or other acquisition of the Company by another party in which 50% or more of the Voting Stock of the Company is sold or transferred to such party or an affiliate thereof; (g) As to either of the Purchasers and the Company, by such Purchaser or the Company on or after August 31, 1997; and (h) As to HP and the Company, by HP or the Company, if at the Closing HP does not purchase the HP Shares. -43- 48 9.3 Effect of Termination. (a) From and after the termination of this Agreement, the covenants, obligations and agreements of the parties set forth herein shall be of no further force or effect and the parties shall be under no further obligation with respect thereto; provided, however, that in the event of such termination, to the extent the terms thereof continue to be applicable, (i) the covenant of the Company and EDS set forth in the second sentence of Section 6.8 shall continue in full force and effect, and (ii) the obligations of the Purchasers as set forth in the letter agreements, as to HP dated July 6, 1990, and, as to EDS, dated June 25, 1990, shall continue in full force and effect. (b) In addition, notwithstanding the provisions of Section 9.3(a), the rights and obligations of the parties set forth in the Registration Rights Agreement shall survive any termination of this Agreement. 9.4 Best Efforts. The Company and each of the Purchasers shall use their respective best efforts to take all actions required under the HSR Act and under any law, rule or regulation adopted subsequent to the date hereto in order that the Company may sell the full amount of Shares to the Purchasers and the Purchasers may purchase the full amount of Shares and any Voting Stock it may wish to purchase in the future and to ensure that the conditions to the Closing set forth herein are satisfied on or before the scheduled date of such Closing. -44- 49 9.5 Governing Law. This Agreement shall be governed in all respects by the laws of the State of California as applied to contracts entered into solely between residents of, and to be performed entirely within, such state. 9.6 Survival. The representations and warranties in Sections 2 and 3 of this Agreement shall survive any investigation made by the Purchasers or the Company. 9.7 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement may not be assigned by a party without the prior written consent of the other party; provided, however, that a Purchaser shall have the right, upon prior notice to the Company, to assign this Agreement to any Wholly Owned Subsidiary of such Purchaser. 9.8 Entire Agreement; Amendment. This Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and thereof and supersede all prior agreements and understandings among the parties relating to the subject matter hereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought. 9.9 Notices and Dates. Any notice or other communication given under this Agreement shall be sufficient if in writing and sent by registered or certified mail, return receipt requested, -45- 50 postage prepaid, to a party at its address set forth below (or at such other address as shall be designated for such purpose by such party in a written notice to the other party hereto): (a) if to the Company, to it at: 2440 West El Camino Real Mountain View, CA 94039-7640 Attn: General Counsel with a copy to: Douglas H. Collom, Esq. Wilson, Sonsini, Goodrich & Rosati Two Palo Alto Square Palo Alto, CA 94306 (b) if to EDS, to it at: 7171 Forest Lane Dallas, TX 75230 Attn: President, Manufacturing and Distribution Division with a copy to: General Counsel Electronic Data Systems Corporation 7171 Forest Lane Dallas, TX 75230 (c) if to HP, to it at: 3000 Hanover Street Palo Alto, CA 94304 Attn: Director, Corporate Development with a copy to: General Counsel Hewlett-Packard Company 3000 Hanover Street Palo Alto, CA 94304 All such notices and communications shall be effective when received by the addressee. In the event that any date provided for -46- 51 in this Agreement falls on a Saturday, Sunday or legal holiday, such date shall be deemed extended to the next business day. 9.10 Brokers. (a) The Company has not engaged, consented to or authorized any broker, finder or intermediary, except Unterberg Harris DeSantis ("UHD"), to act on its behalf, directly or indirectly, as a broker, finder or intermediary in connection with the transactions contemplated by this Agreement. All fees, commissions and other payments owing to UHD as a result of its or its employees' participation, negotiations, or other actions, taken in connection with this Agreement are the sole responsibility and obligation of the Company. The Company hereby agrees to indemnify and hold harmless each of the Purchasers from and against all fees, commissions or other payments owing to UHD or any other party acting on behalf of the Company hereunder. (b) Neither of the Purchasers has engaged, consented to or authorized any broker, finder or intermediary to act on its behalf, directly or indirectly, as a broker, finder or intermediary in connection with the transactions contemplated by this Agreement. Each of the Purchasers hereby agrees to indemnify and hold harmless the Company from and against all fees, commissions or other payments owing to any party acting on its behalf. 9.11 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restriction of this Agreement -47- 52 shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 9.12 Injunctive Relief. Each of the Purchasers, on the one hand, and the Company, on the other, acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specific performance of the terms and provisions hereof in any court of the United States or any state thereof having jurisdiction, this being in addition to any other remedy to which they may be entitled at law or equity. 9.13 Attorneys' Fees. The prevailing party in any litigation between a Purchaser and the Company involving this Agreement or the Registration Rights Agreement shall be entitled to recover from the other party its reasonable attorneys' fees and costs. 9.14 Costs and Expenses. Each party hereto shall pay its own costs and expenses incurred in connection herewith, including the fees of its counsel, auditors and other representatives, whether or not the transactions contemplated herein are consummated. 9.15 No Third Party Rights. Nothing in this Agreement shall create or be deemed to create any rights in any person or entity not a party to this Agreement. 9.16 Publicity. The Purchasers and the Company shall not, without the prior approval of each other party hereto, make or -48- 53 cause to be made any press release or other public statement concerning the transactions contemplated from time to time by this Agreement, except as and to the extent that any party hereto is so obligated by law or the regulations of any stock exchange or the NASD (but only after the Company or the Purchaser or Purchasers, as the case may be, shall have consulted with the other party in advance regarding the form and substance of such press release or public statement). -49- 54 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective authorized officers as of the date aforesaid. "COMPANY" ASK COMPUTER SYSTEMS, INC. By: ________________________________ Name: Title: Attest: By: ________________________________ Name: Title: "PURCHASERS" ELECTRONIC DATA SYSTEMS CORPORATION By: ________________________________ Name: Title: HEWLETT-PACKARD COMPANY By:_________________________________ Name: Title: -50-
EX-13 14 EX-13 1 Exhibit 13 THE ASK GROUP, INC. 2880 SCOTT BOULEVARD P.O. BOX 58013 SANTA CLARA, CA 95052-8013 May 18, 1994 Electronic Data Systems Corporation 7171 Forest Lane Dallas, TX 75230 Attn: President, Manufacturing and Distribution Division Ladies & Gentlemen: This letter is being delivered to you in connection with the transactions contemplated by the Stockholder Option Agreement, dated as of May 18, 1994, among Speedbird Merge, Inc. ("Merger Sub") and certain holders of the shares of Common Stock of The ASK Group, Inc. (the "Company"), including Electronic Data Systems Corporation ("EDS"). Reference is made to that certain Agreement and Plan of Merger, dated as of May 18, 1994 (the "Merger Agreement"), among Computer Associates International, Inc., Merger Sub and the Company. This letter shall serve as the Company's consent to the execution and delivery by EDS of the Stockholder Option Agreement as well as consent to the performance by EDS in accordance with the requirements of the Stockholder Option Agreement, notwithstanding any prohibition thereof contained in, or conflict with, the Common Stock Purchase Agreement, dated as of August 31, 1990 (the "Purchase Agreement") among the Company, EDS and Hewlett-Packard Company, including without limitation, any conflict with the provisions of Sections 7.2, 7.3, 7.5, 7.6 and 8.2 thereof. In addition, you acknowledge the Company's performance under the Purchase Agreement, including without limitation, under Section 6.2 thereof. Very truly yours, The ASK Group, Inc. By: ________________________________ Title: _____________________________ cc: General Counsel, Electronic Data Systems Corporation EX-14 15 EX-14 1 Exhibit 14 THE ASK GROUP, INC. 2880 SCOTT BOULEVARD P.O. BOX 58013 SANTA CLARA, CALIFORNIA 95052-8013 May 18, 1994 Hewlett-Packard Company 3000 Hanover Street Palo Alto, California 94304 Attn: Director, Corporate Development Ladies & Gentlemen: This letter is being delivered to you in connection with the transactions contemplated by the Stockholder Option Agreement, dated as of May 18, 1994, among Speedbird Merge, Inc. ("Merger Sub") and certain holders of the shares of Common Stock of The ASK Group, Inc. (the "Company"), including Hewlett-Packard Company ("HP"). Reference is made to that certain Agreement and Plan of Merger, dated as of May 18, 1994 (the "Merger Agreement"), among Computer Associates International, Inc., Merger Sub and the Company. This letter shall serve as the Company's consent to the execution and delivery by HP of the Stockholder Option Agreement as well as consent to the performance by HP of the Stockholder Option Agreement in accordance with its terms, notwithstanding any prohibition thereof contained in, or conflict with, the Common Stock Purchase Agreement, dated as of August 31, 1990 (the "Purchase Agreement") among the Company, HP and Electronic Data Systems Corporation, including without limitation, any conflict with the provisions of Sections 7.2, 7.3, 7.5, 7.6 and 8.2 thereof. In addition, you acknowledge the Company's performance of its obligations under the Purchase Agreement, including without limitation, under Section 6.2 thereof. ACKNOWLEDGED AND ACCEPTED Very truly yours, HEWLETT-PACKARD COMPANY THE ASK GROUP, INC. By: ______________________________ By: ________________________________ Title: ___________________________ Title: _____________________________ cc: General Counsel, Hewlett-Packard Company EX-15 16 EX-15 1 Exhibit 15 THE ASK GROUP, INC. 2880 SCOTT BOULEVARD P.O. BOX 58013 SANTA CLARA, CA 95052-8013 May 18, 1994 Electronic Data Systems Corporation 7171 Forest Lane Dallas, Texas 75230 Attn: President, Manufacturing and Distribution Division Ladies & Gentlemen: This letter is being delivered to you in connection with the transactions contemplated by the Stockholder Option Agreement, dated as of May 18, 1994, among Speedbird Merge, Inc. ("Merger Sub") and certain holders of the shares of Common Stock of The ASK Group, Inc. (the "Company"), including Electronic Data Systems Corporation ("EDS"). Reference is also made to that certain Agreement and Plan of Merger, dated as of May 18, 1994 (the "Merger Agreement"), among Computer Associates International, Inc. ("CA"), Merger Sub and the Company. As an inducement to CA and Merger Sub to enter into the Merger Agreement, you agree that, effective upon the execution and delivery of the Stockholder Option Agreement and the Merger Agreement and for as long as the Merger Agreement has not been terminated in accordance with its terms, all rights that you have under Section 7.8 of the Common Stock Purchase Agreement, dated as of August 31, 1990 (the "Purchase Agreement") among the Company, EDS and Hewlett-Packard Company, whether presently existing or arising as a result of the transactions contemplated by the Merger Agreement, are hereby waived and released. Very truly yours, The ASK Group, Inc. By: ________________________________ Title: _____________________________ AGREED as of May 18, 1994: ELECTRONIC DATA SYSTEMS CORPORATION By: _______________________________ EX-16 17 EX-16 1 Exhibit 16 THE ASK GROUP, INC. 2880 SCOTT BOULEVARD P.O. BOX 58013 SANTA CLARA, CA 95052-8013 May 18, 1994 Hewlett-Packard Company 3000 Hanover Street Palo Alto, California 94304 Attn: Director, Corporate Development Ladies & Gentlemen: This letter is being delivered to you in connection with the transactions contemplated by the Stockholder Option Agreement, dated as of May 18, 1994, among Speedbird Merge, Inc. ("Merger Sub") and certain holders of the shares of Common Stock of The ASK Group, Inc. (the "Company"), including Hewlett-Packard Company ("HP"). Reference is also made to that certain Agreement and Plan of Merger, dated as of May 18, 1994 (the "Merger Agreement"), among Computer Associates International, Inc. ("CA"), Merger Sub and the Company. As an inducement to CA and Merger Sub to enter into the Merger Agreement, you agree that, effective upon the execution and delivery of the Stockholder Option Agreement and the Merger Agreement and for as long as the Merger Agreement has not been terminated in accordance with its terms, all rights that you have under Section 7.8 of the Common Stock Purchase Agreement, dated as of August 31, 1990 (the "Purchase Agreement") among the Company, HP and Electronic Data Systems Corporation, whether presently existing or arising as a result of the transactions contemplated by the Merger Agreement, are hereby waived and released. Very truly yours, The ASK Group, Inc. By: ________________________________ Title: _____________________________ AGREED as of May 18, 1994: HEWLETT-PACKARD COMPANY By: _______________________________ EX-17 18 EX-17 1 EXHIBIT 17 [Letterhead of The ASK Group, Inc.] May 25, 1994 Dear Stockholder: As you may be aware, on May 18, 1994, ASK entered into a merger agreement with Computer Associates International, Inc. ("CA") and its wholly owned subsidiary, Speedbird Merge, Inc. ("Speedbird"), pursuant to which CA agreed to commence as promptly as practicable a tender offer for ASK common stock for a cash price of $13.25 per share. The agreement provides that, following completion of the offer, CA will cause Speedbird to merge into ASK and any ASK shares that are not acquired through the tender offer will be converted in the merger into the right to receive the same consideration as is paid in the tender offer. YOUR BOARD HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS. THE BOARD RECOMMENDS THAT YOU ACCEPT THE OFFER AND TENDER YOUR SHARES PURSUANT TO THE OFFER. In arriving at its recommendation, the Board gave careful consideration to a number of factors as described in the enclosed Schedule 14D-9, including the opinion of Bear, Stearns & Co. Inc., ASK's financial advisor, that the consideration to be received pursuant to the merger agreement is fair to ASK's stockholders from a financial point of view. We urge you to read the enclosed Schedule 14D-9 and the related CA tender offer materials carefully. On behalf of ASK's Board of Directors, I thank you for the support you have given to the Company over the years. Sincerely, Paul C. Ely, Jr. Chairman EX-18 19 EX-18 1 EXHIBIT 18 BEAR STEARNS Bear, Stearns & Co. Inc. Citicorp Center One Sansome Street San Francisco, California 94104 (415) 772-2900 Atlanta - Boston Chicago - Dallas - Los Angeles New York - San Francisco Frankfurt - Geneva - Hong Kong London - Paris - Tokyo May 18, 1994 Board of Directors The ASK Group, Inc. 2880 Scott Boulevard Santa Clara, California 95050 Dear Sirs: We understand that Computer Associates International, Inc. ("Computer Associates'') has offered to acquire all of the outstanding shares of common stock (the "Shares'') of The ASK Group, Inc. ("ASK''). You have provided us with the merger agreement among ASK, Computer Associates, and Speedbird Merge, Inc. ("Merger Subsidiary'') in substantially final form (the "Merger Agreement''). Pursuant to the Merger Agreement, Merger Subsidiary will promptly commence a tender offer for all of the Shares at a cash price of $13.25 per share, to be followed as promptly as practical by a cash merger at the same price (collectively, the "Transaction''). You have asked us to render our opinion as to whether the Transaction is fair, from a financial point of view, to the shareholders of ASK. In the course of our analyses for rendering this opinion, we have: 1. reviewed the Merger Agreement; 2. reviewed ASK's Annual Reports to Shareholders and Annual Reports on Form 10-K for the years ended June 30, 1991 through 1993, and its Quarterly Reports on Form 10-Q for the periods ended September 30, 1993, December 31, 1993, and March 31, 1994; 3. reviewed certain operating and financial information, including projections, provided to us by ASK's management relating to its business prospects; 4. met with certain members of ASK's senior management to discuss its operations, historical financial statements and future prospects; 5. considered our discussions with certain potential buyers for all or part of ASK; 6. met with certain members of ASK's senior management to discuss the contacts made by Unterberg Harris and ASK to potential buyers for all or part of ASK; 2 7. reviewed the historical market prices and trading volume of the Shares; 8. reviewed publicly available financial information and stock market performance data of other publicly held companies which we deemed generally comparable to ASK; 9. reviewed the financial terms of certain other recent acquisitions of companies which we deemed generally comparable to ASK; and 10. conducted such other studies, analyses, inquiries and investigations as we deemed appropriate. In the course of our review, we have relied upon and assumed, without independent verification, the accuracy and completeness of the financial and other information provided to us by ASK, and we have further relied upon the assurances of management of ASK that they are unaware of any facts that would make the information provided to us incomplete or misleading. In arriving at our opinion, we have not performed or obtained any independent appraisal of the assets of ASK. Based on the foregoing, it is our opinion that the Transaction is fair, from a financial point of view, to the shareholders of ASK. Very truly yours, BEAR, STEARNS & CO. INC. By: MICHAEL GRIMES EX-19 20 EX-19 1 Exhibit 19 UNTERBERG HARRIS 275 Battery Street, 29th Floor San Francisco, California 94111 (415) 399-1500 Fax (415) 399-1113 January 27, 1994 HIGHLY CONFIDENTIAL - ------ ------------ Mr. Pier Carlo Falotti President and Chief Executive Officer The ASK Group, Inc. 2440 W. El Camino Real Mountain View, CA 94039-7640 Dear Pier Carlo: This letter is to confirm our understanding of the basis upon which Unterberg Harris is being engaged to provide investment banking advice and services to The ASK Group, Inc. (the "Company") in connection with the possible sale of all or part of the Company. 1. Services -------- Unterberg Harris will be engaged as the Company's sole and exclusive financial advisor in the performance of the following functions: (a) Assist the Company in evaluating the business and the prospects of Delphi, including conducting business due diligence. (b) Provide valuation and transaction analyses of the Company, Delphi and the combined company, as appropriate. (c) Assist the Company in (i) structuring a Transaction, (ii) negotiating with Delphi, and (iii) carrying through to settlement any letter of intent or definitive agreement that may be reached regarding the Transaction. (d) Render our opinion with respect to the fairness of the consideration to be paid to the Company or its shareholders, if requested. (e) Assist in the preparation of any documents required to execute a Transaction and meet with shareholders of the Company, if appropriate. 2 Mr. Pier Carlo Falotti November 8, 1993 Page 2 2. Compensation ------------ As compensation for the financial advisory work rendered by Unterberg Harris, the Company shall reimburse Unterberg Harris as follows: (a) A retainer fee of $100,000, payable upon the signing of this agreement, with the amount of this fee being credited against any fee incurred pursuant to Section 2(b). (b) In the event of a sale involving all or part of the Company, Unterberg Harris would receive compensation equal to 0.65% of the total consideration involved. In calculating our fee, consideration shall include any amounts paid to holders of unexercised options or the fair market value of shares or options substituted for Company option shares. If such aggregate consideration may be increased by contingent or other payments over time, the portion of our fee relating thereto shall be calculated and paid when and as such payments are made. (c) The Company shall reimburse Unterberg Harris, upon billing, for its reasonable out-of-pocket expenses, including fees and disbursements of counsel incurred by Unterberg Harris in carrying out its duties under this engagement. 3. Indemnification --------------- The Company agrees to indemnify and hold Unterberg Harris harmless against any and all claims or liabilities arising from or relating to its performance hereunder unless our conduct has been found to constitute gross negligence or willful misconduct in a final judgment by a court of competent jurisdiction, and will reimburse Unterberg Harris for all legal and other expenses as incurred in connection therewith. 4. Term of the Engagement ---------------------- The term of this engagement shall be six (6) months from the execution of this agreement and shall automatically renew on a month-to-month basis until terminated in writing by either party. In the event of a transaction involving the Company during the eighteen (18) months following this engagement, then Unterberg Harris shall receive the same consideration as set forth in Section 2(b) above. 3 Mr. Pier Carlo Falotti November 8, 1993 Page 3 If the foregoing letter is in accordance with your understanding of the terms of our engagement, please sign and return to us the enclosed duplicate hereof. We look forward to working with you on this important assignment. Very truly yours, Unterberg Harris By: /s/ Thomas I. Unterberg Thomas I. Unterberg Managing Director Accepted and agreed as of the date hereof: The ASK Group, Inc. By:____________________________
-----END PRIVACY-ENHANCED MESSAGE-----