-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ME3RnZf0u9KhbsOsI1173NplHZhunoDnqCHms4S50WlJQGwZpBZy1EEJNlccKZz0 8u+LzKxHKgJAbwbeW76YiQ== 0000950129-99-001043.txt : 19990319 0000950129-99-001043.hdr.sgml : 19990319 ACCESSION NUMBER: 0000950129-99-001043 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19990306 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990318 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BMC SOFTWARE INC CENTRAL INDEX KEY: 0000835729 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 742126120 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-17136 FILM NUMBER: 99568114 BUSINESS ADDRESS: STREET 1: 2101 CITYWEST BLVD CITY: HOUSTON STATE: TX ZIP: 77042-2827 BUSINESS PHONE: 7139188800 MAIL ADDRESS: STREET 1: 2101 CITYWEST BLVD CITY: HOUSTON STATE: TX ZIP: 77042-2827 8-K 1 BMC SOFTWARE, INC. - DATED 03/06/99 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): March 7, 1999 --------------------- BMC SOFTWARE, INC. (Exact name of registrant as specified in its charter) DELAWARE 0-17136 74-21226120 (State or other jurisdiction (Commission File Number) (I.R.S. Employer Identification of incorporation or No.) organization)
2101 CITYWEST BOULEVARD HOUSTON, TEXAS 77042-2827 (Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (713) 918-8800 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 ITEM 5. OTHER EVENTS. I. NEW DIMENSION SOFTWARE LTD. A. TENDER AGREEMENT AND RELATED AGREEMENTS On March 8, 1999, BMC Software, Inc., a Delaware corporation (the "Company"), issued a press release announcing the execution of a Share Purchase and Tender Agreement, dated March 7, 1999 (the "Tender Agreement"), by and between the Company and New Dimension Software Ltd., an Israeli corporation ("New Dimension"). Pursuant to the Tender Agreement, the Company will offer $52.50 in cash (the "Offer Price") for each outstanding ordinary share, par value NIS 0.01 per share (collectively, the "Shares"), of New Dimension in accordance with the Offer (as defined therein). New Dimension has also agreed to acquire and cancel all options to purchase shares of New Dimension and its subsidiary for an amount in cash equal to the positive difference between the Offer Price and the exercise price of such options, subject to adjustment in the case of options to purchase shares of New Dimension's subsidiary. In addition, the Company has agreed to issue stock options to purchase an aggregate of 500,000 shares of common stock of the Company to employees of New Dimension after completion of the Offer. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares constituting at least 90% of the then issued and outstanding Shares not owned by the Company and its subsidiaries (the "90% Condition"). If the Company is successful in acquiring through the Offer at least 90% of the Shares not then owned by the Company or its subsidiaries within four months of the date the Offer commences, the Company has agreed in the Tender Agreement, in accordance with Section 236 of the Companies Ordinance (New Version) 5743- 1983 of the State of Israel, to declare by notice to the remaining shareholders of New Dimension that it is unilaterally acquiring (the "Compulsory Acquisition") the remaining Shares not yet held by it on the terms set forth in the Offer. A description of the Tender Agreement is contained in the March 8, 1999 press release by the Company, filed herewith as Exhibit 99.1 and incorporated herein by reference. The Tender Agreement is also filed herewith as Exhibit 2.1 and is incorporated herein by reference. In connection with the Offer contemplated by the Tender Agreement, the Company entered into shareholder agreements, dated as of March 7, 1999 (the "Shareholder Agreements"), with (i) Einav Computer Systems Ltd., an Israeli corporation ("ECS"), and Roni A. Einav and Dalia Prashker-Katzman, the sole shareholders of ECS, and (ii) Yossie Hollander (each a "Principal Shareholder" and collectively, the "Principal Shareholders"). Pursuant to the Shareholder Agreements, (a) the Principal Shareholders have agreed to tender into the Offer all of their Shares, which, on the date of the Tender Agreement, represented an aggregate of 7,482,500, or approximately 61%, of the issued and outstanding Shares, (b) the Principal Shareholders have granted to the Company an irrevocable option to purchase all of such Shares in certain circumstances, and (c) each Principal Shareholder has granted to the Company an irrevocable proxy to vote such Principal Shareholder's Shares with respect to matters relating to the Tender Agreement, the Offer or matters inconsistent with the Offer. The Shareholder Agreements are filed herewith as Exhibits 99.2 and 99.3 and are incorporated herein by reference. As an inducement to the Company's execution of the Tender Agreement and concurrently therewith, New Dimension agreed to enter into a third amendment (the "Third Amendment") to the distribution agreement between New Dimension and Boole & Babbage Europe, an Irish corporation ("Distributor") and a wholly owned subsidiary of Boole & Babbage, Inc., a Delaware corporation ("Boole"), dated October 28, 1994, as amended April 24 and October 31, 1997 (the "Distribution Agreement"). The Third Amendment, effective as of March 6, 1999, excludes the Offer from the provisions of the Distribution Agreement, which provides that a "change of control" of New Dimension would provide the Distributor the right to terminate the Distribution Agreement and receive a termination payment from New Dimension. The Third Amendment is filed herewith as Exhibit 99.4 and is incorporated herein by reference. In addition to the Third Amendment, the Company and New Dimension entered into a letter agreement, dated March 7, 1999 (the "Letter Agreement"), which provides that New Dimension will not exercise its right to terminate the Distribution Agreement by reason of the Company's acquisition of Boole pursuant to the 1 3 Agreement and Plan of Reorganization, dated October 31, 1998, by and between the Company and Boole (the "Merger Agreement"), until April 10, 1999. The Letter Agreement further provides that upon completion of the Company's acquisition of Boole, the Company and the Distributor will enter into a fourth amendment (the "Fourth Amendment") to the Distribution Agreement, which will provide for the extension of the period during which New Dimension has the right to terminate the Distribution Agreement as a result of the Company's acquisition of Boole until December 31, 1999; provided, that New Dimension does not give notice of its intent to terminate the Distribution Agreement in connection with the Company's acquisition of Boole until the earlier of the day first succeeding (i) the termination of the Offer or (ii) July 12, 1999, and that such termination notice will become effective within 60 days of the receipt thereof by the Distributor. The Letter Agreement is filed herewith as Exhibit 99.5 and is incorporated herein by reference. B. FINANCING. The total amount of funds required by the Company to consummate the Offer (including cash payments related to the cancellation of outstanding New Dimension options) and the Compulsory Acquisition and to pay related fees and expenses is estimated to be approximately $700 million. The consideration for the Shares to be purchased pursuant to the Offer and the Compulsory Acquisition is expected to be funded from the Company's working capital and loans from U.S. banks. The Company is currently negotiating with three major commercial banks (the "Proposed Lenders") to obtain a credit facility in an aggregate amount of $500,000,000 (the "Proposed Credit Facility"). On March 10, 1999, the Company received commitments from each of the Proposed Lenders, which are filed herewith as Exhibit 99.2 and are incorporated herein by reference. The following is a summary of the principal terms of the Proposed Credit Facility. The Proposed Credit Facility will consist of $500,000,000 of availability under: (a) a 364-day revolving credit facility for general corporate purposes, including the funding of the Offer, with renewal options by the Proposed Lenders and with a one-year option granted to the Company, which will enable the Company to convert the revolving loans into a one-year term loan, and (b) a competitive bid facility which will enable the Company to request bids from the Proposed Lenders for loans on a negotiated basis up to the existing availability under the Proposed Credit Facility. If the Company elects to convert revolving borrowings to a term loan, such term loan must be repaid within one year with interest payable at specified margin levels above LIBOR. Interest rates for loans under the Proposed Credit Facility are based upon a margin above LIBOR within current market parameters and certain financial ratios of the Company. The Proposed Credit Facility will include, among others, covenants regarding the maintenance by the Company of: (a) at least $300,000,000 in cash and marketable securities and (b) certain financial ratios. The Proposed Credit Facility will also contain other typical and customary covenants as well as customary events of default. The Proposed Credit Facility requires the Company to pay an arrangement fee on the aggregate commitment of the Proposed Lenders together with a facility fee (ranging from 10 to 20 basis points) on the drawn and undrawn portion of the aggregate commitments of the Proposed Lenders. Any loans under the Proposed Credit Facility will be repaid over time from a variety of potential sources including, but not limited to, funds generated internally by the Company and its subsidiaries. The Offer is not conditioned on consummation of the Proposed Credit Facility. C. FINANCIAL INFORMATION The financial information provided in this Section C is being included in this Form 8-K to provide additional information solely for the purpose of illustrating how the New Dimension transaction might affect the Company and Boole as a combined company from a financial point of view. The acquisition of New Dimension is subject to numerous significant conditions, including the 90% Condition. As a result of the 90% Condition, the acquisition of New Dimension by the Company is uncertain. There can be no assurance that 2 4 the Company will succeed in its acquisition of New Dimension. The following estimated financial information may not reflect the actual financial results of the Company, Boole and New Dimension as a combined company. In addition, the Company has made various assumptions in its preparation of these estimates. These assumptions and estimated financial information consist of forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements are identified as forward looking statements in this discussion. Important factors, risks and uncertainties that could cause the Company's, Boole's and New Dimension's actual results to differ materially from the results implied by these forward looking statements are also discussed. 1. SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION The unaudited pro forma financial information is derived from historical financial information for the three companies, but includes assumptions and adjustments to reflect the proposed combination of the three companies. The descriptions of these assumptions and adjustments include forward looking statements that contemplate future events, calculations or determinations. These forward looking statements are subject to various risks and uncertainties that could cause actual pro forma financial information for the three companies to differ materially from those set forth below, including the following items: - Different Fiscal Year Ends. The fiscal year ends for the Company, Boole and New Dimension occur at different dates. The Company's fiscal year end is March 31, Boole's is September 30, and New Dimension's is December 31. In order to present the unaudited pro forma combined results on a comparable basis, certain adjustments were made to Boole's and New Dimension's results of operations for certain periods to conform to those of the Company. The selected unaudited pro forma condensed combined financial information for the years ended March 31, 1996 and 1997 are based on the consolidated financial statements of the Company for the years ended March 31, 1996 and 1997, Boole for the years ended September 30, 1995 and 1996, and New Dimension for the years ended December 31, 1995 and 1996. The selected unaudited pro forma condensed combined financial information for the year ended March 31, 1998 is based on the consolidated financial statements of the Company for the year ended March 31, 1998; Boole for the year ended September 30, 1997 reduced by the unaudited consolidated statement of income of Boole for the six months ended March 31, 1997 and increased by the unaudited consolidated statement of income of Boole for the six months ended March 31, 1998; and New Dimension for the year ended December 31, 1998. The selected unaudited pro forma condensed combined financial information for the nine months ended December 31, 1997 and 1998 are based on the unaudited consolidated financial statements of the Company for the nine months ended December 31, 1997 and 1998; the consolidated financial statements of Boole for the years ended September 30, 1997 and 1998 reduced by the unaudited consolidated statements of income of Boole for the six months ended March 31, 1997 and 1998, respectively and increased by the unaudited consolidated statements of income of Boole for the three months ended December 31, 1997 and 1998, respectively; and the audited consolidated financial statements of New Dimension for the year ended December 31, 1997 and the unaudited consolidated financial statements for the year ended December 31, 1998 reduced by the unaudited consolidated financial statements of income of New Dimension for the three months ended March 31, 1997 and 1998, respectively. As a result of the adjustments to conform Boole's fiscal year end to the year ended March 31, 1998, Boole's results of operations for the six months ended March 31, 1997, which include total revenues of $96,212,000 and a net loss of $386,000 have not been included in the selected unaudited pro forma condensed combined statements of income for the periods presented. The unaudited pro forma condensed combined total assets amount is based on the balance sheets of the Company, Boole and New Dimension at December 31, 1998. - Purchase Price. The unaudited pro forma financial information assumes a total purchase price for New Dimension of approximately $700 million, including transaction costs of approximately $15 million. The purchase price also includes approximately $2.26 million representing Boole's basis in approximately 452,800 shares of New Dimension common stock owned by Boole prior to the combination of the three companies. The shares of New Dimension common stock held by Boole are 3 5 reflected in Boole's unaudited historical financial information at current market value which, as of December 31, 1998, approximated $48.125 per share. The shares of New Dimension common stock held by Boole have been assumed to be owned by the Company prior to the tender offer, and therefore are not deemed to be outstanding as of the tender offer and not subject to the tender offer price of $52.50 per share for purposes of calculating the purchase price. - Purchase Price Allocation. The purchase price allocation for acquired in-process research and development is assumed to be approximately $132.3 million, net of income taxes. The purchase price allocation for goodwill and other intangibles is assumed to be approximately $428 million. Amortization of goodwill and other intangibles is assumed to occur over a four year life, resulting in an annual noncash amortization expense of $70 million, net of income taxes, in each year following the acquisition. The final purchase price allocation will not be known until an independent appraisal is complete. The relative allocations of portions of the purchase price to acquired in-process research and development and the period over which goodwill and other intangibles will be amortized and the resulting amortization charge will be based upon determinations by the Company and its independent appraisers and will be subject to review by its auditors and by the Securities and Exchange Commission. The actual amount of any write-off of acquired in-process research and development, remaining amortized goodwill, the actual amortization period and the amount of annual amortization of goodwill and intangibles may vary significantly from these assumptions. - No Cost Savings or Revenue Enhancements. The unaudited pro forma financial information also does not reflect the effect of cost savings and revenue enhancements, if any, which may be realized after consummation of the transactions. - Elimination of Distributor Payments. The unaudited pro forma financial information eliminates distributor payments between Boole and New Dimension of $8.3 million, $11.3 million and $15.2 million for the years ended March 31, 1996, 1997 and 1998, respectively. The information also eliminates distributor payments between Boole and New Dimension of $10.5 million and $10.1 million for the nine months ended December 31, 1997 and 1998. - Interest. The unaudited pro forma financial information assumes interest expense related to short term borrowings of $500 million at 6.0% per annum and reduced interest income associated with the use of $176 million cash and investments with an approximate return of 6.0% per annum. These adjustments include assumptions about anticipated borrowing amounts, cost of funds and return on investment that could prove inaccurate. - Costs Associated with Proposed Combination of the Company and Boole. The unaudited pro forma financial information reflects an accrual, made only to the unaudited pro forma condensed combined balance sheet, of approximately $25.0 million (or $16.25 million, net of income taxes) for estimated transaction fees, certain identified restructuring charges and costs incident to the proposed merger between the Company and Boole. Actual results incurred in connection with the proposed merger could differ significantly from these estimates. - Conversion of Outstanding Shares of Boole's Common Stock. The unaudited pro forma financial information reflects the issuance of 0.675 of a share of the Company's common stock for each share of Boole common stock outstanding at December 31, 1998, pursuant to the terms of the Merger Agreement. Therefore, the historical combined common stock, paid-in-capital and retained earnings balances have been adjusted to reflect the number of shares assumed to be issued, the difference in par value per common share of the Company and Boole and the cancellation of Boole treasury stock. These adjustments are based on the historical outstanding share amounts. Actual shares outstanding on the date the proposed merger is consummated and, therefore, the actual impact of the conversion of outstanding shares of Boole's common stock on the historical combined common stock, paid-in-capital and retained earnings balances might differ from this estimate. The following table sets forth selected unaudited pro forma condensed combined financial information derived from the historical financial information of the Company, Boole and New Dimension and is based on 4 6 the assumptions and adjustments discussed above to reflect the expected combination of the three companies. The unaudited pro forma combined income statement data for the nine months ended December 31, 1997 and 1998 and for the years ended March 31, 1996, 1997 and 1998 assume the merger with Boole and the acquisition of New Dimension were both effected as of April 1, 1995. The unaudited pro forma balance sheet data as of December 31, 1998 assumes the merger with Boole and the acquisition of New Dimension were both effected as of December 31, 1998.
NINE MONTHS ENDED YEARS ENDED MARCH 31, DECEMBER 31, -------------------------------- --------------------- 1996 1997 1998 1997 1998 -------- -------- ---------- -------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) COMPANY, BOOLE AND NEW DIMENSION COMBINED INCOME STATEMENT DATA: Total revenues..................... $666,373 $824,208 $1,045,300 $752,919 $ 982,255 ======== ======== ========== ======== ========== Net earnings....................... $ 29,941 $ 93,339 $ 121,078 $ 64,989 $ 205,500 ======== ======== ========== ======== ========== Diluted earnings per share......... $ 0.13 $ 0.39 $ 0.49 $ 0.27 $ 0.83 COMPANY, BOOLE AND NEW DIMENSION COMBINED BALANCE SHEET DATA: Total assets....................... $2,467,443 Short term borrowings.............. $ 500,000 Stockholder's equity............... $1,065,827
2. ANALYSIS OF IMPACT OF NEW DIMENSION TRANSACTION ON CERTAIN PRO FORMA ESTIMATES OF FUTURE FINANCIAL RESULTS The Company has prepared these calculations solely to illustrate the estimated financial impact of the New Dimension transaction on the Company and Boole as a combined company. If the New Dimension transaction is completed, the Company expects the New Dimension transaction to close in the first or second quarter of its March 31, 2000 fiscal year. The Company has made the following assumptions in preparing the following pro forma financial information. These assumptions and the pro forma financial information are forward looking statements. Certain risks and uncertainties could cause the Company's future operating results to differ materially from those indicated by any of these forward looking statements, including those described below. - Revenue and Earnings Estimates of the Company and Boole are not Estimates by the Company or Boole and are Being Provided Solely for Illustrative Purposes. Combined earnings estimates for the Company and Boole for fiscal 2000 are based upon published financial estimates of SG Cowen & Co. dated January 25, 1999 for the Company and Boole on a combined basis. For fiscal 2001, the Company has assumed an earnings growth rate of 25% and applied this growth rate to the SG Cowen estimate for fiscal 2000. The use of the SG Cowen estimates and the assumed 25% growth rate are solely for the illustrative purpose of estimating the impact of the New Dimension transaction on the Company and Boole as a combined company. The Company is not adopting the SG Cowen estimates or the 25% fiscal 2001 growth rate as accurate or indicative of the Company's internal estimates, nor is the Company giving guidance that it expects revenues, net earnings or earnings per share to equal or exceed these assumed amounts in fiscal 2000 or 2001. - New Dimension Revenue and Earnings Estimates are not Estimates by the Company or New Dimension and are Being Provided Solely for Illustrative Purposes. BMC and New Dimension are on different fiscal years. BMC's fiscal year ends on March 31, and New Dimension's ends on December 31. In preparing this analysis for BMC's fiscal year ending March 31, 2000 and 2001, BMC has used estimates for New Dimension's fiscal year ending December 31, 1999 and 2000, respectively. This is consistent with the method of reconciling the two different fiscal year ends used in preparing the information provided above under the heading "Selected Unaudited Pro Forma Condensed Combined Financial Information." Earnings estimates for New Dimension's fiscal year ending December 31, 1999 and 2000 are based upon published estimates of Goldman, Sachs & Co. dated February 24, 1999. The use of the Goldman, Sachs estimates are solely for the illustrative purpose of estimating the 5 7 impact of the New Dimension transaction on the Company and Boole as a combined company. The Company is not adopting the Goldman, Sachs estimates as accurate or indicative of the Company's or New Dimension's internal estimates, nor is the Company giving guidance that it expects revenues, net earnings or earnings per share of New Dimension to equal or exceed these assumed amounts in fiscal 2000 or 2001. - Estimated Outstanding Shares are not Estimates by the Company and are Being Provided Solely for Illustrative Purposes. Estimated shares outstanding for fiscal 2000 are from the SG Cowen January 25, 1999 report. Estimated shares outstanding for fiscal 2001 were calculated by increasing the fiscal 2000 amount by 4%. The Company is presenting these estimates solely for the purpose of this calculation. The amount of shares outstanding could be significantly increased by stock option grants, stock option exercises and acquisitions for stock, which increase the number of shares used to calculate earnings per share on a diluted basis. - Purchase Price Allocation; Amortization of Intangible Assets. The purchase price allocation for acquired research and development is assumed to be approximately $132.3 million, net of income taxes. The purchase price allocation for goodwill and other intangibles is assumed to be approximately $428 million. Amortization of goodwill and other intangibles is assumed to occur over a four year life, resulting in an annual noncash amortization expense of $70 million, net of income taxes, in each year following the acquisition. The net earnings and earnings per share amounts for fiscal 2000 and 2001 reflect amortization of intangible assets acquired in the New Dimension transaction. The net earnings and earnings per share amounts for fiscal 2000 reflect the anticipated write-off of acquired in-process research and development of approximately $132.3 million, net of income taxes. The net earnings and earnings per share amounts for fiscal 2000 and 2001 reflect the annual amortization of intangibles expense of $70 million, net of income taxes. Excluding these non-charges, the net earnings and earnings per share amounts in this presentation would be as follows: - The net earnings and earnings per share amounts for fiscal 2000 excluding the anticipated write-off of acquired research and development would be $439 million and $1.69. - The net earnings and earnings per share amounts for fiscal 2000 excluding the anticipated write-off of acquired research and development and amortization of intangibles would be $508 million and $1.95. - The net earnings and earnings per share amounts for fiscal 2001 excluding the amortization of intangibles would be $644 million and $2.38. The final purchase price allocation will not be known until an independent appraisal is complete. The relative allocations of portions of the purchase price to acquired in-process research and development and the period over which goodwill and other intangibles will be amortized and the resulting amortization charge will be based upon determinations by the Company, its auditors and its independent appraisers and will be subject to review by the Securities and Exchange Commission. The actual amount of any write-off of acquired in-process research and development, remaining amortized goodwill, the actual amortization period and the amount of annual amortization of goodwill and intangibles may vary significantly from these assumptions. - Other Risks. The financial results and operations of the Company, Boole, and the Company and Boole as a combined company are subject to numerous risks and uncertainties including those set forth in the Company's Registration Statement on Form S-4 dated February 23, 1999 under the heading "Risk Factors" and additional risks and uncertainties applicable to the Company's financial results and operations set forth in the Company's Quarterly Reports on Form 10-Q and Annual Report on Form 10-K under the heading "Certain Risks and Uncertainties that Could Affect Future Operating Results." The following table sets forth certain pro forma estimates of future financial results of the New Dimension transaction on the Company and Boole as a combined company and is based on the assumptions and adjustments discussed above. The data further assumes that the New Dimension transaction will close on April 1, 1999. 6 8
YEARS ENDING MARCH 31, ---------------------- 2000 2001 --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) COMPANY AND BOOLE COMBINED INCOME STATEMENT DATA: Net earnings.............................................. $508,000 $635,000 ======== ======== Net earnings per share.................................... $ 1.95 $ 2.35 Shares used in calculating net earnings per share......... 260,000 270,000 COMPANY, BOOLE AND NEW DIMENSION COMBINED INCOME STATEMENT DATA: Net earnings.............................................. $306,700 $574,000 ======== ======== Net earnings per share.................................... $ 1.18 $ 2.12 Shares used in calculating net earnings per share......... 260,000 270,000
II. NEW LITIGATION On March 9, 1999, a class action complaint was filed in the United States District Court for the Southern District of Texas, Houston Division, styled Rickey Hartman v. BMC Software, Inc., Max P. Watson, William M. Austin, M. Brinkley Morse and Kevin Klausmeyer, No. B-99-0715, against the Company and four senior executives of the Company alleging violations of Sections 10(b) and 20(a) of the Exchange Act in connection with the Company's financial statement presentation following its acquisition of BGS Systems, Inc. ("BGS") in March 1998 in a pooling-of-interests transaction. The lawsuit was filed following the Company's announcement that it was restating its historical financial results to include BGS's financial results in the Company's financial statements as a condition to the Securities and Exchange Commission declaring effective the Company's registration statement on Form S-4 for its pending acquisition of Boole. The complaint alleges that the Company and the individual defendants artificially inflated the Company's stock price by failing to include the historical results of BGS in the Company's historical financial statements thereby reporting inflated revenue and income growth rates during the first three quarters of fiscal 1999 ended December 31, 1998. The plaintiffs seek an unspecified amount of compensatory damages, interest and costs, including legal fees. The Company denies the allegations of wrongdoing in connection with the matters set forth in the complaint and intends to vigorously defend the action. An unfavorable judgment or settlement, however, could have a material adverse effect on the financial results of the Company. 7 9 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits.
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.1 -- Share Purchase and Tender Agreement, dated as of March 7, 1999, by and between the Company and New Dimension. 99.1 -- Press Release of the Company, dated as of March 8, 1999, reporting on the execution of the Share Purchase and Tender Agreement, dated as of March 7, 1999. 99.2 -- Commitment Letters, dated as of March 10, 1999, to the Company from Proposed Lenders. 99.3 -- Shareholder Agreement, dated as of March 7, 1999, by and among the Company, Einav Computer Systems Ltd., an Israeli corporation, Roni A. Einav and Dalia Prashker-Katzman. 99.4 -- Shareholder Agreement, dated as of March 7, 1999, by and between the Company and Yossie Hollander. 99.5 -- Third Amendment to Distribution Agreement by and between New Dimension and Distributor dated October 28, 1994, as amended on April 24 and October 31, 1997, effective as of March 6, 1999. 99.6 -- Letter Agreement regarding Fourth Amendment to Distribution Agreement by and between the Company and New Dimension, dated as of March 7, 1999. 99.7 -- Letter to Boole shareholders transmitting the Current Report on Form 8-K.
8 10 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. BMC SOFTWARE, INC. By: /s/ M. BRINKLEY MORSE ---------------------------------- Name: M. Brinkley Morse Title: Senior Vice President Date: March 18, 1999 11 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.1 -- Share Purchase and Tender Agreement, dated as of March 7, 1999, by and between the Company and New Dimension. 99.1 -- Press Release of the Company, dated as of March 8, 1999, reporting on the execution of the Share Purchase and Tender Agreement, dated as of March 7, 1999. 99.2 -- Commitment Letters, dated as of March 10, 1999, to the Company from Proposed Lenders. 99.3 -- Shareholder Agreement, dated as of March 7, 1999, by and among the Company, Einav Computer Systems Ltd., an Israeli corporation, Roni A. Einav and Dalia Prashker-Katzman. 99.4 -- Shareholder Agreement, dated as of March 7, 1999, by and between the Company and Yossie Hollander. 99.5 -- Third Amendment to Distribution Agreement by and between New Dimension and Distributor dated October 28, 1994, as amended on April 24 and October 31, 1997, effective as of March 6, 1999. 99.6 -- Letter Agreement regarding Fourth Amendment to Distribution Agreement by and between the Company and New Dimension, dated as of March 7, 1999. 99.7 -- Letter to Boole shareholders transmitting the Current Report on Form 8-K.
EX-2.1 2 SHARE PURCHASE & TENDER AGREEMENT, DATED 03/07/99 1 EXHIBIT 2.1 SHARE PURCHASE AND TENDER AGREEMENT by and between BMC SOFTWARE, INC. and NEW DIMENSION SOFTWARE LTD. Dated as of March 7, 1999 2 TABLE OF CONTENTS ARTICLE I THE OFFER.......................................................................................2 1.1. The Offer.......................................................................................2 1.2. Company Actions.................................................................................3 1.3. Shareholder Lists...............................................................................4 1.4. Directors.......................................................................................4 ARTICLE II OTHER AGREEMENTS RELATING TO THE OFFER..........................................................4 2.1. Options and Other Purchase Rights...............................................................4 2.2. Compulsory Acquisition..........................................................................5 2.3. Reservation of Right to Revise Structure........................................................5 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................5 3.1. Organization and Standing.......................................................................5 3.2. Agreement Authorized and its Effect on Other Obligations........................................6 3.3. Capitalization..................................................................................6 3.4. Subsidiaries....................................................................................6 3.5. Reports and Financial Statements................................................................7 3.6. Liabilities.....................................................................................8 3.7. Additional Company Information..................................................................8 3.8. Certain Agreements..............................................................................8 3.9. No Undisclosed Contracts or Defaults............................................................9 3.10. Absence of Certain Changes and Events...........................................................9 3.11. Taxes...........................................................................................9 3.12. Intellectual Property..........................................................................11 3.13. Software Contracts.............................................................................13 3.14. Title to Properties............................................................................14 3.15. Environmental Compliance.......................................................................14 3.16. Compliance with Other Laws; Permits............................................................15 3.17. Finder's Fee; Transaction Expenses.............................................................16 3.18. Compliance with ERISA..........................................................................16 3.19. Consents; Litigation...........................................................................17 3.20. Product Warranty...............................................................................18 3.21. Investment Company.............................................................................18 3.22. Inapplicability of Certain Statutes............................................................18 3.23. Banking Arrangements...........................................................................18 3.24. Relationships with Related Persons.............................................................18 3.25. Restrictions on Business Activities............................................................18 3.26. Offer Documents; Schedule 14D-9................................................................19 3.27. Grants, Incentives and Subsidies...............................................................19 3.28. Industrial Company.............................................................................19
-i- 3 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER....................................................20 4.1. Organization and Qualification.................................................................20 4.2. Authorization and Validity of Agreement........................................................20 4.3. Consents and Approvals.........................................................................20 4.4. No Violation...................................................................................20 4.5. Litigation.....................................................................................21 4.6. Offer Documents; Schedule 14D-9................................................................21 4.7. Brokers and Finders............................................................................21 4.8. Ownership of Shares............................................................................21 ARTICLE V COVENANTS......................................................................................22 5.1. Conduct of Business Pending the Closing Date...................................................22 5.2. Access; Confidentiality........................................................................23 5.3. Notice of Certain Matters......................................................................23 5.4. Non-Solicitation...............................................................................24 5.5. Takeover Statutes..............................................................................24 5.6. Cooperation....................................................................................24 5.7. Public Announcements...........................................................................25 5.8. Acquisition Proposals..........................................................................25 5.9. D&O Indemnification............................................................................26 5.10. Purchaser Plans................................................................................27 5.11. Purchaser Stock Options........................................................................28 5.12. Israeli Operations.............................................................................28 5.13. Boole & Babbage Shares.........................................................................28 ARTICLE VI TERMINATION....................................................................................28 6.1. Termination....................................................................................28 6.2 Effect of Termination..........................................................................29 6.3. Fees and Expenses..............................................................................30 ARTICLE VII MISCELLANEOUS........................................................................................30 7.1. No Survival....................................................................................30 7.2. Notices........................................................................................30 7.3. Certain Definitions............................................................................31 7.4. Entire Agreement...............................................................................32 7.5. Assignment; Binding Effect.....................................................................32 7.6. Amendments.....................................................................................32 7.7. Waivers........................................................................................32 7.8. Captions.......................................................................................32 7.9. Counterparts...................................................................................33 7.10. Validity.......................................................................................33 7.11. Governing Law..................................................................................33 7.12. New Offer......................................................................................33
-ii- 4 EXHIBITS: Exhibit A - Conditions to the Offer Exhibit 1.2 - Form of Amendment to Articles of Association Exhibit B - Form of Option Cancellation Agreement -iii- 5 SHARE PURCHASE AND TENDER AGREEMENT THIS SHARE PURCHASE AND TENDER AGREEMENT is dated as of March 7, 1999 by and between New Dimension Software Ltd., an Israeli corporation (the "Company"), and BMC Software, Inc., a Delaware corporation ("Purchaser"). RECITALS WHEREAS, the respective Boards of Directors of the Company and Purchaser have approved the acquisition of the Company by Purchaser, upon the terms and subject to the conditions set forth herein; WHEREAS, the Board of Directors of the Company deems it desirable and in the best interests of the Company and its shareholders that the Company enter into this Agreement which provides for a cash tender offer for Shares (as defined below) pursuant to Section 236 of the Companies Ordinance (New Version) 5743-1983 of the State of Israel (the "Companies Ordinance"), whereby, among other things, all of the issued and outstanding ordinary shares, par value NIS 0.01 per share, of the Company ("Shares") that are validly tendered pursuant to such offer, shall be purchased by Purchaser in exchange for an amount of cash equal to the Per Share Amount (defined below), upon the terms and subject to the conditions set forth herein and in accordance with the laws of the State of Israel; WHEREAS, Purchaser is unwilling to enter into this Agreement (and effect the transactions contemplated hereby) unless, contemporaneously with the execution and delivery hereof, certain beneficial and record holders of the Shares enter into Shareholder Agreements under which such holders have, among other things, agreed to tender their Shares into the Offer (the "Shareholder Agreements") and, in order to induce Purchaser to enter into this Agreement, such holders are executing and delivering concurrently herewith the Shareholder Agreements; WHEREAS, as a material inducement for Purchaser to enter into this Agreement, the Company has agreed to amend the Distribution Agreement dated October 26, 1997, as previously amended, between the Company and Boole & Babbage Europe effective as of the date of this Agreement; and WHEREAS, as a condition to entering into this Agreement, Purchaser has required the Company to settle all claims with members of its Board of Directors for a maximum settlement amount and, as part of such requirement, certain directors of the Company have agreed to release all claims against the Company relating to their relationship with the Company prior to the Closing Date (as defined below) pursuant to those certain Releases dated as of the date of this Agreement (the "Director Releases"); and NOW, THEREFORE, in consideration of the foregoing and of the respective representations, warranties, covenants and agreements set forth in this Agreement, the parties hereto hereby agree as follows: 6 ARTICLE I THE OFFER 1.1. The Offer. (a) As promptly as practicable (but in no event later than five business days following the public announcement of the execution hereof), Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), an offer to purchase all of the Company's outstanding Shares, at a price of $52.50 per Share (as such amount may be increased, the "Per Share Amount"), net to the seller in cash (as such offer may be amended in accordance with the terms of this Agreement, the "Offer"), subject to the conditions set forth in Exhibit A hereto and all provisions under the laws and regulations of the State of Israel. Notwithstanding the foregoing, the directors of the Company will not have the right to tender their Shares unless the Company's shareholders shall have approved such right in accordance with Section 1.2(b). If, between the date of this Agreement and the date on which Shares are accepted for payment pursuant to the Offer (the "Closing Date"), the outstanding Shares are changed into a different number or class of shares by reason of any stock split, stock dividend, reverse stock split, reclassification, recapitalization or other similar transaction, then the Per Share Amount shall be appropriately adjusted. Purchaser expressly reserves the right to amend or modify the terms of the Offer at any time prior to acceptance of Shares for payment pursuant to the Offer, except that the Purchaser shall not, without the prior written consent of the Company, (i) decrease or change the form of the consideration payable in the Offer, (ii) impose additional conditions to the Offer, (iii) change the conditions to the Offer, except that Purchaser in its sole discretion may waive any of the conditions to the Offer, or (iv) make any other change in the terms or conditions of the Offer that is adverse to the holders of Shares. Purchaser will, on the terms and subject to the prior satisfaction or waiver of the conditions to the Offer, accept for payment and pay for all Shares validly tendered and not withdrawn pursuant to the Offer promptly after expiration of the Offer. The Offer shall be open for an initial period of 20 business days from the date of commencement thereof; provided that, Purchaser may, in accordance with applicable law, extend the Offer if the conditions to the Offer have not been satisfied. The Company agrees that no Shares held by the Company will be tendered to Purchaser pursuant to the Offer; provided, that Shares held beneficially or of record by any plan, program or arrangement sponsored or maintained for the benefit of employees of the Company shall not be deemed to be held by the Company, regardless of whether the Company has, directly or indirectly, the power to vote or control the disposition of such Shares. The obligations of Purchaser to commence the Offer and to accept for payment and to pay for Shares validly tendered on or prior to the expiration of the Offer and not withdrawn shall be subject only to the conditions set forth in Exhibit A hereto. As long as the Company or its Board of Directors shall not have asserted any of their rights pursuant to Section 5.8(b), Purchaser shall at the request of the Company extend the Offer if at any scheduled expiration date of the Offer any of the conditions to Purchaser's obligations to purchase Shares shall not be satisfied; provided, however, that Purchaser shall not be required to extend the Offer beyond July 12, 1999. (b) On the date of commencement of the Offer, Purchaser shall file with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with all amendments thereto, the "Schedule 14D-1") with respect to the Offer, which shall contain the offer to purchase and related letter of transmittal and other ancillary offer documents and instruments -2- 7 pursuant to which the Offer will be made (collectively, together with any supplements or amendments thereto, the "Offer Documents"). Purchaser will disseminate the Offer Documents to holders of Shares. Each of Purchaser and the Company will promptly correct any information provided by it for use in the Offer Documents that becomes false or misleading in any material respect and Purchaser will 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 law. The Company and its counsel shall be given a reasonable opportunity to review and comment on the Offer Documents prior to their filing with the SEC. Purchaser agrees to provide the Company with any comments that may be received from the SEC or its staff with respect to the Offer Documents promptly after receipt thereof and to further provide the Company with a reasonable opportunity to participate in all substantive communications with the SEC and its staff relating to the Offer Documents, the Offer or the transactions contemplated thereby. 1.2. Company Actions. (a) The Company hereby consents to the Offer and represents and warrants that its Board of Directors (at a meeting or meetings duly called and held) has (a) unanimously determined as of the date hereof that the Offer is fair to and in the best interests of the shareholders of the Company and (b) resolved, subject to the directors of the Company not having the right to tender their Shares or the right to receive any compensation for services provided to the Company pursuant to the Director Releases, unless the Company's shareholders shall have approved such right in accordance with Section 1.2(b), to recommend acceptance of the Offer and approval of the matters set forth in Section 1.2(b) by the shareholders of the Company. The Company further represents that CIBC Oppenheimer Corp. has rendered to the Board of Directors of the Company its opinion, dated as of the date hereof, to the effect that the Per Share Amount is fair to the holders of the Shares from a financial point of view. As soon as practicable after the commencement of the Offer, the Company shall file or cause to be filed with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") containing the unanimous recommendation of the Board of Directors in favor of the Offer and shall permit the inclusion in the Schedule 14D-1 of such recommendation. Each of the Company and Purchaser will promptly correct any information provided by it for use in the Schedule 14D-9 that becomes false or misleading in any material respect and the Company will 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 law. Purchaser and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 prior to its filing with the SEC. The Company agrees to provide Purchaser with any comments that may be received from the SEC or its staff with respect to the Schedule 14D-9 promptly after receipt thereof and to further provide Purchaser with a reasonable opportunity to participate in all substantive communications with the SEC and its staff relating to the Schedule 14D-9, the Offer or the transactions contemplated thereby. (b) The Company agrees, as soon as practicable after the date of this Agreement, to duly call, give notice of, convene and hold an extraordinary general meeting of its shareholders (the "Special Meeting") for the purpose of submitting for approval by the Company's shareholders proposals to (i) approve the right of the directors of the Company to sell their Shares to the Purchaser pursuant to the Offer and the transactions contemplated thereby and the right to receive any compensation for services provided to the Company from the Company pursuant to the Director -3- 8 Releases, and (ii) approve, by special resolution, an amendment to the Company's Articles of Association to provide that the holders of at least 60% of the issued and outstanding Shares of the Company shall be entitled to appoint and remove any and all members of the Board of Directors of the Company, by means of a written notice signed by such holders to the Company (collectively, the "Shareholder Approvals"). The Company further agrees to use its best efforts to solicit proxies in favor of and to take all other actions necessary to obtain the Shareholder Approvals at the Special Meeting. The amendment to the Articles of Association shall be in the form attached hereto as Exhibit 1.2(b). The Company will provide Purchaser with a reasonable opportunity to review and approve all proxy or other materials to be sent to shareholders in connection with the Special Meeting. 1.3. Shareholder Lists. In connection with the Offer, the Company shall promptly furnish or cause to be furnished to Purchaser mailing labels and security position listings and any available listing or computer file containing the names and addresses of the record holders of Shares as of a recent date and shall furnish Purchaser with such information reasonably available to the Company and such assistance as Purchaser or its agents may reasonably request in communicating the Offer to the record and beneficial holders of Shares. Subject to the requirements of applicable law and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer, Purchaser and its affiliates will hold in confidence such listings and other information, shall use such information only in connection with the Offer and, if this Agreement is terminated, shall, and shall cause its agents or other representatives to, promptly deliver to the Company all copies of all such information (and extracts or summaries thereof) then in their possession. 1.4. Directors. Subject to obtaining the Shareholder Approvals, promptly upon the purchase by Purchaser pursuant to the Offer of such number of Shares as represents at least 60% of the outstanding Shares and from time to time thereafter, Purchaser shall be entitled to designate the entire Board of Directors of the Company, and the Company shall, upon request of Purchaser, take all actions necessary to enable such Purchaser designees to be so elected or appointed. ARTICLE II OTHER AGREEMENTS RELATING TO THE OFFER 2.1. Options and Other Purchase Rights. (a) The Company shall use its best efforts to obtain from each holder of options ("Company Options") granted under the stock option plans of the Company or any subsidiary of the Company ("Company Option Plans") an agreement in the form of Exhibit B hereto pursuant to which on the Closing Date the Company will cancel such Company Options and make the payments described below. On the Closing Date, each Company Option for which an agreement from the holder thereof has been obtained pursuant to this Section 2.1(a) that is outstanding immediately prior to the Closing Date, whether or not then exercisable or vested, will be canceled by the Company effective on the Closing Date, and the holders thereof shall be entitled to receive, for each Share subject to such Company Option, in settlement and cancellation thereof, an amount in cash equal to the positive difference, if any, between the Per Share Amount and the exercise price per share of such Company Option, which amount shall be paid by the Company at the time the Company Option -4- 9 is canceled; provided, however, that for purposes of calculating the amount of cash to be paid in respect of the cancellation of Company Options that are options to purchase shares of EagleEye Control Software Ltd. capital stock rather than Shares of the Company, the Per Share Amount used in the foregoing calculation shall be multiplied by 9.085. All applicable withholding taxes attributable to the payments made hereunder or to distributions contemplated hereby shall be deducted from the amounts payable under this Section 2.1(a) and all such taxes attributable to the cancellation of Company Options shall be withheld from the proceeds received in connection with the cancellation thereof. (b) To the extent permitted by the Company Option Plans, the Company Option Plans shall terminate on the Closing Date and any rights under any provisions in any other plan, program or arrangement providing for the issuance or grant by the Company of any interest in respect of the capital stock of the Company shall be canceled as of the Closing Date. (c) Purchaser shall make available to the Company all funds required to make the payments to the holders of Company Options as set forth in Section 2.1(a) above. 2.2. Compulsory Acquisition. If Purchaser is successful in acquiring pursuant to the Offer at least 90% of the Shares not owned by Purchaser or its subsidiaries within four months after the date the Offer commences (the "Initial Period"), Purchaser shall, pursuant to Section 236 of the Companies Ordinance, declare by notice to the remaining shareholders (the "Notice of Acquisition") that it is unilaterally acquiring (the "Compulsory Acquisition") the remaining Shares not yet held by it on the same terms as those set forth in the Offer. The Notice of Acquisition will be delivered at any time during the two month period following the Initial Period. The Offer will serve as a "Plan" or "Contract" under Section 236 of the Companies' Ordinance. 2.3. Reservation of Right to Revise Structure. At Purchaser's election, the Offer may alternatively be structured so that the issued and outstanding Shares transferred to Purchaser shall be transferred to a newly formed, wholly owned subsidiary of Purchaser provided that no such change shall alter or change the Per Share Amount. In the event of such an election by Purchaser, the parties agree to execute the appropriate documents to reflect such an election. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants subject to the exceptions specifically described in writing in the respective sections of the disclosure schedule delivered by the Company to Purchaser and dated the date hereof (the "Company Disclosure Schedule") as follows: 3.1. Organization and Standing. The Company is a corporation duly organized, validly existing under the laws of the State of Israel, has full requisite corporate power and authority to carry on its business as it is currently conducted, and to own and operate the properties currently owned and operated by it, and is duly qualified or licensed to do business and is in good standing as a foreign corporation authorized to do business in all jurisdictions in which the character of the properties owned or the nature of the business conducted by it would make such qualification or -5- 10 licensing necessary, except where the failure to be so qualified or licensed would not reasonably be expected to have a Material Adverse Effect. 3.2. Agreement Authorized and its Effect on Other Obligations. The consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company other than the Shareholder Approvals, and this Agreement is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforceability may be limited by (i) bankruptcy, insolvency, reorganization, debtor relief or similar laws affecting the rights of creditors generally, and (ii) general principles of equity. The purchase of Shares pursuant to the Offer will not conflict with or result in a violation or breach of any term or provision of, nor constitute a default under, (i) the Memorandum of Association or Articles of Association of the Company or (ii) any indenture, mortgage, deed of trust, lease, contract or other agreement to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their properties are bound, other than such violations, breaches or defaults as would not reasonably be expected to have a Material Adverse Effect. Section 3.2 of the Company Disclosure Schedule lists all holders of any material indebtedness for borrowed money of the Company as of the date of this Agreement, the lessors of any material property leased by Company and the other parties to any Material Contract (as defined in Section 3.9) to which Company is a party as of the date of this Agreement in each case whose consent to the Offer or the Compulsory Acquisition is required. 3.3. Capitalization. The authorized capitalization of the Company consists of 20,000,000 ordinary shares, par value NIS 0.01 per share, of which as of the date hereof 12,258,898 Shares were issued and outstanding, and an additional 950,705 Shares were reserved for issuance in conjunction with various employee benefit plans. All of such outstanding shares are validly issued, fully paid and nonassessable, and were not issued in violation of any preemptive rights of any shareholder. Section 3.3 of the Company Disclosure Schedule sets forth a complete list as of the date of this Agreement of all outstanding options, warrants or obligations of any kind to issue any shares of capital stock of Company or any subsidiary thereof, the owners thereof and the amounts owned. 3.4. Subsidiaries. Section 3.4 of the Company Disclosure Schedule lists the subsidiary corporations of the Company existing as of the date hereof, and shows as to each of such subsidiary corporations the percentage of the total outstanding stock thereof which is owned by the Company at such date. All outstanding shares of stock of the subsidiary corporations owned by the Company are validly issued, fully paid, and nonassessable, and the Company has good and valid title thereto free and clear of any mortgage, pledge, lien, charge, security interest, option, right of first refusal, preferential purchase right, defect, encumbrance or other right or interest of any other person (collectively, an "Encumbrance"), except for shares of capital stock or other similar ownership interests of certain subsidiaries of the Company that are owned by certain nominee equity holders as required by the applicable law of the jurisdiction of organization of such subsidiaries. Each such subsidiary is a corporation duly organized, validly existing, and in good standing (or equivalent concept with respect to jurisdictions that do not recognize such concept) under the laws of the jurisdiction under which it is incorporated and has full requisite corporate power and authority to own its property and carry on its business as presently conducted by it and is, or on the Closing Date will be, duly qualified or licensed to do business and is, or on the Closing Date will be, in good standing (or equivalent concept with respect to jurisdictions that do not recognize such concept) as -6- 11 a foreign corporation authorized to do business in all jurisdictions in which the character of the properties owned or the nature of the business conducted by such subsidiary makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not reasonably be expected to have a Material Adverse Effect on the Company. As hereinafter used in this Article III, the term "Company" also includes any and all of its directly and indirectly held subsidiaries, except where the context indicates to the contrary; provided, however, that for purposes of Sections 3.7(a) and 3.18, the term "Company" further includes any corporation, trade, business or entity under common control with the Company within the meaning of Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the "Code") or Section 4001 of ERISA. 3.5. Reports and Financial Statements. (a) The Company has previously furnished to Purchaser true and complete copies of (a) all annual reports filed by Company with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), since December 31, 1995, (b) all other reports filed with the SEC since December 31, 1995, and (c) any registration statements (other than Form S-8s) of Company declared effective by the SEC since December 31, 1995. The consolidated financial statements of Company and its subsidiaries included in the Company's most recent report on Form 20-F and any other reports filed with the SEC by the Company under the Exchange Act subsequent thereto (collectively, the "Company Reports") were, or (if filed after the date hereof) will be, prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved and fairly present, or will fairly present, the consolidated financial position for Company and its subsidiaries as of the dates thereof and the consolidated results of their operations and changes in financial position for the periods then ended (except with respect to interim period financial statements, for normal year-end adjustments which are not material and for the absence of footnotes). The Company Reports did not at the time each of the Company Reports was filed with the SEC (or, if amended or superseded by a subsequent filing, then on the date of such filing), and (if filed after the date hereof) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under whey they were made, not misleading. Since December 31, 1995, the Company has filed with the SEC all reports required to be filed by the Company under the Exchange Act and the rules and regulations of the SEC. (b) Included in Section 3.5(b) of the Company Disclosure Schedule are preliminary unaudited consolidated financial statements of the Company and its subsidiaries for the year ended December 31, 1998 (the "1998 Preliminary Statements"). As soon as they become available and prior to the Closing Date, the Company will deliver to the Purchaser audited financial statements of Company and its subsidiaries for the year ended December 31, 1998 (the "1998 Audited Statements"). The 1998 Preliminary Statements were, and the 1998 Audited Statements will be, prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved and fairly present, or will fairly present, the consolidated financial position for Company and its subsidiaries as of the date thereof and the consolidated results of their operations and changes in financial position for the period then ended. Except as set forth in Section 3.5(b) of the Company Disclosure Schedule, the 1998 Preliminary Statements and the 1998 Audited Statements will not differ in any material respect. -7- 12 3.6. Liabilities. Company has no liabilities of the type required to be disclosed in the consolidated financial statements of Company prepared in accordance with United States generally accepted accounting principles applied on a consistent basis, except for: (i) liabilities disclosed in the financial statements (including any related notes) contained in the Company Reports and (ii) liabilities incurred in the ordinary course of business. 3.7. Additional Company Information. Set forth in Section 3.7 of the Company Disclosure Schedule are true, complete and correct lists of the following items, and Company agrees that upon the request of Purchaser, it will furnish to Purchaser true, complete and correct copies of any documents referred to in such lists: (a) Employee Compensation Plans. All bonus, incentive compensation, stock option, deferred compensation, profit-sharing, retirement, pension, welfare, severance pay, supplemental income, group insurance, death benefit, or other fringe benefit plans, arrangements or trust agreements that are in effect as of the date of this Agreement covering active, former or retired employees of the Company (collectively, "Company Plans"), together with copies of the most recent Internal Revenue Service determination letters that have been received, if any, with respect to such plans; (b) Certain Salaries. The names and salary rates as of the date of this Agreement of all officers and employees of the Company as of the date of this Agreement whose regular annual base salary rate as of the date of this Agreement is $125,000 (or the equivalent in foreign currency) or more, together with any bonuses paid or payable to such persons for the fiscal year ended December 31, 1998, or since that date, and, to the extent existing on the date of this Agreement, all arrangements with respect to any bonuses to be paid to such employees from and after the date of this Agreement; (c) Employee Agreements. Any collective bargaining agreements of the Company as of the date of this Agreement with any labor union or other similar representative of employees, including amendments, supplements, and understandings, and all employment and consulting agreements of the Company as of the date of this Agreement with employees whose regular annual base salary exceeds $125,000 (or the equivalent in foreign currency) and with consultants (excluding regular outside legal counsel and independent auditors) whose annual compensation from the Company exceeds $125,000 (or the equivalent in foreign currency); and (d) Guaranties. All material third party indebtedness, liabilities and commitments of others as to which the Company is a guarantor, endorser, co-maker, surety, or accommodation maker (excluding liabilities as an endorser of checks and the like in the ordinary course of business) and all letters of credit, whether stand-by or documentary, issued by any third party. 3.8. Certain Agreements. The consummation of the transactions contemplated by this Agreement will not cause or result in the acceleration or vesting of any benefits, payments or rights covering active, former or retired employees of the Company under (i) any Company Plans or (ii) any other agreements to which the Company is a party. -8- 13 3.9. No Undisclosed Contracts or Defaults. Except as may be specified in the Company Reports, the Company is not a party as of the date of this Agreement, to, or bound as of the date of this Agreement by, any material contract or arrangement of a nature required to be filed as an exhibit to an annual report filed by the Company under the Exchange Act which is to be performed after the Closing Date (a "Material Contract"), nor is the Company in default in any material obligation or covenant on its part to be performed under any lease or other contract that is material to the business of the Company and its subsidiaries taken as a whole. 3.10. Absence of Certain Changes and Events. Except as set forth in the Company Reports or Section 3.10 of the Company Disclosure Schedule, other than as a result of the transactions contemplated by this Agreement, between December 31, 1997 and the date of this Agreement, there has not been: (a) Financial Change. Any adverse change in the financial condition, backlog, operations or business of the Company which could reasonably be expected to have a Material Adverse Effect; (b) Property Damage. Any damage, destruction, or loss to the business or properties of the Company (whether or not covered by insurance) that could reasonably be expected to have a Material Adverse Effect; (c) Dividends. Any declaration, setting aside, or payment of any dividend or other distribution in respect of the Shares, or any direct or indirect redemption, purchase or any other acquisition by the Company of any Shares; (d) Labor Disputes. Any labor dispute (other than routine grievances); or (e) Employment Arrangements. Any increase in compensation, bonus, deferred compensation, stock options or other consideration of any employee or director other than in the ordinary course of business consistent with past practice. 3.11. Taxes. (a) Tax Returns Filed; Taxes Paid. Except with respect to failures which, in the aggregate, could not reasonably be expected to have a Material Adverse Effect and except as set forth in Section 3.11(a) of the Company Disclosure Schedule, (i) all returns and reports ("Tax Returns") of or with respect to any and all taxes, charges, fees, levies, assessments, duties or other amounts payable to any federal, state, local or foreign taxing authority or agency, including, without limitation, (x) income, franchise, profits, gross receipts, minimum, alternative minimum, estimated, ad valorem, value added, sales, use, service, real or personal property, capital stock, license, payroll, withholding, disability, employment, social security, workers compensation, unemployment compensation, utility, severance, excise, stamp, windfall profits, transfer and gains taxes, (y) customs, duties, imposts, charges, levies or other similar assessments of any kind, and (z) interest, penalties and additions to tax imposed with respect thereto ("Tax" or "Taxes") which are required to be filed on or before the Closing by or with respect to the Company have been or will be duly and timely filed, (ii) all Taxes which have become or will become due with respect to the period -9- 14 covered by each such Tax Return have been or will be timely paid in full, (iii) all withholding Tax requirements imposed on or with respect to the Company on or before the Closing have been or will be satisfied in full in all respects, and (iv) no penalty, interest or other charge is or will become due with respect to the late filing of any such Tax Return or late payment of any such Tax. (b) Open Returns Disclosed. All federal and state income and franchise Tax Returns of or with respect to the Company with unexpired or extended statutes of limitations which have been audited by the applicable governmental authority are set forth in Section 3.11 of the Company Disclosure Schedule. (c) Extensions Disclosed. As of the date of this Agreement, except as set forth in Section 3.11(c) of the Company Disclosure Schedule, there is not in force any extension of time with respect to the due date for the filing of any federal or state income or franchise Tax Return of or with respect to the Company or any waiver or agreement for any extension of time for the assessment or payment of any federal or state income or franchise Tax of or with respect to the Company. (d) Claims Disclosed. There is no claim against the Company for any Taxes, and no assessment, deficiency or adjustment has been asserted or proposed in writing with respect to any Tax Return of or with respect to the Company other than those which could not reasonably be expected to have a Material Adverse Effect. (e) Scheduled Tax Liabilities Sufficient. The total amounts set up as liabilities for current and deferred Taxes in the financial statements referred to in Section 3.5 of this Agreement are sufficient to cover in all material respects the payment of all Taxes, whether or not assessed or disputed, which are, or are hereafter found to be, or to have been, due by or with respect to the Company up to and through the periods covered thereby. (f) Tax Allocation Agreements. There are no Tax allocation or sharing agreements other than between or among the Company and its wholly owned subsidiaries. (g) No Tax Liens. Except for statutory liens for current Taxes not yet due, no material liens for Taxes exist upon the assets of the Company. (h) Change of Accounting Method. The Company will not be required to include any amount in income for any taxable period beginning after December 31, 1997 as a result of a change in accounting method for any taxable period or pursuant to any agreement with any Tax authority with respect to any such taxable period. (i) Partnerships. As of the date of this Agreement, none of the property of the Company is held in an arrangement for which partnership Tax Returns are being filed. (j) Safe Harbor Leases; Tax-Exempt Use Property. As of the date of this Agreement, none of the property of the Company is subject to a safe-harbor lease (pursuant to section 168(f)(8) of the Internal Revenue Code of 1954 as in effect after the Economic Recovery Tax Act of 1981 and before the Tax Reform Act of 1986) or is "tax-exempt use property" (within the meaning of -10- 15 section 168(h) of the Code) or "tax-exempt bond financed property" (within the meaning of section 168(g)(5) of the Code). (k) Section 341(f) Election. The Company has not made an election under section 341(f) of the Code. (l) Tax Incentives. Section 3.11(l) of the Company Disclosure Schedule, together with the Company's annual report on Form 20-F for the year ended December 31, 1997, lists each tax incentive to which the Company is entitled under the laws of the State of Israel, the period for which such tax incentive applies, and the nature of such tax incentive. The Company has complied with all material requirements of Israeli law to be entitled to claim any tax incentive. Subject to the receipt of the approvals set forth in Section 3.19 below, except as disclosed in Section 3.11(l) of the Company Disclosure Schedule, the consummation of the Offer and the Compulsory Acquisition will not adversely affect the remaining duration of the incentive or require any recapture of any previously claimed incentive, and no consent or approval of any governmental authority is required, other than as contemplated by Section 3.19, prior to consummation of the Offer or Compulsory Acquisition in order to preserve the entitlement of the Company to any such incentive. Except as set forth on Section 3.11(l) of the Company Disclosure Schedule, no subsidiary of the Company is entitled to any benefit of the type described in this Section 3.11(l). 3.12. Intellectual Property. For purposes of this Section 3.12 and Section 3.13, "Third Party Distributed Software" means the third party software programs currently being distributed by the Company, whether as integrated or bundled with any of the Company's software products or as a separate stand-alone product, and "Internally Developed Software" means all software programs developed for or on behalf of the Company and currently being distributed by the Company and all software products or programs under development by the Company but not currently distributed, other than Third Party Distributed Software. Third Party Distributed Software and Internally Developed Software shall collectively be referred to as the "Software Programs." (a) Ownership. The Company exclusively owns all Internally Developed Software, including without limitation those Software Programs listed on Section 3.12(a) of the Company Disclosure Schedule, free and clear of all mortgages, pledges, liens, security interests, conditional sales agreements, encumbrances or charges of any kind (other than object code end-user licenses in the ordinary course of business and Marketing Agreements (as defined below)). The Company exclusively owns all material patents, trademarks, service marks, trade names and copyrights (including registrations, licenses and applications pertaining thereto) and all other material intellectual property rights, trade secrets and other confidential or proprietary information, processes and formulae embodied in the Internally Developed Software (the "Intellectual Property"), free and clear of all mortgages, pledges, liens, security interests, conditional sales agreements, encumbrances or charges of any kind (other than object code end-user licenses in the ordinary course of business and Marketing Agreements). Section 3.12 of the Company Disclosure Schedule contains a complete list of all registered trademarks and service marks, all reserved trade names, all registered copyrights and all filed patent applications and issued patents relating to the Internally Developed Software. -11- 16 (b) Notices. In no instance has the eligibility of the Internally Developed Software for protection under applicable copyright law been forfeited to the public domain by omission of any required notice or any other action. (c) Protection. The source code and related technical system documentation for the Internally Developed Software are protected by the Company as trade secrets in accordance with trade secret protections sufficient to maintain trade secret status under applicable law. Except as set forth in Section 3.12(c) of the Company Disclosure Schedule, the source code and related technical system documentation for the Internally Developed Software have been disclosed by the Company only to (i) employees and contractors who have had a "need to know" the contents thereof in connection with the performance of their duties to the Company and who have executed nondisclosure agreements substantially in the form provided by the Company to Purchaser, and (ii) third parties under source code escrow agreements. (d) Personnel. The Company has maintained a policy in accordance with customary software industry standards whereby its personnel who during the three years prior to the date hereof have been employees, agents, consultants and contractors of the Company and who (on behalf of the Company) have contributed to or participated in the conception and development of Internally Developed Software and related technical documentation that is material to the operation of the Company's business have executed nondisclosure and noncompetition agreements substantially in the form provided by the Company to Purchaser. All personnel who have contributed to or participated in the conception or development of Internally Developed Software have no rights to any such Internally Developed Software or related technical documentation and all such Internally Developed Software and related technical documentation is exclusively owned by the Company by operation of Israeli law. (e) Third-Party Software. Section 3.12(e) of the Company Disclosure Schedule contains a complete list of material Third Party Distributed Software. Section 3.12(e) of the Company Disclosure Schedule lists all license agreements for the use of all such material Third Party Software and, if any such software is not licensed, the basis of the use of such software by the Company. The Company has not taken any action that could, or failed to take any action, the failure of which could, reasonably be expected to (i) give rise to the termination by a licensor of the Company's license to distribute any material Third Party Distributed Software or (ii) materially restrict the Company's right of use of any material Third Party Distributed Software under any license agreement or other right of use, in each case subject to any right Company may have to receive notice of and/or cure or remedy such action or failure to act. (f) No Infringement. The Internally Developed Software and, to the Company's knowledge as of the date of this Agreement, the Third Party Distributed Software do not infringe and will not infringe any copyright or trade secret of any person or entity, and, to the Company's knowledge, no part of the Internally Developed Software nor the use thereof for their intended purposes (and to the Company's knowledge as of the date of this Agreement, no part of the Third Party Distributed Software nor the use thereof for their intended purposes) infringes or will infringe any valid and subsisting patent or other exclusionary right of any third party. As of the date of this Agreement, no written claims have been asserted against the Company by any person or entity as to the use of any of the Intellectual Property. -12- 17 (g) Integrity. Except with respect to demonstration or trial copies, no portion of the Internally Developed Software or, to the Company's knowledge as of the date of this Agreement, the Third Party Distributed Software contains any "back door," "time bomb," "Trojan horse," "worm," "drop dead device," "virus" or other software routines or hardware components designed to permit unauthorized access or to disable or erase software, hardware, or data without the consent of the user. (h) Year 2000 Compliance. All Software Programs designated with a "check" in the table (the "Y2K Compliance Table") with the heading "B. Release Information" at the third through sixth pages of Exhibit 3.12(h) to the Company Disclosure Schedule are Year 2000 Compliant. All Software Programs that are not designated with a "check" as currently being Year 2000 Compliant will be Year 2000 Compliant on the date indicated in the Y2K Compliance Table. As used in this Section 3.12(h), "Year 2000 Compliant" means such Software Programs will handle correctly: o storage and retrieval of date values o arithmetic calculations which involve date values o comparison and sorting of date fields o calendar management o execution in the 20th and 21st centuries, and real time transition from the former to the latter o common and concurrent manipulation of date values from both the 20th and the 21st century o unambiguous association of any 2-digit year value with a century value o avoidance of extended semantics. All values (including "00" and "99") in any year- field represent only the associated year "Year 2000 Compliant" further means such Software Programs: o will manage and manipulate data involving dates, including single-century formulas and multi-century formulas and not cause an abnormally ending scenario within the application or result in the generation of incorrect values involving such dates o ensure that all date-related user interface functionality and data fields include the indication of century o ensure that all date-related functions will include the indication of century. (i) Notification. The Company has notified each of its customers (excluding customers licensed through distributors) which releases of the Software Programs licensed by such customer will and will not be Year 2000 Compliant. (j) Migration Path. The implementation of the Year 2000 Compliant version of each Software Program will be independent of the version of the Software Program from which the customer is migrating. -13- 18 3.13. Software Contracts. (a) End-User Agreements. Section 3.13(a) of the Company Disclosure Schedule sets forth a complete example of each of the Company's current standard end user license agreements with respect to the Internally Developed Software (the "Standard Licenses"). Section 3.13(a) of the Company Disclosure Schedule accurately identifies each license transaction (with customer name redacted if desired) which generated $200,000 (or the equivalent in foreign currency) or more of revenues for the Company during the fiscal year ended December 31, 1998. (b) Marketing Agreements. Section 3.13(b) of the Company Disclosure Schedule sets forth a complete list of all contracts, agreements, licenses, or other commitments or arrangements in effect with respect to the marketing, remarketing, distribution, licensing or promotion of the Software Programs or any other technical documentation or the Intellectual Property by any independent salesperson, distributor, sublicensor or other remarketer or sales organization (the "Marketing Agreements"), which generated 5% or more of the Company's revenues during the preceding four fiscal quarters. 3.14. Title to Properties. With minor exceptions, which in the aggregate are not material, and except for merchandise and other property and assets sold, used or otherwise disposed of in the ordinary course of business for fair value or no longer necessary for the operation of the Company's business, the Company has good and valid title to or valid leasehold interests in all its properties, interests in properties and assets, real and personal, reflected in the most recent balance sheet of the Company included in the Company Reports, free and clear of any Encumbrance of any nature whatsoever, except (i) liens and Encumbrances reflected in the most recent balance sheet of the Company included in the Company Reports, (ii) liens for current taxes or other governmental charges or levies not yet due and payable, (iii) Encumbrances that are created, arise or exist under or in connection with any leases or other contracts or other matters referred to in the Company Disclosure Schedule, (iv) Encumbrances that relate to or are created, arise or exist in connection with, any legal proceeding that is being contested in good faith, and (v) such imperfections of title, easements and Encumbrances, if any, as do not and will not materially detract from the value of the property subject thereto or affected thereby, or otherwise materially impair business operations. All leases pursuant to which the Company leases (whether as lessee or lessor) any substantial amount of real or personal property are in good standing, valid and effective, except as validity or effectiveness may be limited by (i) bankruptcy, insolvency, reorganization, debtor relief or similar laws affecting the rights of creditors generally, and (ii) general principles of equity; and there is not, under any such leases, any existing or prospective default or event of default or event which with notice or lapse of time, or both, would constitute a default by the Company and in respect to which the Company has not taken reasonable steps to prevent a default from occurring. The buildings and premises of the Company that are used in its business are in good and sufficient operating condition and repair for the continued conduct of the Company's business on a basis consistent with past practice, subject to ordinary wear and tear. All major items of equipment of the Company are in good and sufficient operating condition and in a state of reasonable maintenance and repair for the continued conduct of the Company's business on a basis consistent with past practice, ordinary wear and tear excepted, and are free from any known defects except as may be repaired by routine maintenance and such minor defects as do not substantially interfere with the continued use thereof in the conduct of normal operations. -14- 19 3.15. Environmental Compliance. (a) Environmental Conditions. There are no materials or substances that are regulated by Applicable Environmental Laws (as defined in Section 3.15(c)) on any real property owned by the Company as a result of the actions of the Company or, to its knowledge, of any third party or otherwise, that would reasonably be expected to have a Material Adverse Effect on the Company. (b) Permits, etc. The Company has in full force and effect all environmental permits, licenses, approvals and other authorizations required under Applicable Environmental Laws to conduct its operations and is operating in material compliance thereunder. (c) Compliance. The Company's operations and use of its assets do not violate any applicable federal, state, foreign or local law, statute, ordinance, rule, regulation, order or notice requirement pertaining to (a) the condition or protection of air, groundwater, surface water, soil, or other environmental media, (b) the environment, including natural resources or any activity which affects the environment, or (c) the regulation of any pollutants, contaminants, waste, substances (whether or not hazardous or toxic), including, without limitation, the Comprehensive Environmental Response Compensation and Liability Act (49 U.S.C. Section 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 1609 et seq.), the Clean Water Act (33 U.S.C. 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (17 U.S.C. Section. 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. Section. 201 and Section. 300f et seq.), the Rivers and Harbors Act (33 U.S.C. Section. 401 et seq.), the Oil Pollution Act (33 U.S.C. Section. 2701 et seq.) and analogous state, foreign and local provisions, as any of the foregoing may have been amended or supplemented from time to time (collectively the "Applicable Environmental Laws"), except for violations which, either singly or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (d) Environmental Claims. No written notice has been served on the Company from any entity, governmental agency or individual regarding any existing, pending or threatened investigation or inquiry related to alleged violations under any Applicable Environmental Laws, or regarding any claims for remedial obligations or contribution under any Applicable Environmental Laws, other than any of the foregoing which, either singly or in the aggregate, could not reasonably be expected to have a Material Adverse Effect or which have been cured or corrected in all material respects. (e) Renewals. The Company does not know of any reason it would not be able to renew any of the permits, licenses, or other authorizations required pursuant to any Applicable Environmental Laws to operate and use any of the Company's assets for their current purposes and uses. (f) Environmental Documents. There are no environmental orders or decrees material to current operations conducted by the Company and there have not been any environmental audits, assessments, investigations or reviews conducted within the last five years on any property owned or, to the knowledge of the Company, used by the Company. 3.16. Compliance with Other Laws; Permits. Except as set forth in the Company Reports, the Company is not in violation of or in default with respect to the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.) as amended ("OSHA"), or any other applicable law or any applicable rule, regulation, or any writ or decree of any court or any governmental commission, board, bureau, -15- 20 agency, or instrumentality, or delinquent with respect to any report required to be filed with any governmental commission, board, bureau, agency or instrumentality, except for violations or defaults which, either singly or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. The Company has all permits, licenses, orders, approvals, franchises and other rights and privileges ("Permits") necessary in order for it to carry on its business as presently conducted, except such Permits which no governmental authority has demanded be obtained, or of which the company is unaware, or which the failure to obtain, if required, would not have a Material Adverse Effect, except as set forth in the Company Disclosure Schedule. Section 3.16 of the Company Disclosure Schedule sets forth a list of all such material Permits from all governmental and regulatory bodies wherever located held by the Company and its subsidiaries, including all Permits for the export or import of encryption. 3.17. Finder's Fee; Transaction Expenses. (a) All negotiations relative to this Agreement and the transactions contemplated hereby have been carried on by the Company and its counsel directly with Purchaser and its counsel, without the intervention on behalf of the Company of any other person as the result of any act of the Company, and so far as is known to the Company, without the intervention on behalf of the Company of any other person in such manner as to give rise to any valid claim against any of the parties hereto for a brokerage commission, finder's fee or any similar payments, other than financial advisory fees to be paid by the Company to Compass Partners International, L.L.C. and CIBC Oppenheimer Corp. in connection with the transaction under financial arrangements disclosed to Purchaser. (b) Section 3.17 of the Company Disclosure Schedule sets forth a complete list of all expenses to be paid by the Company in connection with the transactions contemplated by this Agreement to any legal, financial, investment banking, accounting or other professional advisor, including any agreements relating to the foregoing. 3.18. Compliance with ERISA. The Company has made available to Purchaser a copy of each Company Plan, any related summary plan description, trust agreement and annuity or insurance contract, if any, and each plan's most recent annual report filed with the Internal Revenue Service, if any, and: (i) each Company Plan has been maintained and administered in material compliance with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations, and is, to the extent required by applicable law or contract, fully funded without having any deficit or unfunded actuarial liability; (ii) all required contributions under any such plans have been made and the applicable funds have been funded in accordance with the terms thereof and no past service funding liabilities exist thereunder; (iii) each Company Plan that is required or intended to be qualified under applicable law or registered or approved by a governmental agency or authority has been so qualified, registered or approved by the appropriate governmental agency or authority, and, to the knowledge of the Company, nothing has occurred since the date of the last qualification, registration or approval to materially and adversely affect, or cause, the appropriate governmental agency or authority to revoke such qualification, registration or approval; (iv) to the extent applicable, the Company Plans comply, in all material respects, with the requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code, and any Company Plan intended to be qualified under Section 401(a) of the Code has been determined by -16- 21 the Internal Revenue Service to be so qualified and, to the knowledge of the Company, nothing has occurred to cause the loss of such qualified status; (v) no Company Plan is covered by Title IV of ERISA or Section 412 of the Code; (vi) there are no pending or, to the knowledge of the Company, anticipated material claims against or otherwise involving any of the Company Plans and no suit, action or other litigation (excluding claims for benefits incurred in the ordinary course of Company Plan activities) has been brought against or with respect to any Company Plan; (vii) all material contributions, reserves or premium payments, required to be made as of the date hereof to the Company Plans have been made or provided for; (viii) the Company has not incurred any liability under subtitle C or D of Title IV of ERISA with respect to any "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by the Company; (ix) the Company has not incurred any withdrawal liability under Subtitle E of Title IV of ERISA with respect to any "multiemployer plan," within the meaning of Section 4001(a)(3) of ERISA; (x) the Company has substantially performed all obligations, whether arising by law or by contract, required to be performed by it in connection with the Company Plans; (xi) to the knowledge of the Company, no act, omission or transaction has occurred which would result in imposition on the Company of (a) a civil penalty assessed pursuant to subsections (c), (i) or (l) of Section 502 of ERISA, (b) breach of fiduciary duty liability damages under Section 409 of ERISA or (c) a tax imposed pursuant to Chapter 43 of Subtitle D of the Code; (xii) in connection with the consummation of the transactions contemplated by this Agreement, no payments have or will be made hereunder, under the Company Plans or otherwise by the Company which, in the aggregate, would result in imposition of the sanctions imposed under Sections 280G and 4999 of the Code; and (xiii) the Company has no obligations for retiree health and life benefits under any Company Plan, except as set forth on Section 3.18 of the Company Disclosure Schedule, and there are no restrictions on the rights of the Company to amend or terminate any such Company Plan without incurring any liability thereunder. 3.19. Consents; Litigation. No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality ("Governmental Entity"), is required by or with respect to the Company or any of its subsidiaries in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except (a) in connection, or in compliance, with the provisions of the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended ("HSR Act"), other applicable anti-trust regulations and the Exchange Act, (b) applicable requirements, if any, of The Nasdaq Stock Market, (c) filings with the SEC, (d) filings with the Israeli Investment Center of the Israeli Ministry of Trade & Industry (the "Investment Center"), (e) filings with the Office of the Chief Scientist of the Israeli Ministry of Trade & Industry ("OCS"), (f) filings with and the approval of the Israeli Commissioner of Restrictive Trade Practices, if necessary, (g) filings with the Israeli Securities Authority and (h) such other consents, approvals, orders, authorizations, registrations, declarations and filings, the failure of which to be obtained or made would not have, individually or in the aggregate, a Material Adverse Effect. Except as set forth in the Company Reports and on Section 3.19 of the Company Disclosure Schedule, as of the date of this Agreement, there is no action, suit or proceeding pending or, to the company's knowledge, threatened against or affecting the Company at law or in equity, or before any federal, state, foreign, municipal or other governmental department, commission, board, bureau, agency or instrumentality, which either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or prevent consummation of the transactions contemplated hereby. -17- 22 3.20. Product Warranty. There are no existing liabilities or, to the knowledge of the Company, likely liabilities, arising from claims regarding the performance or design of the products and services sold by the Company either in the past or at present for which adequate reserves have not been established on the most recent balance sheet in the Company Reports that in the aggregate could reasonably be expected to have a Material Adverse Effect. 3.21. Investment Company. The Company is not an "investment company," or an "affiliated person of" or "promoter" or "principal underwriter" of an investment company, as those terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"). 3.22. Inapplicability of Certain Statutes. The Company is not subject to any takeover law that might apply to the Offer or the Compulsory Acquisition or any of the other transactions contemplated by this Agreement, other than Section 236 of the Companies' Ordinance and the Exchange Act. 3.23. Banking Arrangements. Section 3.23 of the Company Disclosure Schedule sets forth the name of each bank in or with which the Company or a subsidiary has an account, credit line or safety deposit box and the names of all persons presently authorized to draw thereon or have access thereto, and a brief statement describing the purpose of each such account. 3.24. Relationships with Related Persons. Except as disclosed in the Company Reports filed with the SEC prior to the date hereof and except as set forth and identified on Section 3.24 of the Company Disclosure Schedule and except for this Agreement and the transactions contemplated hereby, there are no, and since December 31, 1997 have not been any, undischarged contracts or agreements or other material transactions between the Company or any of its subsidiaries, on the one hand, and any director or executive officer of the Company or any of their respective Related Persons (as defined below), on the other hand, and no director or executive officer of the Company or any of their respective Related Persons have any interest in any of the assets of the Company or any of its subsidiaries. No executive officer, director of the Company or any of their respective Related Persons has any claim, charge, action or cause of action against the Company or any of its subsidiaries, except for claims for accrued vacation pay, accrued benefits under the Benefit Plans (as hereinafter defined), claims for compensation, expense reimbursement and similar obligations and similar matters and agreements, which have been disclosed in the Company Disclosure Schedule. For purposed hereof, the term "Related Persons" shall mean: (a) each other member of such individual's Family; and (b) any person or entity that is directly or indirectly controlled by any one or more members of such individual's Family. For purposes of this definition, the "Family" of an individual includes (i) such individual, (ii) the individual's spouse, siblings, or ancestors (iii) any lineal descendent of such individual, or their siblings, or ancestors or (iv) a trust for the benefit of any of the foregoing. 3.25. Restrictions on Business Activities. Except as set forth in the Company Disclosure Schedule, there is no agreement, judgment, injunction, order or decree binding upon the Company -18- 23 or its subsidiaries or their properties (including, without limitation, their Intellectual Property) which has or could reasonably be expected to have the effect of prohibiting or materially impairing any material acquisition of property by the Company or any of its subsidiaries or the conduct of the business by the Company or any of its subsidiaries including any exclusive distribution or licensing agreements which cannot be terminated on less than 30 days notice without any cost or expense to the Company or its subsidiaries. 3.26. Offer Documents; Schedule 14D-9. Neither the Schedule 14D-9 nor any other document filed or to be filed by or on behalf of the Company with the SEC or any other governmental entity in connection with the transactions contemplated by this Agreement nor any information supplied by or on behalf of the Company specifically for inclusion in the Offer Documents will, at the respective times filed with the SEC or other governmental entity, or at any time thereafter when the information included therein is required to be updated pursuant to applicable law, 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 light of the circumstances under which they were made, not misleading. The Schedule 14D-9 will, when filed by the Company with the SEC or other governmental entity, comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to the statements made in the foregoing documents based on information supplied by or on behalf of the Purchaser or any of its affiliates specifically for inclusion therein. 3.27. Grants, Incentives and Subsidies. Section 3.27 of the Company Disclosure Schedule provides a complete list of all pending and outstanding grants, incentives and subsidies (collectively, "Grants") from the Government of the State of Israel or any agency thereof, or from any foreign governmental or administrative agency, to the Company, including, without limitation, (i) Approved Enterprise Status from the Investment Center and (ii) grants from the OCS. The Company has made available to Purchaser, prior to the date hereof, correct copies of all applications for Grants submitted by the Company and of all letters of approval, and supplements thereto, granted to the Company. Section 3.27 of the Company Disclosure Schedule details all material undertakings of the Company given in connection with the Grants. Without limiting the generality of the above, Section 3.27 of the Company Disclosure Schedule includes the aggregate amounts of each Grant, and the aggregate outstanding obligations thereunder of the Company with respect to royalties, or the outstanding amounts to be paid by the OCS to the Company and the composition of such obligations or amount by the product or product family to which it relates. The Company is in compliance, in all material respects, with the terms and conditions of their respective Grants and, except as disclosed in Section 3.27 of the Company Disclosure Schedule hereto, have duly fulfilled, in all material respects, all the undertakings relating thereto. The Company is not aware of any event or other set of circumstances which might lead to the revocation or material modification of any of the Grants. 3.28. Industrial Company. The Company is an "industrial company" as defined in the Law for the Encouragement of Industry (Taxes) of the State of Israel, and has been an "industrial company" in each of the years since the initial public offering of the Company. The founding shareholders of the Company, Einav Computer Systems, Ltd., an Israeli corporation, and Yossie Hollander have held their respective Shares in the Company for a period beginning prior to the Company's initial public offering and ending more than five years from the date thereof. -19- 24 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants to the Company as follows: 4.1. Organization and Qualification. Purchaser (a) is duly organized, validly existing and in good standing under the laws of the state of Delaware, (b) has all requisite corporate power to carry on its business as it is now being conducted and (c) is in good standing and duly qualified to do business in each jurisdiction in which the transaction of its business makes such qualification necessary, except where the failure to be in good standing or so qualified would not have a material adverse effect on Purchaser. 4.2. Authorization and Validity of Agreement. Purchaser has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby in accordance with the terms hereof. The Board of Directors of Purchaser has duly authorized the execution, delivery and performance of this Agreement by Purchaser, and no other corporate proceedings on the part of Purchaser are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly executed and delivered by Purchaser and, assuming this Agreement constitutes the legal, valid and binding obligation of the Company, constitutes the legal, valid and binding obligation of Purchaser, enforceable against each Purchaser in accordance with its terms, except as may be limited by any bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors' rights generally or by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 4.3. Consents and Approvals. Neither the execution and delivery of this Agreement by Purchaser nor the consummation by Purchaser of the transactions contemplated hereby will require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority by reason of Purchaser's status or (as applicable) operations, except (a) in connection with the applicable requirements of the HSR Act, (b) pursuant to the applicable requirements of the Securities Act of 1933, as amended, the Exchange Act, and the rules and regulations promulgated thereunder, (c) state securities or "blue sky" laws and state takeover laws, (d) the applicable requirements of the laws and regulations of the State of Israel and (e) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a material adverse effect on Purchaser or prevent the consummation of the transactions contemplated hereby. 4.4. No Violation. Neither the execution and delivery of this Agreement by Purchaser nor the consummation by Purchaser of the transactions contemplated hereby will conflict with or violate the Certificate of Incorporation or Bylaws of Purchaser, result in a violation or breach of, constitute (with or without notice or lapse of time or both) a default under, give rise to any right of termination, cancellation or acceleration of, or result in the imposition of any lien, charge or other encumbrance on any material assets or property of Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license or other instrument or obligation to which Purchaser is a party or -20- 25 by which Purchaser or any of its assets or properties are bound, except for such violations, breaches and defaults (or rights of termination, cancellation or acceleration or lien or other charge or encumbrance) as to which consents have been obtained or which would not have a material adverse effect on Purchaser or prevent the consummation of the transactions contemplated hereby or assuming the consents, approvals, authorizations or permits and filings or notifications referred to in Section 4.3 are duly and timely obtained or made, violate any order, writ, injunction, decree, statute, rule or regulation applicable to Purchaser or any of its assets or properties, except for such violations which would not have a material adverse effect on Purchaser or prevent the consummation of the transactions contemplated hereby. 4.5. Litigation. Except as set forth in the documents filed by Purchaser with the SEC, there are no claims, actions, proceedings or governmental investigations pending or, to the knowledge of Purchaser, threatened against Purchaser or any of its subsidiaries before any court or other governmental or regulatory body, which, if adversely determined, would impair, interfere with, or otherwise adversely affect the ability of Purchaser to consummate the transactions contemplated hereby in any material respect. As of the date hereof, no action or proceeding has been instituted or, to the knowledge of Purchaser, threatened before any court or other governmental or regulatory body by any Person seeking to restrain or prohibit or to obtain damages with respect to the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby. 4.6. Offer Documents; Schedule 14D-9. Neither the Offer Documents nor any other document filed or to be filed by or on behalf of Purchaser with the SEC or any other governmental entity in connection with the transactions contemplated by this Agreement nor any information supplied by or on behalf of Purchaser specifically for inclusion in the Schedule 14D-9 will, at the respective times filed with the SEC or other governmental entity, or at any time thereafter when the information included therein is required to be updated pursuant to applicable law, 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 light of the circumstances under which they were made, not misleading. The Offer Documents will, when filed by Purchaser with the SEC or other governmental entity, comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. Notwithstanding the foregoing, Purchaser makes no representation or warranty with respect to the statements made in the foregoing documents based on information supplied by or on behalf of the Company or any of its affiliates specifically for inclusion therein. 4.7. Brokers and Finders. No broker, finder or investment bank has acted directly or indirectly for Purchaser, nor has Purchaser incurred any obligation to pay any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby, other than Goldman, Sachs & Co. 4.8. Ownership of Shares. As of the date of this Agreement, Purchaser and its subsidiaries do not own any Shares. -21- 26 ARTICLE V COVENANTS 5.1. Conduct of Business Pending the Closing Date. From the date hereof until the Closing Date, except as otherwise required or contemplated hereunder or as required by applicable law or as set forth in Section 5.1 of the Company Disclosure Schedule, the Company shall, and shall cause its subsidiaries to: (a) use all commercially reasonable efforts to conduct its business and the business of its subsidiaries in all material respects only in the ordinary course of business and consistent with past practice; (b) not amend its Articles of Association or Memorandum of Association or other organizational or governing documents or declare, set aside or pay any dividend or other distribution or payment in cash, stock or property in respect of its capital stock or acquire, directly or indirectly, any of its capital stock; (c) not issue, grant, sell or pledge or agree or authorize the issuance, grant, sale or pledge of any shares of, or rights of any kind to acquire any shares of, its capital stock other than Shares issuable upon the exercise of stock options outstanding on the date hereof; (d) not acquire, sell, transfer, lease or encumber any material assets except in the ordinary course of business and consistent with past practice; (e) use all commercially reasonable efforts to preserve intact its business organizations and the business organizations of its subsidiaries, and to keep available the services of its present key officers and employees; provided, however, that to satisfy the foregoing obligation, the Company shall not be required to make any payments or enter into or amend any contractual arrangements or understandings, except in the ordinary course of business and consistent with past practice and that this provision shall not restrict the Company in any way from terminating the employment of its employees, other than its present key officers and employees; (f) not adopt a plan of complete or partial liquidation or adopt resolutions providing for the complete or partial liquidation, dissolution, consolidation, amalgamation, merger, restructuring or recapitalization of the Company or any of it subsidiaries; (g) not grant any severance or termination pay (otherwise than pursuant to policies in effect on the date hereof) to, or enter into any employment agreement with, any of its executive officers or directors; (h) not, except in the ordinary course of business consistent with past practice or pursuant to obligations imposed by collective bargaining agreements, increase the compensation payable or to become payable to its officers or employees, enter into any contract or other binding commitment in respect of any such increase with any of its directors, officers or other employees or any director, officer or other employee of its subsidiaries, and not establish, adopt, enter into, make any new grants or awards under or amend, any collective bargaining agreement or Company Plan, except as -22- 27 required by applicable law, including any obligation to engage in good faith collective bargaining, to maintain tax-qualified status or as may be required by any Company Plan as of the date hereof; (i) not settle or compromise any material claims or litigation or, except in the ordinary course of business, modify, amend or terminate any of its material contracts or waive, release or assign any material rights or claims, or make any payment, direct or indirect, of any material liability before the same becomes due and payable in accordance with its terms; (j) not take any action, other than reasonable and usual actions in the ordinary course of business and consistent with past practice with respect to accounting policies or procedures (including tax accounting policies and procedures), except as may be required by the SEC or the Financial Accounting Standards Board; (k) not make any material tax election or permit any material insurance policy naming it as a beneficiary or a loss payable payee to be canceled or terminated without notice to Purchaser, except in the ordinary course of business consistent with past practice; (l) not incur or pay or agree to pay any fees or expenses that would be required to be included in Section 3.17 of the Company Disclosure Schedule that are not so included; (m) not amend the Director Releases or incur or pay or agree to pay any amount in excess of $7.5 million (including all legal fees and other expenses of such directors) in the aggregate plus value added tax as prescribed by law against a duly issued value added tax invoice, less any amounts required to be withheld pursuant to applicable tax regulations, pursuant to the Director Releases; and (n) not authorize or enter into an agreement to do any of the foregoing. 5.2. Access; Confidentiality. (a) From the date of this Agreement until the Closing Date, upon reasonable prior notice to the Company, the Company shall give Purchaser and its authorized representatives reasonable access during normal business hours to its executive officers and such other officers or other representatives of the Company approved in advance by the Company (which approval shall not be unreasonably withheld), properties, books and records, and shall furnish Purchaser and its authorized representatives with such financial and operating data and other information concerning the business and properties of the Company as Purchaser may from time to time reasonably request. (b) Purchaser will hold and treat, and will cause its affiliates, agents and other representatives to hold and treat, all documents and information concerning the Company furnished to Purchaser or its respective representatives in connection with the transactions contemplated by this Agreement confidential in accordance with the Confidentiality Agreement dated January 6, 1999, between the Company and Purchaser, which Confidentiality Agreement shall remain in full force and effect in accordance with its terms. 5.3. Notice of Certain Matters. The Company shall give prompt notice to Purchaser, and Purchaser shall give prompt notice to the Company, of (a) the occurrence or nonoccurrence of any -23- 28 event that would be likely to cause (i) any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect or (ii) any covenant, condition or agreement contained in this Agreement not to be complied with or satisfied in all material respects and (b) any failure of the Company or of Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder in any material respect. 5.4. Non-Solicitation. Without the prior written consent of the other party, neither Purchaser nor the Company, will for a period of one year from the date of this Agreement, solicit or cause to be solicited the employment of any person who is employed by the other during such time, except as provided for under the Distribution Agreement, as amended, to which the Company and Boole & Babbage Europe are a party as of the date hereof. 5.5. Takeover Statutes. The Company and Purchaser will cooperate to take reasonable steps to (a) exempt the Offer and the purchase of Shares thereunder from the requirements of any applicable takeover law that would prevent or delay or adversely impact the Offer or the purchase of Shares thereunder and (b) assist in any challenge by any of the parties to the validity or applicability to the Offer and the purchase of Shares thereunder of any such takeover law. 5.6. Cooperation. Subject to the terms and conditions of this Agreement and applicable law, each of the parties shall act in good faith and use 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 to consummate and make effective the transactions contemplated by this Agreement as soon as practicable, including such actions or things as any other party may reasonably request in order to cause any of the conditions to such other party's obligation to consummate the transactions contemplated by this Agreement to be fully satisfied. Without limiting the foregoing, the parties shall (and shall cause their respective subsidiaries, and use reasonable efforts to cause their respective affiliates, directors, officers, employees, agents, attorneys, accountants and representatives, to) consult and fully cooperate with and provide assistance to each other in (a) the preparation and filing with the SEC of the Offer Documents and the Schedule 14D-9; (b) obtaining all necessary consents, approvals, waivers, licenses, permits, authorizations, registrations, qualifications, or other permissions or actions by, and giving all necessary notices to and making all necessary filings with and applications and submissions to, any Governmental Entity or other Person as soon as reasonably practicable after filing, including without limitation (i) the OCS, (ii) the Investment Center and (iii), if required, the Commissioner of Restrictive Trade Practices of Israel; (c) seeking early termination of any waiting period under the HSR Act; (d) providing all such information concerning such party, its subsidiaries and its officers, directors, partners and affiliates and making all applications and filings as may be necessary or reasonably requested in connection with any of the foregoing; (e) in general, consummating and making effective the transactions contemplated hereby; and (f) in the event and to the extent required, amending this Agreement so that this Agreement and the Offer complies with applicable law. The parties shall (and shall cause their respective affiliates, directors, officers, employees, agents, attorneys, accountants and representatives to) use their reasonable efforts to cause the lifting of any permanent or preliminary injunction or restraining order or other similar order issued or entered by any court or other Governmental Entity preventing or restricting consummation of the transactions contemplated hereby in the manner provided for herein. Prior to making any application to or filing with any Governmental Entity or other Person in connection with this -24- 29 Agreement (other than filing under the HSR Act), each party shall provide the other party with drafts thereof and afford the other party a reasonable opportunity to comment on such drafts. 5.7. Public Announcements. No party hereto shall or shall permit any of its subsidiaries to (and each party shall use commercially reasonable efforts to cause its affiliates, directors, officers, employees, agents or representatives not to) issue any press release or make any public statement concerning this Agreement or any of the transactions contemplated hereby, without the prior written consent of the other parties hereto; provided, however, that a party may, without the prior written consent of the other party hereto, issue such a press release or make such a public statement to the extent required by applicable law or any listing agreement with a national securities exchange by which such party is bound if it has used commercially reasonable efforts to consult with the other parties and to obtain such parties' consent but has been unable to do so in a timely manner. 5.8. Acquisition Proposals. (a) Subject to Section 5.8(b) below, the Company shall not (and shall not permit any of its subsidiaries to, and shall use its best efforts to cause its officers, directors and employees and any investment banker, attorney, accountant, or other agent retained by it or any of its subsidiaries not to) directly or indirectly (i) solicit, initiate, facilitate or knowingly encourage (including by way of furnishing information) any inquiry or the making of any proposal which constitutes, or may reasonably be expected to lead to, any acquisition or purchase by a third party (other than Purchaser or an affiliate of Purchaser) of a substantial amount of assets of, or any equity interest in, the Company or any merger, consolidation, business combination, sale of securities, recapitalization, liquidation, dissolution or similar transaction involving the Company (collectively, "Company Transaction Proposals") or agree to or endorse any Company Transaction Proposal or (ii) propose, enter into or participate in any discussions or negotiations regarding any Company Transaction Proposal, or furnish to another person (other than Purchaser or a representative of Purchaser) any information with respect to its business, properties or assets for the purpose of facilitating any Company Transaction Proposal. Subject to Section 5.8(b) below, the Board of Directors of the Company will not change its recommendation of the Offer referred to in Section 1.2 (a). (b) Nothing contained in this Section 5.8 or elsewhere in this Agreement shall prohibit the Company from (i) furnishing information pursuant to an appropriate confidentiality letter concerning the Company and its businesses, properties or assets to a third party who has made a Superior Proposal (as defined below), (ii) engaging in discussions or negotiations with a third party who has made a Superior Proposal or (iii) following receipt of a Superior Proposal, taking and disclosing to its shareholders a position (including a positive recommendation) with respect thereto or changing, withdrawing or withholding the approval or recommendation by the Company's Board of Directors of the Offer, but in each case referred to in the foregoing clauses (i) through (iii) only after the Board of Directors of the Company concludes in good faith following advice of its independent counsel, evidenced by a written opinion, that such action is necessary in order for the Board of Directors of the Company to comply with its fiduciary obligations to the Company's shareholders under applicable Israeli law. If the Board of Directors of the Company receives a Company Transaction Proposal, then the Company shall immediately inform Purchaser of the terms and conditions of such proposal and the identity of the person making it and shall keep Purchaser fully informed of the status and details of any such Company Transaction Proposal and of all steps -25- 30 it is taking in response to such Company Transaction Proposal. For purposes of this Agreement, the term "Superior Proposal" shall mean a bona fide Company Transaction Proposal that the Board of Directors of the Company determines in good faith after consultation with (and based in part on the advice of) its independent financial advisors to be more favorable to the Company and the Company's shareholders than the Offer, which Company Transaction Proposal is not subject to any material contingencies relating to financing. (c) If (i) this Agreement is terminated by Purchaser pursuant to Section 6.1(e)(ii) hereof or by the Company pursuant to Section 6.1(f) hereof, or (ii) (A) prior to the Closing Date, there is publicly announced by a third party (other than Purchaser or an affiliate of Purchaser) a proposal for an Alternative Company Transaction (as defined below); (B) the Offer is terminated or expires as a result of the failure of a condition specified in Exhibit A hereto; and (C) either the Company's Board of Directors recommends or approves an acquisition agreement which provides for an Alternative Company Transaction or an Alternative Company Transaction is consummated, in each case with any third party which after the date of this Agreement and before termination of this Agreement has publicly announced a proposal for Alternative Company Transaction, in either case prior to twelve months after the date of termination of this Agreement, then, in any such event unless this Agreement has been terminated by the Company pursuant to Section 6.1(h), the Company shall pay to Purchaser simultaneously with termination by the Purchaser in the case of the occurrence of any of the events specified in clause (i) above, and immediately upon the first to occur of the entering into an agreement providing for, or the consummation of, an Alternative Company Transaction in the case of clause (ii) above (by wire transfer of immediately available funds to an account designated by Purchaser for such purpose), a fee (the "Break-Up Fee") in an amount equal to $25.0 million. For purposes of this Paragraph 5.8(c), the term "Alternative Company Transaction" shall mean any transaction pursuant to which (i) any person, entity or group (within the meaning of Section 13(d)(3) of the Exchange Act) (other than Purchaser or any affiliate of Purchaser) (each, a "Third Party") acquires 50% or more of the outstanding Shares, (ii) a Third Party acquires 25% or more of the total assets of the Company taken as a whole, (iii) a Third Party merges, consolidates or combines in any other way with the Company other than in a transaction in which holders of Shares continue to own at least 75% of the equity of the surviving corporation, or (iv) the Company distributes or transfers to its shareholders, by dividend or otherwise, assets constituting 25% or more of the market value or earning power of the Company on a consolidated basis (it being understood that stock of subsidiaries constitute assets of the Company for purposes of this Paragraph 5.8(c)). 5.9. D&O Indemnification. (a) From the Closing Date through the later of (i) the sixth anniversary of the Closing Date and (ii) the expiration of any statute of limitations applicable to any claim, action, suit, proceeding or investigation referred to below, the Company shall indemnify and hold harmless each present and former director and officer of the Company and its subsidiaries, determined on the Closing Date (the "Indemnified Parties"), against any claims, losses, liabilities, damages, judgments, fines, fees, costs or expenses, including without limitation attorneys' fees and disbursements (collectively, "Costs"), incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring on or prior to the Closing Date, whether asserted or claimed prior to, on or after the Closing Date, to the fullest extent that the Company or such subsidiary would have -26- 31 been permitted, under applicable law, indemnification agreements existing on the date hereof, the Articles of Association or Memorandum of Association of the Company or such subsidiary in effect on the date hereof, to indemnify such Person (and the Company shall also advance expenses as incurred to the fullest extent permitted under applicable law provided the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification). (b) Any Indemnified Party wishing to claim indemnification under this Section 5.9, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify the Company thereof, but the failure to so notify shall not relieve the Company of any liability or obligation it may have to such Indemnified Party except, and only to the extent, that such failure materially prejudices the Company. In the event of any such claim, action, suit, proceeding or investigation (whether arising before, on or after the Closing Date), the Company shall have the right to assume the defense thereof and the Company shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if the Company elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues that raise conflicts of interest between the Company and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and the Company shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received. If such indemnity is not available with respect to any Indemnified Party, then the Company and the Indemnified Party shall contribute to the amount payable in such proportion as is appropriate to reflect relative faults and benefits. In the event that any claim or claims are asserted or made within the aforesaid six-year period, all rights to indemnification in respect of any such claim or claims shall continue until the final disposition of any and all such claims. (c) Notwithstanding anything herein to the contrary, if any claim, action, suit, proceeding or investigation (whether arising before, on or after the Closing Date) is made against any present or former director or officer of the Company, on or prior to the sixth anniversary of the Closing Date, the provisions of this Section 5.9 shall continue in effect until the final disposition of such claim, action, suit, proceeding or investigation. (d) This covenant is intended to be for the benefit of, and shall be enforceable by, each of the Indemnified Parties and their respective heirs and legal representatives. The indemnification provided for herein shall not be deemed exclusive of any other rights to which an Indemnified Party is entitled, whether pursuant to law, contract or otherwise. (e) To the extent that the Company fails to perform any of its obligations pursuant to this Section 5.9, Purchaser shall assume the obligations and rights of the Company under this Section 5.9. 5.10. Purchaser Plans. (a) Following the Closing Date, Purchaser shall cause the Company to provide to persons who were employees of the Company or any of its subsidiaries prior to the Closing Date (the "Company Personnel") employee benefit plans, programs and arrangements (the "Purchaser Plans") -27- 32 which in the aggregate are substantially comparable to those employee benefit plans, programs and arrangements generally provided to similarly situated employees of Purchaser from time to time. (b) Following the Closing Date, Purchaser shall cause the Purchaser Plans to recognize any prior accrued service, compensation credit, credit toward satisfying deductible expense requirements, out-of-pocket expense limits and maximum lifetime benefit limits of such Company Personnel and/or such Company Personnel's eligible dependents, to the extent such prior service, credits and limits were recognized under the comparable employee benefit plans, programs or arrangements of the Company on the Closing Date, for all purposes under the Purchaser Plans (including, but not limited to, participation, eligibility, vesting and the calculation of benefits), and Purchaser shall cause the Purchaser Plans to waive any preexisting condition, exclusion or limitation under any such Plan to the extent such condition, exclusion or limitation would be covered by the comparable plan, program or arrangement of the Company on the Closing Date. (c) Each of the employment agreements, the employment security agreements and severance agreements for the benefit of Company Personnel identified in Section 5.10 of the Company Disclosure Schedule shall be continued by the Company on the Closing Date on the same terms and subject to the same conditions as in effect under such agreements immediately prior to the Closing Date. 5.11. Purchaser Stock Options. Immediately after the Closing Date, Purchaser will issue, to senior management and key employees of the Company, as shall be mutually agreed between the senior officers of the Company and Purchaser, stock options to purchase an aggregate of 500,000 shares of Purchaser common stock under its stock option plan, vesting ratably over five years, under agreements in customary form utilized for Purchaser's employees. 5.12. Israeli Operations. Following the Closing Date, Purchaser intends that the Company will continue as a legal entity, with the same name, engaged in the development, production, marketing and distribution of the software products of the Company and that the business operations and facilities of the Company (including its research and development activities) remain in Israel. 5.13. Boole & Babbage Shares. Purchaser shall use its reasonable efforts to cause Boole & Babbage, Inc. to tender any shares held by it into the Offer. ARTICLE VI TERMINATION 6.1. Termination. This Agreement may be terminated and the Offer may be abandoned at any time, prior to the Closing Date: (a) by mutual written consent of the Company and Purchaser; (b) by either the Company or Purchaser, if the Closing Date shall not have occurred on or before September 12, 1999; provided, that either the Company or the Purchaser may terminate this Agreement if (i) the Closing Date shall not have occurred on or before July 12, 1999, and (ii) within 10 days of expiration of the initial Offer hereunder, Purchaser has not elected to commence -28- 33 a new Offer pursuant to Section 7.12 hereof; and provided, further that the right to terminate this Agreement under this clause (b) shall not be available to any party whose misrepresentation in this Agreement or whose failure to perform any of its covenants and agreements or to satisfy any obligation under this Agreement has been the cause of or resulted in the failure of the Closing Date to occur on or before the applicable dates specified herein; (c) by either the Company or Purchaser, if any federal or state court of competent jurisdiction or other federal or state governmental or regulatory body shall have issued any judgment, injunction, order or decree prohibiting, enjoining or otherwise restraining the transactions contemplated by this Agreement and such judgment, injunction, order or decree shall have become final and nonappealable (provided, however, that the party seeking to terminate this Agreement pursuant to this clause (c) shall have used commercially reasonable efforts to remove such judgment, injunction, order or decree) or if any statute, rule, regulation or executive order promulgated or enacted by any federal or state governmental authority after the date of this Agreement which prohibits the consummation of the Offer shall be in effect; (d) by the Company, if (i) Purchaser fails to commence the Offer as provided in Section 1.1 other than as a result of any action by the Company in violation of this Agreement, (ii) the Offer expires or is terminated without any Shares being purchased thereunder and Purchaser does not commence a new Offer pursuant to Section 7.12 or (iii) Purchaser fails to purchase validly tendered Shares in violation of the terms and conditions of the Offer or this Agreement; (e) by Purchaser, if (i) the Offer is not commenced as provided in Section 1.1 directly as a result of actions or inaction by the Company in violation of this Agreement, (ii) the Company's Board of Directors shall have withdrawn, withheld or modified in a manner adverse to Purchaser its approval of this Agreement or the Offer pursuant to Section 5.8 or (iii) the Offer is terminated or expires as a result of the failure of a condition specified in Exhibit A hereto without the purchase of any Shares thereunder, unless such termination or expiration has been caused by or resulted from the failure of Purchaser to perform any covenants and agreements of Purchaser contained in this Agreement; (f) by the Company, if its Board of Directors shall have withdrawn, withheld or modified in a manner adverse to Purchaser its approval of this Agreement or the Offer in accordance with Section 5.8 and paid to Purchaser the Break-Up Fee; (g) by Purchaser, if there shall have been a material breach of any representation, warranty or material covenant or agreement on the part of the Company, which is incurable or which is not cured after thirty days' written notice by Purchaser to the Company; or (h) by the Company, if there shall have been a material breach of any representation, warranty or material covenant or agreement on the part of Purchaser, which is incurable or which is not cured after thirty days' written notice by the Company to Purchaser. 6.2 Effect of Termination. In the event of any termination of this Agreement pursuant to Section 6.1, this Agreement forthwith shall become void and of no further force or effect, and no party hereto (or any of its affiliates, directors, officers, agents or representatives) shall have any -29- 34 liability or obligation hereunder, except in any such case (a) as provided in Sections 5.2(b) (Confidentiality), 5.4 (Non-Solicitation), 5.7 (Public Announcements), and 6.3 (Fees and Expenses), which shall survive any such termination and (b) to the extent such termination results from the breach by such party of any of its representations, warranties, covenants or agreements contained in this Agreement. 6.3. Fees and Expenses. Whether or not the Offer or is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby (including, without limitation, fees and disbursements of counsel, financial advisors and accountants) shall be borne by the party which incurs such cost or expense. ARTICLE VII MISCELLANEOUS 7.1. No Survival. None of the representations, warranties, covenants or agreements contained in this Agreement or in any certificate or other instrument delivered pursuant to this Agreement shall survive the Closing Date, except for the covenants and agreements contained in Sections 5.9 (D&O Indemnification and Insurance), 5.10 (Company Plans), and 5.11 (Purchaser Stock Options.) 7.2. Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made as of the date delivered, mailed or transmitted, and shall be effective upon receipt, if delivered personally, mailed by registered or certified mail (postage prepaid, return receipt requested) or sent by facsimile (with immediate confirmation) or nationally recognized overnight courier service, as follows: (a) if to Purchaser, to: BMC Software, Inc. 2101 CityWest Blvd. Houston, Texas Attention: Brinkley Morse Fax: (713) 918-8000 with a copy to: John S. Watson Vinson & Elkins L.L.P. 2300 First City Tower Houston, Texas 77002 Fax: (713) 758-2346 -30- 35 Yaakov Neeman Herzog, Fox & Neeman Asia House 4 Weizmann Street Tel-Aviv 64 239 Israel Fax: 972-3-696-6464 (b) if to the Company, to: New Dimension Software, Ltd. ATIDIM, Building 7 POB 85168 Tel Aviv 61 581 Israel Fax: 972-3-645-1100 with a copy to: David Fox Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Fax: (212) 735-2000 Michael Spigelman Dan Cohen, Spigelman & Co. 103 Hahashmonaim St. Israel Fax: 972-3-561-0624 or to such other Person or address or facsimile number as any party shall specify by like written notice to the other parties hereto (any such notice of a change of address to be effective only upon actual receipt thereof). 7.3. Certain Definitions. The following terms, when used in this Agreement, shall have the following respective meanings: (a) "affiliate" shall have the meaning assigned to such term in Rule 12(b)-2 of the Exchange Act. (b) "business day" shall have the meaning set forth in Rule 14d-1(e)(6) under the Exchange Act. (c) "dollars" or "$" means United States dollars. -31- 36 (d) "Material Adverse Effect" means, any change or effect that is materially adverse to the business or financial condition, assets, liabilities or results of operations of the Company and its subsidiaries taken as a whole. (e) "Person" means any natural person, corporation, limited liability company, partnership, unincorporated organization or other entity. (f) "subsidiary" of any Person means any other corporation or entity of which such Person owns, directly or indirectly, stock or other equity interests having a majority of the votes entitled to be cast in the election of directors of such corporation or entity under ordinary circumstances or of which such Person owns a majority beneficial interest. 7.4. Entire Agreement. This Agreement (including the schedules, exhibits and other documents referred to herein), together with the Confidentiality Agreement referred to in Section 5.2(b), constitutes the entire agreement between and among the parties hereto and supersedes all prior agreements and understandings, oral and written, between or among any of the parties with respect to the subject matter hereof. 7.5. Assignment; Binding Effect. Neither this Agreement nor any of the rights, benefits or obligations hereunder may be assigned, in whole or in part, by any party (whether by operation of law or otherwise) without the prior written consent of the other parties hereto. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties or their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, other than rights conferred upon Indemnified Parties under Section 5.9. 7.6. Amendments. This Agreement may be amended by the parties at any time prior to the Closing Date. 7.7. Waivers. At any time prior to the Closing Date, Purchaser or the Company may, to the extent legally allowed, extend the time specified herein for the performance of any of the obligations or other acts of the other, waive any inaccuracies in the representations and warranties of the other contained herein or in any document delivered pursuant hereto, or waive compliance by the other with any of the agreements or covenants of such other party or parties (as the case may be) contained herein. Any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of the party or parties to be bound thereby. No such extension or waiver shall constitute a waiver of, or estoppel with respect to, any subsequent or other breach or failure to strictly comply with the provisions of this Agreement. The failure of any party to insist on strict compliance with this Agreement or to assert any of its rights or remedies hereunder or with respect hereto shall not constitute a waiver of such rights or remedies. 7.8. Captions. The Table of Contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. -32- 37 7.9. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument. 7.10. Validity. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. 7.11. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without regard to any applicable principles of conflicts of law; provided, however, that matters relating to the duties of the directors of the Company and issues governed by the Companies Ordinance shall be governed by the laws of the State of Israel. 7.12. New Offer. In the event the original Offer expires as a result of any or all of the conditions to the Offer set forth in paragraphs (1), (2), (3), (4), (5), (6)(a) and (6)(b) of Exhibit A not being been fulfilled, Purchaser shall have the right to commence a new Offer within 10 days of such expiration. Such new Offer shall be conducted on the same terms as the original Offer, and the terms of this Agreement shall in all respects apply to such new Offer in the same manner as it applied to the original Offer except where the context indicates otherwise. -33- 38 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. NEW DIMENSION SOFTWARE LTD. [NEW DIMENSION SOFTWARE LOGO] By: /s/ RONI A. EINAV ------------------------------------- Name: Roni A. Einav Title: Chairman By: /s/ DAN BARNEA ------------------------------------- Name: Dan Barnea Title: CEO BMC SOFTWARE, INC. By:/s/ M. BRINKLEY MORSE ------------------------------------- Name: M. Brinkley Morse Title: Senior Vice President -34- 39 EXHIBIT A CONDITIONS TO THE OFFER Capitalized terms used in this Exhibit A shall have the meanings assigned to them in the Agreement to which it is attached (the "Tender Agreement"). Purchaser shall not be required to accept for payment, purchase or pay for any Shares tendered and Purchaser may terminate or, subject to the terms and conditions of the Tender Agreement, amend the Offer as to any Shares not then accepted for payment, shall not be required to accept for payment or pay for any Shares, or may delay the acceptance for payment of Shares tendered, if: (1) at the expiration of the Offer, the number of Shares validly tendered and not withdrawn shall not constitute at least 90% of the then outstanding Shares not owned by Purchaser determined in accordance with Section 236 of the Companies Ordinance; (2) at the expiration of the Offer, all material filings required to be made prior to the Closing Date with, and all material consents, approvals, permits and authorizations required to be obtained prior to the Closing Date from, governmental and regulatory authorities in connection with the Offer and the consummation of the other transactions contemplated hereby which are listed in Section 3.19 of the Tender Agreement shall not have been made or obtained, as the case may be, or the expiration of any applicable waiting periods required by the governmental or regulatory authorities listed in Section 3.19 of the Tender Agreement shall not have occurred; (3) the Shareholder Approvals shall not have been obtained at the Special Meeting; (4) the Company shall not have obtained agreements from the holders of all Company Options in accordance with Section 2.1(a) of the Tender Agreement permitting the cancellation of such Company Options on the Closing Date in accordance with Section 2.1(a) thereof; provided, however, that the foregoing shall not require the Company to have obtained such an agreement from any holder of a Company Option (other than a holder of an option to purchase capital stock of any subsidiary of the Company) who is not employed by the Company or its subsidiaries at the Closing Date; (5) the Director Releases shall not have become effective in accordance with their terms; or (6) at any time after the date of the Tender Agreement and prior to the acceptance for payment of Shares, any of the following events shall occur: (a) there shall have been any action or proceeding brought by any governmental authority before any court, or any order or preliminary or permanent injunction entered in any action or proceeding before any court or governmental, administrative or regulatory authority or agency, located or having jurisdiction within the United States or State of Israel, or any other action taken, proposed or threatened, or statute, rule, regulation, legislation, interpretation, judgment or order proposed, sought, enacted, entered, enforced, promulgated, -1- 40 amended, issued or deemed applicable to Purchaser, the Company or any subsidiary or affiliate of Purchaser or the Company or the Offer, by any legislative body, court, government or governmental, administrative or regulatory authority or agency located or having jurisdiction within the United States or the State of Israel, which could reasonably be expected to have the effect of: (i) making illegal, materially delaying or otherwise restraining or prohibiting the Offer or the acquisition by Purchaser of any Shares or the Compulsory Acquisition; (ii) prohibiting or materially limiting the ownership or operation by Purchaser or its affiliates of any material portion of the business or assets of the Company or compelling Purchaser to dispose of or hold separate all or any material portion of the business or assets of the Company, in each case as a result of the transactions contemplated by the Tender Agreement; (iii) imposing material limitations on the ability of Purchaser or any of its affiliates to exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares purchased by them on all matters properly presented to the shareholders of the Company; or (iv) preventing Purchaser or any of its affiliates from acquiring, or to require divestiture by Purchaser or any of its affiliates of, any Shares in the Offer; or (b) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on any national securities exchange or in the over-the-counter market in the United States, (ii) the declaration of any banking moratorium or any suspension of payments in respect of banks or any limitation (whether or not mandatory) on the extension of credit by lending institutions in the United States, or (iii) the commencement of a war, material armed hostilities or any other material international or national calamity involving the United States or the State of Israel and, in the case of armed hostilities involving Israel, having, or which could reasonably be expected to have, a substantial continuing general effect on business and financial conditions in Israel; or (c) any Person, entity or "group" (as such term is used in Section 13(d)(3) of the Exchange Act) other than Purchaser or any of its affiliates shall have become the beneficial owner (as that term is used in Rule 13d-3 under the Exchange Act) of more than 50% of the outstanding Shares; or (d) (i) the Company shall have breached or failed to comply in any material respect with any of its obligations under the Tender Agreement (which breach, if curable, has not been cured within thirty (30) days following receipt of written notice thereof by Purchaser specifying in reasonable detail the basis of such alleged breach), (ii) or any representation or warranty of the Company contained in the Tender Agreement shall not have been true and correct as of such time, except (x) for changes specifically permitted or contemplated by the Tender Agreement; or (y) where the failure of representations and warranties (without giving effect to any limitation based on materiality or Material Adverse Effect or words of similar effect set forth therein) to be true and correct would not, in the aggregate, reasonably be expected to have a Material Adverse Effect; or (e) there shall have occurred a Material Adverse Effect, other than as a result of the transactions specifically contemplated by the Tender Agreement; or -2- 41 (f) the Tender Agreement shall have been terminated pursuant to its terms or amended pursuant to its terms to provide for such termination of the Offer; which, in the good faith judgment of Purchaser makes it inadvisable to proceed with the Offer or with acceptance for payment or payment for Shares. The foregoing conditions are for the sole benefit of Purchaser and may be asserted or waived by Purchaser in whole or in part at any time or from time to time in its discretion subject to the terms and conditions of the Tender Agreement. The failure of Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. The Company will deliver to the Purchaser such evidence as Purchaser shall reasonably request to evidence satisfaction of any of the conditions set forth above, including certificates executed by officers of the Company. -3- 42 EXHIBIT 1.2(B) FORM OF AMENDMENT TO ARTICLES OF ASSOCIATION "To amend the Company's Articles of Association by adding, after Article 39, a new Article marked 39A with the following language: 39A. Without derogating from the provisions of Article 39 and in addition thereto, the holders of no less than 60% (sixty percent) of all the issued and outstanding Ordinary shares of the Company, may appoint and remove the Directors of the Company, by a written notice to the Company, and Directors appointed by such a written notice of the holders of no less than 60% (sixty percent) of all the issued and outstanding Ordinary shares of the Company, shall be deemed elected at the most Recent General Meeting of shareholders held prior to such appointment by a written notice provided for above, and the provisions of Article 39 shall apply mutatis mutandis." -1- 43 EXHIBIT B FORM OF OPTION CANCELLATION AND RELEASE AGREEMENT This Option Cancellation and Release Agreement (the "Agreement") is entered into effective as of the date set forth below by and between New Dimension Software Ltd., an Israeli corporation (the "Company"), and the individual named on the signature page hereof ("Employee"). W I T N E S S E T H: WHEREAS, effective ___________, 199__, the Company established its [Stock Option Plan][Revise as appropriate for EagleEye Plan] (the "Plan"); and WHEREAS, pursuant to the Plan and the stock option agreement or agreements (and, if applicable, amendments thereto) entered into by and between the Company and Employee, copies of which are attached hereto as Exhibit A and incorporated by reference herein (the "Stock Option Agreements"), Employee has been granted the option to purchase ordinary shares, par value NIS 0.01 per share ("Shares") of the Company [revise as appropriate for EagleEye options], subject to the satisfaction of certain events and conditions as set forth in the Stock Option Agreements; and WHEREAS, the Company and BMC Software, Inc., a Delaware corporation ("Purchaser"), have entered into a Stock Purchase and Tender Agreement (the "Tender Agreement"), which provides for, among other things, the acquisition by Purchaser of Shares by means of a cash tender offer (the "Offer") being made by means of an Offer to Purchase dated March 7, 1999, a copy of which has been delivered to Employee; and WHEREAS, in connection with the Offer, Purchaser, the Company and Employee desire to provide for cancellation of the options held by Employee subject to and effective upon the purchase by Purchaser of Shares pursuant to the Offer (the "Closing Time") in exchange for the cash payment described herein; NOW, THEREFORE, in consideration of the foregoing and the mutual promises contained herein, the parties, intending to be legally bound hereby, agree as follows: 1. Options. The parties acknowledge that Employee has been granted the option to purchase shares of the common stock of the Company as set forth on the signature page hereof, subject to the satisfaction of certain events and conditions as set forth in the respective Stock Option Agreements (the "Options"). 2. Payment in Exchange for Cancellation of Options. (a) Subject to and effective as of the Closing Time, the Company agrees to make a payment (the "Payment") to Employee in settlement and cancellation of all of the Options held by Employee as of the Closing Time, which Payment shall be in cash in U.S. dollars in an amount equal -1- 44 to, for each Share subject to such Options, regardless of whether such Option has vested or is then exercisable with respect to such Share, the positive difference, if any, between the Per Share Amount (as defined in the Tender Agreement, which means $52.50 per Share as may be adjusted upward in connection with the Offer pursuant to the Tender Agreement) and the exercise price per share of such Options specified on the signature page hereof. [Note - to be adjusted appropriately in the case of EagleEye options in accordance with Section 2.1(a) of the Tender Agreement] (b) The Payment to Employee as described herein shall be reduced by all applicable withholding taxes, which shall mean all taxes required by any governmental entity to be withheld by the Company. (c) If the Tender Agreement is terminated or the Closing Time does not occur prior to September 12, 1999, then this Agreement shall terminate and be of no further force and effect. 3. Release. Employee hereby releases, acquits and forever discharges the Company, its subsidiaries, and all officers, directors, shareholders, agents, affiliates, subsidiaries, employees, attorneys, successors and assigns of the foregoing from all actions, causes of action, suits, debts, liens, contracts, agreements, obligations, promises, liabilities, claims of any nature, whatsoever (whether in tort, contract, under laws or statutes), rights, demands, damages, losses, costs and expenses (including attorneys' fees, court costs or other costs or expenses actually incurred) of any nature whatsoever, known or unknown, suspected or unsuspected, fixed or contingent, that have accrued or which may accrue on account of, arising out of, or in any way related to the Options canceled hereunder. 4. Israeli Law. This Agreement shall be governed and construed in accordance with the laws of the State of Israel, without giving effect to the principles of conflicts of law thereof. 5. Entirety. This Agreement contains the entire Agreement of the parties and supersedes all prior negotiations and understandings with respect to the subject matter hereof. IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the date set forth below. NEW DIMENSION SOFTWARE LTD. By: ---------------------------------- Name: Title: EMPLOYEE ------------------------------------- Printed name: -2- 45 Date: --------------------------- Number of Shares subject to Options: ---------- Exercise Price: --------------------- -3- 46 Exhibit A to Option Cancellation and Release Agreement Stock Option Agreements -1- EX-99.1 3 PRESS RELEASE, DATED 03/08/99 1 EXHIBIT 99.1 BMC Software to Acquire New Dimension Software HOUSTON, TX - (March 8, 1999) - BMC Software (Nasdaq: BMCS), the leader in providing Application Service Assurance (ASA(TM)) solutions that improve the availability, performance and recovery of business-critical applications, announced today that it has signed a Share Purchase and Tender Agreement to acquire New Dimension Software, Inc. (Nasdaq:DDDDF) for $52.50 per share. New Dimension Software is an industry leader in enterprise management, specializing in job scheduling, managing computer generated output and documents, and security and user administration. The acquisition complements BMC Software's pending merger with Boole & Babbage, Inc., which is expected to be completed on March 30. Boole & Babbage is currently the exclusive European distributor of New Dimension Software's products. As a result of these strategic acquisitions, BMC Software accelerates the delivery of solutions that significantly reduce the complexity of managing large enterprises through innovative products, an extensive worldwide distribution network and superior technical expertise. BMC Software will gain a significant presence in Israel, home of New Dimension Software's worldwide headquarters and a major center for software development and technical expertise. BMC Software intends to maintain and expand New Dimension Software's operations in Israel. "The acquisition of New Dimension Software is a perfect fit for BMC Software's global strategy of providing Application Service Solutions from the back office to the front office and beyond. This acquisition, along with our merger with Boole & Babbage, positions BMC Software as a top-tier player in the enterprise management industry focused on rapidly delivering value to a business, said Max Watson, chairman, president and CEO of BMC Software. "Today, there is already a significant degree of product integration between the companies which is good for our customers who gain focused, best-of-breed solutions that address their critical issues. This combination establishes a new center for technology building on strong skills and resources in Israel, which is renowned for its high degree of technical skills and superior technology workforce. We will be joining IBM, Intel, Microsoft and other leading high technology firms who have established significant operations in Israel." "This transaction is a win-win for all parties: New Dimension Software, BMC Software, our customers and the industry as a whole. The unique combination of our companies' product sets, coupled with our existing distribution arrangement with Boole & Babbage, will enable the new BMC Software to provide state-of-the-art solutions to manage the entire enterprise," said Dan Barnea, CEO of New Dimension Software. "Our employees are looking forward to becoming part of the BMC Software family, one that has a global reputation for excellence and investment in the companies it acquires." The transaction is a cash purchase valued at more than $650 million. BMC Software anticipates an in-process research and development charge of up to 30 percent of the purchase price, with amortization of identifiable intangible assets over four to five years. Because New Dimension Software is a non-U.S. corporation, BMC Software expects to treat the acquisition as an asset purchase for federal income tax purposes, which significantly improves anticipated earnings and cash flow. BMC Software will effect the acquisition through a cash tender offer for all outstanding New Dimension Software shares. BMC Software has entered into option agreements with two holders of more than 60 percent of the outstanding shares. The agreements give BMC Software the right to purchase these shares at the tender offer price for a stipulated period of time and require the shareholders to tender their shares to BMC Software. "We are paying cash because we believe our stock is greatly undervalued and prefer to use cash as our acquisition currency," said Bill Austin, senior vice president and chief financial officer of BMC Software. "We will also avoid the significant delays associated with stock-based pooling transactions. We hope to close this transaction within the next 45 days, so that we begin our fiscal 2000 with both Boole & Babbage and New Dimension Software as part of BMC Software's operations." When the New Dimension Software and Boole & Babbage transactions are completed, BMC Software will employ approximately 5,000 people in 26 countries. Trailing annual revenues of the combined companies will be approximately $1.4 billion. 2 BMC Software's ASA product lines ensure that key business applications are available, perform optimally and can be rapidly recovered in the event of an outage. This enhances the service delivered to the business by the information technology (IT) organization and significantly improves business productivity and return on investment in IT assets. The company's combined product line will provide customers the ability to manage all components of the enterprise which affect application availability and the ability to solve unique application availability problems. Customers will realize these benefits: o Across all major platforms (OS/390, UNIX, NT, Internet) o Across database, middleware, mail and messaging, custom and packaged applications, Internet and Web servers o Across all major functional areas: event management, performance analysis, capacity planning, backup and recovery, job scheduling, output management and security administration COMPANY BACKGROUNDS BMC SOFTWARE, INC. is the leader in delivering Application Service Assurance (ASA) solutions - enterprise-level software that supports and improves the availability, performance and recovery of critical applications and data in complex computing environments. BMC Software is the world's 12th largest independent software vendor and an S&P 500 company, with calendar 1998 revenues exceeding $955 million. The company is headquartered in Houston, Texas, with offices worldwide. For more information, please call 800 841-2031 or 713 918-8800 or visit BMC Software on the Web at www.bmc.com. NEW DIMENSION SOFTWARE is a premier developer of systems management software for complex distributed systems. With the Company's tightly integrated family of products, all aspects of enterprise production, output and security can be effectively managed. By managing the flow of information between applications, systems, end users and administrators, New Dimension Software products allow organizations to achieve their business goals. Founded in 1983, the Company is based in Tel Aviv, with its North American subsidiary's headquarters in Irvine, Calif. and regional offices throughout the United States, Canada, Mexico and Australia. The Company's products are currently licensed to over 2,350 customers in more than 40 countries. For more information, please visit New Dimension Software on the Web at www.ndsoft.com. This news release contains both historical information and forward-looking information. For example, statements in this discussion regarding BMC Software's future financial and operating results, the development of and anticipated markets for BMC Software's products, BMC Software's operating strategies, anticipated acquisition benefits and other statements that are not statements of historical fact are forward looking statements. Actual results could differ materially from any expectation, estimate or projection conveyed by these statements and there can be no assurance that any such expectation, estimate or projection will be met. Numerous important factors, risks and uncertainties affect BMC Software's operating results and could cause actual results to differ from the results implied by these or any other forward looking statements. These factors include, but are not limited to, the following: 1) BMC Software's revenues and earnings are subject to a number of factors, including the significant percentage of quarterly sales typically closed at the end of each quarter, that make estimation of operating results prior to the end of a quarter extremely uncertain; 2) competition for BMC Software's products is increasing for both the open systems and the mainframe database utility products; 3) international results have been volatile over the last two years; 4) BMC Software continues to increasingly depend on large enterprise license transactions as an integral part of its core mainframe and distributed systems businesses; 5) the uncertainties of whether new software products and product strategies will be successful; 6) the high degree of difficulty of integrating different software products and technologies and the general risks associated with mergers of high technology companies, including the potential loss of key personnel and cultural conflicts; and 7) the additional risks and important factors described in BMC Software's, New Dimension Software's and Boole & Babbage's Annual Report to Stockholders on Forms 10-K and 10-Q and other filings with the SEC. 3 NOTE TO INTERESTED PARTIES: BMC Software has scheduled a conference call for 8:00 a.m. CST today to discuss the acquisition. Interested parties may participate by calling (847) 413-2900. You may also access the conference call over the Internet through Vcall at www.vcall.com. To listen to the live call, please go the web site at least fifteen minutes early to register, download, and install any necessary audio software. EDITORS NOTE: BMC Software will be conducting additional conference calls for industry analysts and members of the media. Please see separate media alert for details. BMC Software and the BMC Software logo are registered trademarks or trademarks of BMC Software, Inc. in the USA and in other select countries. New Dimension and the New Dimension logo are registered trademarks or trademarks of New Dimension, Inc. in the USA and in other select countries. Boole & Babbage and the Boole & Babbage logo are registered trademarks or trademarks of Boole & Babbage, Inc. in the USA and in other select countries. (R) and (TM) indicate USA registration or USA trademark. Other logos and product/trade names mentioned are registered trademarks or trademarks of their respective companies. BMC Software, New Dimension Software and Boole & Babbage are Equal Opportunity Employers. MEDIA RELATIONS CONTACTS: BMC Software: Blanc & Otus: (For BMC Software) Pam Austin Jim McManus (713) 663-4812 or (617) 834-7180 (617) 225-9990 pam_austin@bmc.com jmcmanus@bando.com INVESTOR RELATIONS CONTACTS: BMC Software: New Dimension Software: John Cox Laurie Weller Itzik Zion (713) 918-4291 (714) 757-4300 x392 972-3-645-1188 john_cox@bmc.com lauriew@irvine.ndsoft.com itzikzi@telaviv.ndsoft.com Copyright (C) 1999 BMC Software, Inc. All rights reserved. Legal and Privacy Worldwide Locations EX-99.2 4 COMMITMENT LETTERS, DATED 03/10/99 1 EXHIBIT 99.2 [CHASE LOGO] BMC Software, Inc. Senior Credit Facility Commitment Letter March 8, 1999 BMC Software, Inc. 2101 CityWest Blvd. Houston, Texas 77042 Attention: Michael Shryock You (the "Borrower") have requested that Chase Securities Inc. ("CSI") agree to structure, arrange and syndicate a senior revolving credit facility in an aggregate amount of up to $500,000,000 (the "Facility"), and that Chase Bank of Texas, National Association ("Chase"), commit to provide the entire principal amount of the Facility and to serve as administrative agent for the Facility. CSI is pleased to advise you that it is willing to act as exclusive advisor, lead arranger, and book manager for the Facility. Furthermore, Chase is pleased to advise you of (a) its commitment to provide the entire amount of the Facility upon the terms and subject to the conditions set forth or referred to in this commitment letter (the "Commitment Letter") and in the Summary of Terms and Conditions attached hereto as Exhibit A (the "Term Sheet"). It is agreed that Chase will act as the sole and exclusive Administrative Agent, and that CSI will act as the sole and exclusive advisor, lead arranger, and book manager (in such capacity, the "Arranger"), for the Facility, and each will, in such capacities, perform the duties and exercise the authority customarily performed and exercised by it in such roles. You agree that no other agents, co-agents or arrangers will be appointed, no other titles will be awarded and no compensation (other than that expressly contemplated by the Term Sheet and the Fee Letter referred to below) will be paid in connection with the Facility unless you and we shall so agree. We intend to syndicate the Facility to a group of financial institutions (together with Chase, the "Lenders") identified by us in consultation with you. CSI intends to commence syndication efforts promptly upon the execution of this Commitment Letter, and you agree actively to assist CSI in completing a syndication satisfactory to it. Such assistance shall include (a) your using commercially reasonable efforts to ensure that the syndication efforts benefit materially from your existing lending relationships, (b) direct contact between senior management and advisors of the Borrower and the proposed Lenders, (c) assistance in the preparation of a Confidential Information Memorandum and other marketing materials to be used in connection with the syndication and (d) the hosting, with CSI, of one or more meetings of prospective Lenders. As the Arranger, CSI will manage all aspects of the syndication, including decisions as to the selection of institutions to be approached and when they will be approached, when their commitments will be accepted, which institutions will participate, the allocations of the commitments among the Lenders and the amount and distribution of fees among the Lenders. In acting as the Arranger, CSI will have no responsibility other than to arrange the syndication. To assist CSI in its syndication efforts, you agree 2 BMC Software, Inc. March 5, 1999 Page 2 promptly to prepare and provide to CSI and Chase all information with respect to the Borrower and the transactions contemplated hereby, including all financial information and projections (the "Projections"), as we may reasonably request in connection with the arrangement and syndication of the Facility. You hereby represent and covenant that (a) all information other than the Projections (the "Information") that has been or will be made available to Chase or CSI by you or any of your representatives is or will be, when furnished, complete and correct in all material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be made available to Chase or CSI by you or any of your representatives have been or will be prepared in good faith based upon reasonable assumptions. You understand that in arranging and syndicating the Facility we may use and rely on the Information and Projections without independent verification thereof. As consideration for Chase's commitment hereunder and CSI's agreement to perform the services described herein, you agree to pay to Chase the nonrefundable fees in the Fee Letter dated the date hereof and delivered herewith (the "Fee Letter"). Chase and CSI shall be entitled, after consultation with you and with your consent, such consent not to be unreasonably withheld, to change the structure, terms, amount or pricing of the Facility if the syndication has not been completed and if Chase and CSI determine that such changes are advisable in order to ensure a successful syndication of the Facility. Chase's commitment hereunder is subject to the agreements in this paragraph. Chase's commitment hereunder and CSI's agreement to perform the services described herein are subject to (a) there not occurring or becoming known to us any material adverse condition or material adverse change in or affecting the business, operations, property, condition (financial or otherwise) or prospects of the Borrower and its subsidiaries, taken as a whole, (b) our completion of and satisfaction in all respects with a due diligence investigation of the Borrower and the acquisition candidate contemplated with this Facility, (c) our not becoming aware after the date hereof of any information or other matter affecting the Borrower or the transactions contemplated hereby which is inconsistent in a material and adverse manner with any such information or other matter disclosed to us prior to the date hereof, (d) there not having occurred a material disruption of or material adverse change in financial, banking or capital market conditions that, in our judgment, could materially impair the syndication of the Facility, (e) our satisfaction that prior to and during the syndication of the Facility there shall be no competing offering, placement or arrangement of any debt securities or bank financing by or on behalf of the Borrower or any affiliate thereof, (f) the negotiation, execution and delivery on or before May 7, 1999 of definitive documentation with respect to the Facility satisfactory to Chase and its counsel and (h) the other conditions set forth or referred to in the Term Sheet. The terms and conditions of Chase's commitment hereunder and of the Facility are not limited to those set forth herein and in the Term Sheet. Those matters that are not covered by the provisions hereof and of the Term Sheet are subject to the approval and agreement of Chase, CSI and the Borrower. You agree to indemnify and hold harmless Chase, CSI, the other Lenders, their respective affiliates and their respective officers, directors, employees, advisors, and agents (each, an "indemnified person") from and against any and all losses, claims, damages and liabilities to which any such indemnified person may become subject arising out of or in connection with this Commitment Letter, the Facility, the use of the proceeds thereof or any related transaction or any claim, litigation, investigation or proceeding relating to any of the foregoing, regardless of whether any indemnified person is a party thereto, and to reimburse each indemnified person upon demand for any legal or other expenses incurred in connection with investigating or defending any of the foregoing, provided that the foregoing indemnity will not, as to any indemnified person, apply to losses, claims, damages, liabilities or related expenses to the extent they arise from the willful misconduct, unlawful conduct or gross negligence of such indemnified person. YOU AGREE THAT THE INDEMNITY CONTAINED IN THE PRECEDING SENTENCE 3 BMC Software, Inc. March 5, 1999 Page 3 EXTENDS TO AND IS INTENDED TO COVER LOSSES AND RELATED EXPENSES ARISING OUT OF THE ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF ANY INDEMNIFIED PERSON. You also agree to reimburse Chase, CSI and their affiliates on demand for all out-of-pocket expenses (including syndication expenses, travel expenses, and reasonable fees, charges and disbursements of counsel) incurred in connection with the Facility and any related documentation (including this Commitment Letter, the Term Sheet, the Fee Letter and the definitive financing documentation) or the administration, amendment, modification or waiver thereof. No indemnified person shall be liable for any damages arising from the use by others of Information or other materials obtained through electronic, telecommunications or other information transmission systems or for any special, indirect, consequential or punitive damages in connection with the Facilities. This Commitment Letter shall not be assignable by you without the prior written consent of Chase and CSI (and any purported assignment without such consent shall be null and void), is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto. This Commitment Letter may not be amended or waived except by an instrument in writing signed by you, Chase and CSI. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of manually executed counterpart hereof. This Commitment Letter and the Fee Letter are the only agreements that have been entered into among us with respect to the Facility and set forth the entire understanding of the parties with respect thereto. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of Texas. This Commitment Letter is delivered to you on the understanding that neither this Commitment Letter, the Term Sheet or the Fee Letter nor any of their terms or substance shall be disclosed, directly or indirectly, to any other person except (a) to your officers, agents and advisors who are directly involved in the consideration of this matter or (b) as may be compelled in a judicial or administrative proceeding or as otherwise required by law (in which case you agree to inform us promptly thereof), provided, that the foregoing restrictions shall cease to apply (except in respect of the Fee Letter and its terms and substance) after this Commitment Letter has been accepted by you. You acknowledge that CSI and Chase may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you may have conflicting interests regarding the transactions described herein and otherwise. Neither CSI nor Chase will use confidential information obtained from you by virtue of the transactions contemplated by this letter or their other relationships with you in connection with the performance by CSI or Chase of services for other companies, and neither CSI nor Chase will furnish any such information to other companies. You also acknowledge that CSI and Chase have no obligation to use in connection with the transactions contemplated by this letter, or to furnish to you, confidential information obtained from other companies. The reimbursement, indemnification and confidentiality provisions contained herein and in the Fee Letter shall remain in full force and effect regardless of whether definitive financing documentation shall be executed and delivered and notwithstanding the termination of this Commitment Letter or Chase's commitment hereunder. THIS COMMITMENT LETTER, THE ATTACHED TERM SHEET, THE FEE LETTER AND ALL EXHIBITS, SCHEDULES AND OTHER ATTACHMENTS HERETO AND THERETO CONSTITUTE A "LOAN AGREEMENT" FOR PURPOSES OF SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 4 BMC Software, Inc. March 5, 1999 Page 4 If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms hereof and of the Term Sheet and the Fee Letter by returning to us executed counterparts hereof and of the Fee Letter not later than 5:00 p.m., Central Standard Time, on March 10, 1999. Chase's commitment and CSI's agreements herein will expire at such time in the event Chase has not received such executed counterparts in accordance with the immediately preceding sentence. Chase and CSI are pleased to have been given the opportunity to assist you in connection with this important financing. Very truly yours, CHASE BANK OF TEXAS, NATIONAL ASSOCIATION By: /s/ MICHAEL A. CERDA ------------------------ Name: Michael A. Cerda Title: Vice President CHASE SECURITIES INC. By: /s/ GREGORY M. SPIER ------------------------ Name: Gregory M. Spier Title: Managing Director Accepted and agreed to as of the date first written above by: BMC SOFTWARE, INC. By: /s/ STEPHEN SOLCHER --------------------- Name: Stephen Solcher Title: Treasurer 5 EXHIBIT A MARCH 8, 1999 SUMMARY OF TERMS AND CONDITIONS Borrower: BMC Software, Inc. Facilities: Up to $500,000,000; 364-Day Revolving Credit Facility, with one year term out option. Facility to include a Competitive Bid Option for the Borrower to request Competitive Bids. Four (4) days advance notice to Agent required via telephone with written confirmation. Typical Competitive Bid procedures shall apply. Maturity: 364 days from Closing. Additionally, at the option of the Borrower, the ability to term out the outstandings under the revolver at maturity, payable within one year from the date of the term out request. Minimum Initial Commitment Per Institution: $200,000,000 for each Primary Institution Required Lenders: 51% of Commitments Commitment Date: March 9, 1999 Closing Date: Closing and Funding to occur on or before April 7, 1999. Purpose: For general corporate purposes including working capital, capital expenditures and acquisitions. Interest Rate: Performance Pricing tied to a Funded Debt to EBITDA ratio.
- ----------------------------------------------------------- Funded Debt/EBITDA LIBOR Margin* Facility Fee** - ----------------------------------------------------------- >2.25X 92.5 b.p.s. 20.0 b.p.s. - ----------------------------------------------------------- >1.50X 72.5 b.p.s. 15.0 b.p.s. - ----------------------------------------------------------- >0.75X 62.5 b.p.s. 12.5 b.p.s. - ----------------------------------------------------------- <0.75X 52.5 b.p.s. 10.0 b.p.s. - - -----------------------------------------------------------
* If the Borrower elects the one year term option, the LIBOR Margin will Increase by 12.5 bps across all grid points. Additionally, in anticipation of receiving a rating from both S&P and Moody's, a ratings grid will be incorporated into the documentation reflecting drawn pricing of 50 bps for a BBB+/Baa1 senior, unsecured debt rating. The other grid points to be determined. ** The Facility Fee will be paid on the commitment amount regardless of usage. 6 Underwriting Fee: An underwriting fee as set forth in the fee letter on allocated underwritten commitment. Payable on the funding date of the facility, to be reduced by amount of fees necessary for secondary syndication. Facility Fee: A facility fee shall be paid to each Lender on the basis of such Lenders allocated share of the Commitments (both drawn and undrawn portion) in the amount of applicable Facility Fee (as shown on the table for same). Agent Titles: To be determined on 3/10/99. Financial Covenants: o The Total funded Debt to EBITDA shall not exceed 2.5X EBITDA based upon a rolling four quarter basis and including historical EBITDA of the acquired companies. o Borrower and its Subsidiaries shall at all times maintain ownership (free and clear of all encumbrances) of at least $300,000,000 in cash and/or marketable securities. Documentation: The Credit Documentation shall contain representations, warranties, covenants and events of default customary for financings of this type and other terms deemed appropriate by the Lenders, including, without limitation: Representations and Warranties: Financial statements; no material adverse change; corporate existence; compliance with law; corporate power and authority; enforceability of Credit Documentation; no conflict with law or contractual obligations; no material litigation; no default; ownership of property; intellectual property; taxes; Federal Reserve regulations: ERISA; Investment Company Act; Year 2000 matters; accuracy of disclosure. Affirmative Covenants: Delivery of financial statements, reports accountants' letters, projections, officers' certificates and other information reasonably requested by the Lenders; continuation of business and maintenance of existence and material rights and privileges; compliance with laws and material contractual obligations; maintenance of property and insurance; maintenance of books and records; right of the Lenders to inspect property and books and records; and notices of defaults, litigation and other material events. 2 7 Negative Covenants: Limitations on: liens; mergers, consolidations, sales of assets; transactions with affiliates; sale and leasebacks; and changes in lines of business. Events of Default: Nonpayment of principal when due; nonpayment of interest, fees or other; material inaccuracy of representations and warranties; violation of covenants (subject, in the case of certain affirmative covenants, to a grace period to be agreed upon); cross-default; bankruptcy events; certain ERISA events; material judgments; and a change of control (the definition of which is to be agreed). Conditions: to be mutually agreed upon between Administrative Agent and Borrower. Syndication Sell-Down Strategy: Every dollar raised during the syndication process will reduce the Primary Lender's positions until each Primary Lender's position reaches $50,000,000. No Primary Lender's position will be reduced below $50,000,000 until every Primary Lender's position is reduced to $50,000,000. Indemnification: The Administrative Agent, the Arranger, the Agents and the Lenders (and their affiliates and their respective officers, directors, employees, advisors and agents) will have no liability for, and will be indemnified and held harmless against, any loss, liability, cost or expense incurred in respect of the financing contemplated hereby or the use or the proposed use of proceeds thereof (except to the extent resulting from the gross negligence or willful misconduct of the indemnified party). Governing Law and Forum: State of Texas. 3 8 March 9, 1999 BMC Software, Inc. 2101 Citywest Blvd. Houston, TX 77042 Attention: Mike Shryock Re: $500,000,000 Facility Ladies and Gentlemen: NationsBank, N.A. ("NationsBank") is pleased to offer its commitment to lend up to $500,000,000 of the Facility, upon and subject to the terms and conditions of this letter and the Summary of Terms and Conditions attached hereto (the "Summary of Terms"). NationsBanc Montgomery Securities LLC ("NMS") is pleased to advise you of its willingness, as Lead Arranger and Book Manager for the Facility, to use its best efforts to form a syndicate of financial institutions (the "Lenders") reasonably acceptable to you for the Facility. The commitment of NationsBank hereunder and the agreement of NMS to provide the services described herein are subject to the satisfaction of each of the following conditions precedent in a manner acceptable to us in our sole discretion: (a) each of the terms and conditions set forth herein and in the Summary of Terms; (b) the completion of all due diligence with respect to the Borrower and its subsidiaries in scope and determination satisfactory to us in our sole discretion; (c) the negotiation, execution and delivery of definitive documentation for the Facility consistent with the Summary of Terms and otherwise satisfactory to us; (d) since the date hereof, no material adverse change in or material disruption of conditions in the financial, banking or capital markets which we, in our sole discretion, deem material in connection with the syndication of the Facility shall have occurred and be continuing; (e) no change, occurrence or development that could, in our opinion, have a material adverse effect on the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of the Borrower and its subsidiaries taken as a whole shall have occurred or become known to us; and (f) our not becoming aware after the date hereof of any information or other matter which in our judgment is inconsistent in a material and adverse manner with any information or other matter disclosed to us prior to the date hereof. The terms of this letter, the Summary of Terms and the fee letter among you and us (the "Fee Letter") are confidential and, except for disclosure on a confidential basis to your accountants, attorneys and other professional advisors retained by you in connection with the Facility or as may be required by law, may not be disclosed in whole or in part to any other person or entity without our prior written consent. We hereby consent to your disclosure of a copy of this letter and the Summary of Terms (but not the Fee Letter), provided that any information relating to pricing, fees and expenses is omitted. This letter and the Fee Letter shall be governed by laws of the State of Texas. This offer will expire at 5:00 p.m. central time on March 12, 1999. 9 BMC Software, Inc. March 9, 1999 Page 2 We are pleased to have the opportunity to work with you in connection with this important financing. Very truly yours, NATIONSBANK, N.A. By: /s/ DAN KILLIAN ---------------------------------- Title: Vice President NATIONSBANC MONTGOMERY SECURITIES LLC By: /s/ JOSEPH SIEGEL ---------------------------------- Title: Managing Director Accepted and Agreed to as of March 10, 1999: BMC SOFTWARE, INC. By: /s/ STEPHEN SOLCHER ---------------------------------- Title: Treasurer 10 Confidential BMC Software, Inc. - -------------------------------------------------------------------------------- SUMMARY OF TERMS AND CONDITIONS BMC SOFTWARE, INC. $500,000,000 FACILITY BORROWER: BMC Software, Inc., (the "Borrower"). AGENTS, LEAD ARRANGERS AND BOOK MANAGERS: Financial institutions reasonably acceptable to the Borrower, NationsBank and NMS, to be determined on March 10, 1999. FACILITY: An aggregate principal amount of up to $500,000,000 will be available upon the terms and conditions hereinafter set forth: Revolving Credit Facility: $500 million 364 day revolving credit facility (the "Facility"). Facility to include a Competitive Bid Option for the Borrower to request Competitive Bids. Four (4) days advance notice to Agent required via telephone with written confirmation. Typical competitive Bid procedures shall apply. PURPOSE: The proceeds of the Facility shall be used for general corporate purposes including for working capital, capital expenditures, and other lawful corporate purposes and acquisitions. CLOSING: The execution of definitive loan documentation and funding by NationsBank, to occur on or before April 7, 1999 ("Closing"). INTEREST RATES: As set forth in Addendum I. MATURITY: The Revolving Facility shall terminate and all amounts outstanding thereunder shall be due and payable 364 days from Closing. Provided that no event of default under the Facility or incipient default has occurred and is then continuing, the outstanding principal amount of loans under the Revolving Facility on such maturity date may, at the Borrower's election, be converted to a term loan which will be repayable in a single payment one (1) year from such maturity date. CONDITIONS PRE- CEDENT TO CLOSING: The Closing (and the initial funding) of the Facility will be subject to satisfaction of the conditions precedent to be mutually agreed upon by the Borrower, Agents and the Lenders. DOCUMENTATION: The Credit Documentation shall contain representations warranties, covenants and events of default customary for financings of this type and other terms deemed appropriate by the Lenders, to be mutually agreed upon by the Borrower, Agents and the Lenders. REPRESENTATIONS AND WARRANTIES: Usual and customary for transactions of this type, to include without limitation: correctness of financial statements; no material adverse change; corporate existence and status; corporate power and authority; enforceability of Credit Documentation; compliance with law or contractual obligations; no material litigation; no default; ownership of property; intellectual property; no required governmental or third party approvals; use of proceeds/compliance with margin regulations; status under Investment Company Act; ERISA matters; environmental - -------------------------------------------------------------------------------- [BANK OF AMERICA LOGO] Page 1 March 9, 1999 11 Confidential BMC Software, Inc. - -------------------------------------------------------------------------------- matters; payment of taxes; accuracy of disclosure; and Year 2000 preparedness. COVENANTS: Affirmative Covenants: Delivery of financial statements, reports accountants' letters, projections, officers' certificates and other information reasonable requested by the Lenders; continuation of business and maintenance of existence and material rights and privileges; compliance with laws and material contractual obligations; maintenance of property and insurance; maintenance of books and records; right of the Lenders to inspect property and books and records, and; notices of defaults, litigation and other material events. Negative Covenants: Limitations on liens; mergers, consolidations, sales of assets; transactions with affiliates; sale and leasebacks; and changes in lines of business. Financial covenants: o The Total Funded Debt to EBITDA shall not exceed 2.5 to 1.0. o Borrower and its Subsidiaries shall at all times maintain ownership (free and clear of all encumbrances) of at least $300,000,000 in cash and/or marketable securities. EVENTS OF DEFAULT: Nonpayment of principal when due; nonpayment of interest, fees or other; material inaccuracy of representations and warranties; violation of covenants (subject, in the case of certain affirmative covenants, to a grace period to be agreed upon); cross-default; bankruptcy events; certain ERISA events; material judgements; and a change of control (the definition of which is to be agreed). REQUIRED LENDERS: Amendments and waivers of the provisions of the loan agreement and other definitive credit documentation will require the approval of Lenders holding loans and commitments representing more than 50% of the aggregate amount of loans (excluding Competitive Bid Loans) and commitments under the Facility, except that the consent of all the Lenders affected thereby shall be required with respect to (i) increases in the commitment of such Lenders, (ii) reductions of principal, interest or fees, and (iii) extensions of scheduled maturities or times for payment. GOVERNING LAW AND FORUM: State of Texas. FEES/EXPENSES: As set forth in Addendum 1. OTHER: This Summary of Terms is intended as an outline of certain of the material terms of the Facility and does not purport to summarize all of the conditions, covenants, representations, warranties and other provisions which would be contained in definitive documentation for the Facility contemplated hereby. The Borrower and the Guarantors shall each waive its right to a trial by jury. SYNDICATION SELL-DOWN Every dollar raised during the Syndication process will STRATEGY reduce the primary Lender's positions until each Primary Lender's position will be reduced below $50,000,000. No Primary Lender's position will be reduced below $50,000,000 until every Primary Lender's position is reduced to $50,000,000. - -------------------------------------------------------------------------------- [BANK OF AMERICA LOGO] Page 2 March 9, 1999 12 CONFIDENTIAL - -------------------------------------------------------------------------------- ADDENDUM 1 FEES AND EXPENSES FACILITY FEE: The Borrower will pay a fee (the "Facility Fee"), on each Lender's allocated share of the Commitments (both drawn and undrawn portion), in the amount of applicable Facility Fee determined in accordance with the attached Pricing Grid. The Facility Fee is payable quarterly in arrears. INTEREST RATES: At the Borrower's option, any loan under the Facility that is made to it will bear interest at a rate equal to the Applicable Margin, as determined in accordance with the attached Pricing Grid, plus one of the following indexes: (i) LIBOR, or (ii) the Alternate Base Rate (to be defined as the higher of (a) the Administrative Agent's prime rate and (b) the Federal Funds rate plus .50%). If the Borrower shall elect the conversion of any loan under the Facility to a one year Term Loan the Applicable Margin will be equal to the sum of the Applicable Margin for LIBOR Loans, the Facility Fee plus 12.5 basis points. COST AND YIELD PROTECTION: Customary for transactions and facilities of this type, including, without limitation, in respect of breakage or redeployment costs incurred in connection with prepayments, changes in capital adequacy and capital requirements or their interpretation, illegality, unavailability, reserves without proration or offset and payments free and clear of withholding or other taxes. The Facility Fee, the Applicable Margin for any fiscal quarter, shall be the applicable rate per annum set forth in the table below opposite the ratio of Funded Debt to EBITDA determined as of the last day of the immediately preceding fiscal quarter.
FACILITY PRICING GRID ================================================================================ APPLICABLE APPLICABLE MARGIN FOR MARGIN FOR ABR FACILITY LEVEL TOTAL DEBT/EBITDA LIBOR LOANS LOANS FEE - -------------------------------------------------------------------------------- I >2.25x 92.5bps 0.0bps 20.0bps - -------------------------------------------------------------------------------- II > = 1.50x but <2.25x 72.5bps 0.0bps 15.0bps - -------------------------------------------------------------------------------- III* > = 0.75x but <1.50x 82.5bps 0.0bps 12.5bps - -------------------------------------------------------------------------------- IV <0.75x 52.5bps 0.0bps 10.0bps - -------------------------------------------------------------------------------- V BBB+/Baa1 40.0bps 0.0bps 10.0bps ================================================================================
* Anticipated Initial LIBOR margin and Facility Fee. - -------------------------------------------------------------------------------- [BANK OF AMERICA LOGO] Page 3 MARCH 9, 1998 13 [ABN-AMRO BANK LETTERHEAD] March 9, 1999 BMC Software, Inc. 2101 City West Blvd. Houston, Texas 77042 Attn: Stephen Solcher, Vice President and Treasurer Mike Shryock, Finance Manager Re: Proposed $500,000,000 Revolving Credit Facility (the "Facility") Dear Stephen and Mike: We, ABN AMRO Bank N.V. ("ABN AMRO"), hereby issue our commitment to the Facility in a principal amount of $125,000,000 based on the terms and conditions outlined in the revised Summary of Terms and Conditions dated March 8, 1999 (the "Term Sheet") sent to us by BMC Software, Inc. as amended by Mike Shryock's letter to ABN AMRO dated March 9, 1999. Our commitment to this financing is subject to the negotiation and execution of documentation satisfactory to ABN AMRO. The commitment offered by ABN AMRO herein is to underwrite the aggregate amount of $125,000,000. If BMC accepts this commitment offer, ABN AMRO undertakes to syndicate the Facility; provided, however, that the inability of ABN AMRO to complete such syndication shall not affect the commitment of ABN AMRO or the obligations of BMC hereunder. BMC agrees to provide ABN AMRO with all information and take such other actions as ABN AMRO may reasonably request to facilitate the syndication of the Facility by ABN AMRO. ABN AMRO agrees to treat all confidential information provided to it by BMC on a confidential basis in accordance with customary banking practices subject to customary exceptions. ABN AMRO may provide such information to potential syndicate banks and financial institutions provided such banks and financial institutions similarly agree to maintain such confidentiality. This letter is not meant to encompass, nor shall it be construed as encompassing, all of the terms and conditions of the Facility. It is intended to outline the principal points of business understandings concerning the Facility. The commitment of ABN AMRO hereunder is subject to completion by ABN AMRO of satisfactory due diligence and the execution of a definitive lease agreement and other lease documentation in form and substance satisfactory to ABN AMRO. If ABN AMRO and BMC are unable to agree upon such documentation, they shall have no further obligations to each other hereunder 14 [ABN-AMRO BANK LOGO] except that BMC shall be obligated to reimburse ABN AMRO for its out-of-pocket fees, costs and expenses as provided herein. In consideration of the commitments provided by ABN AMRO hereunder, BMC agrees to indemnify and hold harmless each of ABN AMRO and its officers, directors, employees, agents, advisors and affiliates for all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel) incurred by any of them in connection with this commitment letter, the Facility, the use by BMC of the Facility or the proceeds thereof, the collateral for the Facility, the lease documents, any related document, instrument or agreement or any transaction contemplated hereby or thereby whether or not such transactions are consummated, except for the portion of such claims, damages, losses, liabilities and expenses caused by such party's gross negligence or willful misconduct. The commitment set forth in this letter is personal to BMC and may not be transferred or assigned to any other party without the prior written consent of ABN AMRO. Except as otherwise required by law, neither this letter nor any part hereof may, without the prior written consent of ABN AMRO, be disclosed or exhibited to any other party except BMC's accountants, attorneys and other advisors, and then, in each case, only in connection with the transactions contemplated hereby and on a confidential basis. If the commitment offered herein is satisfactory, please indicate BMC's acceptance by having an authorized officer of BMC sign and date each of the enclosed copies of this letter and the attached fee agreement letter and delivering the executed copies of each, to ABN AMRO. ABN AMRO reserves the right to terminate the commitment offer set forth herein at any time prior to receipt by ABN AMRO of such executed copies. Unless so accepted or otherwise terminated by ABN AMRO on or prior to March 15, 1999, the offer set forth herein will expire on that date. Upon the acceptance by BMC of the commitment offer set forth in this letter, ABN AMRO will commence its due diligence and instruct its counsel to commence documentation. By accepting this offer, BMC agrees to reimburse ABN AMRO for all reasonable fees, costs and expenses (whether incurred before or after the date hereof), including, without limitation, audit fees, out-of-pocket syndication expenses, and fees and disbursements of counsel for ABN AMRO, incurred by ABN AMRO in connection with its due diligence, the syndication of the Facility and the negotiation, preparation, execution, delivery and enforcement of the lease documents, whether or not any money is advanced by ABN AMRO under the Facility, any of the transactions contemplated hereby are consummated or any documents are agreed to and executed. If BMC accepts this offer, ABN AMRO's commitment hereunder shall continue until September 30, 1999, on which date such commitment shall expire unless final documents have been executed by ABN AMRO, BMC and the other parties thereto on or prior to such date. This letter shall be governed by and construed in accordance with the laws of the State of California without regard to conflicts of law principles. Closing and funding by ABN-AMRO to occur on or before April 7th, 1999. 15 [ABN-AMRO BANK LOGO] We look forward to working with you on this transaction. Please let us know if you have any questions. Very truly yours, ABN AMRO BANK N.V. By: /s/ JAMIE DILLON By: /s/ MATHEW HARVEY -------------------------------- --------------------------------- Name: Jamie Dillon Name: Mathew Harvey Title: Vice President and Director Title: Vice President ACCEPTED AND AGREED BMC SOFTWARE, INC. By: /s/ STEPHEN SOLCHER -------------------------------- Name: STEPHEN SOLCHER Title: TREASURER Date: 3/10/99 EX-99.3 5 SHAREHOLDER AGREEMENT, DATED 03/07/99 1 EXHIBIT 99.3 SHAREHOLDER AGREEMENT THIS SHAREHOLDER AGREEMENT, dated as of March 7, 1999 (this "Agreement"), is made and entered into among BMC Software, Inc., a Delaware corporation ("Purchaser") Einav Computer Systems Ltd., an Israeli corporation ("ECS"), and Roni A. Einav and Dalia Prashker-Katzman, shareholders of ECS (each an "Owner" and collectively, the "Owners"). For purposes of this Shareholder Agreement, ECS and the Owners are collectively referred to as the "Shareholder Group." WITNESSETH WHEREAS, concurrently herewith, Purchaser and New Dimension Software Ltd., an Israeli corporation (the "Company"), are entering into a Share Purchase and Tender Agreement (as such agreement may hereafter be amended from time to time, the "Tender Agreement"); and WHEREAS, as an inducement and a condition to entering into the Tender Agreement, Purchaser has required that Shareholder Group agree, and Shareholder Group has agreed, to enter into this Agreement; NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein and the benefits to be received by the parties under the terms of the Tender Agreement, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I DEFINITIONS (a) Capitalized terms used and defined herein shall have the respective meanings ascribed to them in the Tender Agreement. For purposes of this Agreement: (i) "Alternative Disposition" shall have the meaning ascribed to such term in Article IV. (ii) "Alternative Transaction Consideration" shall mean all cash, securities, settlement or termination amounts, notes or other debt instruments, and other consideration received or to be received, directly or indirectly, by Shareholder Group and its affiliates in connection with or as a result of an Alternative Disposition or any agreements or arrangements (including, without limitation, any employment agreement, consulting agreement, non-competition agreement, confidentiality agreement, settlement agreement or release agreement) entered into, directly or indirectly, by Shareholder Group or its affiliates (excluding officers and directors of Company other than the Owners) as a part of or in connection with the Alternative Disposition or Company Transaction Proposal. 2 (iii) "Applicable Shares " means all Shares that are Beneficially Owned by Shareholder Group or that become Beneficially Owned by Shareholder Group prior to the Termination Date (in each case, including all Shares Beneficially Owned by ECS and/or the Owners in their individual capacities). (iv) "Beneficially Own" or "Beneficial Ownership" with respect to any securities shall mean bearing "beneficial ownership" of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities by the same holder, securities Beneficially Owned by a Person shall include (i) securities Beneficially Owned by all other Persons (who are affiliates of such Person excluding officers and directors of Company) who together with such Person would constitute a "group" within the meaning of Section 13(d)(3) of the Exchange Act and (ii) securities Beneficially Owned by that Person's spouse and children. (v) "90% Condition" shall be such condition as set forth in paragraph (1) of Exhibit A to the Tender Agreement. (vi) "Offer Termination Date" shall mean the date the Offer terminates or expires without the purchase of Shares thereunder; provided, however, that if Purchaser initiates a new Offer under the terms of the Tender Agreement on or before midnight, central time in the United States on the 10th day following such date, the Offer Termination Date shall mean the date such subsequent Offer terminates or expires without the purchase of Shares thereunder; provided, however, that the Offer Termination Date will not be later than the date of termination of the Tender Agreement. (vii) "Per Share Amount" shall mean the price per Share of the Offer as set forth in Section 1.1 of the Tender Agreement, as such price may be increased in accordance with the Tender Agreement. (viii) "Purchase Option" shall have the meaning ascribed to such term in Section 3.1. (ix) "Termination Date" shall mean the date ending on the first to occur of: (1) the Closing Date; (2) the Offer Termination Date; or (3) midnight, central time in the United States, on the date all of the conditions to the Offer set forth in Exhibit A to the Tender Agreement have been satisfied, except for the conditions set forth in paragraphs (6)(d)(ii) or (6)(e), and Purchaser elects to terminate the Tender Agreement without the purchase of Shares thereunder; 2 3 provided, however, that, notwithstanding subparagraphs (2) and (3) above, if after the date of this Agreement (x) any person, entity or group (within the meaning of Section 13(d)(3) of the Exchange Act) (other than the Purchaser or any affiliate of Purchaser) acquires more than 5% or more of the outstanding Shares and fails to tender such Shares in the Offer and continues to hold such Shares and the Offer is terminated as a result of the failure of the 90%Condition to be satisfied, the Termination Date shall be the date 150 days after the Offer Termination Date, or (y) there is a public announcement of, or the disclosure to the management, board of directors, shareholders or advisors of the Company of, a Company Transaction Proposal, and the board of directors of the Company rejects such Company Transaction Proposal and continues to recommend the Offer and the Offer is terminated as a result of the failure of the 90%Condition to be satisfied, the Termination Date shall be the date 120 days after the Offer Termination Date, or (z) there is a public announcement of, or the disclosure to the management, board of directors, shareholders or advisors of the Company of, a Company Transaction Proposal, and the board of directors of the Company withdraws, withholds or modifies in a manner adverse to Purchaser its approval of the Tender Agreement or the Offer pursuant to Section 5.8 of the Tender Agreement, and the Offer is terminated as a result of the failure of the 90%Condition to be satisfied, the Termination Date shall be the date 150 days after the Offer Termination Date. (x) "Underlying Shares" shall mean the Shares issuable to Shareholder Group upon the exercise by Shareholder Group of Company Options, if any, Beneficially Owned by it (in each case, including all Company Options Beneficially Owned by ECS and/or the Owners in their individual capacities). ARTICLE II VOTING AND TENDER MATTERS 2.1 Voting and Tender Matters. (a) From and after the date of this Agreement and ending as of the Termination Date, at any meeting of the holders of Shares however called, or in any other circumstance upon which the vote, consent or other approval of holders of Shares is sought, Shareholder Group shall vote (or cause to be voted) its issued and outstanding Applicable Shares: (i) against any action or agreement that would result in a breach in any material respect of any covenant, representation or warranty or any other material obligation or agreement of Company under the Tender Agreement or this Agreement; (ii) against the following actions (other than the transactions contemplated by the Tender Agreement): (A) any Company Transaction Proposal, and 3 4 (B) to the extent that such (1) are intended to, or could reasonably be expected to, impede, interfere with, delay, postpone, or materially adversely affect the Offer, or the transactions contemplated by the Tender Agreement or this Agreement or (2) are intended to, or could reasonably be expected to, implement or lead to any Company Transaction Proposal: (x) any change in a majority of the persons who constitute the board of directors of Company; (y) any change in the present capitalization of Company or any amendment of Company's Memorandum and Articles of Association (other than as expressly contemplated by the Tender Agreement); or (z) any other material change in Company's corporate structure or business; and (iii) for the proposals to: (A) approve the right of the directors of the Company to sell their Shares to the Purchaser pursuant to the Offer and the transactions contemplated thereby, (B) approve an amendment to the Company's Articles of Association to provide that the holders of at least 60% of the issued and outstanding Shares of the Company shall be entitled to appoint and remove any and all members of the Board of Directors of the Company, by means of a written notice signed by such holders of the Company, and (C) approve any and all other matters contemplated by the Tender Agreement and presented at the Special Meeting. (b) Shareholder Group hereby grants to, and appoints, Purchaser and any nominee thereof, its proxy and attorney-in-fact (with full power of substitution), from and after the date of this Agreement and ending as of the Termination Date, to vote its Applicable Shares, or to grant a consent or approval in respect of its Applicable Shares on any and all matters relating to the Tender Agreement, the Offer or any Company Transaction Proposal. Shareholder Group intends such proxy to be irrevocable and coupled with an interest and will take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy and hereby revokes any proxy previously granted by Shareholder Group with respect to its Applicable Shares. (c) From and after the date of this Agreement and ending as of the Termination Date, Shareholder Group shall not take any action (including the tender of any Shares) that could reasonably be expected to, implement or lead to any Company Transaction Proposal. 2.2 Tender Agreement and Company Options. (a) Shareholder Group hereby agrees that it shall (i) tender all of its Applicable Shares into the Offer promptly, and in any event no later than the third business day following the commencement of the Offer, and (ii) not withdraw any Applicable Shares so tendered prior to the Offer Termination Date. 4 5 (b) In the event that (i) the 90% Condition is not satisfied, (ii) Purchaser notifies Shareholder Group that Purchaser is prepared to close the Offer but for the fact that the 90% Condition is not satisfied, and (iii) the tender by Shareholder Group of the Underlying Shares, either alone or when aggregated with other Company Options, would cause the 90% Condition to be satisfied, then Shareholder Group hereby agrees that, at any time prior to the Termination Date, immediately upon the request of Purchaser, it shall exercise all Company Options Beneficially Owned by it and immediately tender the Underlying Shares received upon such exercise into the Offer (and not withdraw such Underlying Shares so tendered). Purchaser shall advance to Shareholder Group the funds necessary to pay the exercise price of such Options, and Shareholder Group shall repay Purchaser the amount of such advance, without interest, immediately upon receipt of the Per Share Amount by it for its Underlying Shares. (c) Except as may be required by Section 2.2(b), Shareholder Group hereby agrees that it shall not exercise any Company Options that it Beneficially Owns. ARTICLE III PURCHASE OPTION 3.1 Grant of the Purchase Option. Shareholder Group hereby grants to Purchaser an irrevocable option (the "Purchase Option") to purchase, on the terms and subject to the conditions set forth herein, at the Per Share Amount all its Applicable Shares. 3.2 Exercise of the Purchase Option. (a) Subject to the conditions set forth in Section 3.3, the Purchase Option may be exercised in whole at any time, and in part from time to time, from and after the Offer Termination Date and ending as of the Termination Date; provided, however, that in the event Purchaser exercises its Purchase Option hereunder it shall exercise its Purchase Option in a proportionate amount under that certain Shareholder Agreement with Yossie Hollander of even date herewith entered into in connection with the Tender Agreement. (b) In the event Purchaser wishes to exercise the Purchase Option, Purchaser will send a written notice to Shareholder Group specifying a place, date (not less than two business days nor more than 10 calendar days after the date such notice is given) and time for the closing of the purchase of such Shares (the "Closing"). (c) The purchase price payable to Shareholder Group with respect to any exercise of the Purchase Option will be the product of (i) the Per Share Amount and (ii) the number of Applicable Shares to be purchased upon such exercise. 5 6 3.3 Closing. (a) At the Closing, Shareholder Group will deliver to Purchaser a certificate or certificates representing the Shares being purchased, duly endorsed for transfer or accompanied by appropriate stock powers duly executed in blank, and Purchaser will pay the purchase price in immediately available funds by wire transfer to an account designated by Shareholder Group. Transfer taxes, if any, imposed as a result of the exercise of the Purchase Option and the transfer of any Applicable Shares will be paid by Shareholder Group. (b) The obligation of Purchaser and Shareholder Group to consummate the purchase and sale of the Applicable Shares pursuant to this Article III will be subject to the fulfillment of the following conditions: (i) the expiration or termination of the waiting period applicable to the consummation of such transactions under the HSR Act and any other applicable antitrust laws; and (ii) none of the parties hereto shall be subject to any order or injunction of a court of competent jurisdiction which prohibits the consummation of such transactions. (c) The obligations of Shareholder Group pursuant to this Article III shall also be subject to Purchaser not violating any of its material obligations under the Tender Agreement. Each of the parties hereto will promptly make and will use all reasonable efforts to cause each of their respective affiliates to make, all such filings and take all such actions as may be reasonably required in order to permit the lawful exercise of the Purchase Option, as promptly as possible. The date of any Closing may be extended, if required, to the next business day following (1) the date that any applicable waiting period(s) under the HSR Act and any other applicable antitrust laws shall have expired or been earlier terminated, (2) the date that all other necessary governmental approvals for the sale of the Shares for which the Purchase Option shall have been exercised shall have been obtained, and (3) the satisfaction of any other condition to the Closing under the Tender Agreement. ARTICLE IV CAPTURE 4.1 Capture. In the event that the Applicable Shares of Shareholder Group are sold, transferred, exchanged, canceled or disposed of in connection with or as a result of any Company Transaction Proposal that is in existence on, or that has been otherwise made prior to the Termination Date (an "Alternative Disposition") then, within five business days after the closing of such Alternative Disposition, Shareholder Group shall tender and pay to, or shall cause to be tendered and paid to, Purchaser (or its designee), in immediately available funds, the Profit realized from such Alternative Disposition, less any withholdings. 4.2 Profit. As used in this Article IV, "Profit" shall mean an amount equal to the excess, if any, of (a) the Alternative Transaction Consideration over (b) the Per Share Amount multiplied by Shareholder Group's Applicable Shares sold, transferred, exchanged, canceled or 6 7 disposed of in such Alternative Disposition. For purposes of determining Profit, (i) all non-cash items shall be valued based upon the fair market value thereof as determined by an independent expert selected by Purchaser and who is reasonably acceptable to Shareholder Group, (ii) all deferred payments or consideration shall be discounted to reflect a market rate of net present value thereof as determined by the above-referenced independent expert, and (iii) all contingent payments will be assumed to have been paid. In the event any contingent payments included in the determination of Profit ultimately are not paid pursuant to an Alternative Disposition, then Purchaser shall promptly reimburse Shareholder Group for any amounts paid to Purchaser hereunder in respect of such uncollected contingent payments promptly after receipt of written notice of such non-payment. ARTICLE V ESCROW 5.1 Escrow Agreement. As further set forth in the Escrow Agreement attached hereto as Exhibit 5.1, Shareholder Group and Purchaser agree that the Applicable Shares shall be placed with Dan Cohen, Spigelman & Co. as escrow agent within five business days of the date hereof and ending on the Termination Date, to be disbursed as set forth below. 5.2 Release and Delivery. The Applicable Shares shall be released and delivered during the term hereof at any time or from time to time, (i) to Purchaser in connection with the purchase of such Shares pursuant to this Agreement or the Offer and (ii) unless otherwise distributed to Purchaser, to Shareholder Group on the Termination Date. All Applicable Shares tendered in the Offer and withdrawn or not purchased in the Offer prior to the Termination Date shall be returned to the Escrow Agent. ARTICLE VII RELEASE (a) AS OF THE CLOSING DATE ECS AND THE OWNERS DO HEREBY FOR THEMSELVES, AND IN THE CASE OF THE OWNERS, THEIR HEIRS, EXECUTORS, ADMINISTRATORS AND LEGAL REPRESENTATIVES REMISE, RELEASE, ACQUIT AND FOREVER DISCHARGE COMPANY AND EACH OF ITS SUBSIDIARIES OF AND FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION AND OBLIGATIONS OF EVERY NATURE WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN, MATURED OR UNMATURED, FIXED OR CONTINGENT, WHICH ECS OR SUCH OWNER NOW HAS, OWNS OR HOLDS OR HAS AT ANY TIME PREVIOUSLY HAD, OWNED OR HELD AGAINST COMPANY OR ITS SUBSIDIARIES INCLUDING WITHOUT LIMITATION ALL LIABILITIES CREATED AS A RESULT OF THE NEGLIGENCE, GROSS NEGLIGENCE AND WILLFUL ACTS OF COMPANY OR ITS SUBSIDIARIES AND ITS EMPLOYEES AND AGENTS, AND ALL LIABILITIES RELATING TO COMPENSATION IN ANY FORM OR MANNER EXISTING AS OF THE DATE HEREOF OR RELATING TO ANY MATTER THAT OCCURRED ON OR PRIOR 7 8 TO THE CLOSING DATE; PROVIDED, HOWEVER, THAT ANY CLAIMS, LIABILITIES, DEBTS OR CAUSES OF ACTION THAT MAY ARISE IN CONNECTION WITH THE FAILURE OF ANY OF THE PARTIES HERETO TO PERFORM ANY OF THEIR OBLIGATIONS HEREUNDER OR UNDER ANY OTHER AGREEMENT RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING, WITHOUT LIMITATIONS, SECTION 5.9. OF THE TENDER AGREEMENT, OR FROM ANY BREACHES BY ANY OF THEM OF ANY REPRESENTATIONS OR WARRANTIES HEREIN OR IN CONNECTION WITH ANY OF SUCH OTHER AGREEMENTS SHALL NOT BE RELEASED OR DISCHARGED PURSUANT TO THIS AGREEMENT. (B) ECS AND THE OWNERS REPRESENT AND WARRANT THAT THEY HAVE NOT PREVIOUSLY ASSIGNED OR TRANSFERRED, OR PURPORTED TO ASSIGN OR TRANSFER, TO ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR OBLIGATIONS RELEASED HEREIN. ECS AND THE OWNERS COVENANT AND AGREE THAT THEY WILL NOT ASSIGN OR TRANSFER TO ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR OBLIGATIONS TO BE RELEASED HEREIN. ECS AND THE OWNERS REPRESENT AND WARRANT THAT THEY HAVE READ AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS ARTICLE VI AND THAT THEY HAVE BEEN REPRESENTED BY LEGAL COUNSEL OF THEIR OWN CHOOSING IN CONNECTION WITH THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT. ARTICLE VII COVENANTS, REPRESENTATIONS AND WARRANTIES 7.1 Shareholder Group hereby represents, warrants and covenants to Purchaser as follows: (a) Ownership. Shareholder Group is either (i) the record and Beneficial Owner of, or (ii) the Beneficial Owner but not the record holder of, the number of issued and outstanding Shares set forth on Part I of Schedule A hereto and the Company Options set forth on Part II of Schedule A hereto. As of the date of this Agreement, the Shares set forth on Part I of Schedule A hereto constitute all of the issued and outstanding Shares owned of record or Beneficially Owned by Shareholder Group. Except as otherwise set forth in Part I to Schedule A hereto, Shareholder Group has sole power of disposition, sole power of conversion, and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Shares set forth on Part I of Schedule A hereto, with no material limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement. (b) Power; Binding Agreement. Shareholder Group has the legal capacity, power and authority to enter into and perform all of Shareholder Group's obligations under this Agreement. 8 9 This Agreement has been duly and validly authorized by all necessary action, executed and delivered by Shareholder Group and constitutes a valid and binding agreement of Shareholder Group, enforceable against Shareholder Group in accordance with its terms. There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which Shareholder Group is trustee whose consent is required for the execution and delivery of this Agreement or the consummation by Shareholder Group of the transactions contemplated hereby. If either Owner is married and such Owner's interest in Shareholder Group's Shares constitute community property, this Agreement has been duly authorized, executed and delivered by, and constitutes a valid and binding agreement of, Owner's spouse, enforceable against such person in accordance with its terms. The Owners are the sole owners of ECS. (c) No Conflicts. Except for the filing of an amendment to Shareholder Group's Schedule 13D or 13G, if any, no filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Agreement by Shareholder Group and the consummation by Shareholder Group of the transactions contemplated hereby, except where the failure to obtain such consent, permit, authorization, approval or filing would not interfere with Shareholder Group's ability to perform its obligations hereunder, and none of the execution and delivery of this Agreement by Shareholder Group, the consummation by Shareholder Group of the transactions contemplated hereby or compliance by Shareholder Group with any of the provisions hereof shall (i) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which Shareholder Group is a party or by which Shareholder Group or any of its properties or assets may be bound, or (ii) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to Shareholder Group or any of its properties or assets, in each such case except to the extent that any conflict, breach, default or violation would not interfere with the ability of Shareholder Group to perform its obligations hereunder. All arrangements, understandings, agreements and other instruments relating to Shareholder Group's ability to dispose of, tender, vote or grant a proxy with respect to its Applicable Shares or enter into this Agreement have been validly terminated. (d) No Encumbrances. Except as required herein, at all times during the term hereof, all of Shareholder Group's Shares or Company Options as set forth on Part I and II, respectively, of Schedule A hereto will be held by Shareholder Group, an affiliate of Shareholder Group, or by a nominee or custodian for the benefit of Shareholder Group, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any liens, claims, understandings or arrangements that do not limit or impair Shareholder Group's ability to perform its obligations under this Agreement. 9 10 (e) No Solicitation. Shareholder and the Owners shall comply, and shall cause each of their respective affiliates who Beneficially Own any of Shareholder Group's Applicable Shares to comply, with the terms of Section 5.8 of the Tender Agreement. (f) Restriction on Transfer, Proxies and Non-Interference. Except as expressly contemplated hereby, from and after the date of this Agreement and ending as of the Termination Date, Shareholder Group shall not, and shall cause each of its affiliates who Beneficially Own any of Shareholder Group's Applicable Shares or Company Options not to, directly or indirectly, without the consent of Purchaser: (i) offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or other disposition of, any or all of its Applicable Shares or Company Options, or any interest therein, (ii) grant any proxies or powers of attorney, deposit any or all of its Applicable Shares or Company Options into a voting trust or enter into a voting agreement with respect to its Applicable Shares or Company Options, (iii) enter into any agreement or arrangement providing for any of the actions described in clause (i) or (ii) above, or (iv) take any action that could reasonably be expected to have the effect of preventing or disabling Shareholder Group from performing its obligations under this Agreement. From and after the date of this Agreement and ending as of the Termination Date, Shareholder Group shall not enter into any agreement or understanding with any Person or entity the effect of which would be inconsistent with or violate the provisions and agreements contained in this Section 7.1 (g) Further Assurances. From time to time, at Purchaser's request and without further consideration, Shareholder Group shall execute and deliver such additional documents as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement. 7.2 Purchaser hereby represents, warrants and covenants to Shareholder Group as follows: (a) Organization, Standing and Corporate Power. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with adequate corporate power and authority to own its properties and carry on its business as presently conducted. Purchaser has the corporate power and authority to enter into and perform all of its obligations under this Agreement and to consummate the transactions contemplated hereby. (b) No Conflicts. No filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby, except where the failure to obtain such consent, permit, authorization, approval or filing would not interfere with its ability to perform its obligations hereunder, and none of the execution and delivery of this Agreement by Purchaser, the consummation by Purchaser of the transactions contemplated hereby or compliance by Purchaser with any of the provisions hereof shall (i) conflict with or result in any breach of any applicable organizational documents applicable to Purchaser, 10 11 (ii) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which Purchaser is a party or by which Purchaser or any of Purchaser's properties or assets may be bound, or (iii) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to Purchaser or any of Purchaser's properties or assets, in each such case except to the extent that any conflict, breach, default or violation would not interfere with the ability of Purchaser to perform its obligations hereunder. (c) Execution, Delivery and Performance by Purchaser. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of Purchaser, and Purchaser has taken all other actions required by law, its certificate of incorporation and its by-laws to consummate the transactions contemplated by this Agreement. This Agreement constitutes the valid and binding obligations of Purchaser and is enforceable in accordance with its terms, except as enforceability may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors' rights generally. 7.3 Purchaser will perform its obligations under the Tender Agreement. ARTICLE VIII MISCELLANEOUS 8.1 Stop Transfer. From and after the date of this Agreement and ending as of the Termination Date, Shareholder Group will not request that Company register the transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any of Shareholder Group's Applicable Shares or Company Options, except as otherwise contemplated hereby. 8.2 Recapitalization. In the event of a stock dividend or distribution, or any change in the Shares by reason of any split-up, recapitalization, combination, exchange of shares or the like, the term "Shares" shall include, without limitation, all such stock dividends and distributions and any securities into which or for which any or all of the Applicable Shares may be changed or exchanged as may be appropriate to reflect such event. 8.3 Shareholder Group Capacity. Except as set forth in Section 7.3, neither Owner makes any agreement or understanding herein in his or her capacity as a director or officer of Company and nothing herein shall limit or affect any action taken by either Owner in such capacity. Nothing herein shall in any way restrict or limit either Owner from taking any action in his or her capacity as a director or officer of Company or otherwise fulfilling his or her fiduciary obligations as a director and officer of Company. Subject to the foregoing, all obligations of the Shareholder Group set forth in this Agreement shall apply to the Owners and ECS in their individual capacities as well. 11 12 8.4 Tender Agreement and Company Options. Shareholder Group hereby consent and agree to the treatment of Company Options Beneficially Owned by Shareholder Group or its affiliates as set forth in the Tender Agreement. 8.5 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. 8.6 Amendments, Waivers, Etc. This Agreement may not be amended, changed, supplemented, waived or otherwise modified or terminated, except upon the execution and delivery of a written agreement executed by the parties hereto. 8.7 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly received if so given) by hand delivery, telegram, telex or telecopy, or by mail (registered or certified mail, postage prepaid, return receipt requested) or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses: (a) if to Purchaser, to: BMC Software, Inc. 2101 CityWest Blvd. Houston, Texas 77042 Attn: M. Brinkley Morse Telecopy: (713) 918-8000 with a copy to: Vinson & Elkins LLP 2300 First City Tower Houston, Texas 77002-6760 Attn: John S. Watson Telecopy: (713) 615-5236 (b) if to the Shareholder Group, to: c/o Dan Cohen, Spigelman & Co. 103 Hahashmonaim St. Israel Attn: Michael Spigelman Telecopy: 972-3-561-0624 12 13 with a copy to: Dan Cohen, Spigelman & Co. 103 Hahashmonaim St. Israel Attn: Michael Spigelman Telecopy: 972-3-561-0624 or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 8.8 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. 8.9 Specific Performance. Each of the parties hereto recognizes and acknowledges that a breach by ECS or either Owner of any covenants or agreements contained in this Agreement will cause the Purchaser to sustain damages for which they would not have an adequate remedy at law for money damages, and therefore each of the parties hereto agrees that in the event of any such breach the Purchaser shall be entitled to the remedy of specific performance, without the requirement of posting any bond, of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 8.10 Remedies Cumulative. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. 8.11 No Waiver. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance. 8.12 No Third Party Beneficiaries. This Agreement is not intended to be for the benefit of, and shall not be enforceable by, any person or entity who or which is not a party hereto; provided that, in the event of either Owner's death, the benefits and obligations of such Owner hereunder shall inure to his or her successors and heirs. 13 14 8.13 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. 8.14 Descriptive Headings. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 8.15 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same Agreement. This Agreement shall not be effective as to any party hereto until such time as this Agreement or a counterpart thereof has been executed and delivered by each party hereto. 8.16 Trust Funds. In the event that any party hereto should receive any funds that are to be paid to another party pursuant to the terms of this Agreement, then the receiving party shall hold such funds in trust for the benefit of the party entitled to receive such funds and shall promptly pay such funds to the party entitled to receive such funds in accordance with this Agreement. 14 15 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on this 7th day of March, 1999. PURCHASER By: /s/ M. BRINKLEY MORSE --------------------------------------- Name: M. Brinkley Morse ------------------------------------- Title: Senior Vice President ------------------------------------ ECS By: /s/ DALIA PRASHKER --------------------------------------- Name: Dalia Prashker ------------------------------------- Title: Co-Chairman ------------------------------------ By: /s/ RONI A. EINAV --------------------------------------- Name: Roni A. Einav ------------------------------------- Title: Chairman ------------------------------------ OWNERS /s/ RONI A. EINAV ------------------------------------------ Roni A. Einav /s/ DALIA PRASHKER ------------------------------------------ Dalia Prashker 15 16 ACKNOWLEDGMENT AND CONSENT OF SPOUSE Matia Einav, the spouse of Owner, hereby joins in the execution of this Agreement for the purpose of acknowledging that any ownership interest she may have in the Shares and Company Options Beneficially Owned by Shareholder Group is subject to the terms of this Agreement to the same extent as if she were a "Owner" hereunder, and hereby consents to the foregoing. /s/ MATIA EINAV ----------------- Matia Einav 16 17 ACKNOWLEDGMENT AND CONSENT OF SPOUSE Yossie Prashker, the spouse of Owner, hereby joins in the execution of this Agreement for the purpose of acknowledging that any ownership interest she may have in the Shares and Company Options Beneficially Owned by Shareholder Group is subject to the terms of this Agreement to the same extent as if she were a "Owner" hereunder, and hereby consents to the foregoing. /s/ YOSSIE PRASHKAR --------------------- Yossie Prashkar 17 18 SCHEDULE A PART I Shares Beneficially Owned of Record ECS 3,741,250 Roni A. Einav 0 Dalia Prashker-Katzman 0 Shares Beneficially Owned Not of Record ECS 0 Roni A. Einav 0 Dalia Prashker-Katzman 0 PART II Company Options Beneficially Owned ECS 0 Roni A. Einav 23,000 Dalia Prashker-Katzman 0
EX-99.4 6 SHAREHOLDER AGREEMENT, DATED 03/07/99 1 EXHIBIT 99.4 SHAREHOLDER AGREEMENT THIS SHAREHOLDER AGREEMENT, dated as of March 7, 1999 (this "Agreement"), is made and entered into between BMC Software, Inc., a Delaware corporation ("Purchaser") and Yossie Hollander (the "Shareholder"). WITNESSETH WHEREAS, concurrently herewith, Purchaser and New Dimension Software Ltd., an Israeli corporation (the "Company"), are entering into a Share Purchase and Tender Agreement (as such agreement may hereafter be amended from time to time, the "Tender Agreement"); and WHEREAS, as an inducement and a condition to entering into the Tender Agreement, Purchaser has required that Shareholder agree, and Shareholder has agreed, to enter into this Agreement; NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein and the benefits to be received by the parties under the terms of the Tender Agreement, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I DEFINITIONS (a) Capitalized terms used and defined herein shall have the respective meanings ascribed to them in the Tender Agreement. For purposes of this Agreement: (i) "Alternative Disposition" shall have the meaning ascribed to such term in Article IV. (ii) "Alternative Transaction Consideration" shall mean all cash, securities, settlement or termination amounts, notes or other debt instruments, and other consideration received or to be received, directly or indirectly, by Shareholder and his affiliates in connection with or as a result of an Alternative Disposition or any agreements or arrangements (including, without limitation, any employment agreement, consulting agreement, non-competition agreement, confidentiality agreement, settlement agreement or release agreement) entered into, directly or indirectly, by Shareholder or his affiliates (excluding officers and directors of Company) as a part of or in connection with the Alternative Disposition or Company Transaction Proposal. (iii) "Applicable Shares " means all Shares that are Beneficially Owned by the Shareholder or that become Beneficially Owned by the Shareholder prior to the Termination Date. 2 (iv) "Beneficially Own" or "Beneficial Ownership" with respect to any securities shall mean bearing "beneficial ownership" of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities by the same holder, securities Beneficially Owned by a Person shall include (i) securities Beneficially Owned by all other Persons (who are affiliates of such Person excluding officers and directors of Company) who together with such Person would constitute a "group" within the meaning of Section 13(d)(3) of the Exchange Act and (ii) securities Beneficially Owned by that Person's spouse and children. (v) "90% Condition" shall be such condition as set forth in paragraph (1) of Exhibit A to the Tender Agreement. (vi) "Offer Termination Date" shall mean the date the Offer terminates or expires without the purchase of Shares thereunder; provided, however, that if Purchaser initiates a new Offer under the terms of the Tender Agreement on or before midnight, central time in the United States on the 10th day following such date, the Offer Termination Date shall mean the date such subsequent Offer terminates or expires without the purchase of Shares thereunder; provided, however, that the Offer Termination Date will not be later than the date of termination of the Tender Agreement. (vii) "Per Share Amount" shall mean the price per Share of the Offer as set forth in Section 1.1 of the Tender Agreement, as such price may be increased in accordance with the Tender Agreement. (viii) "Purchase Option" shall have the meaning ascribed to such term in Section 3.1. (ix) "Termination Date" shall mean the date ending on the first to occur of: (1) the Closing Date; (2) the Offer Termination Date; or (3) midnight, central time in the United States, on the date all of the conditions to the Offer set forth in Exhibit A to the Tender Agreement have been satisfied, except for the conditions set forth in paragraphs (6)(d)(ii) or (6)(e), and Purchaser elects to terminate the Tender Agreement without the purchase of Shares thereunder; provided, however, that, notwithstanding subparagraphs (2) and (3) above, if after the date of this Agreement (x) any person, entity or group (within the meaning of Section 13(d)(3) of the Exchange Act) (other than the Purchaser or any affiliate of Purchaser) acquires more than 5% or more of the outstanding Shares and fails to tender such Shares in the Offer and continues to hold such Shares and the Offer is terminated as a result of the failure of the 90%Condition to be satisfied, the Termination Date shall be the date 150 days after the Offer Termination Date, or (y) there is a public 2 3 announcement of, or the disclosure to the management, board of directors, shareholders or advisors of the Company of, a Company Transaction Proposal, and the board of directors of the Company rejects such Company Transaction Proposal and continues to recommend the Offer and the Offer is terminated as a result of the failure of the 90%Condition to be satisfied, the Termination Date shall be the date 120 days after the Offer Termination Date, or (z) there is a public announcement of, or the disclosure to the management, board of directors, shareholders or advisors of the Company of, a Company Transaction Proposal, and the board of directors of the Company withdraws, withholds or modifies in a manner adverse to Purchaser its approval of the Tender Agreement or the Offer pursuant to Section 5.8 of the Tender Agreement, and the Offer is terminated as a result of the failure of the 90%Condition to be satisfied, the Termination Date shall be the date 150 days after the Offer Termination Date. (x) "Underlying Shares" shall mean the Shares issuable to Shareholder upon the exercise by Shareholder of Company Options, if any, Beneficially Owned by him. ARTICLE II VOTING AND TENDER MATTERS 2.1 Voting and Tender Matters. (a) From and after the date of this Agreement and ending as of the Termination Date, at any meeting of the holders of Shares however called, or in any other circumstance upon which the vote, consent or other approval of holders of Shares is sought, Shareholder shall vote (or cause to be voted) his issued and outstanding Applicable Shares: (i) against any action or agreement that would result in a breach in any material respect of any covenant, representation or warranty or any other material obligation or agreement of Company under the Tender Agreement or this Agreement; (ii) against the following actions (other than the transactions contemplated by the Tender Agreement): (A) any Company Transaction Proposal, and (B) to the extent that such (1) are intended to, or could reasonably be expected to, impede, interfere with, delay, postpone, or materially adversely affect the Offer, or the transactions contemplated by the Tender Agreement or this Agreement or (2) are intended to, or could reasonably be expected to, implement or lead to any Company Transaction Proposal: (x) any change in a majority of the persons who constitute the board of directors of Company; (y) any change in the present capitalization of Company or any amendment of Company's Memorandum and Articles of Association (other than as expressly contemplated by the Tender Agreement); or (z) any other material change in Company's corporate structure or business; and 3 4 (iii) for the proposals to: (A) approve the right of the directors of the Company to sell their Shares to the Purchaser pursuant to the Offer and the transactions contemplated thereby, (B) approve an amendment to the Company's Articles of Association to provide that the holders of at least 60% of the issued and outstanding Shares of the Company shall be entitled to appoint and remove any and all members of the Board of Directors of the Company, by means of a written notice signed by such holders of the Company, and (C) approve any and all other matters contemplated by the Tender Agreement and presented at the Special Meeting. (b) Shareholder hereby grants to, and appoints, Purchaser and any nominee thereof, its proxy and attorney-in-fact (with full power of substitution), from and after the date of this Agreement and ending as of the Termination Date, to vote his Applicable Shares, or to grant a consent or approval in respect of his Applicable Shares on any and all matters relating to the Tender Agreement, the Offer or any Company Transaction Proposal. Shareholder intends such proxy to be irrevocable and coupled with an interest and will take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy and hereby revokes any proxy previously granted by Shareholder with respect to his Applicable Shares. (c) From and after the date of this Agreement and ending as of the Termination Date, Shareholder shall not take any action (including the tender of any Shares) that could reasonably be expected to, implement or lead to any Company Transaction Proposal. 2.2 Tender Agreement and Company Options. (a) Shareholder hereby agrees that he shall (i) tender all of his Applicable Shares into the Offer promptly, and in any event no later than the third business day following the commencement of the Offer, and (ii) not withdraw any Applicable Shares so tendered prior to the Offer Termination Date; provided, however, that Shareholder may delay the tender of up to 75,000 of his Shares until notified by Purchaser that such tender is required by Purchaser. (b) In the event that (i) the 90% Condition is not satisfied, (ii) Purchaser notifies Shareholder that Purchaser is prepared to close the Offer but for the fact that the 90% Condition is not satisfied, and (iii) the tender by Shareholder of the Underlying Shares, either alone or when aggregated with other Company Options, would cause the 90% Condition to be satisfied, then Shareholder hereby agrees that, at any time prior to the Termination Date, immediately upon the request of Purchaser, he shall exercise all Company Options Beneficially Owned by him and immediately tender the Underlying Shares received upon such exercise into the Offer (and not withdraw such Underlying Shares so tendered). Purchaser shall advance to Shareholder the funds 4 5 necessary to pay the exercise price of such Options, and Shareholder shall repay Purchaser the amount of such advance, without interest, immediately upon receipt of the Per Share Amount by him for his Underlying Shares. (c) Except as may be required by Section 2.2(b), Shareholder hereby agrees that he shall not exercise any Company Options that he Beneficially Owns. ARTICLE III PURCHASE OPTION 3.1 Grant of the Purchase Option. Shareholder hereby grants to Purchaser an irrevocable option (the "Purchase Option") to purchase, on the terms and subject to the conditions set forth herein, at the Per Share Amount all his Applicable Shares. 3.2 Exercise of the Purchase Option. (a) Subject to the conditions set forth in Section 3.3, the Purchase Option may be exercised in whole at any time, and in part from time to time, from and after the Offer Termination Date and ending as of the Termination Date; provided, however, that in the event Purchaser exercises its Purchase Option hereunder it shall exercise its Purchase Option in a proportionate amount under that certain Shareholder Agreement with Einav Computer Systems Ltd., Roni A. Einav and Dalia Prashker-Katzman of even date herewith entered into in connection with the Tender Agreement. (b) In the event Purchaser wishes to exercise the Purchase Option, Purchaser will send a written notice to Shareholder specifying a place, date (not less than two business days nor more than 10 calendar days after the date such notice is given) and time for the closing of the purchase of such Shares (the "Closing"). (c) The purchase price payable to Shareholder with respect to any exercise of the Purchase Option will be the product of (i) the Per Share Amount and (ii) the number of Applicable Shares to be purchased upon such exercise. 3.3 Closing. (a) At the Closing, Shareholder will deliver to Purchaser a certificate or certificates representing the Shares being purchased, duly endorsed for transfer or accompanied by appropriate stock powers duly executed in blank, and Purchaser will pay the purchase price in immediately available funds by wire transfer to an account designated by Shareholder. Transfer taxes, if any, imposed as a result of the exercise of the Purchase Option and the transfer of any Applicable Shares will be paid by Shareholder. 5 6 (b) The obligation of Purchaser and Shareholder to consummate the purchase and sale of the Applicable Shares pursuant to this Article III will be subject to the fulfillment of the following conditions: (i) the expiration or termination of the waiting period applicable to the consummation of such transactions under the HSR Act and any other applicable antitrust laws; and (ii) none of the parties hereto shall be subject to any order or injunction of a court of competent jurisdiction which prohibits the consummation of such transactions. (c) The obligations of Shareholder pursuant to this Article III shall also be subject to Purchaser not violating any of its material obligations under the Tender Agreement. Each of the parties will promptly make and will use all reasonable efforts to cause each of their respective affiliates to make, all such filings and take all such actions as may be reasonably required in order to permit the lawful exercise of the Purchase Option, as promptly as possible. The date of any Closing may be extended, if required, to the next business day following (1) the date that any applicable waiting period(s) under the HSR Act and any other applicable antitrust laws shall have expired or been earlier terminated, (2) the date that all other necessary governmental approvals for the sale of the Shares for which the Purchase Option shall have been exercised shall have been obtained, and (3) the satisfaction of any other condition to the Closing under the Tender Agreement. ARTICLE IV CAPTURE 4.1 Capture. In the event that the Applicable Shares of Shareholder are sold, transferred, exchanged, canceled or disposed of in connection with or as a result of any Company Transaction Proposal that is in existence on, or that has been otherwise made prior to the Termination Date (an "Alternative Disposition") then, within five business days after the closing of such Alternative Disposition, Shareholder shall tender and pay to, or shall cause to be tendered and paid to, Purchaser (or its designee), in immediately available funds, the Profit realized from such Alternative Disposition, less any withholdings. 4.2 Profit. As used in this Article IV, "Profit" shall mean an amount equal to the excess, if any, of (a) the Alternative Transaction Consideration over (b) the Per Share Amount multiplied by Shareholder's Applicable Shares sold, transferred, exchanged, canceled or disposed of in such Alternative Disposition. For purposes of determining Profit, (i) all non-cash items shall be valued based upon the fair market value thereof as determined by an independent expert selected by Purchaser and who is reasonably acceptable to Shareholder, (ii) all deferred payments or consideration shall be discounted to reflect a market rate of net present value thereof as determined by the above-referenced independent expert, and (iii) all contingent payments will be assumed to have been paid. In the event any contingent payments included in the determination of Profit ultimately are not paid pursuant to an Alternative Disposition, then Purchaser shall promptly 6 7 reimburse Shareholder for any amounts paid to Purchaser hereunder in respect of such uncollected contingent payments promptly after receipt of written notice of such non-payment. ARTICLE V ESCROW 5.1 Escrow Agreement. As further set forth in the Escrow Agreement attached hereto as Exhibit 5.1, Shareholder and Purchaser agree that the Applicable Shares (less up to 75,000 Applicable Shares which need not be placed with the Escrow Agent) shall be placed with Meitar, Liquornik, Geva & Co. as escrow agent within five business days of the date hereof and ending on the Termination Date, to be disbursed as set forth below. 5.2 Release and Delivery. The Applicable Shares shall be released and delivered during the term hereof at any time or from time to time, (i) to Purchaser in connection with the purchase of such Shares pursuant to this Agreement or the Offer and (ii) unless otherwise distributed to Purchaser, to Shareholder on the Termination Date. All Applicable Shares tendered in the Offer and withdrawn or not purchased in the Offer prior to the Termination Date shall be returned to the Escrow Agent. ARTICLE VII RELEASE (a) AS OF THE CLOSING DATE SHAREHOLDER DOES HEREBY FOR HIMSELF OR HIS HEIRS, EXECUTORS, ADMINISTRATORS AND LEGAL REPRESENTATIVES REMISE, RELEASE, ACQUIT AND FOREVER DISCHARGE COMPANY AND EACH OF ITS SUBSIDIARIES OF AND FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION AND OBLIGATIONS OF EVERY NATURE WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN, MATURED OR UNMATURED, FIXED OR CONTINGENT, WHICH SUCH SHAREHOLDER NOW HAS, OWNS OR HOLDS OR HAS AT ANY TIME PREVIOUSLY HAD, OWNED OR HELD AGAINST COMPANY OR ITS SUBSIDIARIES INCLUDING WITHOUT LIMITATION ALL LIABILITIES CREATED AS A RESULT OF THE NEGLIGENCE, GROSS NEGLIGENCE AND WILLFUL ACTS OF COMPANY OR ITS SUBSIDIARIES AND ITS EMPLOYEES AND AGENTS, AND ALL LIABILITIES RELATING TO COMPENSATION IN ANY FORM OR MANNER EXISTING AS OF THE DATE HEREOF OR RELATING TO ANY MATTER THAT OCCURRED ON OR PRIOR TO THE CLOSING DATE; PROVIDED, HOWEVER, THAT ANY CLAIMS, LIABILITIES, DEBTS OR CAUSES OF ACTION THAT MAY ARISE IN CONNECTION WITH THE FAILURE OF ANY OF THE PARTIES HERETO TO PERFORM ANY OF THEIR OBLIGATIONS HEREUNDER OR UNDER ANY OTHER AGREEMENT RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING, WITHOUT LIMITATIONS, SECTION 5.9. OF THE TENDER AGREEMENT, OR FROM ANY BREACHES BY ANY OF THEM OF ANY 7 8 REPRESENTATIONS OR WARRANTIES HEREIN OR IN CONNECTION WITH ANY OF SUCH OTHER AGREEMENTS SHALL NOT BE RELEASED OR DISCHARGED PURSUANT TO THIS AGREEMENT. (b) SHAREHOLDER REPRESENTS AND WARRANTS THAT HE HAS NOT PREVIOUSLY ASSIGNED OR TRANSFERRED, OR PURPORTED TO ASSIGN OR TRANSFER, TO ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR OBLIGATIONS RELEASED HEREIN. SHAREHOLDER COVENANTS AND AGREES THAT HE WILL NOT ASSIGN OR TRANSFER TO ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR OBLIGATIONS TO BE RELEASED HEREIN. SHAREHOLDER REPRESENTS AND WARRANTS THAT HE HAS READ AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS ARTICLE VI AND THAT HE HAS BEEN REPRESENTED BY LEGAL COUNSEL OF HIS OWN CHOOSING IN CONNECTION WITH THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT. ARTICLE VII COVENANTS, REPRESENTATIONS AND WARRANTIES 7.1 Shareholder hereby represents, warrants and covenants to Purchaser as follows: (a) Ownership. Shareholder is either (i) the record and Beneficial Owner of, or (ii) the Beneficial Owner but not the record holder of, the number of issued and outstanding Shares set forth on Part I of Schedule A hereto and the Company Options set forth on Part II of Schedule A hereto. As of the date of this Agreement, the Shares set forth on Part I of Schedule A hereto constitute all of the issued and outstanding Shares owned of record or Beneficially Owned by Shareholder. Except as otherwise set forth in Part I to Schedule A hereto and with respect to encumbrances on up to 75,000 Shares, Shareholder has sole power of disposition, sole power of conversion, and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Shares set forth on Part I of Schedule A hereto, with no material limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement. (b) Power; Binding Agreement. Shareholder has the legal capacity, power and authority to enter into and perform all of Shareholder's obligations under this Agreement. This Agreement has been duly and validly authorized by all necessary action, executed and delivered by Shareholder and constitutes a valid and binding agreement of Shareholder, enforceable against Shareholder in accordance with its terms. There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which Shareholder is trustee whose consent is required for the execution and delivery of this Agreement or the consummation by Shareholder of the transactions contemplated hereby. If Shareholder is married and Shareholder's Shares constitute 8 9 community property, this Agreement has been duly authorized, executed and delivered by, and constitutes a valid and binding agreement of, Shareholder's spouse, enforceable against such person in accordance with its terms. (c) No Conflicts. Except for the filing of an amendment to Shareholder's Schedule 13D or 13G, if any, no filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Agreement by Shareholder and the consummation by Shareholder of the transactions contemplated hereby, except where the failure to obtain such consent, permit, authorization, approval or filing would not interfere with Shareholder's ability to perform his obligations hereunder, and none of the execution and delivery of this Agreement by Shareholder, the consummation by Shareholder of the transactions contemplated hereby or compliance by Shareholder with any of the provisions hereof shall (i) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which Shareholder is a party or by which Shareholder or any of his properties or assets may be bound, or (ii) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to Shareholder or any of his properties or assets, in each such case except to the extent that any conflict, breach, default or violation would not interfere with the ability of Shareholder to perform his obligations hereunder. All arrangements, understandings, agreements and other instruments relating to the Shareholder's ability to dispose of, tender, vote or grant a proxy with respect to his Applicable Shares or enter into this Agreement have been validly terminated, except that the Purchaser acknowledges that Shareholder has encumbered up to 75,000 Shares, which shall be released from such encumbrance on demand by Purchaser. (d) No Encumbrances. Except as required herein, at all times during the term hereof, all of Shareholder's Shares or Company Options as set forth on Part I and II, respectively, of Schedule A hereto will be held by Shareholder, an affiliate of Shareholder, or by a nominee or custodian for the benefit of Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any liens, claims, understandings or arrangements that do not limit or impair Shareholder's ability to perform his obligations under this Agreement; provided, however, that Shareholder may encumber up to 75,000 Shares during the term hereof and Shareholder agrees to cause such Shares to be released from any such encumbrance on demand by Purchaser. (e) No Solicitation. Shareholder shall comply, and shall cause each of his affiliates who Beneficially Own any of Shareholder's Applicable Shares to comply, with the terms of Section 5.8 of the Tender Agreement. (f) Restriction on Transfer, Proxies and Non-Interference. Except as expressly contemplated hereby, from and after the date of this Agreement and ending as of the Termination Date, Shareholder shall not, and shall cause each of his affiliates who Beneficially Own any of 9 10 Shareholder's Applicable Shares or Company Options not to, directly or indirectly, without the consent of Purchaser: (i) offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or other disposition of, any or all of his Applicable Shares or Company Options, or any interest therein, (ii) grant any proxies or powers of attorney, deposit any or all of his Applicable Shares or Company Options into a voting trust or enter into a voting agreement with respect to his Applicable Shares or Company Options, (iii) enter into any agreement or arrangement providing for any of the actions described in clause (i) or (ii) above, or (iv) take any action that could reasonably be expected to have the effect of preventing or disabling Shareholder from performing his obligations under this Agreement. From and after the date of this Agreement and ending as of the Termination Date, Shareholder shall not enter into any agreement or understanding with any Person or entity the effect of which would be inconsistent with or violate the provisions and agreements contained in this Section 7.1 (g) Further Assurances. From time to time, at Purchaser's request and without further consideration, Shareholder shall execute and deliver such additional documents as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement. 7.2 Purchaser hereby represents, warrants and covenants to Shareholder as follows: (a) Organization, Standing and Corporate Power. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with adequate corporate power and authority to own its properties and carry on its business as presently conducted. Purchaser has the corporate power and authority to enter into and perform all of its obligations under this Agreement and to consummate the transactions contemplated hereby. (b) No Conflicts. No filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby, except where the failure to obtain such consent, permit, authorization, approval or filing would not interfere with its ability to perform its obligations hereunder, and none of the execution and delivery of this Agreement by Purchaser, the consummation by Purchaser of the transactions contemplated hereby or compliance by Purchaser with any of the provisions hereof shall (i) conflict with or result in any breach of any applicable organizational documents applicable to Purchaser, (ii) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which Purchaser is a party or by which Purchaser or any of Purchaser's properties or assets may be bound, or (iii) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to Purchaser or any of Purchaser's properties or assets, in each 10 11 such case except to the extent that any conflict, breach, default or violation would not interfere with the ability of Purchaser to perform its obligations hereunder. (c) Execution, Delivery and Performance by Purchaser. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of Purchaser, and Purchaser has taken all other actions required by law, its certificate of incorporation and its by-laws to consummate the transactions contemplated by this Agreement. This Agreement constitutes the valid and binding obligations of Purchaser and is enforceable in accordance with its terms, except as enforceability may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors' rights generally. 7.3 Purchaser will perform its obligations under the Tender Agreement. ARTICLE VIII MISCELLANEOUS 8.1 Stop Transfer. From and after the date of this Agreement and ending as of the Termination Date, Shareholder will not request that Company register the transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any of Shareholder's Applicable Shares or Company Options, except as otherwise contemplated hereby. 8.2 Recapitalization. In the event of a stock dividend or distribution, or any change in the Shares by reason of any split-up, recapitalization, combination, exchange of shares or the like, the term "Shares" shall include, without limitation, all such stock dividends and distributions and any securities into which or for which any or all of the Applicable Shares may be changed or exchanged as may be appropriate to reflect such event. 8.3 Shareholder Capacity. Except as set forth in Section 7.3, Shareholder does not make any agreement or understanding herein in his capacity as a director or officer of Company and nothing herein shall limit or affect any action taken by Shareholder in such capacity. Nothing herein shall in any way restrict or limit Shareholder from taking any action in his capacity as a director or officer of Company or otherwise fulfilling his fiduciary obligations as a director and officer of Company. 8.4 Tender Agreement and Company Options. Shareholder hereby consents and agrees to the treatment of Company Options Beneficially Owned by Shareholder or his affiliates as set forth in the Tender Agreement. 8.5 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. 11 12 8.6 Amendments, Waivers, Etc. This Agreement may not be amended, changed, supplemented, waived or otherwise modified or terminated, except upon the execution and delivery of a written agreement executed by the parties hereto. 8.7 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly received if so given) by hand delivery, telegram, telex or telecopy, or by mail (registered or certified mail, postage prepaid, return receipt requested) or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses: (a) if to Purchaser, to: BMC Software, Inc. 2101 CityWest Blvd. Houston, Texas 77042 Attn: M. Brinkley Morse Telecopy: (713) 918-8000 with a copy to: Vinson & Elkins LLP 2300 First City Tower Houston, Texas 77002-6760 Attn: John S. Watson Telecopy: (713) 615-5236 (b) if to Shareholder, to: c/o Meitar, Liquornik, Geva & Co. 16 Abba Hillel Silver Road Ramat-Gan Israel 52506 Attn: Dan Geva Telecopy: 972-3-610-3100 or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 8.8 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, 12 13 illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. 8.9 Specific Performance. Each of the parties hereto recognizes and acknowledges that a breach by a Shareholder of any covenants or agreements contained in this Agreement will cause the Purchaser to sustain damages for which they would not have an adequate remedy at law for money damages, and therefore each of the parties hereto agrees that in the event of any such breach the Purchaser shall be entitled to the remedy of specific performance, without the requirement of posting any bond, of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 8.10 Remedies Cumulative. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. 8.11 No Waiver. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance. 8.12 No Third Party Beneficiaries. This Agreement is not intended to be for the benefit of, and shall not be enforceable by, any person or entity who or which is not a party hereto; provided that, in the event of Shareholder's death, the benefits and obligations of Shareholder hereunder shall inure to his successors and heirs. 8.13 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. 8.14 Descriptive Headings. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 8.15 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same Agreement. This Agreement shall not be effective as to any party hereto until such time as this Agreement or a counterpart thereof has been executed and delivered by each party hereto. 13 14 8.16 Trust Funds. In the event that any party hereto should receive any funds that are to be paid to another party pursuant to the terms of this Agreement, then the receiving party shall hold such funds in trust for the benefit of the party entitled to receive such funds and shall promptly pay such funds to the party entitled to receive such funds in accordance with this Agreement. 14 15 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on this 7th day of March, 1999. PURCHASER By: /s/ M. BRINKLEY MORSE ----------------------------------------- Name: M. Brinkley Morse Title: Senior Vice President SHAREHOLDER /s/ YOSSIE HOLLANDER -------------------------------------------- Yossie Hollander 15 16 ACKNOWLEDGMENT AND CONSENT OF SPOUSE DANA HOLLANDER, the spouse of Shareholder, hereby joins in the execution of this Agreement for the purpose of acknowledging that any ownership interest she may have in the Shares and Company Options Beneficially Owned by Shareholder is subject to the terms of this Agreement to the same extent as if she were a "Shareholder" hereunder, and hereby consents to the foregoing. /s/ DANA HOLLANDER 16 17 SCHEDULE A PART I Shares Beneficially Owned of Record 3,488,250 (1) ------------- Shares Beneficially Owned Not of Record 253,000 (2) ------------- PART II Company Options Beneficially Owned 0 -------------
(1) 22,000 of those shares may be pledged. (2) 53,000 of those shares are pledged. 17 EX-99.5 7 THIRD AMENDMENT TO DISTRIBUTION AGREEMENT 1 EXHIBIT 99.5 THIRD AMENDMENT TO DISTRIBUTION AGREEMENT DATED OCTOBER 28, 1994 AS AMENDED ON APRIL 24, 1997 AND OCTOBER 31, 1997 This Amendment is made and entered into as of this 6th day of March, 1999. Among NEW DIMENSION SOFTWARE LTD. a corporation organized and existing under the laws of Israel with its principal place of business at Bldg. 7, Alaim Industrial Park, P.O. Box 43227, Tel Aviv, Israel 61430 (hereinafter referred to as: the "Company") and BOOLE & BABBAGE EUROPE a corporation organized and existing under the laws of the Republic of Ireland with its principal place of business at Sadyford Business Centre, Burtonhall Road, Faxrock Dublin 19, Ireland (hereinafter referred to as: the "Distributor") WHEREAS on October 26, 1994, the Company and the Distributor entered into a distribution agreement (hereinafter: "the 1994 Distribution Agreement") whereby the Distributor was granted exclusive distribution rights in certain territories with respect to certain proprietary Software Products of the Company; and WHEREAS the 1994 Distribution Agreement has been amended by the Company and Distributor on April 24, 1997 (hereinafter: the "First Amendment") and on October 31, 1997 (hereinafter: the "Second Amendment") and the Company, Distributor and Boole & Babbage, Inc., the parent company of Distributor ("Boole"), have entered into that certain letter agreement dated December 22, 1998, which provides for additional agreements between the Company and Distributor with respect to the Company's right to notify Distributor of its termination of the Distribution Agreement in connection with the announcement by BMC Software, Inc. ("BMC") of its acquisition of Boole (the "Letter Agreement"); and WHEREAS the Company and Distributor wish to amend certain provisions of the 1994 Distribution Agreement, the First Amendment, the Second Amendment and the Letter Agreement, subject to and in accordance with the provisions and conditions herein. 2 NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties hereby agree as follows: 1. Preamble, Schedules and Captions The Preamble to this Third Amendment constitutes an integral part hereof. This Third Amendment's captions are provided for the sake of convenience and shall not be used to constitute the provisions hereof. 2. Definition, Terms and Provisions of the 1994 Distribution Agreement, First Amendment, Second Amendment and the Letter Agreement Except as expressly provided for herein, all the definitions, terms and provisions of the 1994 Distribution Agreement, the First Amendment, the Second Amendment and the Letter Agreement shall apply hereto mutatis mutandis. 3. Sections 7.1 and 7.2 of the 1994 Distribution Agreement are hereby amended to read in their entirety as follows: "7.1 In the event of a Change of Control (other than a Change of Control by the Company where BMC Software, or a subsidiary of BMC Software is the Merging Party) by either party or by BBI, both the Company and the Distributor (hereinafter: the "Terminating Party") shall have the right (but not the obligation) to terminate the Agreement as of the date a public announcement concerning such Business Transaction (by an official press release or otherwise) has been made (hereinafter: the "Triggering Event"), in accordance with the following provisions: 4. Effective Date The effective date of this Third Amendment is March 6, 1999. 5. General 5.1 Other than as expressly stated and amended hereinabove the 1994 Distribution Agreement as amended in the First Amendment and the Second Amendment, and the terms and provisions therein, shall continue to exist and bind the parties and nothing contained herein shall be deemed to derogate from or change the 1994 Distribution Agreement, and the First Amendment and the Second Amendment thereof or any of the parties' rights and obligations in accordance therewith other than as expressly provided for herein and in the Letter Agreement. However, should any provision herein contradict any provision of the 1994 Distribution Agreement, the First Amendment, the Second Amendment or the Letter Agreement, this Third Amendment shall prevail. -2- 3 5.2 The provisions contained herein set forth the entire amendment of the 1994 Distribution Agreement as amended in the First Amendment and the Second Amendment with respect to the subject matter hereof and supersedes all previous communications, representations or agreements (excluding the Letter Agreement), whether oral written with respect to the subject matter hereof. 5.3 Subject to any legal duty to which both parties, being public companies, are subject, the contents and timing of any public announcement or press release regarding this Third Amendment are to be approved in advance by the designated officer is the Company's Chief Executive Officer and in case of the Distributor the designated officer is the Chief financial Officer of Boole & Babbage Inc. IN WITNESS WHEREOF, the parties have executed this Third Amendment. New Dimension Software Ltd. Boole & Babbage Europe [NEW DIMENSION SOFTWARE LTD. LOGO] By: /s/ RONI A. EINAV By: /s/ PAUL E. NEWTON ------------------------------ ----------------------------------------- Name: Roni A. Einav Name: President & CEO, Boole & Babbage, Inc. ---------------------------- --------------------------------------- Title: CHAIRMAN Title: Paul E. Newton --------------------------- -------------------------------------- By: /s/ DAN BARNEA ------------------------------ Name: Dan Barnea ---------------------------- Title: CEO --------------------------- EX-99.6 8 LETTER AGREEMENT RE: AMEND. DISTRIBUTION AGREEMENT 1 EXHIBIT 99.6 March 7, 1999 BMC Software, Inc. 2101 CityWest Blvd. Houston, Texas 77042 Re: Distribution Agreement (the "Distribution Agreement") by and among New Dimension Software Ltd. (the "Company"), Boole & Babbage Europe (the "Distributor") and Boole & Babbage, Inc. ("BBI") dated October 28, 1994, as amended through the date hereof. Gentlemen: In consideration for you entering into that certain Share Purchase and Tender Agreement dated on even date herewith, the Company hereby agrees not to give a Termination Notice to the Distributor in connection with its Business Transaction with you before April 10, 1999. In addition, each of the Company and you, on behalf of BBI and the Distributor, agree that as soon as practicable after the consummation of the Business Transaction between you and BBI we shall enter into the Fourth Amendment to the Distribution Agreement, which shall be in substantially the form attached hereto as Exhibit A. All terms not otherwise defined herein shall have the same meaning afforded in the Distribution Agreement. New Dimension Software, Inc. By: /s/ RONI A. EINAV --------------------------------------- Name: Roni A. Einav ------------------------------------- Title: Chairman ------------------------------------ By: /s/ DAN BARNEA --------------------------------------- Name: Dan Barnea ------------------------------------- Title: CEO ------------------------------------ Agreed and Accepted this 7th day of March, 1999: BMC Software, Inc. By: /s/ M. BRINKLEY MORSE ---------------------------------- Name: M. Brinkley Morse Title: Senior Vice President 2 EXHIBIT A FOURTH AMENDMENT TO DISTRIBUTION AGREEMENT DATED OCTOBER 28, 1994 AS AMENDED ON APRIL 24, 1997, OCTOBER 31, 1997 AND MARCH , 1999 This Amendment is made and entered into as of this ____ day of __________, 1999. Among NEW DIMENSION SOFTWARE LTD. a corporation organized and existing under the laws of Israel with its principal place of business at Bldg. 7, Alaim Industrial Park, P. O. Box 43227, Tel Aviv, Israel 61430 (hereinafter referred to as: the "Company") and BOOLE & BABBAGE EUROPE a corporation organized and existing under the laws of the Republic of Ireland with its principal place of business at Sadyford Business Centre, Burtonhall Road, Faxrock Dublin 19, Ireland (hereinafter referred to as: the "Distributor") WHEREAS on October 26, 1994, the Company and the Distributor entered into a distribution agreement (hereinafter: "the 1994 Distribution Agreement") whereby the Distributor was granted exclusive distribution rights in certain territories with respect to certain proprietary Software Products of the Company; and WHEREAS the 1994 Distribution Agreement has been amended by the Company and Distributor on April 24, 1997 (hereinafter: the "First Amendment"), on October 31, 1997 (hereinafter: the "Second Amendment") and on March ___, 1999 (hereinafter: the "Third Amendment") and the Company, Distributor and Boole & Babbage, Inc., the parent company of Distributor ("Boole"), have entered into that certain letter agreement dated December 22, 1998, which provides for additional agreements between the Company and Distributor with respect to the Company's right to notify Distributor of its termination of the Distribution Agreement in connection with the announcement by BMC Software, Inc. ("BMC") of its acquisition of Boole (the "Letter Agreement"); and -1- 3 WHEREAS the Company and Distributor wish to amend certain provisions of the 1994 Distribution Agreement, the First Amendment, the Second Amendment, the Third Amendment and the Letter Agreement, subject to and in accordance with the provisions and conditions herein. NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties hereby agree as follows: 1. Preamble, Schedules and Captions The Preamble to this Fourth Amendment constitutes an integral part hereof. This Fourth Amendment's captions are provided for the sake of convenience and shall not be used to construe the provisions hereof. 2. Definition, Terms and Provisions of the 1994 Distribution Agreement, First Amendment, Second Amendment, Third Amendment and the Letter Agreement Except as expressly provided for herein, all the definitions, terms and provisions of the 1994 Distribution Agreement, the First Amendment, the Second Amendment, Third Amendment and the Letter Agreement shall apply hereto mutatis mutandis. 3. Sections 7.2 and 7.3 of the 1994 Distribution Agreement are hereby amended to read in their entirety as follows: "7.2 The Terminating Party may terminate the Agreement, should it elect to do so at its sole and exclusive discretion, during a period of 10 (ten) months as of the last day of the quarter in which the Triggering Event has occurred (or, in the event of a Business Transaction by the Distributor with BMCS, occurring at any time between the effective date of the Second Amendment (October 31, 1997) and up to December 31, 1999) by giving the other party a written notice of its intention to so terminate the Agreement (hereinafter: the "Termination Notice"); provided, that the Company shall not give a Termination Notice to the Distributor in connection with its Business Transaction with BMC Software before the day first succeeding the termination of BMC Software's tender offer to acquire ordinary shares NIS 0.01 of the Company. 7.3 If a Termination Notice has been given by the Terminating Party to the other party hereof, the Agreement shall be terminated within 60 days as of the receipt of such Termination Notice (hereinafter the "Effective Termination Date")." 4. Effective Date The effective date of this Fourth Amendment is ______________, 1999. 5. General -2- 4 5.1 Other than as expressly stated and amended hereinabove the 1994 Distribution Agreement as amended in the First Amendment, the Second Amendment and the Third Amendment and the Letter Agreement, and the terms and provisions therein, shall continue to exist and bind the parties and nothing contained herein shall be deemed to derogate from or change the 1994 Distribution Agreement, and the First Amendment, the Second Amendment and the Third Amendment and the Letter Agreement thereof or any of the parties' rights and obligations in accordance therewith other than as expressly provided for herein and in the Letter Agreement. However, should any provision herein contradict any provision of the 1994 Distribution Agreement, the First Amendment, the Second Amendment, the Third Amendment or the Letter Agreement, this Fourth Amendment shall prevail. 5.2 The provisions contained herein set forth the entire amendment of the 1994 Distribution Agreement as amended in the First Amendment, the Second Amendment and the Third Amendment with respect to the subject matter hereof and supersedes all previous communications, representations or agreements (excluding the Letter Agreement), whether oral or written with respect to the subject matter hereof. 5.3 Subject to any legal duty to which both parties, being public companies, are subject, the contents and timing of any public announcement or press release regarding this Third Amendment are to be approved in advance by the designated officers of the parties hereto. In case of the Company the designated officer is the Company's Chief Executive Officer and in case of the Distributor the designated officer is the Chief Financial Officer of Boole & Babbage Inc. IN WITNESS WHEREOF, the parties have executed this Fourth Amendment. New Dimension Software Ltd. Boole & Babbage Europe By: By: ------------------------------ ------------------------------ Name: Name: ---------------------------- ---------------------------- Title: Title: --------------------------- --------------------------- -3- EX-99.7 9 LETTER FROM BOOLE & BABBAGE, INC. TO SHAREHOLDERS 1 EXHIBIT 99.7 BOOLE & BABBAGE, INC. March 18, 1999 To the Stockholders of Boole & Babbage, Inc. You should have previously received a notice of special meeting dated February 26, 1999 and a proxy statement/prospectus relating to a special meeting of the stockholders of Boole & Babbage, Inc. to be held on March 30, 1999 at 12:00 p.m. at the principal executive offices of Boole located at 3131 Zanker Road, San Jose, California. As you know, at the special meeting, the Boole stockholders will be asked to adopt the merger agreement among Boole, BMC Software, Inc. and Ranger Acquisition Corp., and approve the merger described in the merger agreement. For your information, we are enclosing with this letter a Current Report on Form 8-K that BMC recently filed with the Securities and Exchange Commission. The enclosed Form 8-K includes information relating to the proposed acquisition by BMC of New Dimension Software Ltd., and certain litigation recently filed against BMC. As we mentioned in the proxy statement/prospectus, your Board of Directors has determined that the merger is fair to stockholders and is in your best interests. Your vote on the merger is very important. Therefore, we urge you to vote as soon as possible if you have not already done so. Sincerely, /s/ Arthur F. Knapp, Jr. Arthur F. Knapp, Jr. Secretary -----END PRIVACY-ENHANCED MESSAGE-----