EXHIBIT 7
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PURE ATRIA CORPORATION
AFFILIATE AGREEMENT
This PURE ATRIA CORPORATION AFFILIATE AGREEMENT ("AGREEMENT") is dated as
of April 7, 1997, between Rational Software Corporation, a Delaware corporation
("ACQUIROR"), Pure Atria Corporation, a Delaware corporation ("TARGET") and the
undersigned affiliate ("AFFILIATE") of Target.
WHEREAS, Target and Acquiror have entered into an Agreement and Plan of
Reorganization ("MERGER AGREEMENT") pursuant to which Target and Acquiror intend
to enter into a business combination transaction (the "MERGER") (capitalized
terms used and not otherwise defined herein shall have the respective meanings
ascribed to them in the Merger Agreement);
WHEREAS, pursuant to the Merger, at the Effective Time outstanding shares
of Target Capital Stock, including any shares owned by Affiliate, will be
converted into the right to receive shares of Acquiror Common Stock as set forth
in the Merger Agreement;
WHEREAS, Affiliate has been advised that Affiliate may be deemed to be an
"affiliate" of Target, as the term "affiliate" is used (i) for purposes of
paragraphs (c) and (d) of Rule 145 of the Rules and Regulations of the
Securities and Exchange Commission (the "SEC") and (ii) in the SEC's Accounting
Series Releases 130 and 135, as amended, although nothing contained herein shall
be construed as an admission by Affiliate that Affiliate is in fact an affiliate
of Target;
WHEREAS, it will be a condition to consummation of the Merger pursuant to
the Merger Agreement that (i) the attorneys for each of Acquiror and Target will
have delivered written opinions that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "CODE"), and (ii) the independent accounting firms that audit the
annual financial statements of Target and Acquiror will have delivered their
written concurrences with the conclusions of management of Target and Acquiror
to the effect that the Merger will be accounted for as a pooling of interests
under Accounting Principles Board Opinion No. 16;
WHEREAS, the execution and delivery of this Agreement by Affiliate is a
material inducement to Acquiror to enter into the Merger Agreement.
NOW, THEREFORE, intending to be legally bound, the parties hereby agree as
follows:
1. Acknowledgments by Affiliate. Affiliate has carefully read this
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Agreement and the Merger Agreement and has discussed the requirements of this
Agreement with Affiliate's professional advisors, who are qualified to advise
Affiliate with regard to such matters.
2. Compliance with Rule 145 and the Act.
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(a) Affiliate has been advised that (i) the issuance of shares of
Acquiror Common Stock in connection with the Merger is expected to be effected
pursuant to a Registration Statement on Form S-4 under the Securities Act of
1933, as amended (the "ACT"), and as such will not be deemed "restricted
securities" within the meaning of Rule 144 promulgated thereunder and resale of
such shares will not be subject to any restrictions other than as set forth in
Rule 145 of the Act unless otherwise transferred pursuant to an effective
registration statement under the Act or an appropriate exemption from
registration, (ii) Affiliate may be deemed to be an affiliate of Target, and
(iii) no sale, transfer or other disposition by Affiliate of any Acquiror Common
Stock received by Affiliate will be registered under the Act. Affiliate
accordingly agrees not to sell, transfer or otherwise dispose of any Acquiror
Common Stock issued to Affiliate in the Merger unless (x) such sale, transfer or
other disposition is made in conformity with the requirements of Rule 145(d)
promulgated under the Act, or (y) Affiliate delivers to Acquiror a written
opinion of counsel, reasonably acceptable to Acquiror in form and substance,
that such sale, transfer or other disposition is otherwise exempt from
registration under the Act.
(b) Acquiror will give stop transfer instructions to its transfer
agent with respect to any Acquiror Common Stock received by Affiliate pursuant
to the Merger and there will be placed on the certificates representing such
Acquiror Common Stock, or any substitutions therefor, a legend stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, APPLIES AND MAY ONLY BE TRANSFERRED IN CONFORMITY
WITH RULE 145(d) UNDER SUCH ACT OR IN ACCORDANCE WITH A WRITTEN
OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER IN THE FORM
AND SUBSTANCE THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED."
The legend set forth above shall be removed (by delivery of a substitute
certificate without such legend) and Acquiror shall so instruct its transfer
agent, if Affiliate delivers to Acquiror (i) satisfactory written evidence that
the shares have been sold in compliance with Rule 145 (in which case, the
substitute certificate will be issued in the name of the transferee), or (ii) an
opinion of counsel, in form and substance reasonably satisfactory to the effect
that public sale of the shares by the holder thereof is no longer subject to
Rule 145.
(c) To the extent required by applicable securities laws, Acquiror
agrees, for a period of two years from the date of this Agreement, to file with
the SEC in a timely manner all reports and other documents required of Acquiror
under the Act and the Securities Exchange Act of 1934, as amended.
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3. Covenants Related to Pooling of Interests. In accordance with SAB 65,
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during the period commencing 30 days preceding the Closing Date of the Merger
and continuing until the second day after the day that Acquiror publicly
announces financial results covering at least 30 days of combined operations of
Acquiror and Target, Affiliate will not sell, exchange, transfer, pledge,
distribute, or otherwise dispose of or grant any option, establish any "short"
or put-equivalent position with respect to or enter into any similar transaction
(through derivatives or otherwise) intended or having the effect, directly or
indirectly, to reduce its risk relative to any securities, or shares of Acquiror
Common Stock received by Affiliate in connection with the Merger. Acquiror may,
at its discretion, cause a restrictive legend to the foregoing effect to be
placed on Acquiror Common Stock certificates issued to Affiliate in the Merger
and place a stock transfer notice consistent with the foregoing with its
transfer agent with respect to the certificates, provided that such restrictive
legend shall be removed and/or such notice shall be countermanded promptly upon
expiration of the necessity therefor at the request of Affiliate.
Notwithstanding the foregoing, Affiliate will not be prohibited by the foregoing
from selling or disposing of shares, so long as such sale or disposition is in
accordance with the "de minimis" test set forth in SEC Staff Accounting Bulletin
No. 76 and so long as Affiliate has obtained Acquiror's prior written approval
of such sale or disposition.
4. Representations, Warranties and Covenants Related to Tax Effects of
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the Merger.
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(a) Affiliate is the beneficial owner of the number of shares of
Target Common Stock (including shares issuable upon exercise of stock options)
set forth on the last page of this Agreement and did not acquire any of the
Target Common Stock in contemplation of the Merger;
(b) Affiliate has not engaged in a Sale (as defined below) of any
shares of Target Common Stock in contemplation of the Merger;
(c) Affiliate has no plan or intention (a "PLAN") to engage in a sale,
exchange, transfer, redemption or reduction in any way of Affiliate's risk of
ownership or other disposition, directly or indirectly (such actions being
collectively referred to herein as a "SALE") of more than 50% of the shares of
Acquiror Common Stock to be received by Affiliate in the Merger;
(d) If Affiliate is a partnership, then the term "sale" as used in
paragraph (c) above shall be deemed to include any distribution to the partners
of the undersigned unless no recipient of any such distribution will receive
shares of Target Common Stock representing 1% or more of the shares of Target
Common Stock presently outstanding;
(e) Affiliate is not aware of, or participating in, any Plan on the
part of the Affiliates of Target to engage in a Sale or Sales of the Acquiror
Common Stock to be received in the Merger such that the aggregate fair market
value, as of the Effective Date of the Merger, of the shares subject to such
Sales would exceed 50% of the aggregate fair market value of all shares of
outstanding Target Common Stock immediately prior to the Merger.
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5. Miscellaneous.
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(a) For the convenience of the parties hereto, this Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
(b) This Agreement shall be enforceable by, and shall inure to the
benefit of and be binding upon, the parties hereto and their respective
successors and assigns. As used herein, the term "successors and assigns" shall
mean, where the context so permits, heirs, executors, administrators, trustees
and successor trustees, and personal and other representatives.
(c) This Agreement shall be governed by and construed, interpreted and
enforced in accordance with the internal laws of the State of Delaware (without
regard to the principles of conflict of laws thereof).
(d) If a court of competent jurisdiction determines that any provision
of this Agreement is not enforceable or enforceable only if limited in time
and/or scope, this Agreement shall continue in full force and effect with such
provision stricken or so limited.
(e) Counsel to and accountants for the parties to the Agreement shall
be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right
hereunder waived or any obligation excused, except by a written agreement signed
by both parties.
(g) No party shall be deemed an intended third party beneficiary of
this Agreement.
6. Termination. This Agreement shall terminate and shall have no further
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force or effect upon any termination of the Merger Agreement pursuant to Article
VII thereof.
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Executed as of the date shown on the first page of this Agreement.
RATIONAL SOFTWARE CORPORATION
By:
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Name:
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Title:
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PURE ATRIA CORPORATION
By:
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Name:
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Title:
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AFFILIATE
By:
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Name of Affiliate:
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Name of Signatory (if different from name of
Affiliate):
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Title of Signatory
(if applicable):
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Number of shares of Pure Atria Corporation Common Stock beneficially owned by
Affiliate:
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Number of shares of Pure Atria Corporation Common Stock subject to options
beneficially owned by Affiliate:
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***TARGET AFFILIATE AGREEMENT***
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