EXHIBIT 99.5
AFFILIATE AGREEMENT
November __, 1996
Rational Software Corporation
0000 Xxx Xxxxx Xxxxxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Reorganization dated
as of November __, 1996 (the "Agreement"), among Rational Software
Corporation, a Delaware corporation ("Acquiror"), Sunshine Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of Acquiror
("Merger Sub"), and SQA, Inc., a Delaware corporation ("Target"), Acquiror
will enter into a business combination with Target through the merger of
Merger Sub with and into Target (the "Merger"), with Target continuing as the
surviving corporation and as a wholly-owned subsidiary of Acquiror. Subject
to the terms and conditions of the Agreement, at the Effective Time (as
defined in the Agreement), all of the issued and outstanding shares of the
common stock, $.____ par value per share, of Target (the "Target Common
Stock") will be converted into the right to receive shares of the common
stock, $.01 par value per share, of Acquiror (the "Acquiror Common Stock"), on
the basis described in the Agreement.
The undersigned has been advised that as of the date hereof the
undersigned may be deemed to be an "affiliate" of Target, as the term
"affiliate" is (i) defined for purposes of paragraphs (c) and (d) of Rule 145
of the Rules and Regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933,
as amended (the "Act"), and/or (ii) used in and for purposes of Accounting
Series Releases 130 and 135, as amended, and Staff Accounting Bulletins 65 and
76 of the Commission.
The undersigned understands that the representations, warranties and
covenants set forth herein will be relied upon by Acquiror, stockholders of
Acquiror, Target, other stockholders of Target and their respective counsel
and accountants.
The undersigned represents and warrants to and agrees with Acquiror that:
1. The undersigned has full power to execute and deliver this Affiliate
Agreement and to make the representations and warranties herein and to perform
its obligations hereunder.
2. The undersigned has carefully read this letter and the Agreement and
discussed its requirements and other applicable limitations upon its ability
to sell, transfer or otherwise dispose
of Target Common Stock and Acquiror Common Stock to the extent the undersigned
felt necessary, with its counsel or counsel for Target.
3. The undersigned shall not make any sale, transfer or other
disposition of Acquiror Common Stock in violation of the Act or the Rules and
Regulations.
4. The undersigned has been advised that the issuance of shares of
Acquiror Common Stock to the undersigned in connection with the Merger has
been or will be registered with the Commission under the Act on a Registration
Statement on Form S-4. However, the undersigned has also been advised that,
since the undersigned may be deemed to have been an affiliate of Target and
the distribution by the undersigned of any Acquiror Common Stock has not been
registered, and is not exempt, under the Act, the undersigned may not sell,
transfer or otherwise dispose of Acquiror Common Stock issued to the
undersigned in the Merger unless (i) such sale, transfer or other disposition
has been registered under the Act, (ii) such sale, transfer or other
disposition is made in conformity with the requirements of Rule 145
promulgated by the Commission under the Act, or (iii) in the opinion of
counsel reasonably acceptable to Acquiror, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
5. Acquiror is under no obligation to register the sale, transfer or
other disposition of Acquiror Common Stock by the undersigned or on its behalf
under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
6. Stop transfer instructions will be given to Acquiror's transfer
agent with respect to the Acquiror Common Stock and that there will be placed
on the certificates for the Acquiror Common Stock issued to the undersigned,
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 APPLIES. THE SHARES REPRESENTED BY
THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE
WITH THE TERMS OF AN AGREEMENT DATED NOVEMBER __, 1996
BETWEEN THE REGISTERED HOLDER HEREOF AND RATIONAL SOFTWARE
CORPORATION, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF RATIONAL SOFTWARE CORPORATION."
7. Unless the transfer by the undersigned of its Acquiror Common Stock has
been registered under the Act or is a sale made in conformity with the
provisions of Rule 145, Acquiror
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reserves the right to place the following legend on the certificates issued
any transferee of the undersigned:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE
ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933."
8. The legends set forth in paragraphs 6 and 7 above shall be removed
by delivery of substitute certificates without such legend if the undersigned
shall have delivered to Acquiror a copy of a letter from the staff of the
Commission, or an opinion of counsel in form and substance reasonably
satisfactory to Acquiror, to the effect that such legend is not required for
purposes of the Act.
9. The undersigned is the beneficial owner of (i.e. has sole or shared
voting or investment power with respect to) all the shares of Target Common
Stock and options to purchase Target Common Stock indicated on the last page
hereof (the "Target Securities"). Except for Target Securities, the
undersigned does not beneficially own any shares of Target Common Stock or any
other equity securities of Target or any options, warrants or other rights to
acquire any equity securities of Target.
10. The undersigned agrees that during the period commencing on the date
hereof and ending at such time as financial results covering at least 30 days
of combined operations of Target and Acquiror have been published by Acquiror,
in the form of a quarterly earnings report, an effective registration
statement filed with the Commission, a report to the Commission on Form 10-K,
10-Q or 8-K, or any other public filing or announcement which includes the
combined results of operations, it will not engage, in any sale, exchange,
transfer, pledge, disposition of or grant of any option, the establishment of
any "short" or put-equivalent position with respect to, or the entry into any
similar transaction intended to reduce the risk of the undersigned's risk of
ownership of or investment in, any of the following:
(a) any shares of Acquiror Common Stock which the undersigned may
acquire in connection with the Merger, or any securities which may be
paid as a dividend or
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otherwise distributed thereon or with respect thereto or issued or
delivered in exchange or substitution therefor (all such shares and other
securities being referred to herein, collectively, as "Restricted
Securities"), or any option, right or other interest with respect to any
Restricted Securities;
(b) any Target Securities; or
(c) any shares of Target Common Stock or other Target equity
securities which the undersigned purchases or otherwise acquires after
the execution of this Affiliate Agreement,
so as to interfere with Acquiror accounting for the Merger as a pooling of
interests.
11. Acquiror agrees to publish, as promptly as practicable following the
Merger, financial results covering at least 30 days of combined operations of
Target and Acquiror in the form of a quarterly earnings report, an effective
registration statement filed with the Commission, a report to the Commission
on Form 10-K, 10-Q or 8-K, or any other public filing or announcement that
includes the combined results of operations of Acquiror and Target; provided,
--------
however, that Acquiror shall be under no obligation to publish any such
-------
financial information other than with respect to a fiscal quarter of Acquiror.
12. This Agreement may not be amended or waived other than by a writing
signed by both the undersigned and Acquiror.
13. In the event they were to become available, the undersigned will not
exercise dissenters' rights in connection with the Merger.
14. The undersigned has no plan or intention to engage in a direct or
indirect sale, exchange, redemption, disposition or conveyance or any
transaction that would have the effect of reducing in any way the
undersigned's risk of ownership including, but not limited to, distributions
by a partnership to its partners and by a corporation to its stockholders, of
the shares of Acquiror Common Stock to be received by the undersigned in the
Merger. The undersigned acknowledges that he is giving this representation
and covenant to enable Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP and Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx to opine that the Merger constitutes a reorganization within
the meaning of Section 368 of the Code and further recognizes that significant
adverse tax consequences might result if such representation is not true. The
undersigned understands and agrees that, in connection with the Merger, the
undersigned will be required to restate the foregoing representation on or
about the Effective Time of the Merger.
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NUMBER OF SHARES OF TARGET COMMON STOCK
BENEFICIALLY OWNED BY THE UNDERSIGNED:
________________
NUMBER OF SHARES OF TARGET COMMON STOCK
SUBJECT TO OPTIONS
BENEFICIALLY OWNED BY THE UNDERSIGNED:
________________
Very truly yours,
_________________________________________
(print name of stockholder above)
By: ___________________________________
Name:
Title:
(if applicable)
Accepted this __ day of
November, 1996, by
RATIONAL SOFTWARE CORPORATION
By: ______________________________
Name:
Title:
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