NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
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THE SPECIAL MEETING
GENERAL
This Proxy Statement is being furnished by Cayenne to its stockholders in connection with the solicitation by and on behalf of the Cayenne Board of proxies for use at the Special Meeting. The Special Meeting will be held on _________, September __, 1998, at 9:00 a.m., local time, at the offices of Ropes & Gray, 36th Floor, One International Place, Boston, Massachusetts 02110. The purpose of the Special Meeting is for holders of Cayenne Capital Stock to
consider and vote upon the approval of the Merger Agreement.
THE CAYENNE BOARD BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF CAYENNE AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF CAYENNE VOTE "FOR" THE APPROVAL OF THE MERGER AGREEMENT.
VOTING AT THE SPECIAL MEETING
The holders of record of shares of Cayenne Capital Stock at the close of business on September __, 1998, the Record Date, are entitled to vote such shares at the Special Meeting. At the close of business on the Record Date, the outstanding Cayenne Capital Stock consisted of (i) 21,333,398 shares of Cayenne Common Stock, held of record by ___ holders and (ii) 170,000 shares of Cayenne Preferred Stock, held of record by five holders. Shares of Cayenne Capital Stock owned by Cayenne or by any subsidiary of Cayenne are not considered to be
outstanding.
The holders of shares representing a majority in interest of each class of Cayenne Capital Stock outstanding at the close of business on the Record Date will constitute a quorum for the transaction of business at the Special Meeting.
If the persons present or represented by proxy at the Special Meeting do not constitute a quorum as provided in the immediately preceding sentence, the Special Meeting may be adjourned to a subsequent date for the purpose of obtaining a quorum.
Each share of Cayenne Common Stock is entitled to one vote at the Special Meeting, and each share of Cayenne Preferred Stock is entitled to [53] votes (i.e., a number of votes equal to the number of shares of Cayenne Common Stock into which one share of Cayenne Preferred Stock was convertible at the Record Date) at the Special Meeting. The approval of the Merger Agreement requires (i)
the affirmative vote of the holders of two-thirds of the outstanding shares of Cayenne Capital Stock entitled to vote at the Special Meeting, voting together as a single class, (ii) the affirmative vote of the holders of two-thirds of the outstanding shares of Cayenne Preferred Stock entitled to vote at the Special
Meeting, voting separately by class, and (iii) the affirmative vote of the holders of two-thirds of the outstanding shares of Cayenne Common Stock entitled to vote at the Special Meeting, voting separately by class. As a result, abstentions on such proposal will have the same effect as a vote against such proposal. Broker non-votes, which occur when brokers who are the record holders
of shares do not exercise discretionary voting authority with respect to those beneficial owners who have not provided voting instructions, will also have the same effect as a vote against such proposal. Abstentions, however, will be included in determining the number of shares held by persons present or represented by proxy at the Special Meeting for purposes of determining whether
a quorum exists.
At the Record Date, the Preferred Stockholders owned, in the aggregate, (i) 100% of the outstanding shares of Cayenne Preferred Stock and (ii) less than one percent of the outstanding shares of Cayenne Common Stock, representing approximately [29.8%] of the combined voting power of the then-outstanding
shares of Cayenne Capital Stock. Each of the Preferred Stockholders has agreed to vote the shares of Cayenne Capital Stock beneficially owned by such Preferred Stockholder for the approval of the Merger Agreement. See "The Stockholder Agreement."
Required Votes. The affirmative vote of the holders of two-thirds of the outstanding shares of Cayenne Capital Stock entitled to vote at the Special Meeting, voting together as a single class, the affirmative vote of the holders of two-thirds of the outstanding shares of Cayenne Preferred Stock entitled to vote at the Special Meeting, voting separately by class, and the affirmative vote of the holders of two-thirds of the outstanding shares of Cayenne Common
Stock entitled to vote at the Special Meeting, voting separately by class, are required for the approval of the Merger Agreement. At the close of business on the Record Date, Integral Capital Partners III, L.P., Integral Capital Partners International III, L.P., Winston Partners L.P., Winston Partners II LLC and Winston Partners II LDC (collectively, the "Preferred Stockholders") owned all
of the outstanding shares of Cayenne Preferred Stock, representing approximately [29.8%] of the combined voting power of the then-outstanding shares of Cayenne
Capital Stock. Each of the Preferred Stockholders has agreed to vote the sharesof Cayenne Capital Stock beneficially owned by such Preferred Stockholder for the approval of the Merger Agreement.
If the Merger Agreement is terminated (i) under the circumstances described in the immediately preceding sentence or (ii) because the Special Meeting has been held and the Merger Agreement has not been
approved by an affirmative vote of the holders of the requisite number of shares of Cayenne Capital Stock, Cayenne will be required to pay to Sterling Software a fee in the amount of $570,000. In addition, if the circumstances referred to in the immediately preceding sentence shall have occurred (regardless of whether the Merger Agreement shall have been terminated), the stock option granted by Cayenne to Sterling Software in connection with the execution and delivery of the Merger Agreement would become exercisable. See "The Merger --The Merger
Agreement --Termination; Effects of Termination" and "The Stock Option
Agreement."
THE STOCK OPTION AGREEMENT
As a condition to its willingness to enter into the Merger Agreement, Sterling oftware required that Cayenne enter into an agreement with Sterling Software (the "Stock Option Agreement"), pursuant to which Cayenne granted Sterling Software an option (the "Option") to purchase up to 4,245,346 shares of Cayenne Common Stock or such other number of shares of Cayenne Common Stock as equals
19.9% of the issued and outstanding shares of Cayenne Common Stock at the time of exercise of the Option at a price per share of $0.375, subject to reduction as described in the next sentence.
As a condition to its willingness to enter into the Merger Agreement, Sterling Software required that the Preferred Stockholders enter into an agreement with Sterling Software (the "Stockholder Agreement"), pursuant to which, among other things, (i) each Preferred Stockholder agreed to vote all of the shares of Cayenne Preferred Stock beneficially owned by such Preferred Stockholder for the
approval of the Merger Agreement and (ii) each Preferred Stockholder granted to Sterling Software an option to purchase such shares in exchange for a cash payment equal to the product of (a) $20.00 and (b) the number of shares of Cayenne Preferred Stock so purchased. As of the Record Date, the Preferred Stockholders beneficially owned all of the outstanding shares of Cayenne Preferred Stock, representing approximately [29.8%] of the combined voting power of the then-outstanding shares of Cayenne Capital Stock. See "The Stockholder Agreement."
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