NEON Systems Acquires ClientSoft and Solidifies Leadership in Mainframe Web Services Market; Acquisition Reinforces NEON's Vision to Become the Leader in Mainframe Integration

Business Wire, Dec 14, 2004

SUGAR LAND, Texas -- NEON Systems Inc. (Nasdaq:NEON) today announced it has acquired ClientSoft Inc., a privately-held mainframe integration software vendor based in Miami, known for its leadership in secure, high-performance legacy integration solutions for Microsoft .NET, Java and Web services environments. ClientSoft introduced the industry's first mainframe Web services solution in December 2001 and is acknowledged by most major industry research firms as the category leader in mainframe Web services.

NEON's acquisition of ClientSoft brings together two of the industry-leading mainframe Web services products, ClientSoft's ServiceBuilder and NEON's Shadow z/Services, providing customers and prospective customers with the most robust set of solutions to support Service-Oriented Architectures (SOA) and composite application development. Having already established itself as a leader in real-time business event management with its Shadow z/Events product, the company now has a clear technological advantage over its competitors with the most advanced and complete unified platform for mainframe integration. The ability to support high value Services and Events is considered an essential requirement for underpinning the real-time enterprise architectures being developed by major business and government organizations. The combination of the collective vision, knowledge, leadership, industry expertise, management and quality employees of NEON Systems, ClientSoft and InnerAccess (acquired July 2004) is unmatched by our competitors and will accelerate the introductions of customer-driven solutions and leading edge technology.

ACQUISITION OVERVIEW

According to NEON's management, the acquisition will:

--Combine the proven capabilities of the acknowledged leader in mainframe Web services to NEON's existing Web services capability, providing the most complete, market-tested solution for customers to re-purpose mainframe application logic or screens to rapidly support new business requirements

--Provide NEON's existing 300 mainframe integration customers with immediate access to an expanded range of industry-leading Web services and consulting services

--Add an additional 180 high-quality customers to NEON's roster, expanding its ability to cross-sell Shadow technology supporting real-time event integration and SQL access to mainframe datasources

--Expand NEON's Professional Services organization with the deepest and most experienced mainframe Web services expertise in the market

--Add seamless integration capabilities for Microsoft .NET to NEON's existing expertise with J2EE compliant application development environments

"ClientSoft brings an impressive roster of talent, technology and customers to NEON which, when coupled with its recognized leadership in the mainframe Web services market, reinforces NEON's vision of becoming the leading independent vendor for mainframe integration software and services," said Mark J. Cresswell, president and CEO, NEON Systems. "In conjunction with our pioneering support for Event Driven Architectures and extensive experience at the high-end of mission critical application requirements, this acquisition establishes NEON as the only viable alternative to IBM for mainframe integration. No other independent vendor can match our combination of strategic customer deployments, technology and expertise across Web services, real-time events, SQL access or screen logic integration."

"We are delighted to join forces with NEON Systems, a recognized leader in mainframe integration. The combination of our market-leading Web services technology with NEON's expertise in real-time events and data level access creates a unique opportunity in the market for customers and further positions NEON to become the industry's mainframe integration expert," said William W. Wilson III, president and CEO, ClientSoft Inc.

TRANSACTION TERMS AND TIMING

The Asset Purchase transaction closed on Dec. 13, 2004. NEON paid ClientSoft a cash purchase price of $10.5 million and issued to ClientSoft a warrant to acquire up to 1,125,000 shares of NEON common stock at an exercise price of 1.33 times the closing price of NEON common stock on Dec. 13, 2004. NEON also agreed to register the underlying shares of common stock within the next year. NEON acquired substantially all of the assets of ClientSoft Inc., including its ClientBuilder and ServiceBuilder product lines, customer contracts, maintenance obligations and ClientSoft employees. Among such new employees are: Robert Evelyn, the chief operations officer and SVP of Technology of ClientSoft, who will be added to NEON's executive management as senior vice president of Strategy and Solutions; Hugh Raiford, senior vice president of Corporate Development, who will become vice president of Corporate Development of NEON Systems; and Fady Moussallam, vice president of Engineering at ClientSoft, who will become vice president of Product Strategy with NEON Systems.

Effective upon closing of the transaction, the NEON Board of Directors voted to expand the number of directors on its Board from five to six directors and appointed William W. Wilson III, president and CEO of ClientSoft, to fill the open board seat.