SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY SECTION14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section14a-11(c) or
Section14a-12
INFORMIX CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
Not Applicable
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(2) Aggregate number of securities to which transaction
applies:
Not Applicable
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
$1,000,000,000, all of which is a cash payment
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(4) Proposed maximum aggregate value of transaction:
$1,000,000,000
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(5) Total fee paid:
$200,000
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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'
PRELIMINARY COPY
INFORMIX CORPORATION
MAY 10, 2001
Dear Informix Stockholder:
I am writing to you regarding the proposed sale of the our relational
database management system business to IBM in a cash transaction valued at
$1 billion. Pursuant to a master purchase agreement, the company will sell
substantially all of the assets of the database business to IBM and IBM will
generally assume the current liabilities of the database business and future
obligations under the assigned contracts.
Following this sale, the company will focus on growing and expanding our
information asset management solutions business, Ascential Software. As part of
the sale of the database business, IBM will enter into a strategic alliance with
Ascential Software to jointly promote and market information asset management
solutions based on Ascential's DataStage, DataStage 390 and Media360 products.
To more accurately reflect the new focus of our company, we are proposing to
change the company's name to "Ascential Software Corporation."
We intend to apply part of the proceeds from the transaction to fund the
business of Ascential Software. We also intend to return a substantial portion
of the proceeds to our stockholders in the form of a stock reduction program.
You will be asked to consider and vote upon the proposed sale of the
database business to IBM, as well as the proposal to change the name of the
company to Ascential Software Corporation, at a special meeting of our
stockholders which will be held at the Wyndham Westborough Hotel-Viking Room,
Westborough, Massachusetts on June 8, 2001 at 10:00 a.m., local time.
AFTER CAREFUL CONSIDERATION, OUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED
THE SALE OF THE DATABASE BUSINESS AND THE CHANGE OF THE NAME OF THE COMPANY, AND
HAS DETERMINED THAT THE SALE IS EXPEDIENT AND FOR THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS AND THAT THE CHANGE OF THE NAME OF THE COMPANY IS
IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE SALE OF THE
DATABASE BUSINESS PURSUANT TO THE MASTER PURCHASE AGREEMENT AND THE RELATED
AGREEMENTS AND FOR THE CHANGE OF THE NAME OF THE COMPANY.
Our board of directors considered a number of factors in evaluating the
transaction and consulted with its professional advisors, including legal,
financial and accounting advisors. Included in the attached proxy statement are
the opinions of our financial advisors, Credit Suisse First Boston Corporation
and SG Cowen Securities Corporation, relating to the fairness, from a financial
point of view, of the consideration provided for in the sale of the database
business. You are encouraged to read these opinions carefully and in their
entirety. The attached proxy statement also provides detailed information about
the sale of the database business, the master purchase agreement and the related
documents. Please give this information your careful attention.
Your vote is very important, regardless of the number of shares you own. The
transaction must be approved by the holders of a majority of our common stock.
To vote your shares, you may use the enclosed proxy card or attend the special
meeting in person. ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE, EVEN IF YOU CURRENTLY
PLAN TO ATTEND THE SPECIAL
MEETING. To approve the sale of the database business pursuant to the master
purchase agreement and related agreements and to approve the change of the name
of the company, you MUST vote "FOR" each proposal by following the instructions
stated on the enclosed proxy card. If you do not vote at all or abstain from
voting, your non-vote or abstention will, in effect, count as a vote against the
sale of the database business and the change of the company's name. Returning
the enclosed proxy will not prevent you from voting in person at the special
meeting but will assure that your vote is counted if you are unable to attend
the special meeting.
Thank you for your support of our company. I look forward to seeing you at
the special meeting.
Sincerely,
Peter Gyenes
President, Chief Executive
Officer and Chairman of the
Board of Directors
PRELIMINARY COPY
INFORMIX CORPORATION
50 WASHINGTON STREET
WESTBOROUGH, MASSACHUSETTS 01581
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NOTICE AND PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 2001
TO THE STOCKHOLDERS OF INFORMIX CORPORATION:
Notice is hereby given that a special meeting of the stockholders of
Informix Corporation, or the company, will be held at the Wyndham Westborough
Hotel--Viking Room, 5400 Computer Drive, Westborough, Massachusetts on June 8,
2001 at 10:00 a.m., local time, for the following purpose:
1. SALE PROPOSAL: To consider and vote upon the approval of the sale of our
database business pursuant to a master purchase agreement, dated as of
April 24, 2001 between the company, Informix Software, Inc., and
International Business Machines Corporation, and related agreements. The
full text of the master purchase agreement is included as Annex A to the
attached proxy statement.
2. NAME CHANGE PROPOSAL: To consider and vote upon the approval of an amendment
to our restated certificate of incorporation to change our name to
"Ascential Software Corporation." The change of the company's name is
conditioned upon the closing of the sale of the database business.
3. To consider and act upon any matters incidental to the foregoing and
transact such other business as may properly come before the special meeting
or any adjournment, continuation or postponement thereof.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE SALE OF THE
DATABASE BUSINESS, AND THE CHANGE OF THE NAME OF THE COMPANY, AND HAS DETERMINED
THAT THE SALE OF THE DATABASE BUSINESS IS EXPEDIENT AND FOR THE BEST INTERESTS
OF THE COMPANY AND ITS STOCKHOLDERS AND THAT THE CHANGE OF THE NAME OF THE
COMPANY IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS. THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
SALE OF THE DATABASE BUSINESS PURSUANT TO THE MASTER PURCHASE AGREEMENT AND
RELATED AGREEMENTS AND FOR THE CHANGE OF THE NAME OF THE COMPANY.
The board of directors has fixed the close of business on May 3, 2001 as the
record date for the determination of stockholders entitled to notice of and to
vote at the special meeting. A list of such stockholders will be open for
examination by any stockholder at the special meeting and, during normal
business hours, from May 29, 2001 to the date of the special meeting at the
offices of Informix Corporation, 50 Washington Street, Westborough,
Massachusetts.
Accompanying this notice is a proxy card. WHETHER OR NOT YOU EXPECT TO
ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY. If you plan to attend the special meeting and wish
to vote your shares personally, you may do so at any time before the proxy is
voted.
All stockholders are cordially invited to attend the special meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Gary Lloyd
Secretary
Westborough, Massachusetts
May 10, 2001
PRELIMINARY COPY
INFORMIX CORPORATION
50 WASHINGTON STREET
WESTBOROUGH, MASSACHUSETTS 01581
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PROXY STATEMENT
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SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 2001
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SUMMARY TERM SHEET
THIS SUMMARY TERM SHEET HIGHLIGHTS SELECTED INFORMATION CONTAINED IN THIS
PROXY STATEMENT AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO
YOU. TO UNDERSTAND THE PROPOSED SALE OF THE DATABASE BUSINESS AND RELATED
TRANSACTIONS AND THE PROPOSED NAME CHANGE FULLY, AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE SALE OF THE DATABASE BUSINESS AND RELATED
TRANSACTIONS AND THE PROPOSED NAME CHANGE, YOU SHOULD READ CAREFULLY THE ENTIRE
PROXY STATEMENT AND THE OTHER DOCUMENTS TO WHICH WE HAVE REFERRED YOU, INCLUDING
THE MASTER PURCHASE AGREEMENT ATTACHED AS ANNEX A. SEE "WHERE YOU CAN FIND MORE
INFORMATION" IN THIS PROXY STATEMENT.
PRINCIPAL PARTIES TO THE TRANSACTION (PAGE )
INFORMIX CORPORATION. We are a global provider of information management
software. We are presently made up of two operating businesses, our relational
database management systems business, which operates under the Informix name,
and the information asset management business, which operates under the
Ascential name. We refer to ourselves as the "company," "we," "us" or "our." We
are a Delaware Corporation and our principal corporate offices are located at 50
Washington Street, Westborough, Massachusetts 01581 and our telephone number is
(508) 366-3888.
IBM. International Business Machines Corporation, or IBM, is the world's
largest information technology company, with 80 years of leadership in helping
businesses innovate. IBM develops and manufactures advanced information
technologies, including computer systems, software, and microelectronics. IBM
translates these advanced technologies into value for its customers through its
professional solutions and services worldwide. IBM's principal executive offices
are located at One New Orchard Road, Armonk, New York 10504 and its telephone
number is (914) 499-1900.
THE SALE OF THE DATABASE BUSINESS (PAGE )
Pursuant to the terms of a master purchase agreement, dated as of April 24,
2001 between the company and IBM and related agreements, the company will sell
substantially all of the assets related to its database business (including the
research, development, manufacture, distribution, marketing, sale and service of
relational database management systems) to IBM and IBM will assume certain
liabilities related to the database business, consisting primarily of current
liabilities and future obligations under assigned contracts. IBM will offer
employment to substantially all of the employees engaged in our database
business.
IBM has agreed to purchase the database business, including a specified
amount of net working capital, from the company in exchange for $1.0 billion in
cash and the assumption of certain specified liabilities. $100.0 million will be
held back by IBM from the purchase price for 18 months after closing to satisfy
certain indemnification obligations of the company should they arise. IBM will
pay interest at a rate of 6% per annum, from the date of the closing of the sale
of the database business, on the amount of the holdback returned to the company.
If the net working capital transferred to IBM
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exceeds $124.0 million, IBM will pay the company an amount equal to 50% of the
excess. If the net working capital transferred to IBM is less than
$124.0 million, the company will pay IBM an amount equal to the difference. The
company has also agreed to pay IBM an amount equal to 18% of certain deferred
revenues arising from the database business which are set forth on the
December 31, 2000 balance sheet of the database business and for which the
company had received payment prior to December 31, 2000.
The company will indemnify IBM for certain damages, if incurred, arising
from the breach of its representations and warranties and covenants and from
assets and liabilities not expressly acquired or assumed by IBM. The company
will not be required to indemnify IBM for damages arising from breaches of its
representations and warranties until the cumulative amount of IBM's
indemnification claims exceeds $10.0 million and then only for the excess. The
$100.0 million holdback of the purchase price will represent the sole source of
recovery by IBM for breaches of representations and warranties in the master
purchase agreement, except for breaches of representations and warranties
related to taxes and environmental matters.
IBM has agreed to reimburse the company for up to $21.0 million of severance
costs it incurs related to the company's employees who do not join IBM.
The company has agreed generally not to compete in the database business and
not to hire or solicit former company employees who are hired by IBM as part of
the sale of the database business for a period of five years.
OTHER AGREEMENTS WITH IBM
As part of the sale of the database business, foreign subsidiaries of the
company and IBM will enter into country acquisition agreements for the sale of
the assets of the database business located outside of the United States for
each country in which a portion of the database business is located. (Page )
The company and IBM entered into an employee matters agreement which
contains terms and conditions regarding employee matters arising from the sale
of the database business. (Page )
As part of the sale of the database business, the company and IBM entered
into a strategic alliance to take effect on the closing pursuant to which they
will jointly promote and market information asset management solutions based on
Ascential's DataStage, DataStage 390 and Media 360 products as well as IBM's DB2
UDB and related product platform. (Page )
IBM and the company will each need certain transition services from the
other for a limited period of time following the closing of the sale of the
database business. To facilitate the provision of these services, the company
and IBM have entered into transition services agreements. (Page )
In connection with the master purchase agreement, we will retain a
non-exclusive, perpetual, royalty-free license to certain patents and we will
grant IBM a non-exclusive, perpetual, royalty-free license to certain patents.
Pursuant to a source code license agreement, IBM will grant us a non-exclusive,
perpetual, royalty-free license to use, modify and sublicense certain software
products embedded in our "DataStage" and successor products. Finally, pursuant
to an OEM agreement with IBM, we will receive a non-exclusive license to market
certain IBM software products bundled in certain products of Ascential. (Page )
In connection with the sale of the database business, IBM and the company
have determined to settle current outstanding litigation with respect to their
patents for no separate consideration, and they entered into a settlement
agreement for that purpose to take effect on the closing. (Page )
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USE OF PROCEEDS (PAGE )
The company intends to use a portion of the after-tax proceeds from the sale
of the database business, estimated to be approximately $800 million assuming
that the company receives the full holdback amount and that the sale is
consummated in each of the countries in which the database business operates, to
fund the Ascential business through investment in new products and marketing
initiatives and potentially through acquisitions. While the company investigates
and evaluates acquisition opportunities as part of its regular business
operations, the company is not currently in discussions with respect to any
specific acquisitions.
The company also intends to use a substantial portion of the proceeds from
the sale of the database business to fund a stock reduction program. The amount
of proceeds which will be utilized in the stock reduction program have not yet
been determined, and will depend upon the cash needs and growth opportunities of
the company, including acquisition opportunities. The company intends to
structure any stock reduction program as a partial liquidation for federal
income tax purposes. If the stock reduction program is treated as a partial
liquidation, then amounts received by the company's noncorporate stockholders
will be treated as full payment in exchange for the portion of their stock that
is redeemed, generally resulting in capital gain or loss. There can be no
assurance, however, that such tax treatment will ultimately be available to
noncorporate stockholders. Amounts received by the company's corporate
stockholders (and amounts received by noncorporate stockholders if the stock
reduction program is not treated as a partial liquidation) will be treated as
either a distribution (generally ordinary income) or as payment in exchange for
a portion of their stock (generally capital gain or loss), depending upon their
particular facts and circumstances.
FACTORS CONSIDERED BY OUR BOARD OF DIRECTORS (PAGE )
In reaching its conclusion to approve the sale of the database business, our
board of directors consulted with its professional advisors, including legal,
financial and accounting advisors, and considered the short-term and long-term
interests of the company and its stockholders, focusing on a variety of
business, financial, industry and market factors, including without limitation,
the following:
POSITIVE FACTORS
- The financial performance and future prospects of our database business,
including its slower growth as compared to the growth of the Ascential
business, the current economic and market conditions in the database
industry, including the company's declining market share, and the fairness
of the consideration received for our database business, which fairness is
supported by the opinions from our financial advisors, Credit Suisse First
Boston Corporation and SG Cowen Securities Corporation, sometimes referred
to as SG Cowen;
- That the sale of our database business pursuant to the master purchase
agreement enables us to realize immediately the value of our database
business in cash, increasing our financial flexibility, including our
ability to engage in a stock reduction program which the company intends
to structure as a partial liquidation for federal income tax purposes;
- That the sale of our database business also positions our stockholders to
benefit from a company primarily focused on the faster growing information
asset management software and solutions industry, where we have a more
favorable competitive position;
- That in connection with the sale of our database business, we will enter
into a strategic alliance with IBM to promote and market data warehouse
and digital asset management offerings for the information asset
management market which will bring the advanced features of Ascential's
products to IBM's strategic hardware and software platforms, while
creating an additional channel of distribution for Ascential's information
asset management solutions;
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- The benefits of selling our database business to IBM, which will be able
to realize the value of our database business and employees and continue
to favorably service our customers;
- That the existing patent litigation between the company and IBM will be
settled; and
- The financial presentations of Credit Suisse First Boston and SG Cowen to
the board of directors of the company, including their opinions regarding
the fairness from a financial point of view, to the company of the
consideration provided for in the sale of the database business, which are
described more fully under the caption "Opinions of Financial Advisors to
Our Company."
NEGATIVE FACTORS
- That the sale of the database business will be a taxable transaction to
the company;
- That the consummation of the sale of our database business is conditioned
upon a number of factors including: approval by our stockholders; the
accuracy of the representations and warranties of the parties and
compliance by the parties with their obligations under the master purchase
agreement; expiration of the applicable waiting period under domestic and
foreign antitrust regulatory schemes; absence of a material adverse change
related to either our database customers entering into long term
commitments to purchase competing database business products with persons
other than IBM if such commitments contractually or effectively preclude
IBM from selling database products to such customers, or the loss of our
database business employees; and receipt of third party consents;
- That the failure of the sale to be consummated for any reason could
adversely affect our database business through loss of customers, loss of
employees and other factors;
- That after the consummation of the sale of our database business, the
Ascential business will represent substantially all of our business; that
as a result, our total license and service revenues will be substantially
lower than they are currently; and that while we believe Ascential has
significant growth potential, to date Ascential is a much smaller portion
of our business than our database business, has not generated a profit and
has incurred significant operating losses;
- That we have agreed to indemnify IBM against certain losses and have
agreed to have $100.0 million of the purchase price held back by IBM for
18 months to satisfy claims for the payment of these losses should they
arise;
- That members of our management have interests in the sale of the database
business that may conflict with the interest of our stockholders;
- That the master purchase agreement prevents us from soliciting other
transactions to acquire us or our assets, and requires us to pay IBM
$35.0 million in certain circumstances, including if our board of
directors withdraws or modifies its recommendation of the transaction in a
manner adverse to IBM and IBM terminates the master purchase agreement, or
if a competing takeover proposal has been made, our stockholders do not
approve the transaction and within 12 months of termination the company
enters into an agreement with respect to a takeover proposal; and that in
addition, we are required to reimburse up to $5.0 million of IBM's fees
and expenses in the event that our stockholders fail to approve the sale
of the database business;
- That we will be responsible for substantially all preclosing liabilities
of the database business, except for current liabilities that will be
assumed by IBM at closing; and
- The probability that stockholders who are "value" investors, as opposed to
"growth" investors, may sell shares of our common stock, resulting in
higher than normal levels of selling of our common stock for a period of
time and a decline in the price of our common stock.
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The company's board of directors believed that certain of these negative
factors were unlikely to occur or unlikely to have a material impact on the
company, while others could be avoided or mitigated by the company, and that
overall, the risks associated with the sale of the database business to IBM were
outweighed by the potential benefits of the sale of the database business to
IBM.
CHANGE OF THE NAME OF THE COMPANY (PAGE )
The name "Informix" has traditionally been identified with the relational
database management systems portion of our business, and it is these assets that
are being sold pursuant to the master purchase agreement and related agreements.
The name "Ascential" has, on the other hand, traditionally been identified
with the portion of the company's business that manufactures, distributes,
markets and sells information asset management systems and solutions.
Once the sale of the database business has been completed, our board of
directors believes that the name "Ascential Software Corporation" better
identifies the company and its primary business.
Accordingly, as part of the sale of the database business to IBM, we have
agreed to transfer our rights to the name "Informix." If our stockholders do not
approve the change in our name, IBM will grant us a limited right to use
"Informix Corporation" as our corporate name. If this occurs, we will be
required to use reasonable efforts to avoid confusion with IBM's use of the name
"Informix" and will be required to continue to use commercially reasonable
efforts to obtain the approval of our stockholders to change the company's
corporate name.
RECOMMENDATION OF THE BOARD OF DIRECTORS (PAGE )
At a meeting on April 23, 2001, our board of directors unanimously
determined that the sale of the database business pursuant to the master
purchase agreement is expedient, and for the best interests of the company and
its stockholders and unanimously recommended that the stockholders approve the
sale of the database business pursuant to the master purchase agreement and the
related agreements and the board of directors has also unanimously determined
that the change of the name of the company is in the best interests of the
company and its stockholders.
OPINIONS OF FINANCIAL ADVISORS (PAGE )
The company's financial advisors, Credit Suisse First Boston and SG Cowen
Securities Corporation, have delivered opinions to the company's board of
directors as to the fairness, from a financial point of view, to the company of
the consideration provided for in the sale of the database business. The full
text of Credit Suisse First Boston's written opinion, dated April 24, 2001, is
attached to this document as Annex B, and the full text of SG Cowen's written
opinion, dated April 24, 2001, is attached to this document as Annex C. Credit
Suisse First Boston's opinion and SG Cowen's opinion are addressed to the
company's board of directors and do not constitute recommendations to any
stockholder as to any matter relating to the sale of the database business. We
encourage you to read each of these opinions carefully in their entirety for a
description of the procedures followed, assumptions made, matters considered and
limitations on the review undertaken.
THE COMPANY'S BUSINESS FOLLOWING THE COMPLETION OF THE SALE OF THE DATABASE
BUSINESS (PAGE )
After the consummation of the proposed sale of the database business to IBM,
the company will continue to design, develop, manufacture, market and sell
information asset management systems and solutions to enterprises and government
organizations for a wide variety of industries under the Ascential Software
name.
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INTEREST OF CERTAIN PERSONS IN THE SALE (PAGE )
Some of our directors, executive officers and employees have interests in
the sale of the database business that may differ from your interests as a
stockholder. Our board of directors was aware of these interests and considered
them, among other matters, in approving and recommending the sale of the
database business.
The company has had in effect change of control and severance agreements
with each of the current executive officers of the company. In the event of a
change of control, these agreements provide for acceleration of unvested
options, excise tax protections and cash severance payments upon involuntary, or
in certain cases voluntary, termination of employment, other than terminations
for cause. Each of Peter Gyenes, our president, chief executive officer and
chairman of our board of directors, and Peter Fiore, our senior vice president
and president, Ascential Software, has agreed to waive his rights under these
agreements in connection with the sale of the database business. Upon approval
of the sale of the database business by our stockholders, a total of
approximately 1,360,835 unvested options held by James Arnold, Jr., our vice
president and chief financial officer, Gary Lloyd, our vice president, legal,
general counsel and secretary, William O'Kelly, our vice president, corporate
finance and treasurer and James Foy, our senior vice president and president,
Informix Software, will become immediately exercisable. In addition, if the
employment of each of these four individuals is terminated following approval by
our stockholders of the sale of the database business, these individuals would
receive approximately $5,287,500 in severance payments as a group.
Messrs. Arnold, Foy and Lloyd would also be entitled to receive an additional
payment, referred to as a gross-up payment, estimated to be approximately
$2,546,000 in the aggregate, to offset any federal excise tax incurred on the
receipt of severance and other payments in connection with the sale of the
database business. In addition, the company has had in effect agreements which
provide certain former executive officers of the company with accelerated
vesting of unvested options and excise tax protection.
The company has had in effect change of control and severance agreements, or
severance agreements, with other employees of the company. In the event of a
change of control, these employees may receive some of the following benefits:
acceleration of unvested options, extended vesting of options following
termination, excise tax protection and cash severance payments upon involuntary,
or certain cases voluntary, termination, other than for cause.
The company may establish a transition bonus program to aid in the retention
of employees who are likely to be terminated after the completion of the sale of
the database business.
Our directors have received options under the company's 1989 outside
director stock option plan. These options when granted are subject to vesting
over a three-year period. Pursuant to the terms of these options, upon the sale
of the database business all unvested options would become immediately
exercisable. Each of our directors has agreed to waive their rights to
accelerated vesting of their options in connection with the sale of the database
business.
IBM has agreed to reimburse the company for up to $21.0 million of severance
costs it incurs related to the company's employees who do not join IBM.
THE SPECIAL MEETING (PAGE ):
The special meeting will be held at the Wyndham Westborough Hotel--Viking
Room, 5400 Computer Drive, Westborough, Massachusetts on June 8, 2001 at
10:00 a.m.
RECORD DATE AND VOTING POWER (PAGE ):
Stockholders of record of our common stock as of the close of business on
May 3, 2001 will be entitled to vote at the special meeting. On the record date,
we had 288,332,075 outstanding shares of our common stock held by approximately
21,152 stockholders of record. We have no other class of voting securities
outstanding.
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Stockholders of record on the record date will be entitled to one vote per
share of our common stock on any matter that may properly come before the
special meeting and any adjournment, continuation, or postponement of that
meeting.
QUORUM AND REQUIRED VOTE (PAGE ):
Our certificate of incorporation and bylaws require the presence in person
or by duly executed proxy, of stockholders entitled to cast at least a majority
of the votes entitled to be cast at the special meeting in order to constitute a
quorum.
The sale of the database business pursuant to the master purchase agreement
and related agreements and the change of the name of the company must be
approved by the holders of a majority of the outstanding shares of our common
stock. Abstentions and shares which are not voted will be effectively treated as
votes against the approval of the sale of the database business pursuant to the
master purchase agreement and related agreements and the change of the company's
name.
PROXIES, VOTING AND REVOCATION (PAGE ):
Shares of our common stock represented at the special meeting by properly
executed proxies received prior to or at the special meeting, and not revoked,
will be voted at the special meeting, and at any adjournments, continuations or
postponements of that meeting, in accordance with the instructions on the
proxies. If a proxy is duly executed and submitted without instructions, the
shares of our common stock represented by the proxy would be voted "For" the
approval of the sale of the database business pursuant to the master purchase
agreement and related agreements and "For" the approval of the change of the
name of the company. Proxies are being solicited on behalf of our board of
directors.
The person who executes a proxy may revoke it at, or before, the special
meeting by: (a) delivering to our secretary a written notice of revocation of a
previously delivered proxy bearing a later date than the proxy; (b) duly
executing, dating and delivering a subsequent proxy; or (c) attending the
special meeting and voting in person. Attendance at the special meeting will
not, in and of itself, constitute revocation of a proxy. If your shares are held
in a brokerage account, you must follow your broker's instructions to revoke a
proxy.
THE CLOSING (PAGE ):
The initial closing of the sale of the database business is expected to
occur three business days following the satisfaction or waiver of all of the
conditions to each party's obligations under the master purchase agreement. It
is currently anticipated that the initial closing will occur early in the third
quarter of 2001.
CLOSING CONDITIONS (PAGE ):
The master purchase agreement contains closing conditions that are customary
in transactions similar to the sale of the database business, including:
approval by the stockholders of the company; the accuracy of the representations
and warranties of the parties and compliance by the parties with their
obligations under the master purchase agreement; expiration of the applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
or the HSR Act, and any applicable foreign antitrust regulatory schemes; the
receipt of third-party consents including assignment of a substantial majority
of the most significant database business customer contracts; and absence of a
material adverse change related to either our database customers entering into
long term commitments to purchase competing database business products with
persons other than IBM if such commitments contractually or effectively preclude
IBM from selling database products to such customers, or the loss of our
database business employees. Failure of the sale to be consummated for any
reason could adversely affect our database business through loss of customers,
loss of employees and other factors.
7
APPRAISAL RIGHTS (PAGE ):
Stockholders of the company are not entitled to appraisal rights under the
Delaware General Corporation Law as a result of the sale of the database
business.
TERMINATION (PAGE ):
The master purchase agreement may be terminated under certain circumstances
set forth in the master purchase agreement, including by mutual written consent
of the company and IBM, by either party if any of the conditions to that party's
obligation to close has become incapable of fulfillment or upon a material
breach by the other party, by IBM if our board of directors modifies its
recommendation of the sale of the database business in any manner adverse to
IBM, by the company or IBM if the closing has not occurred on or before
April 24, 2002, or by the company or IBM if the company does not obtain the
approval of the stockholders of the company for the sale of the database
business at the special meeting.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (PAGE ):
The sale of the database business will be a taxable event to the company.
The company will recognize gain on the difference between the purchase price
(increased by the liabilities assumed by IBM) and its tax basis in the assets
and will pay income tax accordingly.
Stockholders of the company will not recognize any gain or loss as a result
of the sale of the database business. The company intends to use a substantial
portion of the net proceeds of the sale of the database business to fund a stock
reduction program. The company intends to structure any stock reduction program
as a partial liquidation for federal income tax purposes. If the stock reduction
program is treated as a partial liquidation, then amounts received by the
company's noncorporate stockholders will be treated as full payment in exchange
for the portion of their stock that is redeemed, generally resulting in capital
gain or loss. The amount of gain or loss recognized by the noncorporate
stockholder is computed by comparing the cash received by the stockholder to the
stockholder's tax basis in the part of his stock that is redeemed. The gain or
loss will be long-term or short-term depending on the stockholder's holding
period for the shares redeemed. There is no assurance, however, that the stock
reduction program will ultimately qualify as partial liquidation for federal
income tax purposes in part or in whole. Amounts received by the company's
corporate stockholders (and amounts received by noncorporate stockholders if the
stock reduction program is not treated as a partial liquidation) will be treated
as either a distribution (generally ordinary income) or as payment in exchange
for a portion of their stock (generally capital gain or loss), depending upon
their particular facts and circumstances. All stockholders are urged to consult
their own tax advisors as to the specific tax consequences to them for amounts
received in the stock reduction program. See "Material United States Federal
Income Tax Consequences."
ACCOUNTING TREATMENT OF THE SALE (PAGE ):
The proposed sale of the database business is expected to be accounted for
as a sale of certain assets and certain liabilities, in accordance with
accounting principles generally accepted in the United States. In the period in
which the proposed sale of the database business is consummated, the company
expects to recognize a gain in the amount of the difference between the sale
price and the aggregate book value of the net assets sold.
REGULATORY AND OTHER MATTERS (PAGE )
As a closing condition of the sale of the database business, we must make
filings and receive authorizations from various federal and state governmental
agencies in the United States and various governmental agencies of foreign
jurisdictions relating to antitrust matters and regulations.
8
INFORMIX CORPORATION
50 WASHINGTON STREET
WESTBOROUGH, MASSACHUSETTS 01581
------------------------
TABLE OF CONTENTS
PAGE
--------
SUMMARY TERM SHEET.......................................... 5
TABLE OF CONTENTS........................................... 5
INTRODUCTION................................................ 5
QUESTIONS AND ANSWERS ABOUT THE SALE OF THE DATABASE
BUSINESS AND THE CHANGE OF THE NAME OF THE COMPANY.......... 5
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... 5
THE SPECIAL MEETING......................................... 5
GENERAL................................................... 5
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING........... 5
RECORD DATE, QUORUM AND VOTE REQUIRED..................... 5
VOTING AND REVOCATION OF PROXIES.......................... 5
SOLICITATION OF PROXIES; EXPENSES......................... 5
BOARD RECOMMENDATION...................................... 5
THE SALE OF THE DATABASE BUSINESS........................... 5
SUMMARY OF SALE OF DATABASE BUSINESS...................... 5
Principal Parties to the Transaction.................... 5
Sale of the Database Business........................... 5
Use of Sale Proceeds.................................... 5
Background of the Sale of the Database Business......... 5
The Company's Reasons for the Sale of the Database
Business............................................... 5
Recommendation of the Company's Board................... 5
Opinions of Financial Advisors to our Company........... 5
Interests of Management or Directors in the
Transactions........................................... 5
Material United States Federal Income Tax
Consequences........................................... 5
Accounting Treatment.................................... 5
Regulatory Matters...................................... 5
Rights of Appraisal..................................... 5
UNAUDITED PRO FORMA FINANCIAL INFORMATION................... 5
TERMS OF THE SALE OF DATABASE BUSINESS...................... 5
CLOSINGS; EFFECTIVENESS OF AGREEMENTS..................... 5
THE MASTER PURCHASE AGREEMENT............................. 5
Sale of the Database Business........................... 5
Purchase Price.......................................... 5
Holdback................................................ 5
9
PAGE
--------
Deferred Revenue........................................ 5
Representations and Warranties.......................... 5
Covenants............................................... 5
No Solicitation......................................... 5
Noncompetition.......................................... 5
Non-hire................................................ 5
Stockholder Meeting..................................... 5
Closing Conditions...................................... 5
Termination............................................. 5
Termination Fees........................................ 5
Other Expenses and Taxes................................ 5
Indemnification......................................... 5
ANCILLARY AGREEMENTS...................................... 5
Country Acquisition Agreements.......................... 5
Employee Matters Agreement.............................. 5
Master Relationship Agreement........................... 5
Litigation Settlement Agreement......................... 5
Buyer Transition Services Agreement..................... 5
Seller Transition Services Agreement.................... 5
Intellectual Property Agreements........................ 5
THE COMPANY'S BUSINESS...................................... 5
AMENDMENT TO CERTIFICATE OF INCORPORATION TO CHANGE THE NAME
OF THE COMPANY.............................................. 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................. 5
OTHER MATTERS............................................... 5
PROPOSALS BY OUR STOCKHOLDERS............................... 5
WHERE YOU CAN FIND MORE INFORMATION......................... 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 5
HISTORICAL FINANCIAL STATEMENTS OF THE DATABASE BUSINESS.... F-1
MASTER PURCHASE AGREEMENT AnnexA
OPINION OF CREDIT SUISSE FIRST BOSTON CORPORATION, DATED
APRIL 24, 2001.............................................. AnnexB
OPINION RENDERED BY SG COWEN SECURITIES CORPORATION, DATED
APRIL 24, 2001.............................................. AnnexC
10
INTRODUCTION
We are furnishing this proxy statement to all holders of shares of our
common stock in connection with the solicitation of proxies by our board of
directors for use at the special meeting of our stockholders to be held at the
Wyndham Westborough Hotel--Viking Room, 5400 Computer Drive, Westborough,
Massachusetts, on June 8, 2001 at 10:00 a.m., local time, and any adjournments,
continuations or postponements of that meeting. The purposes of the special
meeting is for our common stockholders to consider and vote upon a proposal to
approve the sale of our database business to IBM pursuant to a master purchase
agreement and related agreements and to approve the change of the name of the
company. Our board of directors has fixed the close of business on May 3, 2001
as the record date for the special meeting. Accordingly, only stockholders of
record on that date will be entitled to notice of, and, in the case of holders
of our common stock, to vote at, the special meeting.
Unless otherwise indicated or the context otherwise requires, in this proxy
statement, (1) the "company", "we", "us" and "our" refers to Informix
Corporation, a Delaware corporation, (2) "Informix Software" refers to Informix
Software, Inc., a Delaware corporation and one of our wholly-owned subsidiaries,
(3) "Ascential Software" refers to Ascential Software, Inc., a Delaware
corporation and one of our wholly owned subsidiaries and (4) "IBM" refers to
International Business Machines Corporation, a publicly traded New York
corporation.
QUESTIONS AND ANSWERS ABOUT THE SALE OF THE DATABASE BUSINESS
AND THE CHANGE OF THE NAME OF THE COMPANY
The following questions and answers are intended to address briefly some
commonly asked questions regarding the sale of the database business and the
change of the company's name. These questions and answers may not address all
questions that may be important to you as a company stockholder. Please refer to
the more detailed information contained elsewhere in this proxy statement, the
annexes to this proxy statement and the documents referred to or incorporated by
reference into this proxy statement.
Q: WHO IS SOLICITING MY PROXY?
A: The board of directors of the company.
Q: WHY IS THE COMPANY'S BOARD OF DIRECTORS RECOMMENDING THE SALE OF THE DATABASE
BUSINESS?
A: After consulting with our professional advisors, including legal, financial
and accounting advisors, and considering a number of factors, including the
financial performance and future prospects of the database business, current
economic and market conditions in the relational database management systems
industry, the price and other terms of the sale of the database business and
the proposed strategic alliance with IBM to promote and market data
warehouse and digital asset management offerings for the information asset
management market, our board of directors determined that the sale of the
database business pursuant to the master purchase agreement and related
agreements is expedient, and for the best interests of the company and its
stockholders. Our board of directors has unanimously approved the sale of
the database business and recommends that you vote "For" approval of the
sale of the database business.
Q: HOW HAS THE TRANSACTION BEEN STRUCTURED?
A: The sale of the database business has been structured to enable the company
to sell substantially all of the assets related to the database business,
including the research, development, manufacture, distribution, marketing,
sale and service of relational database management systems, to IBM. In
addition, the sale of the database business has been structured to provide
that IBM will
11
assume obligations and liabilities of the company specifically identified in
the master purchase agreement which generally include all current
liabilities and future obligations under the assigned contracts used in the
operation of the database business, subject to certain exceptions. Any
liability or obligation of the database business proposed to be sold which
is not specifically assumed by IBM will remain the obligation and commitment
of the company.
Q: WHAT WILL THE COMPANY RECEIVE FOR THE DATABASE BUSINESS IT IS SELLING TO IBM?
A: IBM has agreed to purchase the database business, including a specified
amount of net working capital, in exchange for $1.0 billion in cash and the
assumption of certain specified liabilities. If the net working capital
transferred to IBM exceeds $124.0 million, IBM will pay the company an
amount equal to 50% of the excess. If the transferred net working capital is
less than $124.0 million, the company will pay IBM the difference.
$100.0 million will be held back by IBM from the purchase price for
18 months after closing to satisfy certain indemnification obligations of
the company should they arise. IBM will pay interest at a rate of 6% per
annum, from the date of the closing of the sale of the database business, on
the amount of the holdback returned to the company. The company has also
agreed to pay IBM an amount equal to 18% of certain deferred revenues
arising from the database business which are set forth on the December 31,
2000 balance sheet of the database business and for which the company had
received payment prior to December 31, 2000.
Q: WILL I RECEIVE ANY PAYMENT AS A RESULT OF THE SALE OF THE DATABASE BUSINESS?
A: The company intends to use a portion of the after-tax proceeds from the sale
of the database business, estimated to be approximately $800 million,
assuming that the company receives the full holdback amount and that the
sale is completed in each country in which the database business operates,
to fund the Ascential business through investment in new products and
marketing initiatives and potentially through acquisitions. The company also
intends to return a substantial portion of the proceeds from the sale of the
database business to its stockholders through a stock reduction program. The
amount of proceeds which will be utilized in the stock reduction program
have not yet been determined, and will depend upon the cash needs and growth
opportunities of the company, including acquisition opportunities. The
company intends to structure any stock reduction program as a partial
liquidation for federal income tax purposes. If the stock reduction program
is treated as a partial liquidation, then the company's noncorporate
stockholders will receive sale or exchange (generally capital gain or loss)
treatment as opposed to dividend (generally ordinary income) treatment on
receipt of the proceeds of the stock reduction program. There can be no
assurance, however, that such tax treatment will ultimately be available to
noncorporate stockholders. The company's corporate stockholders may receive
dividend or sale or exchange treatment depending on their facts and
circumstances.
Q: WHY HAS THE SALE OF THE DATABASE BUSINESS BEEN STRUCTURED TO ALLOW MULTIPLE
CLOSINGS?
A: Multiple closings are necessary to transfer the assets and specified
liabilities to IBM in each country in which the database business operates.
The sale of the database business in the United States, the Republic of
Ireland, Japan, the United Kingdom, the Federal Republic of Germany, the
French Republic, Mexico and the Italian Republic pursuant to the master
purchase agreement and the related country acquisition agreements will close
on the third business day after the satisfaction or waiver of the conditions
set forth in the master purchase agreement. Approximately 96% of the
aggregate purchase price, less the $100.0 million holdback amount, will be
paid at this first closing. With respect to other foreign jurisdictions, the
company and IBM will use all commercially
12
reasonable efforts to cause any such subsequent closings to occur as soon as
reasonably practicable and in any event no later than 60 days following the
initial closing date.
Q: WHEN DO YOU EXPECT THE SALE OF THE DATABASE BUSINESS TO BE COMPLETED?
A: We are working toward completing the sale of the database business in the
early portion of the third quarter of 2001. We expect the closing of the
sale of the database business to occur three business days following the
satisfaction or waiver of all of the conditions to each party's obligations
under the master purchase agreement, including:
- approval by the stockholders of the company,
- expiration of the applicable waiting periods under the HSR Act, and
receipt of authorizations and/or clearances from any applicable foreign
governmental agencies relating to antitrust matters and regulations,
- the receipt of third-party consents including assignment of a substantial
majority of the most significant database business customer contracts, and
- the absence of a material adverse change related to either our database
customers entering into long term commitments to purchase competing
database business products with persons other than IBM if such commitments
contractually or effectively preclude IBM from selling database products
to such customers, or the loss of our database business employees.
Q: WHAT WILL THE COMPANY'S BUSINESS BE FOLLOWING THE SALE OF THE DATABASE
BUSINESS?
A: The company will continue to design, develop, manufacture, market and sell
information asset management systems and solutions to enterprises and
government organizations for a wide variety of industries under the
Ascential Software name. The company has developed a portfolio of products
that enable customers to turn information into a competitive economic
advantage. The company has introduced new solutions designed to address the
growing need among information sensitive companies worldwide.
Q: WHAT WILL THE COMPANY DO IF THE SALE OF THE DATABASE BUSINESS IS NOT APPROVED
BY THE STOCKHOLDERS?
A: If our stockholders do not approve the sale of the database business, the
company will continue to operate the database business and continue to
explore strategic alternatives. Failure of the sale of the database business
to be consummated could adversely effect our database business through loss
of customers, loss of employees and other factors.
Q: WHO MUST APPROVE THE SALE OF THE DATABASE BUSINESS PURSUANT TO THE MASTER
PURCHASE AGREEMENT?
A: In addition to the approvals by the IBM board of directors, the Informix
Software board of directors and the company's board of directors, which have
already been obtained, the sale of the database business must be approved by
the holders of the company's outstanding common stock.
Q: WHAT IS THE REQUIRED STOCKHOLDER VOTE TO APPROVE THE SALE OF THE DATABASE
BUSINESS?
A: The affirmative vote of the holders of a majority of the outstanding shares
of the company's common stock is required to approve the sale of the
database business pursuant to the master purchase agreement and related
agreements.
13
Q. WHAT WILL HAPPEN TO MY SHARES IF THE COMPANY CHANGES ITS NAME?
A. The change of our corporate name will not affect the rights of any
stockholder or the validity or transferability of stock certificates
currently outstanding. Stockholders will not be required to surrender or
exchange any stock certificates of the company that they currently hold. The
company intends to change its trading symbol if the proposed amendment is
approved to change the name of the company.
Q. WHY IS THE COMPANY'S BOARD OF DIRECTORS RECOMMENDING THE CHANGE OF THE NAME
OF THE COMPANY?
A. Once the sale of the database business has been closed, our board of
directors believes that the name "Ascential Software Corporation" better
identifies the company and its primary business. In addition, as part of the
sale of the database business to IBM, we have agreed to transfer our rights
to the name "Informix." The name "Informix" has traditionally been
identified with the relational database management systems portion of our
business, and it is these assets which are being sold pursuant to the master
purchase agreement and related agreements. The name "Ascential" has, on the
other hand, traditionally been identified with the segment of the company's
business which manufactures, distributes, markets and sells information
asset management systems.
Q. WHO MUST APPROVE THE CHANGE OF THE NAME OF THE COMPANY?
A. In addition to the approval by our board of directors, which has already
been obtained, the amendment to our restated certificate of incorporation to
change the name of the company must be approved by the holders of a majority
of our outstanding common stock.
Q: WHAT DO I NEED TO DO NOW?
A: We urge you to read this proxy statement carefully, including the annexes,
and consider how the sale of the database business affects you as a
stockholder. We also urge you to review the documents referenced under
"Where You Can Find More Information."
Q: HOW DO I VOTE?
A: You should indicate on your proxy card how you want to vote, and sign and
mail your proxy card in the enclosed return envelope as soon as possible so
that your shares may be represented at the special meeting. If you sign and
mail a proxy that does not indicate how you want to vote, your proxy will be
voted "For" approval of the sale of the database business pursuant to the
master purchase agreement and "For" the approval of the change of the name
of the company.
Q: IF MY SHARES ARE HELD IN A BROKERAGE ACCOUNT, WILL MY BROKER VOTE MY SHARES
FOR ME?
A: No, your broker will not vote your shares for you unless you provide
instructions on how to vote. It is important that you follow the directions
provided by your broker regarding how to instruct your broker to vote your
shares.
Q: MAY I CHANGE MY VOTE?
A: Yes, you may change your vote at any time before your proxy is voted at the
special meeting. To change your vote, simply send a written revocation or a
later-dated, completed and signed proxy card before the special meeting or
attend the special meeting and vote in person. However, if your shares are
held in a brokerage account, you must follow your broker's instructions to
change your vote.
14
Q: WHEN AND WHERE IS THE SPECIAL MEETING?
A: The special meeting will be held at the Wyndham Westborough Hotel--Viking
Room, 5400 Computer Drive, Westborough, Massachusetts on June 8, 2001 at
10:00 a.m., local time.
Q: WILL I OWE ANY FEDERAL INCOME TAX AS A RESULT OF THE SALE OF THE DATABASE
BUSINESS?
A: No, you will not owe any federal income tax solely as a result of the sale
of the database business. However, if the company implements a stock
reduction program, there will be federal income tax consequences to those
stockholders that participate in that program. These federal income tax
consequences are discussed more fully under "Material United States Federal
Income Tax Consequences."
Q: WILL I HAVE APPRAISAL RIGHTS?
A: No, you will not have appraisal rights under the Delaware General
Corporation Law as a result of the proposal for the sale of the database
business or the proposal to change the name of the company.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: If you have questions about the sale of the database business, please call
the company's Investor Relations office, at (508) 366-3888 or call our proxy
solicitor, Morrow & Co., Inc., at (800) 607-0088.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement contains forward-looking statements. Those statements
include statements regarding the intent, belief or current expectations of the
company and its subsidiaries, as well as the assumptions on which those
statements are based. Those forward-looking statements are not guarantees of
future performance and involve risks and uncertainties, and actual results may
differ materially from those contemplated by the forward-looking statements.
Important factors currently known to management of the company and its
subsidiaries that could cause actual results to differ materially from those in
forward-looking statements include, but are not limited to, the risks and
negative factors discussed elsewhere in this proxy statement and the documents
to which we have referred you. See "Where You Can Find More Information" in the
proxy statement. Except as required by law, the company undertakes no obligation
to update or revise forward-looking statements in this proxy statement to
reflect changes in assumptions, the occurrence of unanticipated events, or
changes in future operating results over time.
15
THE SPECIAL MEETING
GENERAL
The board of directors of the company is soliciting the enclosed proxy for
use at a special meeting of stockholders of the company to be held on June 8,
2001, at 10:00 a.m., local time, and at any adjournments, continuations or
postponements thereof. This proxy statement will be first sent to stockholders
on or about May 10, 2001.
The special meeting will be held at the Wyndham Westborough Hotel--Viking
Room, 5400 Computer Drive, Westborough, Massachusetts.
As of May 3, 2001, 288,332,075 shares of the company's common stock, $.01
par value per share, were outstanding, representing the only voting securities
of the company. Each share of the company's common stock is entitled to one
vote.
The company's mailing address is 50 Washington Street, Westborough,
Massachusetts 01581 and our telephone number is (508) 366-3888.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the special meeting, you will be asked to consider and vote upon the
following matters:
1. SALE PROPOSAL: To consider and vote upon the approval of the sale of
our database business pursuant to a master purchase agreement, dated as of
April 24, 2001 between the company and IBM, and related agreements. The full
text of the master purchase agreement is included as Annex A to this proxy
statement and is incorporated herein by reference.
2. NAME CHANGE PROPOSAL: To consider and vote upon the approval of an
amendment to our restated certificate of incorporation to change our name from
"Informix Corporation" to "Ascential Software Corporation." The change of the
company's name is conditioned upon the closing of the sale of the database
business.
RECORD DATE, QUORUM AND VOTE REQUIRED
Stockholders of record at the close of business on May 3, 2001, sometimes
referred to as the record date, will be entitled to notice of and to vote at the
special meeting or any adjournments, continuations or postponements thereof. Our
restated certificate of incorporation and bylaws require the presence in person
or by duly executed proxy, of stockholders entitled to cast at least a majority
of the votes entitled to be cast at the special meeting in order to constitute a
quorum. The sale of the database business and the amendment to our restated
certificate of incorporation to change our name each must be approved by the
holders of a majority of the outstanding shares of the company's common stock.
VOTING AND REVOCATION OF PROXIES
Stockholders may use the enclosed proxy card to vote their shares or may
vote their shares in person by attending the special meeting. Stockholders are
encouraged to specify their choices by marking the appropriate boxes on the
enclosed proxy card. Shares will be voted in accordance with such instructions.
Votes cast by proxy and not revoked or voted in person at the special
meeting will be counted by the persons appointed by the company to act as
inspectors of election for the special meeting. Although there is no definitive
statutory or case law authority in Delaware as to the proper treatment of
abstentions, the company believes and, the inspectors of election will treat
shares represented by proxies that reflect abstentions or include "broker
non-votes" as shares that are present and entitled to
16
vote for purposes of determining the presence of a quorum. Abstentions do not
constitute a vote "for" or "against" any matter, and will be effectively treated
as votes cast against the approval of the sale of the database business and the
amendment to our restated certificate of incorporation to change our name. Any
properly executed, unmarked proxies, including those submitted by brokers or
nominees, will be voted in favor of the sale of the database business and the
amendment to our restated certificate of incorporation to change our name, as
indicated in the accompanying proxy card.
A proxy may be revoked by written notice to the secretary of the company at
any time prior to the special meeting, by executing a later dated proxy or by
attending the special meeting and voting in person. If your shares are held in a
brokerage account, you must follow your broker's instructions to revoke a proxy.
UNLESS CONTRARY INSTRUCTIONS ARE INDICATED ON THE PROXY, ALL SHARES
REPRESENTED BY VALID PROXIES RECEIVED PURSUANT TO THIS SOLICITATION (AND NOT
REVOKED BEFORE THEY ARE VOTED) WILL BE VOTED FOR THE SALE OF THE DATABASE
BUSINESS AND FOR THE AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION TO
CHANGE OUR NAME.
As to any other business which may properly come before the special meeting
and be submitted to a vote of the stockholders, proxies received by the board of
directors will be voted in accordance with the best judgment of the holders
thereof.
SOLICITATION OF PROXIES; EXPENSES
The company will bear the cost of solicitation of proxies. In addition to
the use of mails, proxies may be solicited by personal interview, telephone or
telegraph, by officers, directors, and other employees of the company. The
company will also request persons, banks, brokerage firms and other custodians,
nominees and fiduciaries holding shares in their names, or in the names of their
nominees, which are beneficially owned by others to send or cause to be sent
proxy material to, and obtain proxies from, such beneficial owners and will
reimburse such holders for their reasonable expenses in so doing. The company
has retained Morrow & Co., Inc. for assistance in connection with the
solicitation of proxies for the special meeting at a cost of approximately
$25,000.
BOARD RECOMMENDATION
The company's board of directors has unanimously approved the sale of the
database business pursuant to the master purchase agreement and related
agreements and the change of the name of the company, has determined that the
sale of the database business is expedient and for the best interests of the
company and its stockholders and that the change of the name of the company is
in the best interests of the company and its stockholder. Our board of directors
unanimously recommends that stockholders vote FOR approval of the sale of the
database business pursuant to the master purchase agreement and related
agreements, and FOR the amendment to our restated certificate of incorporation
to change our name to "Ascential Software Corporation."
17
THE SALE OF THE DATABASE BUSINESS
SUMMARY OF SALE OF DATABASE BUSINESS
PRINCIPAL PARTIES TO THE TRANSACTION
Informix Corporation. We are a global provider of information management
software. We are presently made up of two operating businesses, our relational
database management systems business, which operates under the Informix name,
and the information asset management business, which operates under the
Ascential name. We refer to ourselves as the "company," "we," "us" or "our." We
are a Delaware corporation and our principal corporate offices are located at 50
Washington Street, Westborough, Massachusetts 01581 and our telephone number is
(508) 366-3888.
IBM. IBM is the world's largest information technology company, with
80 years of leadership in helping businesses innovate. IBM develops and
manufactures advanced information technologies, including computer systems,
software, and microelectronics. IBM translates these advanced technologies into
value for its customers through its professional solutions and services
worldwide. IBM's principal executive offices are located at One New Orchard
Road, Armonk, New York 10504 and its telephone number is (914) 499-1900.
SALE OF THE DATABASE BUSINESS
Pursuant to the terms of a master purchase agreement, dated as of April 24,
2001 between the company and IBM and related agreements, the company will sell
substantially all of the assets related to its database business (including the
research, development, manufacture, distribution, marketing, sale and service of
relational database management systems) to IBM and IBM will assume certain
liabilities related to the database business, consisting primarily of current
liabilities and future obligations under assigned contracts. IBM will offer
employment to substantially all of the employees engaged in our database
business.
IBM has agreed to purchase the database business from the company in
exchange for $1.0 billion in cash and the assumption of certain specified
liabilities. $100.0 million will be held back by IBM from the purchase price for
18 months after closing to satisfy certain indemnification obligations of the
company should they arise. IBM will pay interest at a rate of 6% per annum, from
the date of the initial closing of the sale of the database business, on the
amount of holdback returned to the company. If the net working capital
transferred to IBM exceeds $124.0 million, IBM will pay the company an amount
equal to 50% of the excess. If the transferred net working capital is less than
$124.0 million, the company will pay IBM the difference. The company has also
agreed to pay IBM an amount equal to 18% of certain deferred revenues arising
from the database business which are set forth on the December 31, 2000 balance
sheet of the database business for which the company had previously received
payment prior to December 31, 2000.
The company will indemnify IBM for certain damages, if incurred, arising
from the breach of its representations and warranties and covenants and from
assets and liabilities not expressly acquired or assumed by IBM. The company
will not be required to indemnify IBM for damages arising from breaches of its
representations and warranties until the cumulative amount of IBM's
indemnification claims exceed $10.0 million and then only the excess. Except for
breaches of representations related to taxes and environmental matters, the
$100.0 million holdback of the purchase price will represent the sole source of
recovery by IBM for breaches of representations and warranties in the master
purchase agreement.
IBM has agreed to reimburse the company for up to $21.0 million of severance
costs it incurs related to the company's employees who do not join IBM.
18
The company has agreed generally not to compete in the database business and
not to hire or solicit former company employees who are hired by IBM as part of
the sale of the database business for a period of five years.
USE OF SALE PROCEEDS
The company intends to use a portion of the after-tax proceeds from the sale
of the database business, estimated to be approximately $800 million, assuming
that the company receives the full holdback amount and that the sale is
consummated in each of the countries in which the database business operates, to
fund the Ascential business through investment in new products and marketing
initiatives and potentially through acquisitions. While the company investigates
and evaluates acquisition opportunities as part of its regular business
operations, the company is not currently in discussions with respect to any
specific acquisitions.
The company also intends to use a substantial portion of the proceeds from
the sale of the database business to fund a stock reduction program. The amount
of proceeds which will be utilized in the stock reduction program have not yet
been determined, and will depend upon the cash needs and growth opportunities of
the company, including acquisition opportunities. The company intends to
structure any stock reduction program as a partial liquidation for federal
income tax purposes. If the stock reduction program is treated as a partial
liquidation, then amounts received by the company's noncorporate stockholders
will be treated as full payment in exchange for the portion of their stock that
is redeemed, generally resulting in capital gain or loss. There can be no
assurance that such tax treatment will ultimately be available to the
noncorporate stockholders. Amounts received by the company's corporate
stockholders (and amounts received by noncorporate stockholders if the stock
reduction program is not treated as a partial liquidation) will be treated as
either a distribution (generally ordinary income) or as payment in exchange for
a portion of their stock (generally capital gain or loss), depending upon their
particular facts and circumstances.
BACKGROUND OF THE SALE OF THE DATABASE BUSINESS
Beginning in the summer of 2000, the company began exploring strategic
alternatives in the face of significant internal restructurings, senior
management turnover, declining financial results and competitive challenges in
the database business. As part of this process, the company engaged SG Cowen in
August and Credit Suisse First Boston in September to act as its financial
advisors with respect to exploring and evaluating strategic alternatives. The
strategic alternatives considered included a sale or merger of the company, a
spin-off of Ascential and a sale of specific assets.
On September 19, 2000, the company announced its intention to establish two
independent operating companies: Informix Software and Ascential Software.
Informix Software focuses on providing database management systems for data
warehousing, transaction processing and e-business applications. Ascential
Software is an e-business solutions company which provides database and platform
independent software solutions for analytic infrastructure and digital asset
management. The strategic realignment allowed the management teams of each
independent company to focus on their separate businesses, to improve customer
satisfaction and product innovation and to align infrastructure, especially the
sales force, to increase shareholder value. After the initial announcement, the
company confirmed its intention to have Ascential Software become a separate
publicly traded company when market conditions were favorable.
Since the September, 2000 announcement, the company has continued to review
strategic alternatives regarding the separation of the two operating companies
in order to maximize stockholder value in light of the continuing competitive
challenges in the database business. These alternatives included a sale or
merger of the company, a spin-off of Ascential Software and a sale of specific
assets and was expanded to include a strategic alliance with computer equipment
manufacturers. Throughout
19
this process, management of the company has frequently reviewed with the board
of directors of the company the status of the strategic review.
Throughout the process of evaluating the company's strategic alternatives,
Credit Suisse First Boston and SG Cowen, at the direction of the board of
directors of the company, contacted 25 potential acquirors or partners, held
preliminary meetings with eight parties concerning their interest in engaging in
strategic alternatives and held discussions with five of these parties,
including IBM. Discussions with IBM concerning a sale of the database business
began in September, 2000. The initial meeting with IBM was held in early
October, 2000. In January, 2001 IBM entered into a confidentiality agreement and
began formal due diligence on the company's database business.
During November and December, 2000 and January, 2001, the company held
extensive discussions with a potential strategic buyer concerning a stock for
stock merger. In late January 2001, the discussions with this potential
strategic buyer were suspended.
On January 30, 2001, management and the company's financial and legal
advisors met with the board of directors to discuss the potential strategic
alternatives, including a sale or merger of the company, a spin-off of Ascential
Software and a sale of specific assets. At the conclusion of that meeting the
board of directors instructed management to continue to evaluate the strategic
alternatives.
During February, management of the company and its financial and legal
advisors, at the direction of the board of directors of the company, continued
discussions with IBM concerning the key financial terms of the possible sale of
the database business and the key terms of the proposed strategic relationship
between IBM and Ascential Software. IBM also continued its due diligence on the
company's database business.
On February 22, management and the company's financial and legal advisors
met with the company's board of directors to discuss the status of its
negotiations with IBM and of the other strategic alternatives. Also at that
meeting, members of the law firm of Latham & Watkins, outside counsel to the
company, reviewed with the directors their fiduciary duties, especially in the
context of reviewing the various alternatives. At the conclusion of the meeting,
the board of directors instructed management to continue negotiations with IBM
and to continue to investigate other strategic alternatives, including a
possible strategic alliance with computer equipment manufacturers.
During early March, representatives of IBM and the company discussed several
of the financial terms of the possible sale of the database business, the
principal terms of the strategic relationship between Ascential Software and IBM
and the general structure of the potential transaction. During the balance of
March, IBM, the company and their financial and legal advisors, at the direction
of the board of directors of the company, continued to negotiate financial and
other terms of the potential transaction, including the terms of the strategic
alliance, employee and transition issues, and IBM continued to conduct further
due diligence.
On April 3, management and the company's financial and legal advisors met
with the company's board of directors to discuss the status of its negotiations
with IBM and the status of discussions with respect to the other strategic
alternatives. At the meeting, the board of directors also discussed the status
of the financial results of the company for the first quarter of 2001. At the
conclusion of the meeting, the board of directors instructed management to
continue negotiations with IBM and to continue evaluating and investigating
other strategic alternatives.
In late March and early April, IBM provided a draft of the master purchase
agreement and other related agreements to the company. Subsequently, several
meetings between the company, IBM and their respective advisors regarding the
negotiation of the master purchase agreement and related documents took place.
IBM provided revised drafts of the master purchase agreement and other
agreements on April 14, and on April 17 and April 18 representatives of the
company, IBM and their respective advisors met in New York City to discuss these
draft agreements and other matters regarding
20
the sale of the database business and related transactions. Negotiations
continued on the draft agreements through April 23.
On April 23, 2001 at a special meeting of the company's board of directors,
management, together with representatives of Latham & Watkins, reviewed the
proposed terms of the draft master purchase agreement and the other related
documents with the board of directors. Also at this meeting, each of Credit
Suisse First Boston and SG Cowen reviewed their financial analysis of the
consideration provided for in the transaction and delivered to the board an oral
opinion (which opinion was confirmed by a written opinion dated April 24, 2001)
to the effect that, as of the date provided in the respective opinions, and
based on and subject to the matters described in the opinions, the consideration
provided for in the transaction was fair to the company from a financial point
of view. At the conclusion of this meeting, the board of directors unanimously
approved the sale of the database business to IBM pursuant to the master
purchase agreement and the other related agreements and the change of the name
of the company, and authorized management to finalize and execute the definitive
agreements. On April 24, 2001 the company and IBM executed the master purchase
agreement and related documentation and publicly announced the transaction.
THE COMPANY'S REASONS FOR THE SALE OF THE DATABASE BUSINESS
The company's board of directors unanimously determined that the sale of the
database business pursuant to the master purchase agreement is expedient and for
the best interests of the company and its stockholders and unanimously
recommended that the stockholders approve the sale of the database business
pursuant to the master purchase agreement and related agreements.
The company's board of directors believes that the sale of the database
business will be beneficial to the company and its stockholders and considered a
number of positive factors in reaching this conclusion, including the following:
- The financial performance and future prospects of our database business,
including its slower growth as compared to the growth of the Ascential
business, the current economic and market conditions in the database
industry, including the company's declining market share, and the fairness
of the consideration received for our database business, which fairness is
supported by the opinions from our financial advisors, Credit Suisse First
Boston Corporation and SG Cowen.
- That the sale of the database business pursuant to the master purchase
agreement enables the company to realize immediately the value of the
database business in cash, increasing our financial flexibility, including
our ability to engage in a stock reduction program which the company
intends to structure any stock reduction program as a partial liquidation
for federal income tax purposes. If the stock reduction program is treated
as a partial liquidation, then amounts received by the company's
noncorporate stockholders will be treated as full payment in exchange for
the portion of their stock that is redeemed, generally resulting in
capital gain or loss.
- That the sale of our database business also positions our stockholders to
benefit from a company primarily focused on the faster growing information
asset management software and solutions industry, where we have a more
favorable competitive position.
- That in connection with the sale of the database business, we will enter
into a strategic alliance with IBM to promote and market data warehouse
and digital asset management offerings for the information asset
management market which will bring the advanced features of Ascential's
products to IBM's strategic hardware and software platforms, while
creating an additional channel of distribution for Ascential's information
asset management solutions;
- The benefits of selling the database business to IBM, which will be able
to realize the value of our database business and employees and continue
to favorably service our customers;
21
- That the existing patent litigation between the company and IBM will be
settled; and
- The financial presentations of Credit Suisse First Boston and SG Cowen to
the board of directors of the company, including their opinions regarding
the fairness, from a financial point of view, to the company of the
consideration provided for in the sale of the database business which are
described more fully under the caption "Opinions of Financial Advisors to
Our Company."
The company's board of directors also considered a number of potentially
negative factors in its deliberations concerning the sale of the database
business, including:
- That the sale of the database business will be a taxable transaction to
the company;
- That the consummation of the sale of the database business is conditioned
upon a number of factors including: approval by our stockholders; the
accuracy of the representations and warranties of the parties and
compliance by the parties with their obligations under the master purchase
agreement; expiration of the applicable waiting period under domestic and
foreign antitrust regulatory schemes; absence of a material adverse change
related to either our database customers entering into long term
commitments to purchase competing database business products with persons
other than IBM if such commitments contractually or effectively preclude
IBM from selling database products to such customers, or the loss of our
database business employees; and receipt of third party consents;
- That the failure of the sale to be consummated for any reason could
adversely affect our database business through loss of customers, loss of
employees and other factors.
- That after the consummation of the sale of the database business, the
Ascential business will represent substantially all our business; that as
a result, our total license and service revenues will be substantially
lower than they are currently; and that while we believe Ascential has
significant growth potential, to date Ascential is a much smaller portion
of our business than our database business, has not generated a profit and
has incurred significant operating losses;
- That we have agreed to indemnify IBM against certain losses and have
agreed to have $100.0 million of the purchase price held back by IBM for
18 months to satisfy claims for the payment of these losses should they
arise.
- That members of our management have interests in the sale of the database
business that may conflict with the interest of our stockholders;
- That the master purchase agreement prevents us from soliciting other
transactions to acquire us or our assets and requires us to pay IBM
$35.0 million in certain circumstances, including if our board of
directors withdraws or modifies its recommendation of the transaction in a
manner adverse to IBM and IBM terminates the master purchase agreement, or
if a competing takeover proposal has been made, our stockholders do not
approve the transaction and within 12 months of termination the company
enters into an agreement with respect to a takeover proposal; and that in
addition, we are required to reimburse up to $5.0 million of IBM's fees
and expenses in the event that our stockholders fail to approve the sale
of the database business;
- That we will be responsible for substantially all preclosing liabilities
of the database business, except for current liabilities that will be
assumed by IBM at closing; and
- The probability that stockholders who are "value" investors, as opposed to
"growth" investors, may sell shares of our common stock, resulting in
higher than normal levels of selling of our common stock for a period of
time and a decline in the price of our common stock.
The company's board of directors believed that certain of these negative
factors were unlikely to occur or unlikely to have a material impact on the
company, while others could be avoided or
22
mitigated by the company, and that overall, the risks associated with the sale
of the database business were outweighed by the potential benefits of the sale
of the database business.
The foregoing discussion of information and factors considered by the
company's board of directors is not intended to be all-inclusive. In view of the
wide variety of factors considered, the company's board of directors did not
find it practicable to quantify or otherwise assign relative weight to the
specific factors considered. However, after taking into account all of the
factors set forth above, the company's board of directors unanimously determined
that the sale of the database business was expedient, and for the best interests
of the company and its stockholders and that the company should proceed with the
sale of the database business.
RECOMMENDATION OF THE COMPANY'S BOARD
FOR THE REASONS DISCUSSED ABOVE, THE COMPANY'S BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE SALE OF THE DATABASE BUSINESS PURSUANT TO THE MASTER
PURCHASE AGREEMENT AND RELATED AGREEMENTS AND HAS DETERMINED THAT THE SALE OF
THE DATABASE BUSINESS IS EXPEDIENT, AND FOR THE BEST INTERESTS OF THE COMPANY
AND ITS STOCKHOLDERS. ACCORDINGLY, THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE FOR APPROVAL OF THE SALE OF THE
DATABASE BUSINESS PURSUANT TO THE MASTER PURCHASE AGREEMENT AND RELATED
AGREEMENTS.
OPINIONS OF FINANCIAL ADVISORS TO OUR COMPANY
The company retained Credit Suisse First Boston and SG Cowen to act as its
financial advisors in connection with an analysis of strategic alternatives,
including a possible sale of the database business to IBM.
CREDIT SUISSE FIRST BOSTON CORPORATION. Credit Suisse First Boston has
acted as the company's financial advisor in connection with the sale of the
database business. The company selected Credit Suisse First Boston based on
Credit Suisse First Boston's experience, expertise and reputation. Credit Suisse
First Boston is an internationally recognized investment banking firm and is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, leveraged buyouts, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes.
In connection with Credit Suisse First Boston's engagement, the company
requested that Credit Suisse First Boston evaluate the fairness, from a
financial point of view, to the company of the consideration provided for in the
sale of the database business. On April 23, 2001, at a meeting of the company's
board of directors held to evaluate the sale of the database business, Credit
Suisse First Boston rendered to the company's board of directors an oral
opinion, which opinion was confirmed by delivery of a written opinion dated
April 24, 2001, the date of the master purchase agreement, to the effect that,
as of that date and based on and subject to the matters described in its
opinion, the consideration provided for in the sale of the database business was
fair, from a financial point of view, to the company.
The full text of Credit Suisse First Boston's written opinion, dated
April 24, 2001, to the company's board of directors, which sets forth, among
other things, the procedures followed, assumptions made, matters considered and
limitations on the review undertaken, is attached as Annex B and is incorporated
into this document by reference. Holders of the company's common stock are
encouraged to read this opinion carefully and in its entirety. Credit Suisse
First Boston's opinion is addressed to the company's board of directors and
relates only to the fairness of the consideration from a financial point of
view, does not address any other aspect of the sale of the database business or
23
any related transaction and does not constitute a recommendation to any
stockholder as to any matter relating to the sale of the database business. The
summary of Credit Suisse First Boston's opinion in this document is qualified in
its entirety by reference to the full text of the opinion.
In arriving at its opinion, Credit Suisse First Boston reviewed the master
purchase agreement and related documents as well as publicly available business
and financial information relating to the company. Credit Suisse First Boston
also reviewed other information relating to the company, including financial
forecasts, provided to or discussed with Credit Suisse First Boston by the
company, and met with the management of the company to discuss the business and
prospects of the company. Credit Suisse First Boston also considered financial
and stock market data of the company, and compared those data with similar data
for other publicly held companies in businesses similar to the company and
considered, to the extent publicly available, the financial terms of other
transactions that have been effected. Credit Suisse First Boston also considered
other information, financial studies, analyses and investigations and financial,
economic and market criteria that it deemed relevant.
In connection with its review, Credit Suisse First Boston did not assume any
responsibility for independent verification of any of the information that was
provided to or otherwise reviewed by it and relied on that information being
complete and accurate in all material respects. Credit Suisse First Boston was
advised, and assumed, that the financial forecasts for the company were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the management of the company as to the future financial
performance of the company. Credit Suisse First Boston also was advised, and
assumed, that the transaction would be consummated in its entirety in accordance
with the terms of the master purchase agreement, without waiver, amendment or
modification of any material term, condition or agreement. Credit Suisse First
Boston was not requested to make, and did not make, an independent evaluation or
appraisal of the assets or liabilities, contingent or otherwise, of the company,
and Credit Suisse First Boston was not furnished with any evaluations or
appraisals.
Credit Suisse First Boston's opinion was necessarily based on information
available to it, and financial, economic, market and other conditions as they
existed and could be evaluated, on the date of Credit Suisse First Boston's
opinion. Credit Suisse First Boston's opinion did not address the relative
merits of the sale of the database business as compared to other business
strategies that might have been available to the company or the underlying
business decision of the company to proceed with the sale of the database
business. Although Credit Suisse First Boston evaluated the consideration in the
transaction from a financial point of view, Credit Suisse First Boston was not
requested to, and did not, recommend the specific consideration payable in the
transaction, which consideration was determined between the company and IBM. In
connection with its engagement, Credit Suisse First Boston was requested to
solicit indications of interest from, and held discussions with, third parties
regarding the possible acquisition of all or a part of the company. No
limitations were imposed on Credit Suisse First Boston with respect to the
investigations made or procedures followed in rendering its opinion.
In preparing its opinion to the company's board of directors, Credit Suisse
First Boston performed a variety of financial and comparative analyses,
including those described below. The summary of Credit Suisse First Boston's
analyses described below is not a complete description of the analyses
underlying Credit Suisse First Boston's opinion. The preparation of a fairness
opinion is a complex process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, a fairness opinion
is not readily susceptible to partial analysis or summary description. In
arriving at its opinion, Credit Suisse First Boston made qualitative judgments
as to the significance and relevance of each analysis and factor that it
considered. Accordingly, Credit Suisse First Boston believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
factors or focusing on information presented in tabular format, without
considering all analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the processes
underlying its analyses and opinion.
24
In its analyses, Credit Suisse First Boston considered industry performance,
regulatory, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of the company. No company,
transaction or business used in Credit Suisse First Boston's analyses as a
comparison is identical to the company or the proposed transaction, and an
evaluation of the results of those analyses is not entirely mathematical.
Rather, the analyses involve complex considerations and judgments concerning
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the companies, business segments
or transactions analyzed. The estimates contained in Credit Suisse First
Boston's analyses and the ranges of valuations resulting from any particular
analysis are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than those
suggested by the analyses. In addition, analyses relating to the value of
businesses or securities do not necessarily purport to be appraisals or to
reflect the prices at which businesses or securities actually may be sold.
Accordingly, Credit Suisse First Boston's analyses and estimates are inherently
subject to substantial uncertainty.
Credit Suisse First Boston's opinion and financial analyses were only one of
many factors considered by the company's board of directors in its evaluation of
the proposed sale of the database business and should not be viewed as
determinative of the views of the company's board of directors or management
with respect to the sale of the database business or the consideration provided
for in the master purchase agreement.
The following is a summary of the material financial analyses underlying
Credit Suisse First Boston's opinion delivered to the company's board of
directors in connection with the transaction. The financial analyses summarized
below include information presented in tabular format. In order to fully
understand Credit Suisse First Boston's financial analyses, the tables must be
read together with the text of each summary. The tables alone do not constitute
a complete description of the financial analyses. Considering the data in the
tables below without considering the full narrative description of the financial
analyses, including the methodologies and assumptions underlying the analyses,
could create a misleading or incomplete view of Credit Suisse First Boston's
financial analyses.
DISCOUNTED CASH FLOW ANALYSIS. Credit Suisse First Boston performed a
discounted cash flow analysis of the database business to estimate the present
value of the unlevered, after-tax free cash flows that the assets could generate
for fiscal years 2001 through 2005, based on internal estimates of the company's
management. Credit Suisse First Boston calculated a range of estimated terminal
values for the database business by applying a range of terminal value
multiples, based on a selected growth perpetuity range for the database business
of (2.5%) to 2.5%, to the projected fiscal year 2006 unlevered, after-tax free
cash flows of the database business. The present value of the cash flows and
terminal values were then calculated using a range of discount rates of 16.0% to
20.0%, which discount rates were based on the weighted average costs of capital
of selected comparable companies. This analysis indicated the following
aggregate value reference range for the database business, as compared to the
consideration in the transaction:
IMPLIED AGGREGATE VALUE CONSIDERATION
REFERENCE RANGE IN THE TRANSACTION
(IN MILLIONS) (IN MILLIONS)
----------------------- ------------------
$719 -- $1,029 $1,000
Credit Suisse First Boston also performed a discounted cash flow sensitivity
analysis of the database business to estimate the present value of the
unlevered, after-tax free cash flows that the assets could generate for fiscal
years 2001 through 2005, based on internal estimates of the company's management
and assuming a perpetuity growth rate of 0.0%. Assuming a compound annual
revenue growth rate of (2.5%) to 2.5% and a reduction of the operating margins
of up to 3.0%, this analysis
25
indicated an aggregate value reference range for the database business of
$603.3 million to $1,001.1 million.
SELECTED COMPANIES ANALYSIS. Credit Suisse First Boston reviewed the
financial and stock market data of Sybase, Inc., a database management company,
and the following four publicly traded companies in the software industry:
- Novell, Inc.
- Borland Software Corporation
- New Era of Networks, Inc.
- Corel Corporation
Credit Suisse First Boston compared fully diluted aggregate values,
calculated as fully diluted equity value plus net debt, as multiples of latest
12 months, last quarter annualized and estimated calendar year 2001 revenue and
fully diluted aggregate values as multiples of latest 12 months, last quarter
annualized and estimated calendar year 2001 earnings before interest and taxes,
commonly referred to as EBIT. Credit Suisse First Boston also compared stock
prices as multiples of latest 12 months, last quarter annualized and estimated
calendar year 2001 earnings per share. Credit Suisse First Boston then applied a
range of selected multiples derived from the selected companies of latest
12 months revenue to the corresponding financial data of the database business.
All multiples were based on closing stock prices on April 20, 2001. Estimated
financial data for the database business were based on internal estimates of the
company's management and estimated financial data for the selected companies
were based on publicly available research analysts' estimates. This analysis
indicated the following implied aggregate value reference range for the database
business, as compared to the consideration in the transaction:
IMPLIED AGGREGATE VALUE CONSIDERATION
REFERENCE RANGE IN THE TRANSACTION
(IN MILLIONS) (IN MILLIONS)
----------------------- ------------------
$585 -- $885 $1,000
SELECTED TRANSACTIONS ANALYSIS. Credit Suisse First Boston reviewed the
aggregate values of the following seven publicly announced transactions
involving companies in the software industry:
ACQUIROR
--------
- Invensys, plc
- Sybase, Inc.
- Oracle Corporation
- Informix Corporation
- Sterling Software, Inc.
- Corel Corporation
- Computer Associates International, Inc.
TARGET
---------------------------------------
- Baan Company N.V.
- New Era of Networks, Inc.
- Digital Equipment Corporation
- Ardent Software, Inc.
- Texas Instruments Incorporated
- Novell, Inc.
- The Ask Group, Inc.
Credit Suisse First Boston compared aggregate values in the selected
transactions as multiples of latest 12 months and next 12 months revenue and
equity values as multiples of latest 12 months and next 12 months earnings.
Credit Suisse First Boston then applied a range of selected multiples of latest
12 months revenue to corresponding financial data of the database business. All
multiples for the selected transactions were based on information available at
the time of the relevant transaction. Estimated financial data for the database
business were based on internal estimates of the company's management and
estimated financial data for the selected companies were based on publicly
available
26
research analysts' estimates. The results of this analysis indicated the
following implied aggregate value reference range for the database business, as
compared to the consideration in the transaction:
IMPLIED AGGREGATE VALUE CONSIDERATION
REFERENCE RANGE IN THE TRANSACTION
(IN MILLIONS) (IN MILLIONS)
----------------------- ------------------
$693 -- $1,216 $1,000
OTHER FACTORS. In the course of preparing its opinion, Credit Suisse First
Boston also reviewed and considered other information and data, including:
- research analysts' reports for the company's estimated revenue and
earnings per share;
- reported earnings per share for the last eight fiscal quarters for the
company compared to publicly available research analysts' estimates for
the respective quarters; and
- historical price performance and trading characteristics of the company
common stock.
MISCELLANEOUS. The company has agreed to pay Credit Suisse First Boston for
its financial advisory services an aggregate fee of approximately $10 million.
The company also has agreed to reimburse Credit Suisse First Boston for its
out-of-pocket expenses, including fees and expenses of legal counsel and any
other advisor retained by Credit Suisse First Boston, and to indemnify Credit
Suisse First Boston and related parties against liabilities, including
liabilities under the federal securities laws, arising out of its engagement.
Credit Suisse First Boston and its affiliates in the past have provided and
are currently providing financial services to IBM unrelated to the proposed
transaction, for which services Credit Suisse First Boston has received and will
receive compensation. In the ordinary course of business, Credit Suisse First
Boston and its affiliates may actively trade the securities of the company or
IBM for their own accounts and for the accounts of customers and, accordingly,
may at any time hold long or short positions in those securities.
SG COWEN SECURITIES CORPORATION. Pursuant to an engagement letter dated
August 9, 2000 and amended by a letter agreement dated as of September 1, 2000,
the company retained SG Cowen Securities Corporation to render an opinion to the
board of directors of the company as to the fairness, from a financial point of
view, to the company of the consideration to be received in the proposed sale of
the database business.
On April 23, 2001, SG Cowen delivered certain of its written analyses and
its oral opinion to the company's board of directors, subsequently confirmed in
writing as of that date, to the effect that and subject to the various
assumptions set forth therein, as of April 23, 2001, the consideration to be
received in the proposed sale of the database business was fair, from a
financial point of view, to the company. The full text of the written opinion of
SG Cowen, dated April 24, 2001, is attached as Annex C and is incorporated by
reference. Holders of the company's common stock are urged to read the opinion
in its entirety for the assumptions made, procedures followed, other matters
considered and limits of the review by SG Cowen. The summary of the written
opinion of SG Cowen set forth herein is qualified in its entirety by reference
to the full text of such opinion. SG Cowen's analyses and opinion were prepared
for and addressed to the company's board of directors and are directed only to
the fairness, from a financial point of view, of the consideration received in
the proposed sale of the database business, and do not constitute an opinion as
to the merits of the proposed sale of the database business or a recommendation
to any stockholder as to how to vote on the proposed sale of the database
business. The consideration to be received in the proposed sale of the database
business was determined through negotiations between the company and IBM and not
pursuant to any recommendations of SG Cowen.
27
In arriving at its opinion, SG Cowen reviewed and considered such financial
and other matters as it deemed relevant, including, among other things:
- a draft of the master purchase agreement dated April 20, 2001;
- certain publicly available information for the company, including its
annual reports filed on Form 10-K for each of the years ended
December 31, 1998, 1999 and 2000, and its quarterly reports filed on
Form 10-Q for each of the quarters ended March 31, June 30 and
September 30, 1998, 1999 and 2000, and certain other relevant financial
and operating data furnished to SG Cowen by the company's management;
- certain internal financial analyses, financial forecasts, reports and
other information concerning the database business prepared by the
management of the company;
- First Call estimates and financial projections in Wall Street analyst
reports;
- discussions SG Cowen has had with certain members of the management of the
company concerning the historical and current business operations,
financial conditions and prospects of the database business and such other
matters SG Cowen deemed relevant;
- certain operating results of the database business as compared to
operating results of certain publicly traded companies SG Cowen deemed
relevant;
- certain financial terms of the proposed sale of the database business as
compared to the financial terms of certain selected business combinations
SG Cowen deemed relevant;
- based on the financial forecasts/projections prepared by the company, the
cash flows generated by the database business on a stand-alone basis to
determine the present value of the discounted cash flows; and
- such other information, financial studies, analyses and investigations and
such other factors that SG Cowen deemed relevant for the purposes of its
opinion.
In conducting its review and arriving at its opinion, SG Cowen, with the
company's consent, assumed and relied, without independent investigation, upon
the accuracy and completeness of all financial and other information provided to
it by the company or which was publicly available. SG Cowen did not undertake
any responsibility for the accuracy, completeness or reasonableness of, nor did
it independently verify, this information. In addition, SG Cowen did not conduct
any physical inspection of the properties or facilities of the company. SG Cowen
further relied upon the assurance of management of the company that they were
unaware of any facts that would make the information provided to SG Cowen
incomplete or misleading in any respect. SG Cowen, with the company's consent,
assumed that the financial forecasts provided to and reviewed by SG Cowen were
reasonably prepared by the management of the company, and reflected the best
available estimates and good faith judgments of such management as to the future
performance of the database business and that such forecasts provided a
reasonable basis for its opinion.
SG Cowen did not make or obtain any independent evaluations, valuations or
appraisals of the assets or liabilities of the company, nor was SG Cowen
furnished with these materials. In rendering its opinion, SG Cowen did not
consider the effects of any legal matters relating to the company or IBM. SG
Cowen's services to the company in connection with the proposed sale were
comprised of providing general financial advisory services and rendering an
opinion from a financial point of view of the consideration to be received in
the proposed sale of the database business. SG Cowen's opinion was necessarily
based upon economic and market conditions and other circumstances as they
existed and could be evaluated by SG Cowen on the date of its opinion. It should
be understood that although subsequent developments may affect its opinion, SG
Cowen does not have any obligation to update, revise or reaffirm its opinion and
SG Cowen expressly disclaims any responsibility to do so.
28
In rendering its opinion, SG Cowen assumed, in all respects material to its
analysis, that the representations and warranties of each party contained in the
master purchase agreement are true and correct, that each party will perform all
of the covenants and agreements required to be performed by it under the master
purchase agreement and that all conditions to the consummation of the proposed
sale of the database business will be satisfied without waiver thereof. SG Cowen
assumed that the final form of the master purchase agreement would be
substantially similar to the last draft received by SG Cowen prior to rendering
its opinion. SG Cowen also assumed that all governmental, regulatory and other
consents and approvals contemplated by the master purchase agreement would be
obtained and that, in the course of obtaining any of those consents, no
restrictions will be imposed or waivers made that would have an adverse effect
on the contemplated benefits of the proposed sale of the database business.
SG Cowen's opinion does not constitute a recommendation to any stockholder
as to how such stockholder should vote with respect to the proposed sale of the
database business or to take any other action in connection with the proposed
sale of the database business or otherwise. SG Cowen has not been requested to
opine as to, and SG Cowen's opinion does not in any manner address, the
company's underlying business decision to effect the proposed sale of the
database business, the value of the remaining business of the company or the
company's decision on the use of the proceeds from the proposed sale of the
database business. SG Cowen does not express any opinion nor has SG Cowen
performed any analysis of the effects, financial or otherwise, of the strategic
alliance with IBM relating to certain Ascential products entered into between
the company and IBM as part of the proposed sale of the database business.
Furthermore, SG Cowen expresses no view as to the price or trading range for
shares of the common stock of the company following the consummation of the
proposed sale of the database business.
The following is a summary of the principal financial analyses performed by
SG Cowen to arrive at its opinion. Some of the summaries of financial analyses
include information presented in tabular format. In order to fully understand
the financial analyses, the tables must be read together with the text of each
summary. The tables alone do not constitute a complete description of the
financial analyses. Considering the data set forth in the tables without
considering the full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of the financial analyses. SG Cowen performed
certain procedures, including each of the financial analyses described below,
and reviewed with the management of the company the assumptions on which such
analyses were based and other factors, including the historical and projected
financial results of the company. No limitations were imposed by the company's
board of directors with respect to the investigations made or procedures
followed by SG Cowen in rendering its opinion.
DISCOUNTED CASH FLOW ANALYSIS. SG Cowen estimated a range of values for the
database business based upon the discounted present value of the projected
after-tax cash flows of the database business described in the financial
forecasts provided by management of the company, and in the financial forecasts
on a fully taxed basis, for the fiscal years ended December 31, 2001 through
2005, and of the terminal value of the database business at December 31, 2005,
based upon perpetual growth rates of after-tax cash flow. After-tax cash flow
was calculated by taking projected EBIT (Earnings Before Interest and Taxes) and
subtracting from this amount projected taxes, capital expenditures, changes in
working capital and adding back projected depreciation and amortization. This
analysis was based upon certain assumptions described by, projections supplied
by and discussions held with the management of the company. In performing this
analysis, SG Cowen utilized discount rates ranging from 14% to 24%, which were
selected based on the estimated industry weighted average cost of capital. SG
Cowen utilized perpetual growth rates of after-tax cash flow ranging from (5.0)%
to 5.0%, these growth rates represent the range of growth estimated by
management of the company for the database business.
29
Utilizing this methodology, the aggregate value of the database business
ranged from:
- $571 million to $1,363 million, based on the fully taxed financial
forecasts.
ANALYSIS OF CERTAIN PUBLICLY TRADED COMPANIES. To provide contextual data
and comparative market information, SG Cowen compared selected historical
operating and financial data and ratios for the database business to the
corresponding financial data and ratios of certain other companies (the
"Selected Companies") whose securities are publicly traded and which SG Cowen
believes are comparable to the database business from an operating standpoint.
These companies were:
- Borland Software Corporation
- Novell, Inc.
- Progress Software Corporation
- Sybase, Inc.
The data and ratios included the market capitalization of common stock plus
total debt, preferred stock and minority interest less cash and equivalents
("Aggregate Value") of the Selected Companies as multiples of the last twelve
months ("LTM") of reported revenues and EBIT, last reported quarter annualized
("LQA") revenues and EBIT and estimated calendar year 2001 revenues and EBIT. SG
Cowen also examined the ratios of the current share prices of the Selected
Companies to the LTM earnings per share ("EPS") and estimated 2001 calendar year
EPS (in each case, as available from research analyst reports or, if not so
available, First Call) for the Selected Companies.
The following table presents, for the periods indicated, the multiples
implied by the ratio of Aggregate Value to revenues and EBIT for the Selected
Companies and the same multiples for the database business except that the
consideration to be received in the proposed sale of the database business is
substituted for Aggregate Value, and the ratio of current share prices to LTM
earnings per share and estimates for 2001 calendar year earnings per share for
the Selected Companies and the ratio of the consideration to be received in the
proposed sale of the database business as a multiple of fully taxed EBIT for the
same periods for the database business. The information in the table with
respect to the Selected Companies is based on the closing stock price of the
Selected Companies stock on April 20, 2001.
AGGREGATE VALUE OR CONSIDERATION AS A MULTIPLE OF:
------------------------------------------------------------------------------
REVENUES EBIT P/E
------------------------------------ ------------------------------------ --------
LTM LQA CY01E LTM LQA CY01E LTM
--- -------- -------- -------- -------- -------- --------
High......................... 1.4x 1.5x 1.5x 22.7x 64.0x 12.6x 49.8x
Median....................... 1.3 1.4 1.3 13.1 16.0 12.6 19.9
Mean......................... 1.2 1.3 1.1 16.2 31.1 12.6 29.5
Low.......................... 0.6 0.7 0.6 12.8 13.2 12.6 18.8
Database Business............ 1.3 1.4 1.2 10.1 6.0 4.8 15.6
P/E
--------
CY01E
--------
High......................... 49.8x
Median....................... 16.0
Mean......................... 26.5
Low.......................... 13.7
Database Business............ 7.4
Although the Selected Companies were used for comparison purposes, none of
those companies is directly comparable to the database business. Accordingly, an
analysis of the results of such a comparison is not purely mathematical, but
instead involves complex considerations and judgments concerning differences in
historical and projected financial and operating characteristics of the Selected
Companies and other factors that could affect the public trading value of the
Selected Companies or the database business to which they are being compared.
ANALYSIS OF CERTAIN TRANSACTIONS. SG Cowen reviewed the financial terms, to
the extent publicly available, of two transactions (the "Selected Transactions")
involving the acquisition of companies in
30
the software industry, which were announced or completed since May 31, 2000.
These transactions were (listed as acquiror/target):
- Invensys, plc./Baan Company N.V.
- Sybase, Inc./New Era of Networks, Inc.
SG Cowen reviewed the Aggregate Value paid in the Selected Transactions as a
multiple of latest reported twelve month ("LTM") revenues, and next twelve
months ("NTM") estimated revenues, and also examined the multiples of equity
value paid in the Selected Transactions to LTM net income.
The following table presents, for the periods indicated, the multiples
implied by the ratio of Aggregate Value to revenues and the ratio of equity
value to earnings for the Selected Transactions and the same multiples and
ratios for the database business except that the consideration to be received in
the proposed sale of the database business is substituted for Aggregate Value
and equity value.
AGGREGATE VALUE OR
CONSIDERATION AS A
MULTIPLE OF REVENUES EQUITY VALUE/
----------------------- --------------
LTM NTM LTM NET INCOME
--- -------- --------------
Mean.................................................. 1.3x 1.2x NM
Database Business..................................... 1.3 1.2 15.6x
Although the Selected Transactions were used for comparison purposes, none
of those transactions is directly comparable to the proposed sale of the
database business, and none of the companies in those transactions is directly
comparable to the database business. Accordingly, an analysis of the results of
such a comparison is not purely mathematical, but instead involves complex
considerations and judgments concerning differences in historical and projected
financial and operating characteristics of the companies involved and other
factors that could affect the acquisition value of such companies or the
database business to which they are being compared.
The summary set forth above does not purport to be a complete description of
all the analyses performed by SG Cowen. The preparation of a fairness opinion
involves various determinations as to the most appropriate and relevant methods
of financial analyses and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
partial analysis or summary description. In arriving at its opinion, SG Cowen
made qualitative judgments as to the significance and relevance of each analysis
and factor that it considered. Accordingly, notwithstanding the separate factors
summarized above, SG Cowen believes, and has advised the company's board of
directors, that its analyses must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete view of the process
underlying its opinion. In performing its analyses, SG Cowen made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters, many of which are beyond the control of the
company. These analyses performed by SG Cowen are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than suggested by such analyses. In addition, analyses relating to the
value of businesses do not purport to be appraisals or to reflect the prices at
which businesses or securities may actually be sold. Accordingly, such analyses
and estimates are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their respective
advisors. None of the company, SG Cowen or any other person assumes
responsibility if future results are materially different from those projected.
The analyses supplied by SG Cowen and its opinion were among several factors
taken into consideration by the company's board of directors in making its
decision to enter into the master purchase agreement and should not be
considered as determinative of such decision.
31
SG Cowen was selected by the company's board of directors to render an
opinion to the company's board of directors because SG Cowen is an
internationally recognized investment banking firm and because, as part of its
investment banking business, SG Cowen is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
SG Cowen is providing financial services for the company for which it will
receive customary fees. In addition, in the ordinary course of its business, SG
Cowen and its affiliates trade the equity securities of the company and IBM for
their own account and for the accounts of their customers, and, accordingly, may
at any time hold a long or short position in such securities. SG Cowen and its
affiliates in the ordinary course of business have from time to time provided,
and in the future may continue to provide, commercial and investment banking
services to the company and IBM, including serving as a financial advisor on
potential acquisitions and as an underwriter on equity and/or equity offerings,
and have received and may in the future receive fees for the rendering of such
services.
Pursuant to the SG Cowen engagement letter, if the proposed sale of the
database business is consummated, SG Cowen will be entitled to receive a
transaction fee equal to $10 million. The company has also agreed to pay a fee
of $300,000 to SG Cowen for rendering its opinion, which fee shall be credited
against any transaction fee paid. Additionally, the company has agreed to
reimburse SG Cowen for its out-of-pocket expenses, including attorneys' fees,
and has agreed to indemnify SG Cowen against certain liabilities, including
liabilities under the federal securities laws. The terms of the fee arrangement
with SG Cowen, which are customary in transactions of this nature, were
negotiated at arm's length between the company and SG Cowen, and the company's
board of directors was aware of the arrangement, including the fact that a
significant portion of the fee payable to SG Cowen is contingent upon the
completion of the proposed sale of the database business.
INTERESTS OF MANAGEMENT OR DIRECTORS IN THE TRANSACTIONS
In considering the recommendation of the board of directors with respect to
the sale of the database business, stockholders of the company should be aware
that certain of the directors and executive officers of the company have certain
interest in the sale of the database business that may differ from the interests
of the stockholders of the company. Our board of directors was aware of these
interests and considered them, among other factors, in approving and
recommending the sale of the database business.
The company has had in effect change of control and severance agreements
with each of the executive officers of the company. In the event of a change of
control these agreements provide for acceleration of unvested options, excise
tax protections and cash severance payments upon involuntary, or in certain
cases voluntary, termination of employment, other than terminations for cause.
Each of Peter Gyenes, our president, chief executive officer and chairman of our
board of directors, and Peter Fiore, our senior vice president and president,
Ascential Software, has agreed to waive his rights under these agreements in
connection with the sale of the database business.
Assuming approval of the sale of the database business by our stockholders
at the special meeting, approximately 380,835 unvested options held by James
Arnold, Jr., our vice president and chief financial officer, approximately
316,665 unvested options held by Gary Lloyd, our vice president, legal, general
counsel and secretary, approximately 167,500 unvested options held by William
O'Kelly, our vice president, corporate finance and treasurer and approximately
495,835 unvested options held by James Foy, our senior vice president and
president, Informix Software, will become immediately exercisable. In addition,
if the employment of each of these four individuals is terminated following
approval by our stockholder of the sale of the database business, these
individuals would receive approximately $1,190,000, $1,360,000, $337,500 and
$2,400,000, respectively, in severance payments. In addition, because payments
made to Messrs. Arnold, Foy and Lloyd in connection with the sale of the
32
database business may become subject to an excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended, Messrs. Foy, Arnold and Lloyd
each will be entitled under their change of control and severance agreements to
an additional amount, referred to as a gross-up payment, to offset any federal
excise tax incurred on receipt of severance and other payments in connection
with the sale of the database business. We currently estimate that these
payments to Messrs. Foy, Arnold and Lloyd will be approximately $1,200,00,
$720,000 and $626,000, respectively.
The company has entered into agreements which provide certain former
executive officers of the company with acceleration of vesting of unvested
options and excise tax protection. Assuming approval of the sale of the database
business by our stockholders at the special meeting, approximately 450,000
unvested options held by Yon Yoon Jordan, our former executive vice president
and chief financial officer, approximately 395,415 unvested options held by F.
Steven Weick, our former senior vice president, and approximately 280,835
unvested options held by Wayne Page, our former vice president, human resources,
will become immediately exercisable. The company believes that no federal excise
tax will be due by any of these individuals and that the company will have no
obligations to pay any additional amounts under the excise tax protection
provisions of their agreements.
In addition, the company has entered into change of control and severance
agreements, or severance agreements with other employees. In the event of a
change of control, these employees may receive some of the following benefits:
acceleration of unvested options, extended vesting of options following
termination, excise tax protection and cash severance payments upon involuntary,
or in certain cases voluntary termination, other than for cause.
The company may establish a transition bonus program to aid in the retention
of employees who are likely to be terminated after the completion of the sale of
the database business.
Our directors have received options under the company's 1989 outside
director stock option plan. These options when granted are subject to vesting
over a three-year period. Pursuant to the terms of these options, upon the sale
of the database business, all unvested options would become immediately
exercisable. Each of our directors has agreed to waive their rights to
accelerated vesting of their options in connection with the sale of the database
business.
IBM has agreed to reimburse the company for up to $21.0 million of severance
costs it incurs related to the company's employees who do not join IBM.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion summarizes the material federal income tax
consequences of the sale of the database business and the use of a substantial
portion of the net proceeds of the sale of the database business to fund a stock
reduction program. The summary is based on the existing provisions of the
Internal Revenue Code of 1986, as amended, or Code, existing and proposed
Treasury regulations promulgated under the Code and current administrative
rulings and pronouncements and court decisions, all of which are subject to
change. Any such change, which may or may not be retroactive, could alter the
tax consequences to the company or its stockholders. Unless stated otherwise,
all section references contained in this section are to the Code.
The company's stockholders should be aware that this discussion does not
address all tax consequences that may be relevant to particular stockholders in
light of their particular circumstances, including without limitation
stockholders who are foreign citizens or residents, foreign corporations,
foreign partnerships, or any other foreign persons, insurance companies,
financial institutions, investment companies, tax-exempt organizations, brokers,
dealers or traders in securities or commodities, "S" corporations, expatriates,
persons who are subject to alternative minimum tax, persons that have a
functional currency other than the United States dollar, persons who hold shares
in
33
participation of corporate tax shelters, persons who acquired shares through
exercise of an employee stock option or right, or otherwise as compensation,
persons who participated in the company's stock repurchase program dated
announced April 25, 2001, or persons who hold shares as part of a hedging
transaction, straddle or conversion transaction, or persons who have entered
into a "constructive sale" transaction with respect to the company's common
stock. This discussion assumes that shares held by stockholders are held as
capital assets. In addition, the following discussion does not address the tax
consequences of the sale of assets under foreign, state or local laws or the tax
consequences of transactions consummated prior or subsequent to or concurrently
with the sale of assets (whether or not such transactions are in connection with
the sale of assets), including, without limitation, transactions in which the
stock of the company or its subsidiaries is disposed of. The company does not
intend to request a ruling from the IRS with respect to the tax consequences of
the proposed sale of the database business and the stock reduction program, and
the IRS could disagree with portions of this discussion.
ACCORDINGLY, STOCKHOLDERS OF THE COMPANY ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE SPECIFIC AND DETAILED TAX CONSEQUENCES OF THE SALE OF THE
DATABASE BUSINESS AND THE DISTRIBUTION OF THE NET PROCEEDS, PURSUANT TO A STOCK
REDUCTION PROGRAM, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN
TAX CONSEQUENCES TO THEM IN THEIR PARTICULAR CIRCUMSTANCES.
TAX CONSEQUENCES TO THE COMPANY
The sale of the database business assets will be a taxable event to the
company. The company will recognize gain on the difference between the purchase
price (increased by the liabilities assumed by IBM) and its tax basis in the
assets and will pay income tax accordingly. The distribution of cash proceeds
from the sale to its stockholders pursuant to the stock reduction program is not
a separate taxable event to the company.
The above events will require appropriate adjustments to the company's
earnings and profits account. First, the earnings and profits will be increased
by the gain recognized on the sale of assets, net of the tax liabilities
incurred. Secondly, the earnings and profits will be reduced by the amount of
the cash distribution to stockholders in redemption of the company's stock
pursuant to the stock reduction program. If the stock redemption qualifies for
sale or exchange treatment (as discussed below), then the reduction is limited
to an amount not in excess of the ratable share of the earnings and profits
allocable to the stock redeemed.
TAX CONSEQUENCES TO NONCORPORATE STOCKHOLDERS
GENERAL. The company intends to structure any stock reduction program as a
partial liquidation for federal income tax purposes. There can be no assurance,
however, that such tax treatment will ultimately be available to our
stockholders. A partial liquidation distribution is defined under
Section 302(e) of the Code as a distribution that (i) is "not essentially
equivalent to a dividend" as determined at the corporate level, which generally
requires a genuine contraction of the business of the corporation,
(ii) constitutes a redemption of stock, and (iii) is made pursuant to a plan of
partial liquidation and within the taxable year in which the plan is adopted or
within the succeeding taxable year. The company believes that a stock reduction
program will qualify as a partial liquidation under Section 302(b)(4) and
(e) of the Code, provided that (1) at least 20 percent of the company's
outstanding stock is redeemed in the stock reduction program, and (2) the
proceeds from the sale of database assets owned directly by the company and
Informix Software, net of taxes, expenses, and the holdback to the extent not
distributed by the close of the taxable year following the adoption of the plan
of partial liquidation, are sufficient to completely fund the stock reduction
program.
34
If the stock reduction program qualifies as a partial liquidation, then
noncorporate stockholders will receive sale or exchange treatment for
distributions in redemption of stock, with the consequences as discussed below
under "--Sale or Exchange Treatment." If the stock reduction program fails to
qualify as a partial liquidation, then the tax consequences to noncorporate
stockholders will be generally the same as the tax consequences to corporate
stockholders discussed below.
SALE OR EXCHANGE TREATMENT. If the stock redemption qualifies for sale or
exchange treatment, whether as a partial liquidation or otherwise as described
below under "Other Situations Where Sale or Exchange Treatment May Be
Available," then amounts received by a stockholder in the stock redemption will
be treated as full payment in exchange for the portion of his stock that is
redeemed.
The amount of gain or loss recognized by a stockholder is computed by
comparing the cash received by such stockholder to the stockholder's basis in
the part of his or her common stock that is redeemed in a partial liquidation. A
stockholder holding more than one block of shares can choose which block is
redeemed for purposes of determining his basis and holding period by making an
"adequate identification" of the redeemed shares under the applicable Treasury
regulations. Absent such an identification, the shares earliest acquired by the
stockholder among his total ownership will be those considered redeemed for
purposes of determining his basis and holding period.
If the stock redeemed is a capital asset in the stockholder's hands, the
stockholder's gain or loss will be capital. The gain or loss will be long-term
or short-term depending on the stockholder's holding period for the shares
redeemed. In order to qualify for favorable long-term capital gain treatment,
the stockholder must have held the redeemed shares for more than one year. In
certain circumstances, such as stock acquired by gift or inheritance, the
present owner's holding period is increased by the period the common stock was
owned by the prior owners.
For a noncorporate stockholder, a net long-term capital gain is taxed at a
maximum rate of 20% (10% for taxpayers in the 15% ordinary income tax bracket)
to individual stockholders. If an individual stockholder incurs a capital loss
on the redemption, the stockholder can offset the capital loss with other
capital gains and up to $3,000 of his ordinary income for the year, and excess
capital losses may be carried over to future years indefinitely. For corporate
stockholders, net capital gain is taxed at the same rate as ordinary income.
TAX CONSEQUENCES TO CORPORATE STOCKHOLDERS
GENERAL. For a corporate stockholder, (and for a noncorporate stockholder
in the event that the stock reduction program fails to qualify as a partial
liquidation), the amounts received in the stock redemption will be taxed as a
distribution, unless the stock redemption qualifies for sale or exchange
treatment under Section 302(b)(1) (redemptions not essentially equivalent to a
dividend), Section 302(b)(2) (substantially disproportionate redemptions), or
Section 302(b)(3) (complete termination of a stockholder's interest) of the
Code, as discussed more fully below under "Other Situations Where Sale or
Exchange Treatment May Be Available."
NO SALE OR EXCHANGE TREATMENT. If the stock redemption does not qualify for
sale or exchange treatment and is taxed as a distribution, then to the extent of
the company's current and accumulated earnings and profits the redemption is
treated as a dividend, taxable as ordinary income to stockholders. Any portion
in excess of current and accumulated earnings and profits will be nontaxable to
the extent of the stockholder's basis in the stock and will reduce the basis
accordingly. The excess of the remaining portion over the stockholder's basis
will be treated as gain from the sale or exchange of the stock.
Generally, a U.S. corporation will be entitled to a dividends-received
deduction for the cash received in the stock redemption, subject to certain
limitations. However, as cash received in the stock reduction program may be
subject to the "extraordinary dividend" provisions of Section 1059 of the
35
Code, in which case a corporate stockholder will generally be required to reduce
its basis in the stock by the nontaxed portion of the dividend, i.e., the amount
offset by the dividends-received deduction.
OTHER SITUATIONS WHERE SALE OR EXCHANGE TREATMENT MAY BE AVAILABLE
Section 302(b)(1) of the Code provides that a stock redemption will receive
sale or exchange treatment "if the redemption is not essentially equivalent to a
dividend." In contrast with Section 302(b)(4) of the Code as described above,
the "not essentially equivalent to a dividend" for purposes of
Section 302(b)(1) of the Code is determined at the stockholder level instead of
at the corporate level. A stock redemption will qualify under Section 302(b)(1)
of the Code when there has been a meaningful reduction of the stockholder's
proportionate interest in the redeeming corporation, which will depend upon the
stockholder's particular facts and circumstances. Generally, a stockholder of a
widely-held public corporation will receive sale or exchange treatment in a
stock redemption even if the reduction of the stockholder's proportionate
interest in the redeeming corporation is not significant.
A stock redemption will qualify for sale or exchange treatment under
Section 302(b)(2) of the Code if the following two conditions are met:
- The redemption is substantially disproportionate. To be substantially
disproportionate, the stockholder must own, after the redemption, less
than 80 percent of his interest in the corporation before the redemption.
For example, if a stockholder has a 5 percent ownership in the company,
the redemption is substantially disproportionate only if the percentage of
ownership after the redemption is less than 4 percent (80 percent of
5 percent).
- The stockholder owns, after the redemption, less than 50 percent of the
total combined voting power of all classes of stock entitled to vote.
A stock redemption will qualify for sale or exchange treatment under
Section 302(b)(3) of the Code if a stockholder terminates his entire stock
ownership in a corporation through a stock redemption.
For purposes of determining if the redemption is a sale or exchange under
Sections 302(b)(1), 302(b)(2) or 302(b)(3) of the Code, a stockholder will be
deemed to own shares owned by certain related persons pursuant to Section 318 of
the Code.
If the stock redemption qualifies for sale or exchange treatment under
Sections 302(b)(1), 302(b)(2) or 302(b)(3) with respect to a particular
stockholder, then the stockholder will receive the same tax treatment of the
stock redemption as discussed above for noncorporate stockholders under "Tax
Consequences to Noncorporate Stockholders--Sale or Exchange Treatment."
BACKUP WITHHOLDING AND INFORMATION REPORTING. Payments for the stock
redeemed will be subject to information reporting to the IRS and may be subject
to a 31% backup withholding tax on the gross amount received by the stockholder.
The backup withholding tax will apply if the stockholder (i) fails to provide an
accurate taxpayer identification number, or (ii) previously failed to include
all reportable interest and dividend payments in his income tax return.
Corporate stockholders and certain exempted stockholders are not subject to
backup withholding. The amount paid as backup withholding does not constitute an
additional tax and will be creditable against the stockholder's federal income
tax liability. A stockholder may provide his taxpayer identification number by
completing a Form W-9.
ACCOUNTING TREATMENT
The proposed sale of the database business is expected to be accounted for
as a sale of certain assets and certain liabilities, in accordance with
accounting principles generally accepted in the United States. In the period in
which the proposed sale of the database business is consummated, the company
36
expects to recognize a gain in the amount of the difference between the sales
price and the aggregate book value of the net assets sold.
REGULATORY MATTERS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the related rules, the sale of the database business may not be completed
until certain information has been furnished to the Antitrust Division of the
Department of Justice, or Antitrust Division, and the Federal Trade Commission,
or FTC, and certain regulatory waiting period requirements have been satisfied.
The company and IBM will be making all required filings with the Antitrust
Division and FTC as soon as practicable after the signing of the master purchase
agreement.
The Antitrust Division and FTC frequently review transactions such as the
sale of the database business for their competitive effects. At any time before
or after consummation of the sale of the database business, the FTC or the
Antitrust Division could take such action under the antitrust laws as it deems
necessary or desirable in the public interest to preserve competition, including
such action seeking to enjoin the sale of the database business or seeking the
divestiture of substantial assets of the company and IBM or their respective
subsidiaries. Private parties and state attorneys general also may bring legal
action under federal or state antitrust laws under certain circumstances. While
the company believes that the sale of the database business is beneficial to
competition and consumers, we can give no assurance that a challenge to the sale
of the database business on antitrust grounds will not be made or, if such a
challenge is made, that it would be unsuccessful.
The company and IBM conduct operations in a number of foreign jurisdictions
where other regulatory filings or approvals, including antitrust filings, may be
required and/or advisable in connection with the completion of the sale of the
database business. The company and IBM are currently reviewing whether other
filings or approvals may be required or desirable in these other jurisdictions
and the company will make or assist IBM in making all such filings. Certain of
these filings may not be made before the completion of the sale of the database
business, and some of these approvals, which are not as a matter of practice
required to be obtained before the effectiveness of the sale of the database
business, may not be obtained before the closing. While the company believes
that the sale of the database business is beneficial to competition and
consumers, we can give no assurance that a challenge to the sale of the database
business on antitrust grounds will not be made by any applicable foreign
antitrust regulatory authorities or, if such a challenge is made, that it would
be unsuccessful.
RIGHTS OF APPRAISAL
Under the Delaware General Corporation Law, the company's stockholders are
not entitled to rights of appraisal in connection to the sale of the database
business or any of the transactions contemplated by the master purchase
agreement.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements give effect to the sale of substantially all of the assets and
certain liabilities of the database business to IBM for $1.0 billion. The
unaudited pro forma condensed consolidated balance sheet as of December 31, 2000
gives effect to the sale as if it occurred on December 31, 2000. The unaudited
pro forma condensed consolidated statement of operations for the year ended
December 31, 2000 gives effect to the sale as if it occurred on January 1, 2000.
The pro forma adjustments are based on preliminary estimates, currently
available information and certain assumptions that we believe are reasonable.
The unaudited pro forma financial information presented herein is not
necessarily indicative of the financial position or results of operations that
we
37
would have obtained had such events occurred as of the dates assumed, or of the
future results of the company.
The unaudited pro forma condensed consolidated financial statements should
be read in connection with the company's historical consolidated financial
statements and the related notes included in the company's Annual Report on
Form 10-K for the year ended December 31, 2000. See "Where You Can Find More
Information."
38
INFORMIX CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000
(IN THOUSANDS)
INFORMIX
CORPORATION
CONSOLIDATED PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ----------- ----------
CURRENT ASSETS
Cash and cash equivalents............................ $128,420 $ 900,000 (c) $1,016,820
(11,600)(d)
Short-term investments............................... 88,541 88,541
Accounts receivable, net............................. 235,429 (201,532)(a) 33,897
Other current assets................................. 17,330 (8,124)(a) 9,206
-------- ---------- ----------
Total current assets................................... 469,720 678,744 1,148,464
-------- ---------- ----------
PROPERTY AND EQUIPMENT, net............................ 67,617 (53,694)(a) 13,923
SOFTWARE COSTS, net.................................... 41,444 (26,303)(a) 15,141
INTANGIBLE ASSETS, net................................. 48,258 (6,956)(a) 41,302
OTHER ASSETS........................................... 28,842 (8,732)(a) 120,110
100,000 (c)
-------- ---------- ----------
Total Assets........................................... $655,881 $ 683,059 $1,338,940
======== ========== ==========
CURRENT LIABILITIES
Accounts payable, accrued expenses and other current $ 67,230 $ (44,159)(a) $ 97,731
liabilities........................................ 25,000 (c)
49,660 (b)
Accrued employee compensation........................ 66,167 (49,660)(b) 16,507
Income taxes payable................................. 23,139 210,000 (e) 233,139
Deferred revenue and advances from customers......... 152,227 (138,464)(a) 13,763
Accrued merger, realignment and other charges........ 28,210 -- 28,210
-------- ---------- ----------
Total current liabilities.............................. 336,973 52,377 389,350
OTHER NON CURRENT LIABILITIES.......................... 787 (634)(a) 153
Total stockholders' equity............................. 318,121 (122,084)(a) 949,437
975,000 (c)
(11,600)(d)
(210,000)(e)
-------- ---------- ----------
Total Liabilities and Stockholders' Equity............. $655,881 $ 683,059 $1,338,940
======== ========== ==========
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial
Information.
39
INFORMIX CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS)
INFORMIX
CORPORATION
CONSOLIDATED PRO FORMA PRO
HISTORICAL ADJUSTMENTS (F) FORMA
------------ --------------- --------
NET REVENUES
Licenses............................................... $ 404,421 $(337,718) $ 66,703
Services............................................... 524,898 (469,870) 55,028
---------- --------- --------
929,319 (807,588) 121,731
COSTS AND EXPENSES
Cost of software distribution.......................... 50,422 (36,536) 13,886
Cost of services....................................... 184,581 (141,671) 42,910
Sales and marketing.................................... 402,569 (332,303) 70,266
Research and development............................... 166,076 (121,459) 44,617
General and administrative............................. 100,027 (81,837) 18,190
Merger, realignment and other charges.................. 126,828 (105,028) 21,800
---------- --------- --------
1,030,503 (818,834) 211,669
---------- --------- --------
Operating loss......................................... (101,184) 11,246 (89,938)
OTHER INCOME............................................. 18,887 (3,990) 14,897
---------- --------- --------
LOSS BEFORE INCOME TAXES................................. (82,297) 7,256 (75,041)
Income taxes........................................... 16,018 (13,109) 2,909
---------- --------- --------
NET LOSS................................................. (98,315) 20,365 (77,950)
---------- --------- --------
Preferred stock dividend............................... (191) -- (191)
---------- --------- --------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS............... $ (98,506) $ 20,365 $(78,141)
========== ========= ========
NET LOSS PER COMMON SHARE
Basic.................................................. $ (0.34) $ (0.27)
========== ========
Diluted................................................ $ (0.34) $ (0.27)
========== ========
SHARES USED IN PER SHARE CALCULATIONS
Basic.................................................. 286,138 286,138
========== ========
Diluted................................................ 286,138 286,138
========== ========
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial
Information.
40
INFORMIX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
BASIS OF PRESENTATION
On April 24, 2001, the company executed a master purchase agreement with
IBM, pursuant to which IBM will purchase substantially all of the assets and
certain liabilities of the company's database business for $1.0 billion in cash.
Under the terms of the master purchase agreement, IBM will hold back
$100.0 million of the purchase price for 18 months after closing to satisfy
certain indemnification obligations of the company should they arise. If the net
working capital transferred to IBM exceeds $124.0 million, IBM will pay the
company an amount equal to 50% of the excess. If the transferred net working
capital is less than $124.0 million, the company will pay IBM the difference. In
addition, the company has agreed to pay IBM an amount equal to 18% of certain
deferred revenues arising from the database business which are set forth on the
December 31, 2000 balance sheet of the database business and for which the
company had received payment prior to December 31, 2000.
The unaudited pro forma condensed consolidated balance sheet as of
December 31, 2000 gives effect to the sale as if it occurred on that date. The
unaudited pro forma condensed consolidated statement of operations for the year
ended December 31, 2000 gives effect to the sale as if it occurred on
January 1, 2000.
PRO FORMA ADJUSTMENTS
Adjustments to present the unaudited pro forma condensed consolidated
financial statements are set forth below. The pro forma adjustments only give
effect to amounts that are directly attributable to the sale:
a. These adjustments reflect the removal from the company's balance sheet
of substantially all of the assets and certain liabilities of the
database business under the terms of the master purchase agreement as if
the sale occurred on December 31, 2000.
b. This adjustment reflects a reclassification from accrued employee
compensation to accrued expenses for the liabilities in respect of the
database business employees. Under the terms of the master purchase
agreement, the company will retain the obligation to pay substantially
all accrued employee compensation that relates to the employees of the
database business and that is earned up to the close of the transaction.
This reclassification is made as substantially all the database business
employees will transfer to IBM, and so these liabilities will no longer
relate to ongoing employees of the company.
c. These adjustments reflect the proceeds from the sale of $900 million and
a receivable for the holdback of $100 million and an accrual of
$25 million for estimated investment bankers' fees, legal fees,
accounting fees and other costs of the sale. Full receipt of the holdback
is assumed on the pro forma condensed consolidated balance sheet.
d. This adjustment reflects the payment to IBM of $11.6 million for 18% of
certain deferred revenues arising from the database business set forth on
the December 31, 2000 balance sheet for the database business and for
which the company had received payment prior to December 31, 2000.
e. This adjustment reflects an accrual of $210.0 million for the estimated
taxes on the gain of the sale of the database business.
f. These adjustments reflect the elimination of the operations of the
database business as if the sale occurred on January 1, 2000.
41
INFORMIX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(CONTINUED)
The following items have been excluded from the unaudited pro forma
financial information:
- The gain on the sale of the database business and any interest income on
the cash proceeds have been excluded from the unaudited pro forma
condensed consolidated statement of operations in accordance with
guidelines established by the Securities and Exchange Commission.
- The announced stock reduction program for the company has been excluded
from the unaudited pro forma condensed consolidated balance sheet because
the type and extent of the stock reduction has not been determined.
- Any potential adjustment to the purchase price arising from the difference
between the working capital, as defined in the master purchase agreement,
and $124.0 million has been excluded from the unaudited pro forma
condensed consolidated balance sheet because any such adjustment is not
determinable prior to closing.
42
TERMS OF THE SALE OF DATABASE BUSINESS
The terms of the transaction are included in the following transaction
agreements:
- A Master Purchase Agreement, dated as of April 24, 2001, among the
company, Informix Software and IBM, which is attached hereto as Annex A
and is incorporated into this proxy statement by reference.
- Form of Country Acquisition Agreements to be entered into among various
foreign subsidiaries of the company and various subsidiaries of IBM.
- The Employee Matters Agreement, dated as of April 24, 2001, among the
company, Informix Software and IBM.
- The Master Relationship Agreement, dated as of April 24, 2001, between
Ascential Software, Inc. and IBM.
- The OEM Software Agreement, dated as of April 24, 2001, between Ascential
Software, Inc. and IBM.
- The Source Code License Agreement, dated as of April 24, 2001, between
Ascential Software and IBM.
- Two Transition Services Agreements, both dated as of April 24, 2001,
between the company and IBM.
- The Litigation Settlement Agreement, dated as of April 24, 2001, between
the company and IBM.
CLOSINGS; EFFECTIVENESS OF AGREEMENTS.
The initial closing of the sale of the database business in the United
States, the Republic of Ireland, Japan, the United Kingdom, the Federal Republic
of Germany, the French Republic, Mexico and the Italian Republic, pursuant to
the master purchase agreement will close on the third business day after the
satisfaction or waiver of the conditions set forth in the master purchase
agreement. Approximately 96% of the aggregate purchase price, less the
$100.0 million holdback amount, will be paid at this first closing. With respect
to all other foreign jurisdictions, IBM, the company and Informix Software will
use all commercially reasonable efforts to cause any such subsequent closing to
occur as soon as reasonably practicable and in any event no later than 60 days
following the initial closing date. The portion of the purchase price allocated
to the purchase of the database business in foreign jurisdictions which do not
close on the initial closing date will be withheld from the purchase price and
paid on the date the sale of the database business in that foreign jurisdiction
closes. Each of the employee matters agreement, the litigation settlement
agreement, the master relationship agreement, the OEM software agreement, the
source code license agreement and the two transition services agreements shall
become effective upon the initial closing.
Below are summaries of the material provisions of the transaction
agreements. You should refer to the full text of the master purchase agreement,
attached to this proxy statement as annex A, for details of the terms and
conditions of this agreement.
THE MASTER PURCHASE AGREEMENT
THE FOLLOWING DESCRIPTION OF THE MASTER PURCHASE AGREEMENT DESCRIBES THE
MATERIAL PROVISIONS OF THE MASTER PURCHASE AGREEMENT BUT DOES NOT PURPORT TO
DESCRIBE ALL OF THE TERMS OF THE MASTER PURCHASE AGREEMENT. THE FULL TEXT OF THE
MASTER PURCHASE AGREEMENT IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX A AND
IS INCORPORATED BY REFERENCE. ALL INFORMIX STOCKHOLDERS ARE URGED TO READ THE
MASTER PURCHASE AGREEMENT IN ITS ENTIRETY BECAUSE IT IS THE LEGAL DOCUMENT
43
THAT GOVERNS THE TRANSACTION AND THE PRINCIPAL DOCUMENT PURSUANT TO WHICH THE
COMPANY WILL SELL THE DATABASE BUSINESS TO IBM.
SALE OF THE DATABASE BUSINESS
The sale of the database business will be effected principally through a
series of asset and specified liability transfers. Pursuant to those transfers,
the company, Informix Software and certain subsidiaries of the company which are
also selling the database business assets to IBM, sometimes collectively
referred to in this proxy statement as the Selling Entities, will sell to IBM or
any subsidiaries of IBM designated by IBM, sometimes collectively referred to in
this proxy statement as the Purchasing Companies, all of the assets other than
Excluded Assets, as discussed below, (the "Acquired Assets") that are owned,
controlled, leased or licensed by the company, Informix Software or their
respective subsidiaries and used, held for use or intended to be used in the
operation or conduct of the relational database management systems businesses,
including the research, development, manufacture, distribution, marketing, sale
and service of the relational management systems that are commonly used as
database engines for data warehousing systems and transaction processing systems
(commonly referred to in the industry as RDBMS), of the Selling Entities, or
otherwise referred to as the Database Business.
ACQUIRED ASSETS
The master purchase agreement defines the term "Acquired Assets" to
expressly include:
- all intellectual property (including rights under licenses and settlement
agreements) that is used, held for use or intended to be used in the
operation or conduct of the Database Business,
- all contracts of the Selling Entities, including any rights under those
contracts arising at or after the applicable closing, that are used, held
for use or intended to be used in the operation or conduct of the Database
Business or to which the Acquired Assets are subject, other than certain
contracts that contain one or more of a series of identified types of
provisions or that are not in the English language (unless accompanied by
a translation the accuracy of which has been certified by an officer of
the company or Informix Software),
- all receivables constituting the right to receive payments in respect of
goods or services arising out of or relating to the operation or conduct
of the Database Business,
- the certificates, permits, licenses, franchises approvals, qualifications,
registrations, certifications, and other similar authorizations from any
governmental entity used, held for use or intended to be used in the
operation or conduct of the Database Business,
- the real property leased by the Selling Entities and used, held for use or
intended to be used in the operation or conduct of the Database Business
and any improvements, fixtures and furniture,
- office and other supplies that are used, held for use or intended to be
used in the operation or conduct of the Database Business,
- equipment (including vehicles) that is used, held for use or intended to
be used in the operation or conduct of the Database Business,
- the inventory of the Selling Entities for the products of the Database
Business,
- all information technology systems (including financial, administrative,
development, customer support and personnel systems) that are used, held
for use or intended to be used in the operation or conduct of the Database
Business,
- all credits, prepaid expenses, deferred charges, advance payments,
security deposits and other prepaid items that are used, held for use or
intended to be used in, or that arise out of, the operation or conduct of
the Database Business,
44
- all rights, claims and credits to the extent relating to the Database
Business or to any Acquired Asset or any Assumed Liability (as defined
below), including all rights in and to products sold or leased (including
products returned after the applicable closing and rights of rescission,
replevin and reclamation) in the operation or conduct of the Database
Business and any rights, claims and credits arising under insurance
policies and all guarantees, representations, warranties, indemnities and
similar rights in favor of the Selling Entities to the extent relating to
the Database Business or to any Acquired Asset or Assumed Liability,
- all other assets reflected on the December 31, 2000 unaudited balance
sheet for the Database Business (including any equipment which has been
fully depreciated), except inventory or obsolete or worn out equipment
sold in the ordinary course of business consistent with past practice,
- all goodwill generated by or associated with the Database Business,
- all books of account, ledgers, general, financial, legal, regulatory, tax,
accounting and personnel records, files, customers' and suppliers' lists,
sales and promotional literature, customer and supplier correspondence,
manuals, files, data, papers, personnel and employment records and other
information, whether in hard copy or computer or other format, that are
used, held for use or intended to be used, or that arise out of, the
operation or conduct of the Database Business, and
- certain assets relating to employee benefit plans to be transferred to IBM
under the employee matters agreement.
EXCLUDED ASSETS
IBM will not acquire the following Excluded Assets under the master purchase
agreement:
- all rights, claims, credits and causes of action of the company, Informix
Software or any of their respective subsidiaries to the extent relating to
any Excluded Liability (as defined below),
- except as otherwise specifically provided in the employee matters
agreement, all the assets of or assets relating to the employee benefit
plans,
- all financial and tax records that form a part of the general ledger of
any Selling Entity (except that IBM will receive a copy of the portions of
any of those records to the extent they relate to the Database Business in
any respect),
- the software products and other intellectual property contained in the O2
product family,
- certain contracts of the Selling Entities that contain one or more of a
series of identified types of provisions or that are not in the English
language (unless accompanied by a translation the accuracy of which has
been certified by an officer of the company or Informix Software),
- all rights of the company, Informix Software and their respective
subsidiaries under the master purchase agreement and the other transaction
agreements, and
- all cash and cash equivalents.
ASSUMED LIABILITIES
IBM will assume the following obligations and liabilities of the Selling
Entities specifically identified with or resulting from the operation or conduct
of the Database Business incurred in the ordinary course of business consistent
with past practice (excluding the Excluded Liabilities discussed below) (the
"Assumed Liabilities"):
- all obligations, liabilities and commitments under any contract that is
used, held for use or intended to be used in the operation or conduct of
the Database Business or to which the Acquired Assets are subject, except
obligations, liabilities or obligations (1) arising out of any actual or
alleged breach by the company, Informix Software or their respective
subsidiaries of, or
45
nonperformance by the company, Informix Software or their respective
subsidiaries under, any of those contracts, in each case on or prior to
the date of the relevant closing, and (2) in respect of excluded contracts
not acquired by IBM or the other Purchasing Companies that contain one or
more of a series of identified types of provisions or that are not in the
English language (unless accompanied by a translation the accuracy of
which has been certified by an officer of the company or Informix
Software),
- any liabilities assumed expressly by IBM under the employee matters
agreement, and
- all current liabilities of the Database Business reflected on the face of
the closing statement (excluding the notes to the closing statement).
EXCLUDED LIABILITIES
Under the master purchase agreement, IBM will not assume the following
Excluded Liabilities:
- any obligation, liability or commitment of whatever nature, whether
presently in existence or arising hereafter, of the Selling Entities, not
expressly assumed under the master purchase agreement,
- any liability, obligation or commitment of the company, Informix Software
or of their respective subsidiaries that arises out of or is associated
with any Excluded Asset or any business of the company, Informix Software
or any of their respective subsidiaries, or that arises out of the
ownership by, the company, Informix Software or their respective
subsidiaries of the Excluded Assets or is associated with the realization
of the benefits of any Excluded Asset,
- any liability, obligation or commitment of the company, Informix Software
or their respective subsidiaries or any part of the Database Business to
any of their respective affiliates (other than to a part of the Database
Business),
- any liability, obligation or commitment of or relating to the benefit
plans, or relating to any current or former officer, employee, independent
contractor or director of the company, Informix Software or any of their
respective subsidiaries or their benefits or compensation, including the
termination thereof, other than any liabilities assumed expressly by IBM
under the employee matters agreement,
- any liabilities for certain excluded taxes,
- any indebtedness (other than ordinary course trade payables),
- any liability, obligation or commitment arising under any environmental
law, which liability, obligation or commitment relates to or arises out of
(1) any acts or omissions of the company, Informix Software or their
respective subsidiaries on or prior to the relevant closing, or (2) any
facts, circumstances or conditions existing on or prior to the relevant
closing relating to hazardous substances, including any management,
disposal or arranging for disposal of hazardous substances by the company,
Informix Software or their respective subsidiaries or otherwise in
connection with the Database Business or the Acquired Assets or activities
or operations occurring or conducted in connection with any predecessor
operations of the Database Business or otherwise, and
- any other liability, obligation or commitment (other than those set forth
in the definition of the term "Assumed Liabilities") as and to the extent
that liability, obligation or commitment is not reflected on the face of
the closing statement (excluding the notes to the closing statement).
REAL ESTATE MATTERS
In addition, Informix Software and IBM will, or will cause the relevant
Selling Entities or Purchasing Companies to, enter into agreements with respect
to Informix Software's real estate leases identified on a schedule to the master
purchase agreement, pursuant to which, in accordance with
46
certain guidelines contained in the master purchase agreement, (1) Informix
Software or the applicable Selling Entity will assign to IBM or the applicable
Purchasing Company, and IBM or the relevant Purchasing Company will assume from
Informix Software or the relevant Selling Entity, those leases in which IBM or
the relevant Purchasing Company requires the predominate amount of space (and
Informix Software or the relevant Selling Entity will sublease or license back
from IBM or the relevant Purchasing Company the space at those leased locations
that IBM or the relevant Purchasing Company will not use to operate the Database
Business or which exceeds normal excess real estate capacity at any location) or
(2) with respect to leased property at which IBM or the relevant Purchasing
Company does not require the predominate amount of space, IBM or the relevant
Purchasing Company will sublease or license from Informix Software or the
relevant Selling Entity the space that IBM or the relevant Purchasing Company
will use to operate the Database Business and which does not exceed normal
excess real estate capacity.
It has yet to be determined which leases, and what percentage of total
overall lease liability, will be assumed by IBM and the relevant Purchasing
Companies. Further, it has yet to be determined which leases will be sublet or
licensed to or from IBM and the relevant Purchasing Companies and what
percentage of lease space this will absorb.
The sublease and license arrangements to be entered into by and between
Informix Software and IBM (and between the relevant Selling Entities and the
relevant Purchasing Companies) are similar in most material respects. However,
in all instances in which IBM or the relevant Purchasing Company licenses space
from Informix Software or the relevant Selling Entity, IBM or the relevant
Purchasing Company will have the right to terminate the license on 120 days'
notice to Informix Software or the relevant Selling Entity, in which case
Informix Software or the relevant Selling Entity will remain exclusively
responsible for that space. Neither Informix Software nor any Selling Entity
will have a corresponding termination right, or "put back" right with respect to
any space that it lets or licenses back from IBM or any Purchasing Company. Most
of these assignment, licensing and subleasing arrangements will require landlord
consent and, failure to obtain these consents, could result in defaults under
the related leases.
The company, Informix Software and IBM will cooperate and use commercially
reasonable efforts to consolidate the space to be used by IBM and the other
Purchasing Companies to operate the Database Business and the remaining space at
any given location in order to facilitate the subletting of currently vacant or
unnecessary space to third parties.
PURCHASE PRICE
The purchase price to be paid by the Purchasing Entities for the Database
Business, including a specified amount of net working capital, will be
$1.0 billion in cash. The purchase price will be allocated to the Database
Business in the United States and in various foreign jurisdictions. The purchase
price, subject to holdback of $100.0 million to be deducted from the purchase
price payable on the initial closing date, will be paid as the sale of the
Database Business in an applicable jurisdiction is closed. If the aggregate
working capital amount on the closing statement is less than $124.0 million, the
company will pay IBM the difference. In the event that the aggregate working
capital amount on the closing statement exceeds $124.0 million, IBM will pay the
company one-half of such excess.
The working capital amount is calculated for each country in which the
Database Business conducts business that is included in a particular closing and
generally represents, subject to the qualifications contained in the definition
of "Working Capital Amount" contained in the master purchase agreement:
- net accounts receivable arising in the ordinary course of business, PLUS
- prepaid expenses, MINUS
- ordinary course trade payables, MINUS
47
- accrued ordinary course expenses, other than expenses related to salary,
bonus, vacation, severance or benefits relating to any current or former
employee, officer, director or independent contractor of the company,
Informix Software and their respective subsidiaries.
HOLDBACK
IBM will retain $100.0 million of the purchase price for 18 months after the
initial closing to satisfy any indemnification claims that may be brought. IBM
will pay interest at a rate of 6% per annum, from the date of the closing of the
sale of the Database Business, on the amount of the holdback returned to
Informix at the expiration of the 18-month holdback period. Funds necessary to
provide for claims that are made prior to the expiration of 18 months but not
resolved by such date will continue to be held until those claims are resolved.
48
The holdback is IBM's sole remedy for breaches of representations and
warranties, except with respect to taxes and environmental matters, in which
case the Selling Entities' liability will be limited to the purchase price paid
by IBM for the Database Business.
DEFERRED REVENUE
On the initial closing date, the company will pay IBM 18% of the deferred
revenues from the operation or conduct of the Database Business that are both
set forth on the December 31, 2000 balance sheet for the Database Business and
for which any Selling Entity received payment prior to December 31, 2000.
REPRESENTATIONS AND WARRANTIES
The master purchase agreement contains customary representations and
warranties by the company and Informix Software as to the condition of the
Database Business. These representations and warranties relate to:
- the corporate organization of the Selling Entities and similar corporate
matters,
- the authorization, execution, delivery, performance and enforceability of,
and any required consents, approvals and authorizations relating to, the
master purchase agreement and the other transaction agreements,
- the absence of conflict with, violation or breach of, or default under the
certificate of incorporation, charter, bylaws and contracts of the Selling
Entities and applicable laws in connection with the master purchase
agreement and the other transaction agreements,
- the accuracy of certain unaudited financial statements of the Database
Business,
- as of the date of the master purchase agreement, the absence of any fact,
change, development, event, effect, condition or occurrence since
December 31, 2000 which has had, or could reasonably be expected to
constitute, a Business Material Adverse Effect (as defined below),
- the fitness of the products sold or produced by the Selling Entities,
- tax matters,
- title to the acquired assets owned or leased by the Selling Entities,
- contracts that constitute Acquired Assets or Assumed Liabilities that
contain certain identified types of provisions,
- certain pending or threatened litigation affecting that Database Business
or the Acquired Assets,
- employee benefit matters,
- compliance with applicable laws, including environmental laws,
- certain labor matters involving or relating to the Database Business or
the Selling Entities,
- intellectual property (including rights under licenses and settlement
agreements) that is used, held for use or intended to be used in the
operation or conduct of the Database Business,
- the sufficiency of the Acquired Assets to conduct the Database Business,
- the condition of the Acquired Assets,
- as of the date of the master purchase agreement, the condition of the
inventory of the Business,
- the collectability of the accounts receivables of the Database Business,
- the insurance policies maintained by the Selling Entities with respect to
the Database Business,
49
- the applicability of state takeover statutes,
- fees payable as of the date of the master purchase agreement, by the
Selling Entities to bankers, investment brokers, financial advisors or
other persons in connection with the sale of the Database Business,
- as of the date of the master purchase agreement, or with respect to the
period between December 31, 2000 and the date of the master purchase
agreement, suppliers to, customers of and resellers to the Database
Business and the Selling Entities,
- the accuracy of the company's reports and financial statements filed with
the Securities and Exchange Commission, or SEC, since January 1, 1998,
- the absence of any undisclosed liabilities that are required to be, but
are not, recognized or disclosed, on a consolidated balance sheet prepared
in accordance with generally accepted accounting principles, if those
liabilities could reasonably be expected to have a Business Material
Adverse Effect,
- the vote required from the company's stockholders to approve the
transactions contemplated by the master purchase agreement and the other
transaction agreements,
- the delivery of opinions by the company's financial advisors regarding the
fairness to the company, from a financial point of view, of the
consideration provided for in the transaction, and
- the inapplicability of state takeover statutes.
The master purchase agreement defines "Business Material Adverse Effect" to
mean any state of facts, change, development, event, occurrence, action or
omission that individually or in the aggregate could reasonably be expected to:
- result in a material adverse effect on the business, assets, properties,
financial condition or results of operations of the Database Business,
taken as a whole,
- prevent or materially impede, interfere with, hinder or delay the
consummation by the Selling Entities of the transactions contemplated by
the master purchase agreement and the other transaction agreements, or
- result in a material impairment on the ability of IBM, the other
Purchasing Companies and their respective subsidiaries to continue
operating the Database Business after the applicable closing in
substantially the same manner as it was operated immediately prior to the
date of the master purchase agreement.
However, for purposes of determining if IBM's and the other Purchasing
Companies' conditions to closing with respect to any closing following the
initial closing have been satisfied, there will be disregarded any state of
facts, change, development, event, occurrence, action or omission that has
occurred or come into existence with respect to the part of the Database
Business conducted in any country on or after the date on which that part of the
Database Business was acquired by IBM or any Purchasing Company pursuant to any
closing.
The master purchase agreement also contains customary representations and
warranties by IBM relating to:
- the corporate organization of IBM and the Purchasing Companies and similar
corporate matters,
- the authorization, execution, delivery, performance and enforceability of,
and any required consents, approvals and authorizations relating to, the
master purchase agreement and the other transaction agreements,
50
- the absence of conflict with, violation or breach of, or default under any
of the certificate of incorporation, charter, bylaws or contracts of IBM
and the other Purchasing Companies and applicable laws in connection with
the master purchase agreement and the other transaction agreements,
- fees payable by IBM and the Purchasing Companies to brokers, investment
bankers, financial advisors or other persons in connection with the
purchase of the Database Business, and
- the availability of funds to effectuate the transactions contemplated by
the master purchase agreement.
COVENANTS
The company and Informix Software have agreed that during the period between
the date of the master purchase agreement and the closing in each relevant
country, they will:
- provide, and will cause their respective subsidiaries to provide, IBM, the
Purchasing Companies and their employees, counsel, investment bankers and
other advisors ("Representatives") full access upon reasonable advance
notice and during normal business hours to the Selling Entities' offices
and facilities, records, agreements, documents, information, personnel,
data and files relating to the Database Business as may be reasonably
requested,
- conduct, and cause the other Selling Entities to conduct, the Database
Business in the ordinary course of business consistent with past practice,
- apply, and will cause the other Selling Entities to apply, any and all
insurance proceeds received upon any damage, destruction or loss to any
material Acquired Asset to the prompt repair, replacement and restoration
of that Acquired Asset before that Acquired Asset is transferred to IBM or
the applicable Purchasing Company,
- continue to audit and update, and will cause the other Selling Entities to
continue to audit and update, distributor and reseller royalty reports in
the ordinary course of business consistent with past practice,
- confer, and will cause the other Selling Entities to confer, with the
Purchasing Companies and their Representatives regarding material
operational and other developments related to the Database Business, and
- promptly notify IBM of certain material events.
Following each closing, the company and Informix Software will, and will
cause their respective subsidiaries to, provide IBM and its subsidiaries and
their Representatives reasonable access, during normal business hours and upon
reasonable notice, to all books, documents, information, data, files and other
records relating to: (1) the operation of the Business prior to the applicable
closing, (2) the Acquired Assets or (3) the Assumed Liabilities.
The company and Informix Software have agreed that during the period between
the date of the master purchase agreement and the closing in each relevant
country, except as otherwise expressly agreed to in the master purchase
agreement, they will not, and will not permit any of their respective affiliates
to, in each case insofar as the Database Business is concerned, without IBM's
approval:
- amend any certificate of incorporation, by-laws or similar governing
documents of any subsidiary whose equity or other ownership interests are
included in the Acquired Assets,
- adopt or amend any employee benefit plan or enter into, adopt, extend,
renew or amend any collective bargaining agreement or other contract with
any labor organization, union or association, or any of the covered
employees (as defined in the employee matters agreement),
51
except in each case as required by law, or grant to any of those employees
any increase in compensation or benefits, other than increases made in
connection with annual salary reviews, that are consistent with past
practice and that do not exceed 10% for any of those employees,
- release or otherwise terminate the employment of any covered employees,
transfer any of those employees out of the Database Business or solicit
for employment any of those employees to engage in a business other than
the Database Business, except for any terminations for cause or
terminations or transfers as a result of any of those employees' willful
and material violations of a Selling Entity's policies and procedures, as
in effect on the date of the master purchase agreement,
- incur, assume or guarantee any liabilities, obligations or indebtedness
other than in the ordinary course of business and consistent with past
practice,
- acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, company, partnership, limited liability
company, trust, joint venture, business association or other business
organization or division or otherwise acquire any assets (other than
inventory) that are material to the Database Business,
- make or incur or commit to make or incur any capital expenditure that,
individually, exceeds $250,000 or make or incur or commit to make or incur
any capital expenditures which, in the aggregate, exceed the $5,000,000
budget agreed to by the company and IBM,
- enter into any lease of real property or any renewal of an existing lease
of real property that may constitute a lease to be acquired by IBM or a
Purchasing Company pursuant to the master purchase agreement,
- pay, discharge, modify or satisfy any claims, liabilities or obligations
(whether accrued, absolute, contingent, asserted or otherwise) other than
in the ordinary course of business consistent with past practice, other
than those claims, liabilities or obligations which are required by their
terms as in effect on the date of the master purchase agreement to be
paid, discharged or modified to the extent those claims, liabilities or
obligations are reflected or reserved against in the balance sheet for the
Database Business as of December 31, 2000 (or in the notes to the balance
sheet), provided that the company and Informix Software will not, and will
not permit their respective affiliates to pay, loan or advance any amount
to, or enter into any agreement or arrangement with, or make any payments
to or on behalf of, the company, Informix Software or their respective
affiliates which would have an adverse impact on, or adverse consequences
to, the Database Business after the date of the relevant closing,
- make loans, advances or capital contributions to, or investments in, any
other person,
- enter into, extend or renew any contract or amendment to a contract of
(1) which contains any of a series of identified types of provisions,
(2) which contains any of a separate series of identified types of
provisions unless that contract or amendment is necessary to operate the
Database Business as it was operated in the ordinary course consistent
with past practice immediately prior to the date of the master purchase
agreement or (3) which restricts the ability of the Database Business to
own, operate, sell, transfer, pledge or otherwise dispose of or encumber
any Acquired Asset,
- enter into, extend or renew (1) any contract or amendment thereof that
grants any party the right or ability to access, license or use all or a
material portion of the intellectual property of any business unit,
(2) any contract providing for the services of any dealer, distributor,
sales representative, or similar representative, or (3) any other
contract, other than, in the case of
52
clauses (2) or (3) above, in the ordinary course of business consistent
with past practice with a term not in excess of one year,
- accelerate, terminate, modify, waive, relinquish, assign or cancel any
material contract,
- engage in any other transaction involving the Database Business or the
Acquired Assets other than in the ordinary course of business consistent
with past practice,
- settle or compromise (1) any suit or claim relating to the transactions
contemplated by the master purchase agreement or the other transaction
agreements or threatened suit or claim relating to the transactions
contemplated by the master purchase agreement or the other transaction
agreements or (2) except for certain identified litigation, any material
litigation or material threatened litigation,
- accelerate the billing or collection or other realization of cash or
Excluded Assets from the Acquired Assets or accelerate the provision of
goods and services of the Database Business or delay the payment of
liabilities which would become Assumed Liabilities or grant any allowance
or discount, in each case outside the ordinary course of business
consistent with past practice,
- write down any of its material assets, including any intellectual property
to be acquired by IBM and the Purchasing Companies, or make any change in
any accounting principal, method or practice other than those required by
generally accepted accounting principles or applicable law,
- take any action or fail to take any action which would result in the
material loss or reduction in value of the intellectual property to be
acquired by IBM and the Purchasing Companies, taken as a whole,
- take any action that would or that could reasonably be expected to result
in (1) any of the representations and warranties of the Selling Entities
set forth in the master purchase agreement that is qualified as to
materiality becoming untrue, (2) any of those representations and
warranties that is not so qualified becoming untrue in any material
respect or (3) any of IBM's or any Purchasing Company's closing conditions
set forth in the master purchase agreement and described below under
"--Closing Conditions" not being satisfied, or
- authorize any of, or commit or agree to take, whether in writing or
otherwise, to do any of, the foregoing actions.
IBM has agreed to waive compliance by the company and the Selling Entities
with the provisions of the "bulk sales", "bulk transfer" or similar laws of any
state.
NO SOLICITATION
The company has agreed not to, and not to permit any of its subsidiaries to,
or to authorize or permit any of its or its subsidiaries' directors, officers or
employees or any investment banker, attorney, accountant or other advisor or
representative of the company or any of its subsidiaries to, (1) directly or
indirectly, solicit, initiate or encourage, or take any other action to
knowingly facilitate, any Takeover Proposal (as defined below) or (2) enter
into, continue or otherwise participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or
otherwise cooperate in any way with, any Takeover Proposal. The board of
directors of the company may, however, prior to obtaining the approval of its
stockholders to the transactions contemplated by the master purchase agreement:
- provide, or cause its subsidiaries to provide, information to anyone who
has made a bona fide unsolicited Takeover Proposal that the board of
directors of the company determines in good faith constitutes or is
reasonably likely to lead to a Superior Proposal (as defined below)
53
pursuant to a customary confidentiality agreement, so long as this
information has been or is furnished to IBM on a prior or substantially
concurrent basis, and
- participate in discussions or negotiations regarding that proposal with
anyone (including its Representatives) who has made a bona fide
unsolicited Takeover Proposal that the board of directors of the company
determines in good faith constitutes or is reasonably likely to lead to a
Superior Proposal.
In addition, the company has agreed that neither the company's board of
directors nor any of its committees will or will agree or resolve to:
- withdraw or modify, in a manner adverse to IBM, its approval of or
recommendation with respect to the master purchase agreement or publicly
propose to do so, unless the board of directors or a committee thereof
determines in good faith that failure to take that action would result in
a breach of its fiduciary duties under applicable law, or
- recommend any Takeover Proposal or publicly propose to do so, unless the
board of directors or a committee thereof determines in good faith that
the Takeover Proposal constitutes a Superior Proposal, or
- adopt or approve, or publicly propose to adopt or approve, a Takeover
Proposal or withdraw its approval of the master purchase agreement, the
other transaction agreements and the related transactions, or
- cause or permit the company to enter into any letter of intent, memorandum
of understanding, agreement in principle, acquisition agreement, merger
agreement, option agreement, joint venture agreement, partnership
agreement or other agreement constituting or related to, or that is
intended to is reasonably likely to lead to, any Takeover Proposal.
Nothing described above limits the company's ability to take actions to
comply with specified rules under the Securities Exchange Act of 1934, as
amended, or make any disclosure to the company's stockholders if, in the good
faith judgment of the company's board of directors, after consultation with
outside counsel, failure so to disclose would be inconsistent with applicable
law.
We agreed to promptly, and in any event within 24 hours, notify IBM of any
request for information or other inquiry received by the company that the
company reasonably believes could reasonably be expected to lead to a Takeover
Proposal or of any Takeover Proposal, and to keep IBM informed in all material
respects on a current basis of the status and details, including amendments or
proposed amendments, of any Takeover Proposal, request or inquiry.
The master purchase agreement defines the term "Takeover Proposal" to means
any inquiry, proposal or offer from any person relating to, or that is
reasonably likely to lead to, any direct or indirect acquisition, in one
transaction or a series of transactions, including any merger, consolidation,
tender offer, exchange offer, binding share exchange, business combination,
recapitalization, liquidation, dissolution, joint venture or similar
transaction, of:
- assets or businesses that constitute or represent 20% or more of the total
revenue, operating income, EBITDA or assets of the company and its
subsidiaries, taken as a whole, or
- 20% or more of the outstanding shares of the company's common stock or any
class or series of capital stock of (or other equity or voting interests
in) any of the company or its subsidiaries directly or indirectly holding
assets or businesses that constitute or represent 20% or more of the total
revenue, operating income, EBITDA or assets of the company and its
subsidiaries, taken as a whole, other than the transactions contemplated
by the master purchase agreement and the other transaction agreements.
54
The master purchase agreement defines the term "Superior Proposal" to mean
any bona fide written offer not solicited by or on behalf of the company or any
of its subsidiaries made by a third party that, upon acceptance thereof, would
be binding on the company or any of its subsidiaries and if consummated would
result in the third party acquiring, directly or indirectly:
- shares representing more than 50% of the value and voting power of the
capital stock of the company or all or substantially all the assets of the
company and its subsidiaries, taken as a whole or
- all or substantially all of the assets of the Database Business,
in either case for consideration consisting of cash and/or securities and/or
assumption of indebtedness or other obligations that the board of directors of
the company determines in its good faith judgment (after consultation with a
financial advisor of nationally recognized reputation) to be of a higher value
than the transactions contemplated by the master purchase agreement and the
other transaction agreements, after taking into account all matters the
company's board of directors determines to be material, including the benefits
to the company and its subsidiaries from the master relationship agreement and
the value of the company and its subsidiaries following the consummation of
those transactions, from a financial point of view to the stockholders of the
company (after taking into account any amendments or modifications to the master
purchase agreement and the other transaction agreements proposed by IBM that,
upon acceptance thereof, would be binding on the company, Informix Software and
IBM).
NONCOMPETITION
For a period of five years, the company and Informix Software will not, and
will cause each of their respective subsidiaries not to, and will use
commercially reasonable efforts to cause their respective affiliates not to,
directly or indirectly, prior to the consummation of a Change of Control (as
defined below) which is effected on or after the six-month anniversary of the
initial closing date, engage in activities or businesses, or establish any new
businesses, in any country in or to which the Database Business develops,
distributes, manufactures, markets or sells its products or services on the date
of the master purchase agreement, directly or indirectly through subsidiaries or
affiliates, that compete in any respect with the Database Business including
not:
- developing, distributing, manufacturing, marketing or selling products or
services of the type sold by the Database Business;
- soliciting any customer or prospective customer of the Database Business
to purchase any products or services sold by the Database Business or
competitive products or services, from anyone other than IBM or its
subsidiaries; and
- assisting any person in any way to, or attempt to, develop, distribute,
manufacture, market or sell products or services of the type sold by the
Database Business, or to solicit any customer or prospective customer of
the Database Business to purchase any products or services sold by the
Database Business or competitive products or services from anyone other
than IBM or its subsidiaries.
55
However, these noncompetition restrictions do not prohibit the company or
Informix Software or any of their respective subsidiaries or affiliates from
engaging in the above activities that relate to the RDBMS products that are
embedded in, or products that are "bundled with," Ascential products so long as:
- the primary purpose of those activities is the sale, or the provision of
services in respect of, those Ascential products that do not compete with
the Database Business, and
- none of the company or Informix Software or any of their respective
subsidiaries or affiliates engages in any marketing or promotion of RDBMS
products, it being understood that (1) for the six-month period following
the initial closing date, at which time the restrictions in this
clause (1) shall lapse, this prohibited marketing or promotion will
include selling activities in which the company or Informix Software or
any of their respective subsidiaries or affiliates participates in a sales
campaign (as opposed to routine sales calls) that includes customer
meetings with any suppliers of RDBMS products and advertising activities
in which the company or Informix Software or any of their respective
subsidiaries or affiliates is featured exclusively with any single
supplier of RDBMS products and (2) this prohibition on marketing and
promotion will not restrict any marketing or promotional materials the
primary purpose of which is the marketing or promotion of Ascential
products if those materials include ordinary course references to
non-exclusive Ascential business partner relationships and Ascential
product interoperability with third party products.
NON-HIRE
For a period of five years, except to the extent prohibited by applicable
law, the company and Informix Software will not, and will cause each of their
respective subsidiaries not to, and will use commercially reasonable efforts to
cause their respective affiliates not to, directly or indirectly engage in any
action, activity or course of conduct that is substantially detrimental to the
Database Business or its business reputation, including:
- soliciting, recruiting or hiring any employees of the Database Business or
persons who have worked for the Database Business; and
- soliciting or encouraging any employee of the Database Business to leave
the employment of the Database Business.
However, these restrictions do not prohibit the company, Informix Software
or any of their respective subsidiaries or affiliates from hiring any employee
who has ceased to be employed by the Database Business for at least 12 months.
In addition, these restrictions terminate upon a Change of Control, if the
Change of Control occurs on or after the 18-month anniversary of the initial
closing date, or on the 18-month anniversary of the initial closing date, if a
Change of Control occurs prior to that 18-month anniversary.
The master purchase agreement defines the term "Change of Control" to mean:
- the sale or other disposition of all or substantially all of the company's
assets to an entity that is not an affiliate of the company, or
- any merger, consolidation or other business combination involving the
company as a result of which, immediately following the consummation of
any of that transaction, the stockholders of the company immediately prior
to consummation of that transaction will own, in the aggregate, less than
40% of the outstanding voting securities of the surviving or acquiring
corporation immediately after the consummation of that transaction.
STOCKHOLDER MEETING
The company has agreed to file its preliminary proxy statement with the SEC
on or before April 30, 2001. The company has also agreed to file with the SEC
and mail the definitive proxy
55
materials to its stockholders on or prior to the eleventh calendar day following
the filing of the preliminary proxy statement with the SEC. Each of the company
and IBM will use commercially reasonable efforts to respond as promptly as
practicable to any SEC comments relating to the proxy statement.
The company has agreed to hold its stockholders meeting to approve the sale
of the Database Business no later than the twentieth business day following
mailing of the definitive proxy statement. The company will be permitted to
delay the date of the meeting for up to five business days if necessary in order
to obtain a quorum for the meeting. Also, the company will be permitted to delay
the date of the meeting, and to supplement the proxy materials to the extent the
company reasonably determines that such delay is required by applicable law to
comply with comments from the staff of the SEC with respect to the proxy
materials.
The company has agreed to call and hold the stockholders' meeting, even if
the board of directors has changed its recommendation with respect to the IBM
transaction or recommended an alternative transaction.
In the event the company's stockholders do not approve the amendment of the
company's certificate of incorporation to change the company's corporate name
from "Informix Corporation", IBM will authorize the company to use the name
"Informix Corporation" for references to its corporate name which are required
by applicable law, so long as the company agrees to use commercially reasonable
efforts to avoid confusion with the Database Business and IBM's ownership and
use of the Acquired Assets, including the name "Informix" and source of origin
of goods. In addition, the company agrees to continue to use its commercially
reasonable efforts to obtain the approval of its stockholders to the amendment
to the company's certificate of incorporation to change its corporate name.
CLOSING CONDITIONS
IBM CONDITIONS
The obligation of IBM to consummate each closing is subject to the
satisfaction or waiver of the following conditions:
- the affirmative vote at the company's stockholder meeting of the holders
of a majority of the votes represented by the outstanding shares of the
company's common stock, approving the master purchase agreement and the
transactions contemplated by that agreement,
- the representations and warranties of the company and Informix Software in
the master purchase agreement (without regard to any materiality or
Business Material Adverse Effect qualifiers) being true and correct as of
the date of the master purchase agreement and as of the relevant closing
date as though made on that date (or, in the case of any representation or
warranty which expressly speaks as of an earlier date, as of that earlier
date), unless the failure of the representations and warranties to be true
and correct could not be reasonably expected to have a Business Material
Adverse Effect,
- the performance by the Selling Entities of, or compliance by the Selling
Entities with, in all material respects, all covenants, obligations and
agreements required by the master purchase agreement and the other
transaction agreements to be performed or complied with by the Selling
Entities,
- the absence of any pending or threatened suit, action or proceeding by any
person that has a reasonable likelihood of success (1) seeking to restrain
or prohibit the acquisition by IBM or any of its subsidiaries of any of
the Acquired Assets or the Database Business or any other material
transaction contemplated by the master purchase agreement and the other
transaction agreements or seeking to obtain from IBM or any of its
subsidiaries any damages that are material in relation to the value of the
Database Business, taken as a whole, (2) seeking to
56
prohibit or limit the ownership or operation by IBM or any of its
subsidiaries of any material portion of the business or assets of IBM or
any of its material subsidiaries or the Database Business, or to compel
IBM or any of its subsidiaries to dispose of or hold separate any material
portion of the business or assets of IBM or any of its subsidiaries or the
Database Business, in each case as a result of any of the transactions
contemplated by the master purchase agreement and the other transaction
agreements, (3) seeking to impose limitations on the ability of IBM or any
of its subsidiaries to acquire or hold, or exercise full rights of
ownership of, the Acquired Assets or (4) seeking to prohibit IBM or any of
its subsidiaries from effectively controlling in any material respect the
Database Business,
- the absence of any action having been taken, or any statute, rule,
regulation or order having being enacted or entered or deemed applicable
to the transactions contemplated by the master purchase agreement and the
other transaction agreements, or any temporary restraining order or
preliminary or permanent injunction or other order by any governmental
entity, (1) granting any of the relief referred to in clauses (1) through
(4) of the immediately preceding bullet point or (2) which otherwise could
reasonably be expected to have a Business Material Adverse Effect,
- the expiration or early termination of the waiting period under the HSR
Act, the receipt of certain required European Union approvals, and the
receipt or making of all other material authorizations, consents, permits,
orders or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any governmental entity reasonably necessary
in connection with the consummation of the applicable closing,
- the receipt by the initial closing date of all material consents, waivers,
authorizations and approvals of any person necessary to transfer all of
the Acquired Assets (other than assigned contracts) to IBM or any other
Purchasing Company,
- the absence of any state of facts, change, development, event, occurrence,
action or omission that individually or in the aggregate could reasonably
be expected to result in a material adverse effect on the business,
assets, properties, financial condition or results of operations of the
Database Business, taken as a whole, to the extent arising from one or
both of (1) the entry by customers of the Selling Entities, taken as a
whole, into long-term commitments with persons other than IBM, any
Purchasing Company or any of their respective affiliates (other than the
Selling Entities) to purchase database products that compete with database
products of the Database Business if such commitments contractually or
effectively preclude IBM or other Purchasing Companies from selling
database products to such customers or (2) the loss of employees of the
Database Business, taken as a whole, on or prior to the relevant closing
date (except that, for purposes of determining if the company's and
Informix Software's conditions to closing with respect to any closing
other than the initial closing, there will be disregarded any state of
facts, change, development, event, occurrence, action or omission that has
occurred or come into existence with respect to any part of the Database
Business conducted in any country on or after the date on which that part
of the Database Business was acquired by IBM or any Purchasing Company
pursuant to any closing since the date of the master purchase agreement),
and
- the assignment or transfer to IBM or the other Purchasing Companies of not
less than 108 out of the 142 most significant customer assigned contracts.
COMPANY AND INFORMIX SOFTWARE CONDITIONS
The obligation of the company and Informix Software to consummate the
transaction is subject to the following conditions:
- the affirmative vote at the company's stockholder meeting of the holders
of a majority of the votes represented by the outstanding shares of the
company's common stock, approving the master purchase agreement and the
transactions contemplated by that agreement,
57
- the representations and warranties of IBM in the master purchase agreement
(without regard to any qualifiers as to materiality or Buyer Material
Adverse Effect (as defined below) being true and correct, unless the
failure of the representations and warranties to be true and correct as of
the date of the master purchase agreement and as of the relevant closing
date as though made as of that date (or, in the case of any representation
or warranty which expressly speaks as of an earlier date, as of that
earlier date) could not be reasonably expected to have a Buyer Material
Adverse Effect,
- the performance by IBM and the other Purchasing Companies of, in all
material respects, all covenants, obligations and agreements required by
the master purchase agreement and the other transaction agreements to be
performed or complied with by IBM and the other Purchasing Companies,
- the expiration or early termination of the waiting period under the HSR
Act, the receipt of certain required European Union approvals, and the
receipt or making of all other material authorizations, consents, permits,
orders or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any governmental entity reasonably necessary
in connection with the consummation of the applicable closing,
- the absence of any pending or threatened suit, action or proceeding by any
governmental entity that has a reasonable likelihood of success
(1) seeking to restrain or prohibit the disposition by the Selling
Entities of any of the Acquired Assets or the Database Business or any of
the other material transactions contemplated by the master purchase
agreement and the other transaction agreements or (2) seeking to obtain
from any of the Selling Entities any damages to the extent relating to the
transactions contemplated by the master purchase agreement or the other
transaction agreements that are material in relation to the value of the
company and its subsidiaries, taken as a whole, and
- the absence of any statute, rule, regulation or order having been enacted
or entered or deemed applicable to the transactions contemplated by the
master purchase agreement and the other transaction agreements which has
the effect of prohibiting the consummation of any of those transactions
and the absence of any temporary restraining order or preliminary or
permanent injunction or other order issued by any governmental entity
prohibiting any of the transactions contemplated by the master purchase
agreement and the other transaction agreements.
Under the master purchase agreement, the term "Buyer Material Adverse
Effect" is defined to mean any state of facts, change, development, event,
occurrence, action or omission that could reasonably be expected to prevent or
materially impede, interfere with, hinder or delay the consummation by IBM or
any other Purchasing Company of the transactions contemplated by the master
purchase agreement and the other transaction agreements.
TERMINATION
The master purchase agreement may be terminated by mutual written consent of
the company, Informix Software and IBM. The agreement may also be terminated at
any time prior to the initial closing date, including after receipt of the
approval of the company's stockholders to the sale of the Database Business:
- by IBM upon written notice to the company if any of conditions to IBM's
obligation to close the U.S. closing have become incapable of fulfillment
and have not been waived by IBM;
- by the company upon written notice to IBM if any of the conditions to the
company's obligation to close the U.S. closing have become incapable of
fulfillment and have not been waived by the company;
- by either the company or IBM upon written notice to the other party if the
U.S. closing does not occur on or prior to April 24, 2002;
58
- by either the company or IBM if the company's stockholders do not approve
of the sale of the Database Business at the special meeting;
- by IBM in the event the company's board of directors or any committee of
the board of directors withdraws or modifies in any manner adverse to IBM
or publicly proposes to withdraw or modify in any manner adverse to IBM
its recommendation of the master purchase agreement, the other transaction
agreements and the transactions contemplated by those agreements, or
recommends a Takeover Proposal;
- by IBM in the event the company's board of directors fail to publicly
reaffirm its recommendation of the master purchase agreement, the other
transaction agreements and the transactions contemplated by those
agreements within ten business days of a written request by IBM;
- by the company, if IBM breaches or fails to perform in any respect any of
its representations, warranties or covenants contained in the master
purchase agreement and such breach or failure to perform would give rise
to the failure of certain of the company's and Informix Software's closing
conditions set forth in the master purchase agreement and cannot be or has
not been cured within 30 days following delivery by the company of written
notice of such breach or failure to perform;
- by IBM, if either the company or Informix Software breaches or fails to
perform in any respect any of its representations, warranties or covenants
contained in the master purchase agreement and that breach or failure to
perform would give rise to the failure of certain of IBM's closing
conditions set forth in the master purchase agreement and cannot be or has
not been cured within 30 days following delivery by IBM of written notice
of such breach or failure to perform;
- by either the company or IBM if any temporary restraining order or
preliminary or permanent injunction or other order granting any of the
relief described in the fourth bullet point under the heading "Closing
Conditions--IBM Conditions" will be in effect and will have become a final
non-appealable order, decree or ruling, PROVIDED that the party seeking to
terminate the master purchase agreement under this clause has used
commercially reasonable efforts to prevent the entry of and to remove the
order or injunction; or
- by the company and Informix Software if a government entity has commenced,
and has not withdrawn, any litigation to prohibit any of the transactions
contemplated by the master purchase agreement and the other transaction
agreements and IBM has not agreed to defend such litigation within
30 days after commencement of such litigation or, at any time following
its agreement to defend the litigation, IBM has abandoned its defense of
the litigation.
TERMINATION FEES
The company has agreed to pay IBM a termination fee of $35.0 million if the
master purchase agreement is terminated by IBM in either of the circumstances
described in the fifth and sixth bullet points under the heading "Termination."
In addition, the termination fee would be payable to the company if a
Takeover Proposal has been made to the company or its stockholders or any person
has announced an intention (whether or not conditional and whether or not
withdrawn) to make a Takeover Proposal, and
- after that announcement, the master purchase agreement is terminated by
either of the company or IBM because:
the U.S. closing has not occurred on or before April 24, 2002 (but only if
a vote to obtain the approval of the company's stockholders to the master
purchase agreement, the other transactions agreements and the transactions
contemplated by those agreements or the company's special meeting has not
been held), OR
the approval of the company's stockholders to the master purchase
agreement, the other transactions agreements and the transactions
contemplated by those agreements has not been obtained at the special
meeting, AND
59
- within 12 months after the termination of the master purchase agreement,
the company or any of its subsidiaries enters into any letter of intent,
memorandum of understanding, agreement in principle, acquisition
agreement, merger agreement, option agreement, joint venture agreement,
partnership agreement or other agreement with respect to, or consummates,
any Takeover Proposal (except that for purposes of this provision only,
the references to 20% in the definition of "Takeover Proposal" in the
master purchase agreement will be treated as if they were references to
35%).
Further, if the master purchase agreement is terminated because approval is
not obtained from the company's stockholders, the company will reimburse IBM for
IBM's fees and expenses up to $5.0 million in connection with the evaluation and
pursuit of the transactions contemplated by the master purchase agreement and
the other transaction agreements. If the company is later required to pay IBM
the $35.0 million termination fee under the master purchase agreement, the
amount of these fees and expenses will be credited against that termination fee.
OTHER EXPENSES AND TAXES
Each party is responsible for its costs and expenses incurred in connection
with the sale of the database business and any related transactions unless
specifically provided for in the master purchase agreement or any related
agreements. Other than transfer taxes relating to the database assets located in
the Republic of Ireland which the company will pay (provided the purchasing
entity that acquires the intellectual property of the business unit located in
the Republic of Ireland shall not be resident or domiciled in the Republic of
Ireland by virtue of incorporation or place of management and control), the
company and IBM have agreed to equally share any transfer taxes up to a
$2.0 million cap in the case of the amount IBM is obligated to pay.
INDEMNIFICATION
The company and Informix Software have agreed to, and to cause the other
Selling Entities to, indemnify IBM and its affiliates and each of their
respective officers, directors, employees, stockholders, agents and
representatives against and to hold them harmless from any loss or liability
incurred in connection with:
- any failure of any representation or warranty of Selling Entities or any
Selling Subsidiaries contained in the master purchase agreement, any other
transactions, agreements or any certificates delivered by the Selling
Entities to be true and correct in all respects; provided that, for
purposes of indemnification, those representations and warranties will be
deemed not to be qualified by any references to materiality or Buyer
Material Adverse Effect or Business Material Adverse Effect contained in
those representations and warranties),
- any breach of any obligation of the Selling Entities contained in the
master purchase agreement or any other transaction agreements,
- any of the liabilities not assumed by IBM or the other Purchasing
Companies pursuant to the master purchase agreement and other transaction
agreements, or
- the operation or ownership of the assets not purchased by IBM and the
other Purchasing Companies.
However, the Selling Entities are not required to indemnify or hold harmless
any person for untrue or incorrect representations or warranties unless the
aggregate of all losses for which the Selling Entities would be liable exceeds
$10.0 million, and then only for the excess over $10.0 million, and the Selling
Entities are not required to indemnify IBM or any other indemnified party for
individual claims relating to untrue or incorrect representations or warranties
that involve losses of less than $50,000 each.
60
The Selling Entities' indemnification obligations for breach of
representations and warranties (other than the tax and environmental
representations and warranties) are limited to the $100.0 million purchase price
holdback retained by IBM. The Selling Entities' indemnification obligations for
breach of the tax and environmental representations and warranties are limited
to the amount of the total purchase price paid by IBM for the Database Business.
IBM has agreed to, and will cause the other Purchasing Companies to,
indemnify the company, Informix Software and each of their respective affiliates
and each of their respective, officers, directors, employees, stockholders,
agents and representatives against and to hold them harmless from any loss or
liability incurred in connection with:
- any failure of any representation or warranty of IBM or any of its
affiliates contained in the master purchase agreement, the other
transaction agreements or any certificates delivered by or on behalf of
IBM to be true and correct in all material respects; provided that, for
the purposes of indemnification, those representations and warranties will
be deemed not qualified by any references to materiality, to Buyer
Material Adverse Effect or to Business Material Adverse Effect contained
in those representations and warranties,
- any breach of any obligation of IBM, any Purchasing Company, or any of
their affiliates contained in the master purchase agreement or any other
transaction agreements,
- any of the liabilities assumed by IBM or the other Purchasing Companies
pursuant to the master purchase agreement and the other transaction
agreements, or
- the operation of the Database Business after the relevant closing.
However, IBM and the other Purchasing Companies are not required to
indemnify or hold harmless any person for untrue or incorrect representations or
warranties unless the aggregate of all losses for which IBM would be liable
exceeds $10.0 million, and IBM and the other Purchasing Companies not required
to indemnify the Selling Entities and the other indemnified parties for
individual claims relating to untrue or incorrect representations and warranties
that involve losses of less than $50,000 each.
ANCILLARY AGREEMENTS
COUNTRY ACQUISITION AGREEMENTS
The Selling Entities and IBM have agreed to enter into short-form country
acquisition agreements for the sale of the database business located outside of
the United States for each country in which the database business is located.
Each country acquisition agreement will be substantially similar in form, but
modified to delete inapplicable provisions, to satisfy local law requirements.
An IBM subsidiary will enter into a country acquisition agreement with our
local subsidiary to purchase the database business in a particular country for a
purchase price specified in the master purchase agreement. The IBM subsidiary
will also assume certain obligations and liabilities specifically identified
with or related to the operation of the database business.
EMPLOYEE MATTERS AGREEMENT
In connection with the master purchase agreement, the Selling Entities and
IBM have entered into the employee matters agreement which contains terms and
conditions regarding employee matters arising from the sale of the database
business.
Pursuant to the employee matters agreement, IBM will make offers of
employment to specified employees of the Selling Entities involved in the
Selling Entities' database business whose employment will not be transferred by
operation of law. Except as specified in the employee matters agreement, IBM
will be solely responsible for all liabilities that arise after the applicable
closing and that relate to the employees who accept employment with IBM,
sometimes referred to as Transferred Employees, on or after the applicable
closing date. The Selling Entities will assign to IBM and IBM will assume
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liability under certain individual employment, change of control or severance
agreements and confidential agreements, entered into with Transferred Employees.
All severance and/or change of control benefits required to be paid in
connection with consummation of the transactions contemplated by the master
purchase agreement will be the responsibility of the company, but IBM will
reimburse the company for such payments in an amount not to exceed
$21.0 million. If IBM pays bonuses to Transferred Employees after the applicable
closing date with respect to the company's Executive Incentive Compensation Plan
and the company's Key Employee Developer Plan, the Selling Entities agree to
reimburse IBM for such bonuses on a pro rata basis up to an amount equal to
$166,667 multiplied by the complete number of months that have expired since
January 1, 2001 through but excluding the month in which the initial closing
occurs for each such plan. The Selling Entities also will pay Transferred
Employees who participated in the company's Profit Achievement Plan pro rata
bonuses for actual sales performances through the applicable closing date.
Pursuant to the terms of the employee matters agreement and the company's
401(k) plan, all accrued benefits and individual account balances of Transferred
Employees will be vested and nonforfeitable as of the applicable closing date.
Immediately following the applicable closing date, Transferred Employees will be
eligible to participate in employee benefit plans designated by IBM in
accordance with the terms of those plans.
The company has agreed to amend the company's 1997 Employee Stock Purchase
Plan so that the Transferred Employees will have an opportunity to purchase its
common stock immediately prior to the U.S. closing date. In addition,
Transferred Employees will as long as they continue to be employed by IBM be
permitted to continue to vest in their options with the company for a period
ending on the later of August 1, 2002 or the first anniversary of the applicable
closing date, and such options will remain exercisable for a period of ninety
days following the earlier of the date the Transferred Employee's employment
with IBM is terminated or the date the options no longer continue to vest. At
IBM's request on or after January 1, 2002, the company will reimburse Buyer for
all unused and unpaid vacation days accrued as of the applicable closing date by
Transferred Employees.
Additionally, certain employees who have entered into change of control or
severance agreements with the Selling Entities have entered into agreements with
IBM not to solicit or hire any individuals who were Transferred Employees and
covered employees in the employee matters agreement for a period of 12 months
following the initial closing date. Furthermore, certain of those employees who
are principally based outside California have entered into agreements not to
compete with any U.S. business that primarily engages in the relational database
management systems business for 12 months following the initial closing date.
MASTER RELATIONSHIP AGREEMENT
In connection with the master purchase agreement, Ascential Software and IBM
have entered into a master relationship agreement under which IBM will market
and distribute certain Ascential Software products.
Under the master relationship agreement, Ascential Software has granted IBM
the non-exclusive right and license to market and distribute the computer
programs entitled "DataStage for IBM DB2 Warehouse Manager," "DataStage/390 for
IBM DB2 Warehouse Manager" and "Media360" worldwide. IBM agrees to use its sales
force and infrastructure to promote the licensed computer programs as a
preferred offering complimentary to IBM e-business offerings for data
integration and digital media production, as part of a solution that includes
the licensed software. IBM agrees to develop and implement a market support plan
for the licensed software and to promote the licensed software for reseller
situations.
IBM will pay Ascential Software a percentage of its net revenue from sales
of the licensed software products, subject to a minimum royalty. IBM's
obligations are contingent upon Ascential
62
Software's successful porting, and the general availability of, the licensed
software products for use with certain IBM technologies and software products.
The master relationship agreement will become effective upon the initial
closing and will continue for an initial three year term, subject to automatic
annual renewals thereafter. Either party may terminate the master relationship
agreement for breach and, commencing twelve months after its effective date,
either party may terminate the agreement on 90 days' notice for convenience.
Ascential Software agrees to promote certain IBM software database products.
In addition, Ascential Software agrees that a specified percentage of its net
license revenue for the "Media 360" software product will be generated from
deployment on IBM software platforms. Ascential Software also agrees to provide
IBM with technical support and training related to the licensed software, and
IBM agrees to provide Ascential Software with support and training for its
solutions that incorporate the licensed software.
LITIGATION SETTLEMENT AGREEMENT
In connection with the master purchase agreement, Selling Entities and IBM
have entered into a litigation settlement agreement, to resolve patent
infringement claims alleged by each party against the other.
Pursuant to the litigation settlement agreement, the parties have agreed to
mutually release the other party, including the other party's subsidiaries,
officers, directors, employees, attorneys, trustees, administrators, successors,
assigns and further including any customer of the party or its subsidiaries
based on such customer's sale or use of a product of the party or its
subsidiaries, from all past, present and future claims relating to the
patents-in-suit. The mutual releases are contingent upon, and will not become
effective until, the initial closing.
BUYER TRANSITION SERVICES AGREEMENT
In connection with the master purchase agreement, the company and IBM
entered into a buyer transition services agreement whereby IBM, or its designee,
will provide the company and its subsidiaries with certain transitional
services, including initially wide area network and voice communications
services, local area network and desktop support services, and SAP financial
data warehouse maintenance. Services will be provided at cost plus a
commercially reasonable margin to recover appropriate overhead expenses based on
a time and materials basis. The term of the buyer transition services agreement
will commence on the initial closing date and remain effective for a period of
not longer than 18 months.
Either party may terminate the buyer transition services agreement upon
30 days' written notice, provided that services have previously been provided
for at least 90 days.
SELLER TRANSITION SERVICES AGREEMENT
In connection with the master purchase agreement, the company and IBM
entered into a seller transition services agreement whereby the company, or its
designee, will provide certain transitional services, including initially
experienced personnel and maintain and operate related information technology
systems in the areas of human resources, real estate site services, contract
management services, and purchasing and general procurement services. Services
will be provided at cost plus a commercially reasonable margin to recover
appropriate overhead expenses based on a time and materials basis. The term of
the seller transition services agreement will commence on the initial closing
date and remain effective for a period of not longer than 18 months.
Either party may terminate the buyer transition services agreement upon
30 days' written notice, provided that services have previously been provided
for at least 90 days.
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INTELLECTUAL PROPERTY AGREEMENTS
In connection with the master purchase agreement, Ascential Software and IBM
have entered into the OEM software agreement and the source code license
agreement, each containing terms and conditions regarding the licensing of
intellectual property to be used by Ascential Software following the initial
closing. In addition, the master purchase agreement contains provisions
regarding the licensing of intellectual property.
Under the master purchase agreement, we retain a non-exclusive, perpetual,
royalty-free license to the patents and any patent applications to be
transferred to IBM. We grant IBM a non-exclusive, perpetual, royalty-free
license to the patents and any patent applications to be retained by Ascential
Software. We also grant IBM a non-exclusive, perpetual, royalty-free license to
any patents filed by Ascential Software on or after the date of the master
purchase agreement that are entitled to an effective filing date within one year
after the initial closing. Additionally, for a period of two years from the
initial closing, we agree with IBM not to sue each other for patent infringement
for each other's current products or follow on versions.
Under the OEM software agreement, IBM grants us a non-exclusive license to
market certain products which will be transferred to IBM as part of the sale of
the database business bundled in our "Media360" and "i.Decide WebSuccess"
software products.
Under the source code license agreement, IBM grants us a non-exclusive,
perpetual, royalty-free license to use, modify and sublicense the "Universe"
software product provided that it is embedded in our "DataStage" or successor
software products.
THE COMPANY'S BUSINESS
The company, a global provider of information management software, is
presently made up of two operating businesses, Informix Software and Ascential
Software.
Informix Software, the relational database company, is a global provider of
relational database management systems for business information management.
Informix Software designs, develops, manufactures, markets and supports a range
of database management systems and application development tools for building
applications that allow customers to access, retrieve, and manipulate business
data. Informix Software offers complete database solutions by developing
strategic partnerships with application, hardware, and systems integration
providers.
Ascential Software is a supplier of information asset management software
and solutions to enterprises and government organizations worldwide. Ascential
designs, develops, manufactures, markets and supports software that allows large
organizations to manage complex and varied enterprise information, focusing on
the collection, validation, organization, administration and delivery of
customers' information assets for maximum business value.
Ascential Software's information infrastructure solutions integrate and
manage a wide range of data and content sources, including data from mainframe
legacy systems, relational database management systems, enterprise resource
planning systems and applications, web-generated transactions and clickstreams,
eXtensible Markup Language, or XML, data, graphical images, video, audio and
maps. Ascential Software's solutions support an information infrastructure
enabling customers to identify unrefined data and content through a set of value
creating processes that transform them into managed information assets used and
re-used by employees, partners/suppliers, and customers.
Ascential Software solves customers' business problems by delivering suites
of products, components and services, and by leveraging strategic partnerships
with systems integrators, hardware vendors, solution and application vendors,
and complementary technology vendors.
Ascential Software's solutions are used in many industries, including
retail, telecommunications, financial services, healthcare, pharmaceuticals,
manufacturing, transportation, broadcast media, publishing and government
agencies.
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For the reasons explained elsewhere in this proxy statement, the company has
entered into the master purchase agreement and related agreements to sell the
database business and to concentrate its future efforts on the design,
development, marketing, sale and support of the information asset management
software and solutions of Ascential Software.
AMENDMENT TO CERTIFICATE OF INCORPORATION TO CHANGE THE NAME OF THE COMPANY
The board of directors unanimously recommends an amendment to our restated
certificate of incorporation of the company to change our name from "Informix
Corporation" to "Ascential Software Corporation." The name "Informix" has
traditionally been identified with the relational database management systems
portion of our business, and it is these assets which are being sold pursuant to
the master purchase agreement and related agreements. The name "Ascential" has
on the other hand, traditionally been identified with the portion of the
company's business which manufactures, distributes, markets and sells
information asset management systems and solutions. Once the sale of the
database business has been completed, our board of directors believes that the
name "Ascential Software Corporation" better identifies the company and its
primary business.
In addition, as part of the sale of the database business to IBM, we have
agreed to transfer our rights to the name Informix. If our stockholders do not
approve the change in our name, IBM will grant us a limited right to use
Informix Corporation as our corporate name. If this occurs, we will be required
to use reasonable efforts to avoid confusion with IBM's use of the name Informix
and will be required to continue to use commerically reasonable efforts to
obtain the approval of our stockholders to change the company's corporate name.
The change in our corporate name will not affect the rights of any
stockholder or the validity or transferability of stock certificates currently
outstanding. Stockholders will not be required to surrender or exchange any
stock certificates of the company that they currently hold. The company intends
to change its trading symbol if the company's name is changed.
In accordance with the Delaware General Corporation Law and the company's
restated certificate of incorporation, approval of the amendment to the restated
certificate of incorporation to change our corporate name requires the
affirmative vote of a majority of the outstanding shares of common stock
entitled to vote on this proposal. If approved, upon the closing of the sale of
the database business, the company will amend its restated certificate of
incorporation as provided above, which amendment will be effective upon filing
with the Delaware Secretary of State.
The company's name will only be changed if the initial closing of the sale
of the database business occurs. If the initial closing of the sale of the
database business does not occur for any reason, the company's corporate name
will remain Informix Corporation.
AFTER CAREFUL CONSIDERATION, OUR BOARD OF DIRECTORS UNANIMOUSLY HAS
DETERMINED THAT THE CHANGE OF OUR CORPORATE NAME IS IN THE BEST INTERESTS OF THE
COMPANY AND THE STOCKHOLDERS AND RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO
AMEND OUR RESTATED CERTIFICATE OF INCORPORATION TO CHANGE OUR CORPORATE NAME TO
ASCENTIAL SOFTWARE CORPORATION.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the company's common stock as of March 31, 2001 by: (i) each person
or entity who is known by the company to own beneficially 5% or more of the
company's outstanding common stock; (ii) each director of the company;
(iii) each person that served as the company's chief executive officer during
the last fiscal year; (iv) each of the company's four most highly compensated
executive officers, other than its chief executive officer, who were serving as
officers of the company at the end of the fiscal year ended December 31, 2000
and whose salary and bonus for fiscal year 2000 exceeded $100,000, (v) up to two
additional persons for whom (iv) above would have applied but for the fact that
they were no longer serving as executive officers of the company at the end of
fiscal year 2000; and (vi) all directors and current executive officers of the
company as a group.
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED(2)
-----------------------
PERCENT OF
NAME AND ADDRESS OF STOCKHOLDER(1) NUMBER CLASS
- - ---------------------------------- ---------- ----------
COMMON STOCK
5% STOCKHOLDERS
Mellon Financial Corporation(3)......................... 21,638,776 7.68%
c/o Mellon Financial Corporation
One Mellon Center
Pittsburgh, Pennsylvania 15258
DIRECTORS AND NAMED EXECUTIVE OFFICERS
Peter Gyenes(4)......................................... 1,814,647 *
Jean Yves F. Dexmier(5)................................. 1,025,000 *
Leslie G. Denend(6)..................................... 15,000 *
James L. Koch(7)........................................ 104,225 *
Thomas A. McDonnell(8).................................. 160,000 *
Robert M. Morrill(9).................................... 1,261,331 *
James R. Arnold, Jr.(10)................................ 26,296 *
Peter Fiore(11)......................................... 443,123 *
James Foy(12)........................................... 614,245 *
Gary Lloyd(13).......................................... 227,944 *
James Hendrickson(14)................................... 466,462 *
Yon Y. Yoon Jorden(15).................................. 150,000 *
All directors and current executive officers as a group 4,681,111 1.66%
(11 persons) (16).....................................
- - ------------------------
* Less than 1%.
(1) Information with respect to beneficial ownership is based upon information
furnished by each director and executive officer or contained in filings
made with the Securities and Exchange Commission. Unless otherwise
indicated, the address for each listed stockholder is c/o Informix
Corporation, 50 Washington Street, Westborough, Massachusetts 01581. Except
as otherwise indicated, and subject to applicable community property laws,
the persons named in the table have sole voting and investment power with
respect to all shares of common stock held by them.
(2) For figures related to holdings of common stock, applicable percentage
ownership is based on 281,731,081 shares of common stock outstanding as of
March 31, 2001, together with applicable options or warrants for such
stockholder. Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities, subject to community property
laws, where applicable. Shares of
67
common stock subject to options or warrants that are presently exercisable
or exercisable within 60 days of March 31, 2001 are deemed to be
beneficially owned by the person holding such options or warrants for the
purpose of computing the percentage of ownership of such person but are not
treated as outstanding for the purpose of computing the percentage of any
other person.
(3) Based solely upon information contained in a Schedule 13G filed with the
Securities and Exchange Commission on January 18, 2001, represents
21,638,776 shares of common stock deemed beneficially owned by Mellon
Financial Corporation, of which Mellon has sole voting power as to
17,600,998 shares, shared voting power as to 1,004,400 shares, sole
dispositive power as to 21,474,448 shares and shared dispositive power as to
43,700 shares. Of the shares deemed beneficially owned by Mellon, 18,441,878
shares are also deemed beneficially owned by The Boston Company, Inc., a
holding company subsidiary of Mellon, of which The Boston Company has sole
voting power as to 14,639,478 shares, shared voting power as to 960,800
shares and sole dispositive power as to 18,321,250 shares. Of the shares
deemed beneficially owned by The Boston Company, 15,650,550 shares are
deemed also beneficially owned by The Boston Company Asset Management, LLC,
a registered investment advisor and a subsidiary of The Boston Company, of
which The Boston Company Asset Management, LLC has sole voting power as to
11,849,650 shares, shared voting power as to 960,800 shares and sole
dispositive power as to 15,650,550 shares.
(4) Includes 1,562,147 shares of common stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 2001. Mr. Gyenes is the chairman of
the company's board of directors, and is also the president and chief
executive officer of the company.
(5) Includes 950,000 shares of common stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 2001. Mr. Dexmier was the president
and chief executive officer of the company until his resignation from the
company effective July 12, 2000.
(6) Includes 15,000 shares of common stock issuable upon exercise of outstanding
options which are presently exercisable or will become exercisable within
60 days of March 31, 2001. Mr. Denend is a member of the company's board of
directors.
(7) Includes 1,825 shares of common stock held by Mr. Koch, 400 shares of common
stock held by Mr. Koch's son and 102,000 shares of common stock issuable
upon exercise of outstanding options which are presently exercisable or will
become exercisable within 60 days of March 31, 2001. Mr. Koch is a member of
the company's board of directors.
(8) Includes 105,000 shares of common stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 2001. Mr. McDonnell is a member of
the company's board of directors.
(9) Includes 625,665 shares of common stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 2001. Mr. Morrill was appointed a
member of the company's board of directors effective March 16, 2000.
(10) Includes 17,500 shares of common stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 2001. Mr. Arnold is the company's
vice president and chief financial officer.
(11) Includes 424,586 shares of common stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 2001. Mr. Fiore is the company's
senior vice president and president, Ascential Software.
(12) Includes 80,717 shares of common stock held by Mr. Foy, 5,000 shares held
by each of Mr. Foy's three children, and 518,528 shares of common stock
issuable upon exercise of outstanding options
68
which are presently exercisable or will become exercisable within 60 days of
March 31, 2001. Mr. Foy is the company's senior vice president and
president, Informix Software.
(13) Includes 212,500 shares of common stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 2001. Mr. Lloyd is the company's
vice president, legal, general counsel and secretary.
(14) Includes 462,875 shares of common stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 2001. Mr. Hendrickson was the
company's senior vice president and group executive, i.Informix Group until
August 2000. Mr. Hendrickson is currently serving as the acting chief
information officer of Informix Software, Inc.
(15) Includes 150,000 shares of common stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 2001. Ms Jorden was the chief
financial officer of the company from May 22, 2000 until her resignation
effective November 1, 2000.
(16) Includes 3,595,426 shares of common stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 2001.
69
OTHER MATTERS
The board of directors of the company knows of no other matters that will be
presented for consideration at the special meeting. If any other matters are
properly brought before the special meeting, it is the intention of the persons
named in the accompanying proxy to vote on such matters in accordance with their
best judgment, unless the authority to do so is withheld in such proxy.
PROPOSALS BY OUR STOCKHOLDERS
Stockholders are entitled to present proposals for action at the company's
2002 annual meeting if they comply with the requirements of the proxy rules
promulgated by the SEC and our bylaws as amended. In order for a stockholder to
present a proposal for inclusion in the company's proxy materials for the
company's 2002 annual meeting and to properly bring such business before the
company's 2002 annual meeting, a stockholder must give written notice of the
proposed action to the secretary of the company no later than January 2, 2002 If
we change the date for the 2002 annual meeting by more than 30 days from the
date of the 2001 annual meeting then the deadline is a reasonable before the
company begins to print and mail its proxy materials for the 2002 annual
meeting. If a stockholder intends to submit a proposal at the company's 2002
annual meeting, which is not eligible for inclusion in the company's proxy
materials relating to that meeting, the stockholder must give notice to the
company in accordance with the requirements set forth in the Securities and
Exchange Act of 1934, as amended, no later than February 4, 2002. If such
stockholder fails to comply with the foregoing notice provision, the proxy
holders will be allowed to use their discretionary voting authority when and if
the proposal is raised at the company's 2002 annual meeting. The fact that the
company may not insist upon compliance with these requirements should not be
construed as a waiver of our right to do so at any time in the future.
WHERE YOU CAN FIND MORE INFORMATION
The company is subject to the information filing requirements of the
Securities Exchange Act of 1934, as amended, and, in accordance with Securities
and Exchange Act, is obligated to file with the SEC periodic reports, proxy
statements and other information relating to our business, financial condition
and other matters. These reports, proxy statements and other information may be
inspected at the SEC's office at the public reference facilities of the SEC at
450 Fifth Street, NW, Washington, D.C. 20549, and are also available for
inspection at the regional offices of the SEC located at 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of these materials can be obtained,
upon payment of the SEC's customary charges, by writing to the SEC's principal
office at 450 Fifth Street, NW, Room 1024 Washington, D.C. 20549. The SEC also
maintains a website at http://www.sec.gov that contains reports, proxy
statements and other information. The information is also available at the
offices of the National Association of Securities Dealers, Inc., Reports
Section, 1735 K Street, N.W., Washington, D.C. 20006.
You should rely only on the information contained in this document to vote
your shares of common stock at the special meeting. We have not authorized
anyone to provide you with information that is different from what is contained
in this document. This document is dated May 10, 2001. You should not assume
that the information contained in this document is accurate as of any date other
than that date, and the mailing of this document to stockholders does not create
any implication to the contrary. This document does not constitute a
solicitation of a proxy in any jurisdiction where, or to or from any person to
whom, it is unlawful to make such solicitation in that jurisdiction.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We are incorporating by reference each document we file with the SEC under
the Securities Exchange Act after the date of this proxy statement and prior to
the special meeting. All such
70
documents will be incorporated by reference into this proxy statement and deemed
to be a part of the proxy statement from the date of filing such documents.
We also are incorporating by reference into this proxy statement the
documents listed below which have been filed with the SEC under the Securities
Exchange Act:
1) our Annual Report on Form 10-K for the fiscal year ended December 31,
2000 and
2) our Definitive Proxy Statement on Schedule 14-A, filed on April 30,
2001.
Documents incorporated by reference are available from us without charge,
excluding all exhibits (unless we have specifically incorporated by reference an
exhibit into this proxy statement). You may obtain documents incorporated by
reference by requesting them in writing or by telephone as follows:
Informix Corporation
50 Washington Street
Westborough, Massachusetts 01581
Attention: Investor Relations
Telephone: (508) 366-3888
If you would like to request documents from us, please do so immediately in
order to ensure timely receipt before the special meeting.
71
INDEX TO FINANCIAL STATEMENTS AND ANNEXES
Historical Financial Statements of the database business.... F-1
Master Purchase Agreement................................... Annex A
Opinion of Credit Suisse First Boston Corporation, dated
April 24, 2001............................................ Annex B
Opinion rendered by SG Cowen Securities Corporation, dated
April 24, 2001............................................ Annex C
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
INDEX TO UNAUDITED COMBINED FINANCIAL STATEMENTS
PAGE
----
Unaudited Combined Balance Sheets........................... F-2
Unaudited Combined Statements of Operations................. F-3
Unaudited Combined Statements of Cash Flows................. F-4
Unaudited Combined Statements of Operational Surplus........ F-5
Notes to Unaudited Combined Financial Statements............ F-6
F-1
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
UNAUDITED COMBINED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31,
-------------------
2000 1999
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 53,796 $ 67,959
Accounts receivable, net.................................. 201,532 224,221
Deferred taxes............................................ -- 5,363
Other current assets...................................... 10,429 22,012
-------- --------
Total current assets........................................ 265,757 319,555
PROPERTY AND EQUIPMENT, net................................. 53,694 57,932
SOFTWARE COSTS, net......................................... 26,303 37,532
LONG-TERM INVESTMENTS....................................... 1,265 500
INTANGIBLE ASSETS, net...................................... 6,956 30,621
OTHER ASSETS................................................ 7,467 8,667
-------- --------
Total Assets................................................ $361,442 $454,807
======== ========
LIABILITIES AND OPERATIONAL SURPLUS
CURRENT LIABILITIES
Accounts payable.......................................... $ 19,904 $ 24,485
Accrued expenses.......................................... 25,459 39,272
Accrued employee compensation............................. 49,660 63,167
Income taxes payable...................................... 22,917 21,213
Deferred revenue.......................................... 131,225 138,913
Advances from customers................................... 7,239 31,049
Accrued merger, realignment and other charges............. 24,510 5,549
Other current liabilities................................. 317 3,810
-------- --------
Total current liabilities................................... 281,231 327,458
-------- --------
OTHER NON-CURRENT LIABILITIES............................... 634 1,257
COMMITMENTS AND CONTINGENCIES (Note 6)
OPERATIONAL SURPLUS
Accumulated surplus....................................... 100,629 137,124
Accumulated other comprehensive loss...................... (21,052) (11,032)
-------- --------
Total operational surplus................................... 79,577 126,092
-------- --------
Total Liabilities and Operational Surplus................... $361,442 $454,807
======== ========
See Notes to Unaudited Combined Financial Statements.
F-2
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
UNAUDITED COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
YEARS ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
NET REVENUES
Licenses.................................................. $337,718 $481,912 $439,628
Services.................................................. 469,870 473,059 397,376
-------- -------- --------
807,588 954,971 837,004
COSTS AND EXPENSES
Cost of software distribution............................. 36,536 45,746 41,101
Cost of services.......................................... 141,671 188,219 176,575
Sales and marketing....................................... 332,303 340,132 303,596
Research and development.................................. 121,459 165,426 160,702
General and administrative................................ 81,837 78,507 85,883
Write-off of acquired research and development............ -- -- 2,600
Merger, realignment and other charges..................... 105,028 12,093 4,640
-------- -------- --------
818,834 830,123 775,097
-------- -------- --------
Operating income (loss)..................................... (11,246) 124,848 61,907
OTHER INCOME (EXPENSE)
Interest income........................................... 2,690 3,398 3,509
Other, net................................................ 1,300 (300) (4,000)
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES........................... (7,256) 127,946 61,416
Income taxes.............................................. 13,109 28,961 6,861
-------- -------- --------
NET INCOME (LOSS)........................................... $(20,365) $ 98,985 $ 54,555
======== ======== ========
See Notes to Unaudited Combined Financial Statements.
F-3
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
UNAUDITED COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................... $(20,365) $98,985 $54,555
Adjustments to reconcile net income (loss) to cash and cash
equivalents provided by (used in) operating activities:
License fees received in advance.......................... (34,506) (81,984) (66,069)
Depreciation and amortization............................. 38,657 48,841 50,048
Amortization of capitalized software...................... 18,454 19,660 21,433
Write-off of capitalized software......................... -- 2,371 588
Write-off of long term assets............................. -- 5,894 --
Write-off of acquired research and development............ -- -- 2,600
Foreign currency transaction losses (gains)............... 1,012 (1,900) 2,641
(Gain) loss on disposal of property and equipment......... 4,848 (144) 500
Deferred tax expense...................................... 5,004 8,721 3,247
Provisions for losses on accounts receivable.............. 7,171 1,151 590
Merger, realignment and other charges..................... 105,028 12,093 4,640
Changes in operating assets and liabilities:
Accounts receivable..................................... 24,751 (30,385) (40,147)
Other current assets.................................... 11,949 (13,089) 81,060
Accounts payable, accrued expenses and other
liabilities........................................... (91,108) (8,941) (99,910)
Deferred maintenance revenue............................ (13,178) (6,371) 24,337
-------- ------- -------
Net cash and cash equivalents provided by operating
activities................................................ 57,717 54,902 40,113
CASH FLOWS FROM INVESTING ACTIVITIES
Investments of excess cash:
Purchases of available-for-sale securities................ (5,000) -- --
Purchases of property and equipment......................... (35,429) (20,113) (19,558)
Proceeds from disposal of property and equipment............ 166 1,248 864
Additions to software costs................................. (18,578) (21,095) (19,994)
Business combinations, net of cash acquired................. -- -- 1,834
Other....................................................... 483 1,319 4,808
-------- ------- -------
Net cash and cash equivalents used in investing
activities................................................ (58,358) (38,641) (32,046)
CASH FLOWS FROM FINANCING ACTIVITIES
Intercompany transfers...................................... (16,130) (12,895) (9,313)
Advances from customers..................................... 10,733 6,539 11,402
Payments for structured settlements with resellers.......... (152) (4,135) --
Principal payments on capital leases........................ (1,853) (4,810) (16,840)
-------- ------- -------
Net cash and cash equivalents used in financing
activities................................................ (7,402) (15,301) (14,751)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS............................................... (6,120) (3,190) 16,152
-------- ------- -------
Increase (decrease) in cash and cash equivalents............ (14,163) (2,230) 9,468
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 67,959 70,189 60,721
-------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 53,796 $67,959 $70,189
======== ======= =======
See Notes to Unaudited Combined Financial Statements.
F-4
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
UNAUDITED COMBINED STATEMENTS OF OPERATIONAL SURPLUS
AND COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS)
ACCUMULATED OTHER
ACCUMULATED COMPREHENSIVE COMPREHENSIVE
DEFICIT INCOME (LOSS) INCOME (LOSS) TOTALS
----------- ------------- ----------------- --------
Balances at December 31, 1997............. $(22,614) $(11,288) $(33,902)
Intercompany transfers.................... 19,093 19,093
Comprehensive income
Net income.............................. 54,555 $ 54,555 54,555
Other comprehensive income
Foreign currency translation
adjustments......................... 3,259 3,259 3,259
--------
Comprehensive income...................... $ 57,814
========
Balances at December 31, 1998............. $ 51,034 $ (8,029) $ 43,005
-------- -------- --------
Intercompany transfers.................... (12,895) (12,895)
Comprehensive income
Net income.............................. 98,985 $ 98,985 98,985
Other comprehensive loss
Foreign currency translation
adjustments......................... (3,003) (3,003) (3,003)
--------
Comprehensive income...................... $ 95,982
========
Balances at December 31, 1999............. $137,124 $(11,032) $126,092
-------- -------- --------
Intercompany transfers.................... (16,130) (16,130)
Comprehensive income
Net loss................................ (20,365) $(20,365) (20,365)
Other comprehensive loss
Unrealized loss on available-for-sale
securities.......................... (4,235) (4,235)
Foreign currency translation
adjustments......................... (5,785) (5,785)
--------
Other comprehensive loss.................. (10,020) (10,020)
--------
Comprehensive loss........................ $(30,385)
========
Balances at December 31, 2000............. $100,629 $(21,052) $ 79,577
======== ======== ========
See Notes to Unaudited Combined Financial Statements.
F-5
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS. On April 24, 2001, Informix Corporation
reached an agreement with International Business Machines Corporation ("IBM"),
whereby IBM will purchase substantially all of the assets and certain
liabilities of Informix Corporation's database business ("Database Business").
Informix Corporation is a publicly traded company with two operating businesses,
the Database Business, a provider of database management systems for data
warehousing, transaction processing, and e-business applications, and Ascential
Software, a provider of information asset management solutions to enterprises
and government organizations worldwide.
Under the terms of the agreement, Informix Corporation will sell
substantially all of the assets related to the Database Business (including the
research, development, manufacture, distribution, marketing, sale and service of
relational database management systems) to IBM and IBM will assume certain
liabilities related to the Database Business, which are primarily current
liabilities and future obligations under assigned contracts. In addition to
assuming certain liabilities, IBM has agreed to purchase the Database Business
from Informix Corporation for a purchase price of $1.0 billion in cash. If the
net working capital transferred to IBM exceeds $124 million, IBM will pay
Informix Corporation an amount equal to 50% of the excess. If the transferred
net working capital is less than $124 million, Informix Corporation will pay IBM
the difference. $100 million of the purchase price will be held back by IBM for
18 months after closing to satisfy certain indemnification obligations of
Informix Corporation should they arise. In addition, Informix Corporation has
agreed to pay IBM an amount equal to 18% of certain deferred revenues arising
from the Database Business set forth on Informix Corporation's December 31, 2000
balance sheet for which Informix Corporation had received payment prior to
December 31, 2000. The agreement is subject to Informix Corporation shareholder
and regulatory approvals and is expected to close in the third quarter of 2001.
BASIS OF PRESENTATION. On September 19, 2000, Informix Corporation approved
plans to realign its operations from five former business units into two
operating businesses, the Database Business and Ascential Software (Note 11).
Management believes that the two operating businesses are in the same line of
business, information management software, and serve the same class of
customers. The Database Business was not managed as a separate operating
business of Informix Corporation prior to the announcement. The accompanying
combined financial statements include the carved-out operations of the database
business of Informix Corporation for all periods presented and have been
prepared as if the Database Business was historically an operating business of
Informix Corporation, utilizing Informix Corporation's centralized systems for
cash management, payroll, purchasing and distribution, employee benefit plans,
insurance and administrative services. Substantially all cash received by the
Database Business was deposited in and commingled with Informix Corporation's
general corporate funds. Similarly, operating expenses, capital expenditures and
other cash requirements of the Database Business were paid by Informix
Corporation and charged directly or allocated to the Database Business. The
allocated common expenses, such as rent, personnel benefits, and rent, were
charged to the Database Business based upon headcount. Certain assets and
liabilities related to the Database Business' operations are managed and
controlled by Informix Corporation on a centralized basis. Such assets and
liabilities have been allocated (by product type, location of assets, headcount,
or percentage of revenue or expenses) to the Database Business based on the
Database Business' use of those assets and liabilities. Cash and cash
equivalents represents one month of operating expenses of the Database Business'
operations. In the opinion of management, Informix Corporation's methods for
allocating costs, assets and liabilities are reasonable. As the Database
Business is not a legal entity, Informix Corporation entered into contractual
agreements on the behalf of the Database Business. For
F-6
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
convenience, all such contractual agreements in the notes to the combined
financial statements have been shown as entered into by the Database Business.
The combined financial statements and related notes present the financial
position, results of operations and cash flows of the Database Business, as if
it were a separate stand-alone entity for all periods presented. The combined
financial statements have been prepared using Informix Corporation's historical
basis in the assets and liabilities associated with the Database Business.
Changes in operational surplus represent the net income (loss) of the Database
Business plus the change in cash transferred between the Database Business and
Informix Corporation and certain non-cash items.
However, these combined financial statements are not necessarily indicative
of results that would have occurred if the Database Business had been a separate
stand-alone entity during the periods presented or of future results of the
Database Business.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
PRINCIPLES OF COMBINATION. The combined financial statements include the
accounts of foreign entities that form part of the Database Business. These
entities are wholly owned subsidiaries of Informix Corporation. All material
intercompany transactions and balances between entities included in these
combined financial statements have been eliminated.
FOREIGN CURRENCY TRANSLATION. For foreign operations with the local
currency as the functional currency, assets and liabilities are translated at
year-end exchange rates, and statements of operations are translated at the
exchange rates during the year. Exchange gains or losses arising from
translation of such foreign entity financial statements are included as a
component of other comprehensive income (loss).
For foreign operations with the U.S. dollar as the functional currency,
monetary assets and liabilities are remeasured at the year-end exchange rates as
appropriate and non-monetary assets and liabilities are remeasured at historical
exchange rates. Statements of operations are remeasured at the exchange rates
during the year. Foreign currency transaction gains and losses are included in
other income (expense), net. The Database Business recorded net foreign currency
transaction losses of $0.3 million, $0.3 million and $4.8 million for the years
ended December 31, 2000, 1999 and 1998, respectively.
DERIVATIVE FINANCIAL INSTRUMENTS. The Database Business enters into foreign
currency forward exchange contracts to reduce its exposure to foreign currency
risk due to fluctuations in exchange rates underlying the value of intercompany
accounts receivable and payable denominated in foreign currencies (primarily
European and Asian currencies) until such receivables are collected and payables
are disbursed. A foreign currency forward exchange contract obligates the
Database Business to exchange predetermined amounts of specified foreign
currencies at specified exchange rates on specified dates or to make an
equivalent U.S. dollar payment equal to the value of such exchange. These
foreign currency forward exchange contracts are denominated in the same currency
in which the underlying foreign currency receivables or payables are denominated
and bear a contract value and maturity date which approximate the value and
expected settlement date of the underlying transactions.
F-7
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
As the Database Business' contracts are not designated and effective as hedges
for financial reporting, discounts or premiums (the difference between the spot
exchange rate and the forward exchange rate at inception of the contract), and
net changes in market value of the underlying contract are recorded in earnings
as other income (expense). The Database Business operates in certain countries
in Latin America, Eastern Europe, and Asia/Pacific where there are limited
forward currency exchange markets and thus the Database Business has unhedged
exposures in these currencies.
Most of the Database Business' international revenue and expenses are
denominated in local currencies. Due to the substantial volatility of currency
exchange rates, among other factors, the Database Business cannot predict the
effect of exchange rate fluctuations on the Database Business' future operating
results. Although the Database Business takes into account changes in exchange
rates over time in its pricing strategy, it does so only on an annual basis,
resulting in substantial pricing exposure as a result of foreign exchange
volatility during the period between annual pricing reviews. In addition, the
sales cycles for the Database Business' products is relatively long, depending
on a number of factors including the level of competition and the size of the
transaction. Notwithstanding the Database Business' efforts to manage foreign
exchange risk, there can be no assurances that the Database Business' hedging
activities will adequately protect the Database Business against the risks
associated with foreign currency fluctuations.
REVENUE RECOGNITION. Revenue consists principally of fees for licenses of
the Database Business' software products, maintenance, consulting, and training.
The Database Business recognizes revenue using the residual method in accordance
with Statement of Position 97-2 (SOP 97-2), "Software Revenue Recognition," as
amended by SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition
with Respect to Certain Transactions." Under the residual method, revenue is
recognized in a multiple element arrangement in which Company-specific objective
evidence of fair value exists for all of the undelivered elements in the
arrangement, but does not exist for one or more of the delivered elements in the
arrangement. Company-specific objective evidence of fair value of maintenance
and other services is based on the Database Business' customary pricing for such
maintenance and/or services when sold separately. At the outset of the
arrangement with the customer, the Database Business defers revenue for the fair
value of its undelivered elements (e.g., maintenance, consulting, and training)
and recognizes revenue for the remainder of the arrangement fee attributable to
the elements initially delivered in the arrangement (i.e., software product)
when the basic criteria in SOP 97-2 have been met. If such evidence of fair
value for each element of the arrangement does not exist, all revenue from the
arrangement is deferred until such time that evidence of fair value does exist
or until all elements of the arrangement are delivered.
Under SOP 97-2, revenue attributable to an element in a customer arrangement
is recognized when persuasive evidence of an arrangement exists, delivery has
occurred, the fee is fixed or determinable, collectibility is probable, and the
arrangement does not require services that are essential to the functionality of
the software. If at the outset of the customer arrangement, the Database
Business determines that the arrangement fee is not fixed or determinable or
that collectibility is not probable, revenue is recognized when the arrangement
fee becomes due and payable.
F-8
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Database Business' specific policies for recognition of license revenues
and services revenues are as follows:
LICENSE REVENUE. The Database Business recognizes revenue from sales of
software licenses to end users upon persuasive evidence of an arrangement,
delivery of the software to a customer, determination that collection of a fixed
or determinable license fee is considered probable, and determination that no
undelivered services are essential to the functionality of the software.
If consulting services are essential to the functionality of the licensed
software, then both the license revenue and the consulting service revenue are
recognized under the completed contract method of contract accounting. The
Database Business' arrangements generally do not include services that are
essential to the functionality of the software.
Revenue for transactions with application vendors, OEMs, and distributors is
generally recognized as earned when the licenses are resold or utilized by the
reseller and all related obligations of the Database Business have been
satisfied. The Database Business provides for sales allowances on an estimated
basis. The Database Business accrues royalty revenue through the end of the
reporting period based on reseller royalty reports or other forms of
customer-specific historical information. In the absence of customer-specific
historical information, royalty revenue is recognized when the customer-specific
objective information becomes available. Any subsequent changes to previously
recognized royalty revenues are reflected in the period when the updated
information is received from the reseller.
SERVICE REVENUE. Maintenance contracts generally call for the Database
Business to provide technical support and software updates and upgrades to
customers. Maintenance revenue is recognized ratably over the term of the
maintenance contract, generally on a straight-line basis where all revenue
recognition requirements are met. Other service revenue, primarily training and
consulting, is generally recognized at the time the service is performed and it
is determined that the Database Business has fulfilled its obligations resulting
from the services contract.
During the fourth quarter of 2000, the Database Business adopted Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements,"
("SAB No. 101"). The adoption of SAB No. 101 did not have a material effect on
the Database Business' combined statement of financial position or results of
operation.
ADVANCES FROM CUSTOMERS. Amounts received in advance of revenue being
recognized are recorded as a liability on the accompanying financial statements.
The Database Business' license arrangements with some of its customers provide
contractually for a non-refundable fee payable by the customer in single or
multiple installment(s) at the initiation or over the term of the license
arrangement. If the Database Business fails to comply with certain contractual
terms of a specific license agreement, the Database Business could be required
to refund the amount(s) received to the customer.
RECEIVABLES FINANCING ARRANGEMENTS. Prior to 2000, the Database Business
periodically sold certain accounts receivable to financial institutions. Such
factoring arrangements are treated as sales, since the Database Business
relinquishes control and all rights over the accounts that are transferred to
the financial institution. Receivables sold under these arrangements totaled
approximately $10.8 million in 1999 and $13.2 million in 1998. These sales were
typically done on a limited recourse basis, and any
F-9
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
potential losses were evaluated at the time the asset was sold. To date, no
losses on factored receivables have been incurred and the fee charged to the
Database Business by the factor has been recorded as interest expense.
SOFTWARE COSTS. The Database Business accounts for its software development
expenses in accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed." This statement requires that, once technological feasibility of a
developing product has been established, all subsequent costs incurred in
developing that product to a commercially acceptable level be capitalized and
amortized ratably over the revenue life of the product. The Database Business
uses a detail program design approach in determining technological feasibility.
Software costs also include amounts paid for purchased software and outside
development on products which have reached technological feasibility. All
software costs are amortized as a cost of software distribution either on a
straight-line basis, or on the basis of each product's projected revenues,
whichever results in greater amortization, over the remaining estimated economic
life of the product, which is generally estimated to be three years. The
Database Business recorded amortization of $18.5 million, $19.7 million and
$21.4 million of software costs in 2000, 1999 and 1998, respectively, in cost of
software distribution.
The Database Business accounts for the costs of computer software developed
or obtained for internal use in accordance with Statement of Position 98-1 (SOP
98-1), "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," which was effective for fiscal years beginning after
December 15, 1998. This statement requires that certain costs incurred during a
software development project be capitalized. During the years ended
December 31, 2000 and 1999, the Database Business capitalized approximately
$3.3 million and $2.8 million under SOP 98-1, which will be amortized over the
estimated useful life of the software developed, which is generally three years.
During 2000, $2.4 million of software costs previously capitalized under SOP
98-1 were written off to sales and marketing expense when the Database Business
determined that it was no longer probable that the development of a project
would be completed.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost less
accumulated depreciation and amortization which is calculated using the
straight-line method over the estimated useful lives of the assets. Estimated
useful lives of 36 to 48 months are used on computer equipment, and an estimated
useful life of seven years is used for furniture and fixtures. Depreciation and
amortization of leasehold improvements is computed using the shorter of the
remaining lease term or seven years. The Database Business reviews property and
equipment for impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets may not be recoverable. Recoverability
of property and equipment to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Property and equipment to be disposed of
are reported at the lower of the carrying amount or fair value less costs to
sell.
BUSINESSES ACQUIRED. The purchase price of businesses acquired, accounted
for as purchase business combinations, is allocated to the tangible and
identifiable intangible assets acquired based on their estimated fair values
with any amount in excess of such allocations being designated as goodwill.
Intangible assets are amortized on a straight-line basis over their estimated
useful lives, which to date range from three to ten years. As of December 31,
2000, and 1999, the Database Business had
F-10
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
$12.5 million and $46.3 million of intangible assets, with accumulated
amortization of $5.5 million and $15.7 million, respectively, as a result of
these acquisitions. Management periodically reviews intangible assets for
impairment indicators. At the time management determines the existence of such
indicators, the Database Business uses undiscounted cash flows of the acquired
business over the remaining amortization period to initially determine whether
impairment should be recognized. The Database Business then performs a
subsequent calculation to measure the amount of the impairment loss based on the
excess of the carrying value over the fair value of the impaired assets. If
quoted market prices for the assets are not available, the fair value is
calculated using the present value of estimated expected future cash flows. The
cash flow calculation would be based on management's best estimates, using
appropriate assumptions and projections at the time. The carrying-value of
identifiable intangible assets are reviewed in a manner consistent with the
policy for reviewing impairment of property and equipment, as described above.
STOCK-BASED COMPENSATION. Employees of the Database Business participated
in the option plans of Informix Corporation (Note 5). The Database Business
accounts for Informix Corporation's stock-based awards issued to its employees
in accordance with Accounting Principles Board Opinion No. 25 (APB 25),
"Accounting for Stock Issued to Employees." Under APB 25, the Database Business
generally recognizes no compensation expense with respect to such awards.
CONCENTRATION OF CREDIT RISK. The Database Business designs, develops,
manufactures, markets, and supports computer software systems to customers in
diversified industries and in diversified geographic locations. The Database
Business performs ongoing credit evaluations of its customers' financial
condition and generally requires no collateral. No single customer accounted for
10% or more of the net revenues of the Database Business in 2000, 1999 or 1998.
CASH, CASH EQUIVALENTS, AND LONG-TERM INVESTMENTS. The Database Business
considers liquid investments purchased with an original remaining maturity of
three months or less to be cash equivalents. All other investments are
considered long-term investments. Long-term investments are classified as
available-for-sale and are carried at fair value, with the unrealized gains and
losses, net of tax, reported as a component of other comprehensive income
(loss). Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in other
income (expense), net. No realized gains and losses were recorded during 2000,
1999, and 1998.
The Database Business invests in equity instruments of privately-held,
information technology companies for business and strategic purposes. These
investments are included in long-term investments and are accounted for under
the cost method when ownership is less than 20% and the Database Business does
not otherwise have significant influence over the investee. For these non-quoted
investments, the Database Business' policy is to regularly review the
assumptions underlying the operating performance and cash flow forecasts in
assessing the carrying values. When the Database Business determines that a
decline in fair value below the cost basis is other than temporary, the related
investment is written down to fair value.
FAIR VALUE OF FINANCIAL INSTRUMENTS. Fair values of cash, cash equivalents,
long term investments and foreign currency forward contracts are based on quoted
market prices.
F-11
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SUPPLEMENTAL CASH FLOW DATA. The Database Business paid income taxes in the
net amount of $3.1 million and $10.0 million during 2000 and 1999, respectively,
and received a refund in the net amount of $31.0 million during 1998.
NEW ACCOUNTING PRONOUNCEMENTS. In June 1998, the Financial Accounting
Standards Board issued Statement No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities," which establishes standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires an entity to recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Database Business will
adopt SFAS 133 in the first quarter of 2001 and does not expect such adoption to
have a material effect on the Database Business' results of operations or
financial position.
NOTE 2--BALANCE SHEET COMPONENTS
DECEMBER 31,
---------------------
2000 1999
--------- ---------
(IN THOUSANDS)
Accounts receivable, net:
Receivables............................................... $ 213,737 $ 239,084
Less: allowance for doubtful accounts..................... (12,205) (14,863)
--------- ---------
$ 201,532 $ 224,221
========= =========
Property and equipment, net:
Computer equipment........................................ $ 91,615 $ 142,840
Furniture and fixtures.................................... 26,043 31,384
Leasehold improvements.................................... 24,827 29,880
Buildings and other....................................... 43,536 42,814
--------- ---------
186,021 246,918
Less: accumulated depreciation and amortization........... (132,327) (188,986)
--------- ---------
$ 53,694 $ 57,932
========= =========
Software costs, net:
Capitalized software development costs.................... $ 43,125 $ 61,649
Less: accumulated amortization............................ (16,822) (24,117)
--------- ---------
$ 26,303 $ 37,532
========= =========
Long-term investments:
Marketable equity securities (Note 3)..................... $ 765 $ --
Investments in privately-held companies................... 500 500
--------- ---------
$ 1,265 $ 500
========= =========
F-12
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--FINANCIAL INSTRUMENTS
The following is a summary of available-for-sale securities:
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
DECEMBER 31, 2000 COST GAINS LOSSES FAIR VALUE
- - ----------------- -------- ---------- ---------- ----------
(IN THOUSANDS)
Marketable equity securities.......................... $5,000 $ -- $(4,235) $765
Amounts included in long-term investments............. $5,000 $ -- $(4,235) $765
At December 31, 1999, the Database Business had no available-for-sale
securities.
NOTE 4--DERIVATIVE FINANCIAL INSTRUMENTS
The Database Business enters into foreign currency forward exchange
contracts primarily to hedge the value of intercompany accounts receivable or
accounts payable denominated in foreign currencies against fluctuations in
exchange rates until such receivables are collected or payables are disbursed.
The purpose of the Database Business' foreign exchange exposure management
policy and practices is to attempt to minimize the impact of exchange rate
fluctuations on the value of the foreign currency denominated assets and
liabilities being hedged.
The table below summarizes by currency the contractual amounts of the
Database Business' foreign currency forward exchange contracts at December 31,
2000 and December 31, 1999. The information is provided in U.S. dollar
equivalents and presents the notional amount (contract amount) and the related
fair value. As the Database Business' foreign currency forward contracts are not
accounted for as hedges, they are carried at fair value. Fair value represents
the prevailing financial market information as of December 31, 2000 and 1999.
All contracts mature within twelve months.
F-13
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
FORWARD CONTRACTS
AT DECEMBER 31, 2000 CONTRACT AMOUNT FAIR VALUE
- - -------------------- --------------- ----------
(IN THOUSANDS)
Forward currency to be sold under contract:
Euro...................................................... $25,666 $ 49
Japanese Yen.............................................. 8,491 95
Australian Dollar......................................... 7,546 25
Taiwan Dollar............................................. 4,319 (162)
Korean Won................................................ 3,937 (32)
Swiss Franc............................................... 2,797 10
German Deutschmark........................................ 2,490 7
Singapore Dollar.......................................... 2,382 16
South African Rand........................................ 2,815 (33)
French Franc.............................................. 2,151 5
Thailand Bhat............................................. 2,285 --
Czech Koruna.............................................. 1,887 7
Other (individually less than $1 million)................. 1,549 (2)
------- -----
Total....................................................... $68,315 $ (15)
======= =====
Forward currency to be purchased under contract:
British Pound............................................. $10,843 $ (18)
Other (individually less than $1 million)................. 530 (2)
------- -----
Total....................................................... $11,373 $ (20)
======= =====
Grand Total................................................. $79,688 $ (35)
======= =====
F-14
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
AT DECEMBER 31, 1999 CONTRACT AMOUNT FAIR VALUE
- - -------------------- --------------- ----------
(IN THOUSANDS)
Forward currency to be sold under contract:
Euro...................................................... $33,352 $ 198
Korean Won................................................ 5,314 (23)
Australian Dollar......................................... 3,116 (7)
Czech Koruna.............................................. 2,620 1
German Mark............................................... 2,013 122
Thai Bhat................................................. 1,852 (12)
Singapore Dollar.......................................... 1,814 13
French Franc.............................................. 1,749 104
Other (individually less than $1 million)................. 3,687 (35)
------- -----
Total....................................................... $55,517 $ 361
======= =====
Forward currency to be purchased under contract:
British Pound............................................. $34,445 $ (52)
Japanese Yen.............................................. 2,484 (36)
Other (individually less than $1 million)................. 2,480 (57)
------- -----
Total....................................................... $39,409 $(145)
======= =====
Grand Total................................................. $94,926 $ 216
======= =====
While the contract amounts provide one measure of the volume of these
transactions, they do not represent the amount of the Database Business'
exposure to credit risk. The amount of the Database Business' credit risk
exposure (arising from the possible inabilities of counterparties to meet the
terms of their contracts) is generally limited to the amounts, if any, by which
the counterparties' obligations exceed the obligations of the Database Business
as these contracts can be settled on a net basis at the option of the Database
Business. The Database Business controls credit risk through credit approvals,
limits and monitoring procedures.
As of December 31, 2000 and 1999, other than foreign currency forward
exchange contracts discussed immediately above, the Database Business does not
currently invest in or hold any other derivative financial instruments.
NOTE 5--EMPLOYEE BENEFIT PLANS
These combined financial statements and disclosures described below reflect
Informix Corporation's various employee benefit plans in which the Database
Business employees participated. Upon completion of the sale of the Database
Business' assets to IBM, any obligations related to these plans will remain with
Informix Corporation.
401(k) PLAN
Informix Corporation has a 401(k) plan covering substantially all of its
U.S. employees. Under this plan, participating employees may defer up to
15 percent of their pre-tax earnings, subject to the Internal Revenue Service
annual contribution limits. Informix Corporation matches 50 percent of each
employee's contribution up to a maximum of $2,500. The matching contributions to
this 401(k) plan
F-15
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--EMPLOYEE BENEFIT PLANS (CONTINUED)
charged to the Database Business for 2000, 1999 and 1998 were $3.5 million,
$3.5 million and $3.2 million, respectively.
OPTION PLANS
In April 1994, Informix Corporation adopted the 1994 Stock Option and Award
Plan (the "1994 Plan"). Incentive stock options, nonqualified stock options,
performance shares, or a combination thereof, can be granted to employees, at
not less than the fair market value on the date of grant and generally vest in
annual installments over two to four years. The Compensation Committee may grant
awards, provided that during any fiscal year of Informix Corporation, no
participant shall receive stock options covering more than 250,000 shares or
performance shares covering more than 100,000 shares. However, the committee may
grant up to 500,000 shares during any fiscal year of Informix Corporation in
which the individual first becomes an employee and/or is promoted from a
position as a non-executive officer employee to a position as an executive
officer. In April 2000, Informix Corporation's Board of Directors approved an
amendment to this Plan whereby the options are generally not exercisable until
one year from the date of grant.
In July 1997, Informix Corporation adopted the 1997 Non-Statutory Stock
Option Plan ("the 1997 Stock Plan"), authorizing the grant of non-statutory
stock options to employees and consultants. Terms of each option are determined
by the Board or committee delegated such duties by the Board.
In December 1997, Informix Corporation's Board of Directors authorized the
repricing of outstanding options to purchase Common Stock under Informix
Corporation's stock option plans. Employees were eligible to participate only if
they remained actively employed at the effective date of the repricing and were
only permitted to exchange options granted and outstanding prior to May 1, 1997.
The repricing/option exchange was effective January 9, 1998 (the "Repricing
Effective Date"). The repricing program offered eligible employees the
opportunity to exchange eligible outstanding options with exercise prices in
excess of the closing sales price of the Informix Corporation's Common Stock on
the Repricing Effective Date for a new option with an exercise price equal to
such price. Other than the exercise price, each new option issued upon exchange
has terms substantially equivalent to the surrendered option, including the
number of shares, vesting terms and expiration except that options issued in
connection with the exchange may not be exercised for a period of one year from
the Repricing Effective Date. In addition, Officers and Directors of Informix
Corporation were not eligible to have their shares repriced. The exercise price
for repriced options was $5.0938, the closing sales price of Informix
Corporation's Common Stock on the Repricing Effective Date.
In July 1998, Informix Corporation adopted the 1998 Non-Statutory Stock
Option Plan ("the 1998 Stock Option Plan"). Options can be granted to employees
and consultants with terms which are determined by the Board or committee
delegated such duties by the Board.
As a result of the acquisition of Red Brick Systems, Inc. ("Red Brick") in
December 1998, Informix Corporation assumed all outstanding Red Brick stock
options. Each Red Brick stock option so assumed is subject to the same terms and
conditions as the original grant and generally vests over four years and expires
ten years from the date of grant. Each option was adjusted at a ratio of 0.6
shares of Informix Common Stock for each one share of Red Brick Common Stock,
and the exercise price was adjusted by dividing the exercise price by 0.6.
F-16
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--EMPLOYEE BENEFIT PLANS (CONTINUED)
As a result of the acquisition of Ardent Software, Inc. ("Ardent") in
March 2000, Informix Corporation assumed all outstanding Ardent stock options.
Each Ardent stock option so assumed is subject to the same terms and conditions
as the original grant and generally vests over four years and expires ten years
from the date of grant. Each option was adjusted at a ratio of 3.5 shares of
Informix Common Stock for each one share of Ardent Common Stock, and the
exercise price was adjusted by dividing the exercise price by 3.5.
As a result of the acquisition of Cloudscape, Inc. ("Cloudscape") in
October 1999, Informix Corporation assumed all outstanding Cloudscape stock
options. Each Cloudscape stock option so assumed is subject to the same terms
and conditions as the original grant and generally vests over four years and
expires ten years from the date of grant. Each option was adjusted at a ratio of
approximately 0.56 shares of Informix Common Stock for each one share of
Cloudscape Common Stock, and the exercise price was adjusted by dividing the
exercise price by approximately 0.56.
EMPLOYEE STOCK PURCHASE PLAN
In May 1997, Informix Corporation's stockholders approved the 1997 Employee
Stock Purchase Plan (the "1997 ESPP"). The 1997 ESPP permits participants to
purchase Common Stock through payroll deductions of up to 15 percent of an
employee's compensation, including commissions, overtime, bonuses and other
incentive compensation. The price of Common Stock purchased under the 1997 ESPP
is equal to 85 percent of the lower of the fair market value of the Common Stock
at the beginning or at the end of each calendar quarter in which an eligible
employee participates. The Plan qualifies as an employee stock purchase plan
under Section 423 of the Internal Revenue Code of 1986, as amended.
Ardent's Employee Stock Purchase Plan ("the Purchase Plan") provided for the
purchase of common stock at six-month intervals at 85% of the lower of the fair
market value on the first day or the last day of each six-month period. Ardent
issued 432,000 and 528,000 shares in 1999 and 1998, respectively, under the
Purchase Plan. This plan was terminated in April 2000.
STOCK-BASED COMPENSATION
Pro forma information regarding the net income (loss) is required by
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation," as if the Database Business had accounted for
Informix Corporation's stock based awards to employees of the Database Business
under the fair value method of SFAS 123. The fair value of Informix
Corporation's stock-based awards issued to employees of the Database Business
was estimated using a Black-Scholes option-pricing model.
F-17
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--EMPLOYEE BENEFIT PLANS (CONTINUED)
The fair value of Informix Corporation's stock-based awards issued to
employees of the Database Business was estimated assuming no expected dividends
and the following weighted-average assumptions:
OPTIONS ESPP
------------------------------ ------------------------------
2000 1999 1998 2000 1999 1998
-------- -------- -------- -------- -------- --------
Expected life (years).................... 4.5 4.5 4.5 .25 .25 .25
Expected volatility...................... 90% 70-73% 64-73% 90% 70-73% 56-95%
Risk-free interest rate.................. 5.8% 5.7% 4.7% 5.9% 4.6-5.1% 4.7-5.3%
For pro forma purposes, the estimated fair value of Informix Corporation's
stock-based awards issued to employees of the Database Business is amortized
over the award's vesting period (for options) and the three-month purchase
period (for stock purchases under the ESPP). The Database Business' pro forma
information is as follows:
2000 1999 1998
-------- -------- --------
(IN THOUSANDS)
Net income (loss).......................... As reported $(20,365) $98,985 $54,555
Pro forma (50,522) 67,464 17,935
The weighted-average fair value of the options granted during 2000, 1999 and
1998 were $4.70, $5.24 and $3.58 per share, respectively. The weighted-average
fair value of employee stock purchase rights granted under the ESPP during 2000,
1999 and 1998 were $1.97, $2.27 and $1.72 per share, respectively.
NOTE 6--COMMITMENTS AND CONTINGENCIES
Historically, the Database Business has leased certain computer and office
equipment under capital leases having terms of three-to-five years. During 2000,
the Database Business did not enter into any new capital lease arrangements and
during 1999 and 1998, did not finance a significant amount of equipment
purchases under capital lease arrangements. Amounts capitalized for such leases
are included on the balance sheets as property and equipment and at
December 31, 2000 the amount was not significant. As of December 31, 1999,
computer and office equipment under capital leases included in property and
equipment was $8.8 million and accumulated amortization was $7.1 million.
Amortization of the cost of leased equipment is included in depreciation
expense.
The Database Business leases certain of its office facilities and equipment
under non-cancelable operating leases and total rent expense was $31.5 million,
$34.9 million and $31.8 million in 2000, 1999 and 1998, respectively.
F-18
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum payments, by year and in the aggregate, under the capital and
non-cancelable operating leases as of December 31, 2000, are as follows:
NON-CANCELABLE
YEAR ENDING DECEMBER 31 CAPITAL LEASES OPERATING LEASES
- - ----------------------- -------------- ----------------
(IN THOUSANDS)
2001.................................................... $51 $28,891
2002.................................................... 2 20,544
2003.................................................... -- 9,864
2004.................................................... -- 3,006
2005.................................................... -- 1,253
Thereafter.............................................. -- 1,022
--- -------
Total payments.......................................... 53 $64,580
=======
Less: amount representing interest...................... 2
---
Present value of minimum lease payments................. 51
Less current portion.................................... 49
---
$ 2
===
The Database Business has several active software development and service
provider contracts with third-party technology providers. These agreements
contain financial commitments by the Database Business of $8.3 million and
$4.7 million in fiscal 2001 and 2002, respectively. In addition, the Database
Business makes annual payments of approximately $1.8 million to third-party
technology providers, and will continue to do so for such period as the Database
Business utilizes the related technology in its products.
NOTE 7--BUSINESS SEGMENTS
Consistent with Informix Corporation, the Database Business operates in one
business segment in four geographical areas, North America, Europe, Asia/Pacific
and Latin America. The Database Business has evaluated its business segment
performance based primarily on license revenues and service revenues. The
Database Business' products are marketed internationally through Informix
Corporation's subsidiaries and through application resellers, OEMs and
distributors.
F-19
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--BUSINESS SEGMENTS (CONTINUED)
Revenue by geographic area for the respective years ended December 31 is as
follows:
NORTH LATIN
AMERICA EUROPE ASIA/PACIFIC AMERICA TOTAL
-------- -------- ------------ -------- --------
(IN THOUSANDS)
2000:
License revenues......................... $150,157 $113,038 $ 46,995 $27,528 $337,718
Service revenues
Maintenance revenues................... 204,032 121,407 37,240 29,690 392,369
Consulting and education revenues...... 44,440 20,882 4,884 7,295 77,501
-------- -------- -------- ------- --------
Total service revenues................. 248,472 142,289 42,124 36,985 469,870
-------- -------- -------- ------- --------
Total revenues........................... $398,629 $255,327 $ 89,119 $64,513 $807,588
======== ======== ======== ======= ========
1999:
License revenues......................... $221,611 $164,738 $ 60,159 $35,404 $481,912
Service revenues
Maintenance revenues................... 183,875 116,692 35,290 25,454 361,311
Consulting and education revenues...... 67,462 31,003 6,709 6,574 111,748
-------- -------- -------- ------- --------
Total service revenues................. 251,337 147,695 41,999 32,028 473,059
-------- -------- -------- ------- --------
Total revenues........................... $472,948 $312,433 $102,158 $67,432 $954,971
======== ======== ======== ======= ========
1998:
License revenues......................... $203,828 $142,491 $ 58,812 $34,497 $439,628
Service revenues
Maintenance revenues................... 146,203 95,388 26,134 17,984 285,709
Consulting and education revenues...... 70,808 31,163 4,364 5,332 111,667
-------- -------- -------- ------- --------
Total service revenues................. 217,011 126,551 30,498 23,316 397,376
-------- -------- -------- ------- --------
Total revenues........................... $420,839 $269,042 $ 89,310 $57,813 $837,004
======== ======== ======== ======= ========
NOTE 8--INCOME TAXES
The Database Business is included in the consolidated federal income tax
return filed by Informix Corporation. However, the tax expense reflected on the
combined statements of operations and the tax assets and liabilities reflected
on the combined balance sheets have been prepared as though the Database
Business filed stand-alone income tax returns. Current taxes payable are
recorded as increases to Operational Surplus.
F-20
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--INCOME TAXES (CONTINUED)
The provision for income taxes applicable to income (loss) before income
taxes consists of the following:
2000 1999 1998
-------- -------- --------
(IN THOUSANDS)
Currently payable:
Federal................................................... $ 789 $ 5,929 $ 889
State..................................................... -- 747 195
Foreign................................................... 7,316 13,564 2,530
------- ------- -------
8,105 20,240 3,614
Deferred:
Federal................................................... -- 184 (3,343)
State..................................................... -- (834) (1,375)
Foreign................................................... 5,004 9,371 7,965
------- ------- -------
5,004 8,721 3,247
------- ------- -------
$13,109 $28,961 $ 6,861
======= ======= =======
Income (loss) before income taxes consists of the following:
2000 1999 1998
-------- -------- --------
(IN THOUSANDS)
Domestic.................................................... $(69,088) $ 65,338 $ 5,476
Foreign..................................................... 61,832 62,608 55,940
-------- -------- -------
$ (7,256) $127,946 $61,416
======== ======== =======
The provision for income taxes differs from the amount computed by applying
the federal statutory income tax rate to income (loss) before income taxes. The
sources and tax effects of the differences are as follows:
2000 1999 1998
------------------- ------------------- -------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
Computed tax (benefit) at federal
statutory rate...................... $ (2,540) 35.0% $ 44,781 35.0% $ 21,496 35.0%
Valuation allowance................... 24,509 (337.8) (39,102) (30.6) (12,804) (20.9)
State income taxes, net of federal tax
benefit............................. -- -- 493 0.4 (722) (1.2)
Foreign withholding taxes not
currently creditable................ 3,280 (45.2) 8,782 6.9 2,675 4.4
Foreign taxes, net.................... (18,353) 252.9 10,730 8.4 (4,702) (7.7)
Non-deductible charges................ 6,067 (83.6) 3,466 2.7 1,265 2.1
Other, net............................ 146 (2.0) (189) (0.2) (347) (0.5)
-------- ------ -------- ----- -------- -----
$ 13,109 (180.7)% $ 28,961 22.6% $ 6,861 11.2%
======== ====== ======== ===== ======== =====
F-21
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial statement
purposes and the amounts used for income tax purposes. Significant components of
the Database Business' deferred tax assets and liabilities as of December 31,
2000 and 1999 are as follows:
2000 1999
--------- ---------
(IN THOUSANDS)
Deferred Tax Assets:
Reserves and accrued expenses............................... $ 4,905 $ 8,112
Deferred revenue............................................ 3,941 2,627
Foreign net operating loss carryforwards.................... 18,731 19,935
Domestic net operating loss carryforwards................... 87,229 87,782
Foreign taxes credit........................................ 13,400 10,015
R&D and AMT credit carryforwards............................ 28,238 27,172
Acquisition and restructuring reserve....................... 11,014 --
Other....................................................... 16,690 5,875
--------- ---------
Total deferred tax assets................................... 184,148 161,518
Valuation allowance for deferred tax assets................. (177,566) (141,268)
--------- ---------
Deferred tax assets, net of valuation allowance............. 6,582 20,250
========= =========
Deferred Tax Liabilities:
Capitalized software........................................ 6,582 14,887
Valuation of investment portfolio FAS 115................... -- --
--------- ---------
Total deferred tax liabilities.............................. 6,582 14,887
--------- ---------
Net deferred tax assets..................................... $ -- $ 5,363
========= =========
At December 31, 2000, the Database Business had approximately $59.2 million
and $218.4 million of foreign and federal net operating loss carryforwards,
respectively. The foreign net operating loss carryforwards expire at various
dates beginning in 2001. The federal net operating loss carryforwards expire at
various dates beginning in 2004. At December 31, 2000, the Database Business had
approximately $41.6 million of various federal tax credit carryforwards that
will expire at various dates beginning in 2001.
The valuation allowance was increased by $36.3 million in 2000 and was
decreased by $34.9 million in 1999. At December 31, 2000, the Database Business
has provided a valuation allowance against deferred tax assets in all
jurisdictions as future income in each jurisdiction is uncertain. At
December 31, 1999 the net deferred tax asset of $5.4 million represented the tax
effect of net operating loss carryforwards existing in certain foreign
jurisdictions that the Database Business believed were more likely than not to
be realized, based on earnings in those jurisdictions.
F-22
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--INCOME TAXES (CONTINUED)
Subsequently recognizable tax benefits relating to the valuation allowance
for deferred tax assets at December 31, 2000 will be as follows:
Income tax benefit from continuing operations............... $139,362
Goodwill and other noncurrent intangible assets............. 14,127
Additional paid-in capital.................................. 24,077
--------
Total....................................................... $177,566
========
NOTE 9--BUSINESS COMBINATIONS
POOLING-OF-INTERESTS COMBINATIONS
On March 1, 2000, the Database Business recorded the acquisition of Ardent,
a provider of data integration infrastructure software for data warehouse,
business intelligence, and e-business applications. In the acquisition, the
former shareholders of Ardent received 3.5 shares of Informix Corporation's
common stock in exchange for each outstanding Ardent share (the "Ardent
Merger"). An aggregate of 70,437,000 shares of Informix Corporation common stock
were issued pursuant to the Ardent Merger, and an aggregate of 17,174,000
options to purchase Ardent common stock were assumed by Informix Corporation.
The Ardent Merger was accounted for as a pooling-of-interests combination and,
accordingly, the combined financial statements for periods prior to the
combination include the accounts and results of operations of Ardent's database
operations.
On October 8, 1999, the Database Business recorded the acquisition of
Cloudscape, a privately-held provider of synchronized database solutions for the
remote and occasionally connected workforce. In the acquisition, the former
shareholders of Cloudscape received 0.56 shares of Informix Corporation's common
stock in exchange for each outstanding Cloudscape share (the "Cloudscape
Merger"). An aggregate of 9,583,000 shares of Informix Corporation common stock
were issued pursuant to the Cloudscape Merger, and an aggregate of 417,000
options and warrants to purchase Cloudscape common stock were assumed by
Informix Corporation. The acquisition of Cloudscape was accounted for as a
pooling-of-interests combination and, accordingly, the combined financial
statements for the periods prior to the combination include the accounts and
results of operations of Cloudscape.
In February 1998, Ardent merged with Unidata, Inc. ("Unidata") and issued
5,750,000 shares of Ardent common stock to Unidata shareholders for all their
interest in Unidata. All outstanding Unidata options were assumed by Ardent. The
merger was accounted for as a pooling-of-interests and, accordingly, the
combined financial statements include the accounts and results of operations of
Unidata for all periods prior to the merger.
PURCHASE COMBINATIONS
On December 31, 1998, the Database Business recorded the acquisition of Red
Brick Systems, Inc. ("Red Brick"), a provider of scalable decision support
solutions for data warehousing, data marts, OLAP and data mining. Under terms of
the acquisition, approximately 7,600,000 shares of Informix Corporation common
stock were issued in exchange for all outstanding shares of Red Brick common
stock. In addition, options to purchase approximately 2.5 million shares of
Informix Corporation common stock were issued in exchange for outstanding
unvested options to purchase Red Brick
F-23
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--BUSINESS COMBINATIONS (CONTINUED)
common stock. The Database Business accounted for the acquisition using the
purchase method of accounting, and a summary of the purchase price for the
acquisition is as follows (in thousands):
Informix Corporation stock and stock options, net of
issuance costs............................................ $35,914
Direct acquisition costs.................................... 1,042
Other liabilities assumed................................... 5,892
Accrued merger and integration costs........................ 7,850
Deferred revenue............................................ 5,149
-------
Total....................................................... $55,847
=======
The purchase price was allocated as follows:
Cash and short-term investments acquired.................... $ 7,763
Other tangible assets acquired.............................. 10,281
Intangible assets
Capitalized software...................................... 7,400
Workforce................................................. 4,700
Goodwill.................................................. 23,103
-------
35,203
In-process research and development......................... 2,600
-------
Total....................................................... $55,847
=======
In-process research and development represents the fair value of
technologies acquired for use in the Database Business' own development efforts.
The Database Business determined the amount of the purchase price to be
allocated to in-process research and development based on an independent
appraisal of certain intangible assets which indicated that approximately
$2.6 million of the acquired intangible assets consisted of in-process research
and development that had not yet reached technological feasibility and had no
alternative future uses. Accordingly, the Database Business recorded a charge to
operations of $2.6 million in the fourth quarter of fiscal 1998. The remaining
intangible assets acquired, with an assigned value of approximately
$35.2 million, were included in "Intangible Assets" in the accompanying combined
balance sheets, and are being amortized over three to five years.
The following pro forma financial information presents the combined results
of operations of the Database Business and Red Brick as if the acquisitions had
occurred as of the beginning of 1999 and 1998, after giving effect to certain
adjustments, including amortization of goodwill and excluding the write-off of
acquired in-process research and development. The pro forma financial
information does
F-24
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--BUSINESS COMBINATIONS (CONTINUED)
not necessarily reflect the results of operations that would have occurred had
these companies constituted a single entity during such periods.
YEAR ENDED
DECEMBER 31,
-------------------
1999 1998
-------- --------
(IN THOUSANDS)
Net revenues................................................ $954,971 $871,487
Net income.................................................. $ 98,985 $ 26,237
NOTE 10--LITIGATION
The Database Business and Informix Corporation are subject to various claims
and legal proceedings arising in the normal course of the business. The Database
Business does not believe that any of these proceedings and claims will have a
material adverse effect on the Database Business' business or financial
condition.
NOTE 11--ACCRUED MERGER, REALIGNMENT AND OTHER CHARGES
During the year ended December 31, 2000, Informix Corporation approved plans
to realign its operations by establishing two operating businesses, the Database
Business and Ascential Software. The strategic realignment included a refinement
of Informix Corporation's product strategy, consolidation of facilities and
operations to improve efficiency and a reduction in worldwide headcount. In
connection with the strategic realignment, the Database Business recorded
realignment and other charges of $79.8 million during the year ended
December 31, 2000. The following analysis sets forth the significant components
of this charge:
ACCRUAL
REALIGNMENT BALANCE AT
AND OTHER PAYMENTS/ DECEMBER 31,
CHARGES CHARGES 2000
----------- --------- ------------
Write-off of goodwill and other intangible assets.......... $27.2 $(27.2) $ --
Severance and employment related costs..................... 38.6 (18.1) 20.5
Facility and equipment costs............................... 7.5 (3.9) 3.6
Costs to exit various commitments and programs............. 4.0 (1.7) 2.3
Other charges.............................................. 2.5 (2.5) --
----- ------ -----
$79.8 $(53.4) 26.4
===== ======
Amount included in accrued employee compensation.................................... (5.0)
-----
Amount included in accrued merger, realignment and other charges.................... $21.4
=====
The $27.2 million write-off of goodwill and other intangible assets
consisted primarily of $12.0 million of goodwill and $15.2 million of
capitalized software. The $12.0 million write-off of goodwill resulted from the
carrying amount of certain long-lived assets exceeding the estimated future
undiscounted cash flows due to the decision to curtail development of certain
database products over the next few years. $15.2 million of capitalized software
was written off because the carrying amount of certain capitalized costs
exceeded net realizable value. Of the $15.2 million write-off, $9.0 million was
F-25
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--ACCRUED MERGER, REALIGNMENT AND OTHER CHARGES (CONTINUED)
for the abandonment of certain database development costs in conjunction with
the decision to move to a single database-management system, $4.0 million
related to the decision to discontinue use of licensed software, and
$2.2 million was for abandonment of other developed tools and products.
Severance and employment related costs of $38.6 million included
$22.9 million of termination compensation and related benefits, $10.4 million of
retention and incentive bonuses for employees who management believes are
critical to the successful outcome of the realignment and $5.3 million for
payments to qualified employees of the Database Business related to Informix
Corporation's decision to terminate its sabbatical plan. The sabbatical plan
provided employees a one-month sabbatical after every five years of continuous
service. As a direct result of the plan termination, the Database Business paid
cash bonuses to employees based upon their progress toward earning a sabbatical.
As of December 31, 2000, approximately $10.7 million of termination compensation
and related benefits had been paid to terminate approximately 430 employees and
$7.4 million of retention and incentive bonuses had been paid. The remaining
accrual balance of $20.5 million will be paid on various dates extending through
June 2001.
Included in the $7.5 million charge for facility and equipment costs was
$3.2 million for the write-off of obsolete and abandoned computer and office
equipment, as these assets are no longer being used, and $4.3 million for lease
obligations for redundant facilities. The remaining accrual balance at
December 31, 2000 of $3.6 million is for lease obligations that extend through
2004 for redundant facilities.
Included in the $4.0 million charge for costs to exit various commitments
and programs was $2.0 million for the termination of contracted service
commitments and $2.0 million to cancel various marketing programs. The remaining
accrual of $2.3 million should be paid by July 2001. Also, included in the
$2.5 million of other charges is $1.3 million in receivables that have been
deemed uncollectable as a direct result of merger, realignment and restructuring
decisions.
The impairment charge for long-lived assets related to identifiable assets
previously classified within primarily the North America business segment.
In connection with the merger with Ardent, the Database Business recorded a
charge of $35.5 million for merger, integration and restructuring costs, of
which $25.4 million was for accrued merger and restructuring costs and the
remaining $10.1 million was for integration and transition costs incurred during
the quarter ended March 31, 2000. This amount included $13.0 million for
severance and employment related costs associated with the termination of
approximately 206 employees from various organizations throughout the Database
Business who held overlapping positions, $8.9 million for the closure of
facilities and equipment costs associated with combining the operations of the
two companies and $3.5 million for the write-off of redundant technology and
other duplicate costs. Subsequent to the quarter ended March 31, 2000, the
Database Business recorded adjustments of $9.0 million to the merger and
restructuring charge. The major components of the adjustments were a
$4.7 million adjustment to accrued facility and equipment costs and a
$2.6 million adjustment to accrued severance and employment costs. The
adjustment to the accrued facility and equipment costs resulted from the
Database Business' ability to exit or sub-lease certain facility leases in
advance of original estimates, and the adjustment to accrued severance costs was
because certain former Ardent executives will remain with the Database Business
as a result of the realignment and therefore will not
F-26
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--ACCRUED MERGER, REALIGNMENT AND OTHER CHARGES (CONTINUED)
receive severance. The following analysis sets forth the significant components
of the restructuring charge:
ACCRUAL
MERGER AND BALANCE AT
RESTRUCTURING PAYMENTS/ DECEMBER 31,
CHARGE ADJUSTMENTS CHARGES 2000
------------- ----------- --------- ------------
Severance and employment costs................. $13.0 $(3.5) $ (8.5) $1.0
Facility and equipment costs................... 8.9 (4.7) (3.0) 1.2
Write-off of redundant technology.............. 3.5 (0.8) (2.7) --
----- ----- ------ ----
$25.4 $(9.0) $(14.2) $2.2
===== ===== ====== ====
As of December 31, 2000, essentially all 206 of the positions originally
identified for termination had been eliminated and the remaining payments of
$1.0 million for severance and employment costs are expected to be made through
December 2001 as certain employees have elected to receive their severance
payments over an extended period of time. The remaining facility costs of
$1.2 million extend through 2003. The impairment charge for long-lived assets
related to identifiable assets previously classified within primarily the North
America business segment.
As part of the acquisition of Cloudscape, the Database Business recorded a
charge of $2.8 million during the quarter ended December 31, 1999, for accrued
merger and restructuring costs. This amount included $1.2 million for financial
advisor, legal and accounting fees related to the merger and $1.6 million for
costs associated with combining the operations of the two companies including
expenditures of $0.7 million for severance and related costs, $0.4 million for
closure of facilities and $0.5 million for the write-off of redundant assets and
other costs. As of December 31, 2000, all obligations related to the Cloudscape
merger had been paid.
In May 1999, Ardent adopted a formal plan to exit the operations of O2
Technologies, Inc. ("O2"), which had been acquired by Ardent in December 1997,
and recorded a charge of $9.9 million for accrued restructuring charges. The
charge was comprised of $5.9 million for asset impairment, $3.6 million for
severance and related costs and $0.4 million for facility closings and other
obligations. As of December 31, 2000, all obligations related to the O2
restructuring had been paid.
On December 31, 1998, the Database Business recorded the acquisition of Red
Brick Systems, Inc. ("Red Brick"). Accrued merger and restructuring costs
recorded by the Database Business in connection with the acquisition of Red
Brick included approximately $1.6 million for severance and other
acquisition-related costs, $4.7 million for costs associated with the shutdown
and consolidation of the Red Brick facilities and $1.6 million for costs
associated with settling acquired royalty commitments for abandoned technology.
As of December 31, 2000, approximately $0.4 million remained unpaid and related
to future rental obligations on idle facilities that extend through 2002.
In February 1998, Ardent acquired Unidata and recorded a charge of
$14.9 million for merger and restructuring costs related to the merger. The
charge included $3.9 million for financial advisor, legal and accounting fees,
$6.2 million for severance and benefit costs related to the termination of 139
Unidata employees who held overlapping positions, $2.2 million for the closure
of facilities and $2.6 million for the write-off of redundant assets. As of
December 31, 1999, all obligations related to the Unidata merger had been paid.
F-27
DATABASE BUSINESS (AN OPERATING BUSINESS OF INFORMIX CORPORATION)
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--ACCRUED MERGER, REALIGNMENT AND OTHER CHARGES (CONTINUED)
During 1997, the Database Business approved plans to restructure its
operations and recorded a charge of $108.2 million in order to bring expenses in
line with forecasted revenues by substantially reducing worldwide headcount and
consolidating facilities and operations to improve efficiency. As of
December 31, 2000, approximately $0.5 million remained unpaid and related to
rental obligations on idle facilities that expire at various dates through 2002.
F-28
ANNEX A
EXECUTION COPY
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
MASTER PURCHASE AGREEMENT
AMONG
INFORMIX CORPORATION,
INFORMIX SOFTWARE, INC.
AND
INTERNATIONAL BUSINESS MACHINES CORPORATION
------------------------
DATED AS OF APRIL 24, 2001
------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
MASTER PURCHASE AGREEMENT
TABLE OF CONTENTS
PAGE
--------
ARTICLE I
Definitions
SECTION 1.1. Definitions................................................. 1
ARTICLE II
Purchase and Sale of the Business
SECTION 2.1. Purchase and Sale of the Business Units..................... 11
SECTION 2.2. Tax Treatment............................................... 12
ARTICLE III
Closings; Assumption of Liabilities
SECTION 3.1. Closings.................................................... 13
SECTION 3.2. Assumption of Assumed Liabilities........................... 13
SECTION 3.3. Exclusion of Liabilities.................................... 13
SECTION 3.4. Holdback of Retained Amount................................. 13
SECTION 3.5. Working Capital Adjustment.................................. 13
SECTION 3.6. Business Unit Purchase Prices............................... 14
ARTICLE IV
Conditions to Closing
SECTION 4.1. Conditions to Buyer's Obligation............................ 15
SECTION 4.2. Conditions to Parent and Seller's Obligation................ 16
SECTION 4.3. Frustration of Closing Conditions........................... 17
ARTICLE V
Representations and Warranties of Parent and Seller
SECTION 5.1. Organization, Standing and Authority........................ 17
SECTION 5.2. No Violation; Consents and Approvals........................ 18
SECTION 5.3. Financial Statements........................................ 19
SECTION 5.4. Absence of Changes or Events................................ 19
SECTION 5.5. Products.................................................... 20
SECTION 5.6. Taxes....................................................... 20
SECTION 5.7. Title to Assets and Real Property........................... 21
SECTION 5.8. Contracts................................................... 22
SECTION 5.9. Litigation.................................................. 24
SECTION 5.10. Employee and Related Matters; ERISA......................... 24
SECTION 5.11. Compliance with Laws........................................ 26
SECTION 5.12. Labor Matters............................................... 27
SECTION 5.13. Intellectual Property, etc.................................. 28
SECTION 5.14. Sufficiency of Assets....................................... 29
i
PAGE
--------
SECTION 5.15. Condition of Acquired Assets................................ 29
SECTION 5.16. Inventory................................................... 29
SECTION 5.17. Receivables................................................. 29
SECTION 5.18. Insurance................................................... 29
SECTION 5.19. Brokers..................................................... 29
SECTION 5.20. Suppliers................................................... 30
SECTION 5.21. Customers; Resellers........................................ 30
SECTION 5.22. SEC Document; Undisclosed Liabilities....................... 30
SECTION 5.23. Voting Requirements......................................... 31
SECTION 5.24. Opinions of Financial Advisors.............................. 31
SECTION 5.25. State Takeover Statutes..................................... 31
ARTICLE VI
Representations and Warranties of Buyer
SECTION 6.1. Organization, Standing and Authority........................ 31
SECTION 6.2. No Violation; Consents and Approvals........................ 32
SECTION 6.3. Brokers..................................................... 32
SECTION 6.4. Availability of Funds....................................... 32
ARTICLE VII
Covenants of Parent and Seller
SECTION 7.1. Access...................................................... 33
SECTION 7.2. Ordinary Conduct............................................ 33
SECTION 7.3. Confidentiality............................................. 36
SECTION 7.4. Preparation of the Parent Proxy Statement; Stockholder 36
Meeting.....................................................
SECTION 7.5. No Solicitation by Parent................................... 38
SECTION 7.6. Expenses.................................................... 39
SECTION 7.7. Intellectual Property....................................... 40
ARTICLE VIII
Covenants of Buyer
SECTION 8.1. Confidentiality............................................. 41
SECTION 8.2. Bulk Transfer Laws.......................................... 41
ARTICLE IX
Mutual Covenants
SECTION 9.1. Consents; Excluded Contracts................................ 41
SECTION 9.2. Publicity................................................... 42
SECTION 9.3. Commercially Reasonable Efforts............................. 42
SECTION 9.4. Regulatory Matters.......................................... 43
SECTION 9.5. Intercompany Arrangements................................... 43
SECTION 9.6. Further Assurances.......................................... 43
SECTION 9.7. Other Transaction Agreements................................ 43
SECTION 9.8. Tax Matters................................................. 43
SECTION 9.9. Accounts.................................................... 44
SECTION 9.10. Real Estate Matters......................................... 44
ii
PAGE
--------
ARTICLE X
Noncompetition
SECTION 10.1. Noncompetition.............................................. 46
ARTICLE XI
Indemnification
SECTION 11.1. Indemnification by Parent and Seller........................ 47
SECTION 11.2. Indemnification by Buyer.................................... 47
SECTION 11.3. Losses Net of Insurance..................................... 48
SECTION 11.4. Termination of Indemnification.............................. 48
SECTION 11.5. Procedures Relating to Third Party and Direct 48
Indemnification.............................................
SECTION 11.6. Reduction of Retained Amount................................ 50
SECTION 11.7. Distributions Following the Eighteen-Month Anniversary of 50
the Last Closing............................................
SECTION 11.8. Final Distribution of Retained Amount....................... 51
SECTION 11.9. Indemnity Payments.......................................... 51
SECTION 11.10. Exclusive Remedy; Limitations on Indemnification............ 51
ARTICLE XII
Termination
SECTION 12.1. Termination................................................. 51
SECTION 12.2. Other Transaction Agreements; Material To Be Returned....... 52
SECTION 12.3. Effect of Termination....................................... 53
ARTICLE XIII
Miscellaneous
SECTION 13.1. Assignment.................................................. 53
SECTION 13.2. No Third Party Beneficiaries................................ 53
SECTION 13.3. Amendments.................................................. 53
SECTION 13.4. Consents and Approvals...................................... 53
SECTION 13.5. Waivers..................................................... 53
SECTION 13.6. Survival of Representations................................. 54
SECTION 13.7. Notices..................................................... 54
SECTION 13.8. Exhibits and Schedules; Interpretation...................... 55
SECTION 13.9. Counterparts................................................ 55
SECTION 13.10. Entire Agreement............................................ 55
SECTION 13.11. Severability................................................ 55
SECTION 13.12. Consent to Jurisdiction..................................... 55
SECTION 13.13. Governing Law............................................... 56
EXHIBITS
EXHIBIT A Employee Matters Agreement
EXHIBIT B Form of Country Acquisition Agreement
EXHIBIT C-1 Form of Assignment and Assumption Agreement
EXHIBIT C-2 Form of Sublease Agreement
EXHIBIT C-3 Form of Sublease Agreement
EXHIBIT C-4 Form of Master License Agreement
iii
EXHIBIT C-5 Form of Master License Agreement
EXHIBIT D Buyer Transition Services Agreement
EXHIBIT E Parent Transition Services Agreement
EXHIBIT F OEM Agreement
EXHIBIT G Litigation Settlement Agreement
EXHIBIT H Alliance Agreement
EXHIBIT I Code License Agreement
SCHEDULES
Schedule 1.1(a) Products of the Business
Schedule 1.1(b) Excluded Assets
Schedule 2.2 Tax Treatment
Schedule 4.1 (ix) Significant Customer Contracts
Schedule 5.2 No Violation; Consents and Approvals
Schedule 5.3(a)(i) Financial Statements
Schedule 5.3(b) Financial Statements
Schedule 5.4(a) Absence of Changes or Events
Schedule 5.4(b) Absence of Changes or Events
Schedule 5.6 Taxes
Schedule 5.7(a) Title to Assets and Real Property Leases
Schedule 5.7(b) Title to Assets and Real Property Leases
Schedule 5.8(a) Contracts
Schedule 5.8(b) Contracts
Schedule 5.9 Litigation
Schedule 5.10(a) Employee and Related Matters; ERISA
Schedule 5.10(e) Employee and Related Matters; ERISA
Schedule 5.11(a) Compliance with Laws
Schedule 5.11(b) Compliance with Laws
Schedule 5.12 Labor Matters
Schedule 5.13(a) Intellectual Property
Schedule 5.13(b) Intellectual Property
Schedule 5.16 Inventory
Schedule 5.18 Insurance
Schedule 5.20 Suppliers
Schedule 5.21 Customers; Resellers
Schedule 6.2 No Violation; Consents and Approvals
Schedule 7.2 Ordinary Conduct
Schedule 7.2 (v) Ordinary Conduct
Schedule 7.7 Intellectual Property
Schedule 9.1(b)(i) Non-Excluded Contracts
Schedule 9.1(b)(ii) Excluded Contracts
Schedule 9.10 Real Estate Matters
iv
MASTER PURCHASE AGREEMENT dated as of April 24, 2001, among Informix
Corporation, a Delaware corporation ("Parent"), Informix Software, Inc., a
Delaware corporation and a wholly owned subsidiary of Parent ("Seller"), and
International Business Machines Corporation, a New York corporation ("Buyer").
Buyer and the other Purchasing Companies desire to purchase from Parent,
Seller and the Selling Subsidiaries, and Parent, Seller and the Selling
Subsidiaries desire to sell to Buyer and the other Purchasing Companies, the
Business upon the terms and subject to the conditions of this Agreement.
The Board of Directors of Parent, by resolution duly adopted, has declared
that it deems the sale of the property and assets of Parent, Seller and the
Selling Subsidiaries to Buyer to be expedient and for the best interests of
Parent, and deems it advisable and in the best interests of its stockholders to
consummate, and has approved, the Transaction Agreements and the transactions
contemplated thereby on the terms and conditions set forth in the Transaction
Agreements.
Accordingly, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"Accounting Firm" shall have the meaning ascribed to such term in
Section 3.5.
"Acquired A/R" shall mean all receivables constituting the right to receive
payments in respect of goods or services arising out of or relating to the
operation or conduct of the Business.
"Acquired Assets" shall mean all the right, title and interest of Parent,
Seller and the Selling Subsidiaries in all the businesses, properties, assets,
goodwill and rights of Parent, Seller and their respective Subsidiaries of
whatever kind and nature, wherever located, real or personal, tangible or
intangible, that are owned, controlled, leased or licensed by Parent, Seller or
their respective Subsidiaries and used, held for use or intended to be used in
the operation or conduct of the Business other than the Excluded Assets,
including (other than the Excluded Assets):
(i) subject to Section 9.1(a), the Acquired Intellectual Property;
(ii) subject to Section 9.1(a) and Section 9.1(b), the Assigned
Contracts, including any rights thereunder arising at or after the
applicable Closing;
(iii) the Acquired A/R;
(iv) subject to Section 9.1(a), the Acquired Permits;
(v) the Leased Real Property and the improvements and fixtures thereon,
furniture and other appurtenances thereto;
(vi) office and other supplies that are used, held for use or intended
to be used in the operation or conduct of the Business;
(vii) equipment (including vehicles) that is used, held for use or
intended to be used in the operation or conduct of the Business;
(viii) the Inventory;
(ix) except to the extent included in subparagraph (i) above, all
information technology systems (including financial, administrative,
development, customer support and personnel systems) that are used, held for
use or intended to be used in the operation or conduct of the Business;
A-1
(x) all credits, prepaid expenses, deferred charges, advance payments,
security deposits and other prepaid items that are used, held for use or
intended to be used in, or that arise out of, the operation or conduct of
the Business;
(xi) all rights, claims and credits to the extent relating to the
Business or to any Acquired Asset or any Assumed Liability, including all
rights in and to products sold or leased (including products returned after
the applicable Closing and rights of rescission, replevin and reclamation)
in the operation or conduct of the Business and any rights, claims and
credits arising under insurance policies and all guarantees,
representations, warranties, indemnities and similar rights in favor of
Parent, Seller or any Selling Subsidiaries to the extent relating to the
Business or to any Acquired Asset or Assumed Liability;
(xii) all other assets reflected on the Balance Sheet (including any
equipment which has been fully depreciated), except Inventory or obsolete or
worn out equipment sold in the ordinary course of business consistent with
past practice;
(xiii) all goodwill generated by or associated with the Business;
(xiv) all books of account, ledgers, general, financial, legal,
regulatory, Tax, accounting and personnel records, files, customers' and
suppliers' lists, sales and promotional literature, customer and supplier
correspondence, manuals, files, data, papers, personnel and employment
records and other information, whether in hard copy or computer or other
format, that are used, held for use or intended to be used, or that arise
out of, the operation or conduct of the Business (collectively, the "Books
and Records"); and
(xv) any assets to be transferred pursuant to Section 3(d) of the
Employee Matters Agreement.
"Acquired Intellectual Property" shall mean all right, title and interest of
Parent, Seller and the Selling Subsidiaries in, to and under Intellectual
Property (including rights under licenses and settlement agreements) that is
used, held for use or intended to be used in the operation or conduct of the
Business.
"Acquired Permits" shall mean all Permits used, held for use or intended to
be used in the operation or conduct of the Business.
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly Controlling, Controlled by or under common Control with
such first person.
"Agreement" shall mean this Master Purchase Agreement.
"Alliance Agreement" shall mean the Master Relationship Agreement dated as
of the date of this Agreement between Parent and Buyer, a copy of which is
attached as Exhibit H hereto.
"Applicable Spot Rate" shall mean, with respect to any foreign currency and
any Business Day, the exchange rate published in The Financial Times (or such
other authority agreed by Parent and Buyer) on such Business Day as the
mid-point closing U.S. dollar exchange rate with respect to such currency for
the most recent prior Business Day.
"Asset Acquisition Statement" shall have the meaning ascribed to such term
in Section 2.2(a).
"Assigned Contract" shall mean any Contract of Parent, Seller or any Selling
Subsidiary (other than any Excluded Contract) that is used, held for use or
intended to be used in the operation or conduct of the Business or to which the
Acquired Assets are subject.
"Assignment and Assumption Agreement" shall mean the form of Assignment and
Assumption Agreement attached as Exhibit C-1 hereto.
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"Assumed Liabilities" shall mean the portion of the following accrued
obligations and liabilities of Parent, Seller and the Selling Subsidiaries
specifically identified with or resulting from the operation or conduct of the
Business incurred in the ordinary course of business consistent with past
practices, in each case excluding any Excluded Liabilities:
(i) all obligations, liabilities and commitments under the Assigned
Contracts arising after the date of the relevant Closing, except
obligations, liabilities or obligations arising out of any actual or alleged
breach on or prior to the date of the relevant Closing by Parent, Seller or
their respective Subsidiaries of, or nonperformance on or prior to the date
of the relevant Closing by Parent, Seller or their respective Subsidiaries
under, any Assigned Contract;
(ii) any liabilities assumed expressly by Buyer under the Employee
Matters Agreement; and
(iii) all current liabilities of the Business reflected on (and only to
the extent they are reflected on) the face of the Closing Statement (not
including the notes thereto).
"Balance Sheet" shall have the meaning ascribed to such term in
Section 5.3(a).
"Benefit Plans" shall have the meaning ascribed to such term in
Section 5.10(a).
"Books and Records" shall have the meaning ascribed to such term in the
definition of "Acquired Assets".
"Business" shall mean the relational database management systems businesses
of Parent, Seller and the Selling Subsidiaries, including the research,
development, manufacture, distribution, marketing, sale and service of
relational database management systems that are commonly used as database
engines for datawarehousing systems and transaction processing systems (commonly
referred to in the industry as RDBMS), including the products listed on
Schedule 1.1(a).
"Business Day" shall mean any day other than (a) a Saturday or Sunday,
(b) any other day on which commercial banks in New York City are authorized or
required by law to close and (c) when such term is used in relation to a
Business Unit not located in the United States, any other day on which
commercial banks in the country in such Business Unit is located are authorized
or required to close.
"Business Material Adverse Change" shall mean any state of facts, change,
development, event, occurrence, action or omission that individually or in the
aggregate could reasonably be expected to result in a material adverse effect on
the business, assets, properties, financial condition or results of operations
of the Business, taken as a whole, to the extent arising from one or both of
(i) the entry by customers of Parent, Seller and the Selling Subsidiaries, taken
as a whole, into long-term commitments with persons other than Buyer, any
Purchasing Company or any of their respective Affiliates (other than Parent,
Seller or any Selling Subsidiary) to purchase database products that compete
with database products of the Business if such commitments contractually or
effectively preclude Buyer or other Purchasing Companies from selling database
products to such customers or (ii) the loss of employees of the Business, taken
as a whole, on or prior to the relevant Closing Date; PROVIDED that, for
purposes of determining compliance with the conditions specified in Section 4.1
with respect to any Closing other than the Initial Closing, there shall be
disregarded any state of facts, change, development, event, occurrence, action
or omission that has occurred or come into existence with respect to any
Business Unit on or after the date on which such Business Unit was acquired by
Buyer or any Purchasing Company pursuant to any Closing hereunder.
"Business Material Adverse Effect" shall mean any state of facts, change,
development, event, occurrence, action or omission that individually or in the
aggregate could reasonably be expected to (i) result in a material adverse
effect on the business, assets, properties, financial condition or results of
operations of the Business, taken as a whole, (ii) prevent or materially impede,
interfere with, hinder or delay the consummation by Parent, Seller or any
Selling Subsidiary of the transactions contemplated by
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the Transaction Agreements or (iii) result in a material impairment on the
ability of Buyer, the other Purchasing Companies and their respective
Subsidiaries to continue operating the Business after the applicable Closing in
substantially the same manner as it was operated immediately prior to the date
of this Agreement; PROVIDED that, for purposes of determining compliance with
the conditions specified in Section 4.1 with respect to any Closing other than
the Initial Closing, there shall be disregarded any state of facts, change,
development, event, occurrence, action or omission that has occurred or come
into existence with respect to any Business Unit on or after the date on which
such Business Unit was acquired by Buyer or any Purchasing Company pursuant to
any Closing hereunder.
"Business Property" shall have the meaning ascribed to such term in
Section 5.7(b).
"Business Unit" shall mean, with respect to any country, the part of the
Business conducted in such country.
"Business Unit Purchase Price" shall mean, with respect to any Business
Unit, the portion of the Worldwide Purchase Price allocated thereto on the
Purchase Price Schedule.
"Buyer" shall have the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"Buyer Material Adverse Effect" shall mean any state of facts, change,
development, event, occurrence, action or omission that could reasonably be
expected to prevent or materially impede, interfere with, hinder or delay the
consummation by Buyer or any other Purchasing Company of the transactions
contemplated by the Transaction Agreements.
"Buyer's Required Space" shall have the meaning ascribed to such term in
Section 9.10.
"Buyer Transition Services Agreement" shall mean the Transition Services
Agreement dated as of the date of this Agreement between Parent and Buyer
pursuant to which Buyer and the other Purchasing Companies shall provide certain
transition services to Parent and its Subsidiaries, a copy of which is attached
as Exhibit D hereto.
"Change of Control" shall mean (A) the sale or other disposition of all or
substantially all of Parent's assets to an entity that is not an Affiliate of
Parent or (B) any merger, consolidation or other business combination involving
Parent as a result of which, immediately following the consummation of any such
transaction, the stockholders of Parent immediately prior to such consummation
shall own, in the aggregate, less than 40% of the outstanding voting securities
of the surviving or acquiring corporation immediately after such consummation.
"Closing Statement" shall have the meaning ascribed to such term in
Section 3.5(a).
"Closings" shall have the meaning ascribed to such term in Section 3.1(a).
"Code License Agreement" shall mean the Source Code License Agreement
between Buyer and Ascential Software, Inc., a Delaware corporation, dated as of
the date of this Agreement, a copy of which is attached as Exhibit I hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder.
"Commonly Controlled Entity" shall have the meaning ascribed to such term in
Section 5.10(a).
"Competitive Activities" shall have the meaning ascribed to such term in
Section 10.1(a).
"Confidentiality Agreement" shall have the meaning ascribed to such term in
Section 8.1.
"Contracts" shall have the meaning ascribed to such term in Section 6.2(a).
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"Control" shall mean the power to direct the affairs of a person by reason
of ownership of voting stock (or other similar equity interest), by contract or
otherwise.
"Controlling Party" shall have the meaning ascribed to such term in
Section 11.5(b).
"Country Acquisition Agreements" shall have the meaning ascribed to such
term in Section 2.1(b).
"Country WC Statement" shall have the meaning ascribed to such term in
Section 3.5(a).
"Covered Employees" shall have the meaning ascribed to such term in the
Employee Matters Agreement.
"Direct Claim" shall have the meaning ascribed to such term in
Section 11.5(b).
"DOJ" shall mean the United States Department of Justice.
"$" shall mean US $.
"Due Date" shall have the meaning ascribed to such term in Section 9.8(d).
"EC Merger Regulation" shall mean Council Regulation (EEC) No. 4064/89 of
21st December, 1989 on the control of concentrations between undertakings (as
amended by Council Regulation (EC) No. 1310/97 of 30th June, 1997).
"Employee Matters Agreement" shall mean the Employee Matters Agreement dated
as of the date of this Agreement among Parent, Seller and Buyer, a copy of which
is attached as Exhibit A hereto.
"Environmental Law" shall mean all laws (including common law), rules,
regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices
or binding agreements issued, promulgated or entered into by any Governmental
Entity, relating in any way to the environment, the preservation or reclamation
or natural resources, the presence or handling of, or exposure to, hazardous
substances, or to health and safety matters.
"Environmental Permits" shall have the meaning ascribed to such term in
Section 5.11(b).
"ERISA" shall have the meaning ascribed to such term in Section 5.10(a).
"EU Approval" shall have the meaning ascribed to such term in
Section 5.2(b).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Excluded Assets" shall mean the following assets of Parent, Seller and
their respective Subsidiaries, which shall be excluded from the Acquired Assets
and shall not (subject to the rights of the Purchasing Companies under the
Transaction Agreements) be sold, conveyed, assigned, transferred or delivered to
Buyer or the other Purchasing Companies pursuant to this Agreement:
(i) all rights, claims, credits and causes of action of Parent, Seller
or any of their respective Subsidiaries to the extent relating to any
Excluded Liability;
(ii) except as otherwise specifically provided in the Employee Matters
Agreement, all the assets of or assets relating to the Benefit Plans;
(iii) all financial and Tax records that form a part of the general
ledger of Parent, Seller or any Selling Subsidiary; PROVIDED that Buyer
shall receive a copy of the portions of any such records to the extent they
relate to the Business in any respect;
(iv) the assets listed on Schedule 1.1(b);
(v) all Excluded Contracts;
(vi) all rights of Parent, Seller and their respective Subsidiaries
under the Transaction Agreements; and
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(vii) all cash and cash equivalents.
"Excluded Contract" shall have the meaning ascribed to such term in
Section 9.1(b).
"Excluded Liabilities" shall mean:
(a) any obligation, liability or commitment of whatever nature, whether
presently in existence or arising hereafter, of Parent, Seller or the Selling
Subsidiaries the assumption of which is not expressly provided for by this
Agreement; and
(b)(i) any liability, obligation or commitment of Parent, Seller or their
respective Subsidiaries that arises out of or is associated with any Excluded
Asset or any business of Parent, Seller or any of their respective Subsidiaries,
or that arises out of the ownership by, Parent, Seller or their respective
Subsidiaries of the Excluded Assets or is associated with the realization of the
benefits of any Excluded Asset;
(ii) any liability, obligation or commitment of Parent, Seller or their
respective Subsidiaries or any Business Unit to any of their respective
Affiliates (other than to a Business Unit);
(iii) any liability, obligation or commitment of or relating to the
Benefit Plans, or relating to any current or former officer, employee,
independent contractor or director of Parent, Seller or any of their
respective Subsidiaries or their benefits or compensation, including the
termination thereof, other than any liabilities assumed expressly by Buyer
under the Employee Matters Agreement;
(iv) any liabilities for Excluded Taxes;
(v) any indebtedness (other than ordinary course trade payables);
(vi) any liability, obligation or commitment arising under Environmental
Law, which liability, obligation or commitment relates to or arises out of
(A) any acts or omissions of Parent, Seller or their respective Subsidiaries
on or prior to the relevant Closing, or (B) any facts, circumstances or
conditions existing on or prior to the relevant Closing relating to
Hazardous Substances, including any management, disposal or arranging for
disposal of Hazardous Substances by Parent, Seller or their respective
Subsidiaries or otherwise in connection with the Business or the Acquired
Assets or activities or operations occurring or conducted in connection with
any predecessor operations of the Business or otherwise; and
(vii) any other liability, obligation or commitment (other than those set
forth in clauses (i) and (ii) of the definition of the term "Assumed
Liabilities") as and to the extent such liability, obligation or commitment
is not reflected on the face of the Closing Statement (not including the
notes thereto).
"Excluded Taxes" shall mean any liability, obligation or commitment for
Taxes whether or not accrued, assessed or currently due and payable, (A) of
Parent, Seller or the Selling Subsidiaries or (B) relating to the operation and
ownership of the Business, the Acquired Assets or the Assumed Liabilities for
any Pre-Closing Tax Periods and, except as otherwise provided in Section 9.8(a)
any liability, obligation or commitment for Transfer Taxes. For purposes of this
Agreement, in the case of any Straddle Period, (i) Property Taxes for the
Pre-Closing Tax Period shall be equal to the amount of such Property Taxes for
the entire Straddle Period multiplied by a fraction, the numerator of which is
the number of days during the Straddle Period that are in the Pre-Closing Tax
Period and the denominator of which is the number of days in the entire Straddle
Period, and (ii) Taxes (other than Property Taxes) for the Pre-Closing Tax
Period shall be computed as if such taxable period ended as of the close of
business on the date of the applicable Closing.
"Exhibits" shall mean the exhibits to this Agreement.
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"Final Determination" shall mean (i) in respect of U.S. Federal income
taxes, a "determination" as defined in Section 1313(a) of the Code or the
execution of an Internal Revenue Service Form 870-AD, and (ii) in respect of
Taxes other than U.S. Federal income taxes, any final determination of liability
in respect of a Tax that, under applicable law, is not subject to further
appeal, review or modification through proceedings or otherwise (including the
expiration of a statute of limitations or a period for the filing of claims for
refunds, amended returns or appeals from adverse determinations).
"Financial Statements" shall have the meaning ascribed to such term in
Section 5.3(a).
"Foreign Benefit Plans" shall have the meaning ascribed to such term in
Section 5.10(f).
"FTC" shall mean the Federal Trade Commission.
"GAAP" shall mean generally accepted accounting principles in effect from
time to time in the United States of America.
"Governmental Entity" shall have the meaning ascribed to such term in
Section 5.2(b).
"Hazardous Substances" shall mean any (A) petroleum, petroleum products or
byproducts or any other hydrocarbons, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, radon gas, chlorofluorocarbons or any
other ozone-depleting substances; or (B) any chemical, material, substance,
waste, pollutant or contaminant that is prohibited, limited or regulated by or
pursuant to any Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"indemnified party" shall have the meaning ascribed to such term in
Section 11.5.
"Initial Closing" shall mean (i) the U.S. Closing, (ii) the Other Key
Territories Closings and (iii) the other Closings, if any, which occur on the
date of the Initial Closing.
"Initial Closing Date" shall mean the date on which the Initial Closing
shall occur.
"Initial Distribution Amount" shall have the meaning ascribed to such term
in Section 11.7(a).
"Injunction" shall have the meaning ascribed to such term in Section 4.1.
"Intellectual Property" shall mean Software, trademarks, service marks,
brand names, certification marks, trade dress, assumed names, domain names,
trade names (including the name "Informix") and other indications of origin, the
goodwill associated with the foregoing and registrations in any jurisdiction of,
and applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patentable or not in any
jurisdiction; patents, applications for patents (including divisions,
provisionals, continuations, continuations in-part and renewal applications),
and any renewals, extensions or reissues thereof, in any jurisdiction;
non-public information, trade secrets, know-how, formulae, processes,
procedures, research records, records of inventions, test information, market
surveys, software and confidential information, whether patentable or not in any
jurisdiction and rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works, whether copyrightable or not in
any jurisdiction; registrations or applications for registration of copyrights
in any jurisdiction, and any renewals or extensions thereof; any similar
intellectual property or proprietary rights; and any claims or causes of action
(pending, threatened or which could be filed) arising out of or related to any
infringement or misappropriation of any of the foregoing.
"Inventory" shall mean inventories of any of the products of the Business,
and raw materials, work in process, wrappings, supply and packaging items
relating thereto, in each case owned by Parent, Seller or any of the Selling
Subsidiaries.
A-7
"IRS" shall mean the Internal Revenue Service.
"Leased Real Property" shall have the meaning ascribed to such term in
Section 5.7(b).
"Liens" shall have the meaning ascribed to such term in Section 5.7(a).
"Litigation Settlement Agreement" shall mean the Litigation Settlement
Agreement dated as of the date of this Agreement between Parent and Buyer, a
copy of which is attached as Exhibit G hereto.
"Loss" shall have the meaning ascribed to such term in Section 11.1.
"Multiemployer Plan" shall have the meaning ascribed to such term in
Section 5.10(b).
"Non-Controlling Party" shall have the meaning ascribed to such term in
Section 11.5(a).
"Non-U.S. Benefit Plan" shall have the meaning ascribed to such term in
Section 5.10(a)(ii).
"Notice of Disagreement" shall have the meaning ascribed to such term in
Section 3.5(a).
"Notice of Superior Proposal" shall have the meaning ascribed to such term
in Section 7.5(b).
"OEM Agreement" shall mean the OEM Software Agreement between Buyer and
Parent, a copy of which is attached as Exhibit F hereto.
"Other Transaction Agreements" shall mean all the Transaction Agreements
other than this Agreement.
"Other Key Territories" shall mean the Republic of Ireland, Japan, the
United Kingdom, the Federal Republic of Germany, the French Republic, Mexico and
the Italian Republic.
"Other Key Territories Closings" shall mean, collectively, the Closings
relating to the Business Units in the Other Key Territories.
"Parent" shall have the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"Parent Acquisition Agreement" shall have the meaning ascribed to such term
in Section 7.5(b).
"Parent Adverse Recommendation Change" shall have the meaning ascribed to
such term in Section 7.5(b).
"Parent Common Stock" shall have the meaning ascribed to such term in
Section 5.24.
"Parent Proxy Statement" shall have the meaning ascribed to such term in
Section 5.2(b).
"Parent SEC Documents" shall have the meaning ascribed to such term in
Section 5.22.
"Parent Stockholder Approval" shall have the meaning ascribed to such term
in Section 5.23.
"Parent Stockholder Meeting" shall have the meaning ascribed to such term in
Section 7.4(c).
"Parent Transition Services Agreement" shall mean the Transition Services
Agreement dated as of the date of this Agreement between Buyer and Parent
pursuant to which Parent and its Subsidiaries shall provide certain transition
services to Buyer and the other Purchasing Companies, a copy of which is
attached as Exhibit E hereto.
"Pension Plans" shall have the meaning ascribed to such term in
Section 5.10(a).
"Permits" shall have the meaning ascribed to such term in Section 5.11(a).
"Permitted Liens" shall have the meaning ascribed to such term in
Section 5.7(a).
"Person" shall mean any natural person, corporation, limited liability
company, partnership, joint venture, trust, business association, Governmental
Entity or other entity.
A-8
"Personnel" shall have the meaning ascribed to such term in
Section 5.13(c).
"Pre-Closing Tax Period" shall mean, with respect to any Business Unit, any
Tax period (or portion thereof) ending on or before the date of the applicable
Closing with respect to such Business Unit.
"Projected Indemnity Amount" shall mean, as of any date, the maximum
aggregate amount that is determined by Buyer in good faith could reasonably be
expected to be sufficient to satisfy all Third Party Claims and Direct Claims
for indemnification pursuant to Article XI that have been timely asserted by any
person (including Buyer or any other Purchasing Company) specified in
Section 11.1 but not finally resolved by that date, including an amount with
respect to fees, costs and expenses projected by Buyer in good faith to be the
maximum aggregate amount that could reasonably be expected to be sufficient to
cover related costs and expenses that are subject to Article XI.
"Property Taxes" shall mean real, personal and intangible property taxes and
similar ad valorem obligations.
"Purchase Price Schedule" shall mean Schedule 2.3, which Schedule sets forth
the portion of the Worldwide Purchase Price allocated to each Business Unit.
"Purchasing Companies" shall have the meaning ascribed to such term in
Section 2.1(a).
"Real Property Leases" shall have the meaning ascribed to such term in
Section 5.7(b).
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating, or migrating of any Hazardous Substances into
or through the environment.
"Remaining Amount" shall have the meaning ascribed to such term in
Section 11.7(b).
"Representatives" shall have the meaning ascribed to such term in
Section 7.1(a).
"Restricted Assets" shall have the meaning ascribed to such term in
Section 9.1(a).
"Retained Amount" shall mean $100,000,000.
"Return" shall mean any return, statement, report or form, including in each
case any amendments thereto, required to be filed with any Taxing Authority by
or with respect to Taxes of the Business.
"Schedules" shall mean the schedules to this Agreement.
"Seller" shall have the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"Seller's Retained Space" shall have the meaning ascribed to such term in
Section 9.10.
"Selling Subsidiaries" shall mean all the Subsidiaries of Parent and Seller
that are involved in the operation of any portion of the Business.
"Software" shall mean all types of computer software programs, including
operating systems, application programs, software tools, firmware and software
imbedded in equipment, including both object code and source code. The term
"Software" shall also include all written or electronic data, documentation, and
materials that explain the structure or use of Software or that were used in the
development of Software or are used in the operation of the Software including
logic diagrams, flow charts, procedural diagrams, error reports, manuals and
training materials, look-up tables and databases.
"Specified Excluded Assets" shall have the meaning ascribed to such term in
Section 9.10.
"Straddle Period" shall mean, with respect to any Business Unit, any
complete Tax period that includes but does not end on the date of the applicable
Closing with respect to such Business Unit.
A-9
"Subsequent Closing" shall mean any Closing that occurs after the Initial
Closing.
"Subsequent Distribution Amount" shall have the meaning ascribed to such
term in Section 11.7(b).
"Subsidiary" of any person shall mean any other person (i) more than 50% of
whose outstanding shares or securities representing the right to vote for the
election of directors or other managing authority of such other person are, now
or hereafter, owned or Controlled, directly or indirectly, by such first person,
but such other person shall be deemed to be a Subsidiary only so long as such
ownership or Control exists, or (ii) which does not have outstanding shares or
securities with such right to vote, as may be the case in a partnership, joint
venture or unincorporated association, but more than 50% of whose ownership
interest representing the right to make the decisions for such other person is,
now or hereafter, owned or Controlled, directly or indirectly, by such first
person, but such other person shall be deemed to be a Subsidiary only so long as
such ownership or Control exists.
"Superior Proposal" shall have the meaning ascribed to such term in
Section 7.5(a).
"Surplus Space" shall have the meaning ascribed to such term in
Section 9.11.
"Takeover Proposal" shall have the meaning ascribed to such term in
Section 7.5(a).
"Tax" shall mean all income, profits, franchise, gross receipts, capital,
net worth, sales, use, withholding, turnover, value added, ad valorem,
registration, general business, employment, social security, disability,
occupation, real property, personal property (tangible and intangible), stamp,
transfer (including real property transfer or gains), conveyance, severance,
production, excise and other taxes, withholdings, duties, levies, imposts,
license and registration fees and other similar charges and assessments
(including any and all fines, penalties and additions attributable to or
otherwise imposed on or with respect to any such taxes, charges, fees, levies or
other assessments, and interest thereon) imposed by or on behalf of any
Governmental Entity.
"Tax Claim" shall have the meaning ascribed to such term in
Section 11.5(b).
"Taxing Authority" shall mean any governmental or regulatory authority, body
or instrumentality exercising any authority to impose, regulate or administer
the imposition of Taxes.
"Third Party Claim" shall have the meaning ascribed to such term in
Section 11.5(a).
"Transaction Agreements" shall mean this Agreement, the Country Acquisition
Agreements, the Buyer Transition Services Agreement, the Parent Transition
Services Agreement, the Employee Matters Agreement, the OEM Agreement, the
Litigation Settlement Agreement, the Alliance Agreement, the Code License
Agreement, Exhibits C-1 through C-5 and the Confidentiality Agreement and all
other agreements executed in connection herewith or therewith.
"Transfer Taxes" shall have the meaning ascribed to such term in
Section 9.8(a).
"U.S. Closing" shall mean the Closing relating to the Business Unit located
in the United States of America.
"WC Adjustment" shall have the meaning ascribed to such term in
Section 3.5.
"WC Amount" shall mean $124,000,000.
"Working Capital Amount" shall mean, with respect to any Business Unit on
any date, in each case determined in the same manner as the following were
determined in preparing the Balance Sheet, (x) the sum of (i) net accounts
receivable arising from bona fide transactions in the ordinary course of
business of such Business Unit that are not subject to any disputes, setoffs,
discounts, rebates, credits, reductions or counterclaims which have not been
taken into account in establishing the accounting reserves of such Business Unit
and that, with reasonable collection efforts consistent with good business
A-10
practices, are able to be fully paid (such collectability with respect to each
Business Unit to be measured as of the date of the Closing of such Business
Unit) without resort to collection agencies or legal action (PROVIDED that the
reserves for doubtful accounts shall be calculated consistent with GAAP and with
Parent's, Seller's or the Selling Subsidiary's, as applicable, prior methods and
practices which are in accordance with GAAP, which methods and practices include
the following procedures: (A) all trade accounts receivable are reviewed on a
quarterly basis and a specific reserve for doubtful accounts is established
where the facts and circumstances indicate that collection is unlikely and
(B) a general reserve is established at 0.75% of accounts receivable less
specific reserves to cover instances where collection will be unlikely but where
the facts that give rise thereto have not yet occurred or have not risen to the
attention of Parent, Seller or the Selling Subsidiary, as the case may be, and
PROVIDED, FURTHER, that the aggregate amount of such reserves for doubtful
accounts, determined in accordance with the foregoing proviso, shall in no case
be less, as a percentage of the aggregate gross accounts receivable, than the
aggregate amount of the reserves for doubtful accounts represented as a
percentage of gross accounts receivable reflected on the Balance Sheet) and
(ii) prepaid expenses of such Business Unit MINUS (y) the sum of (i) ordinary
course trade payables and (ii) accrued ordinary course expenses, other than any
such expenses in connection with salary, bonus, vacation, severance or benefits
relating to any current or former employee, officer, director or independent
contractor of Parent, Seller or any of their respective Subsidiaries. For the
avoidance of doubt, liabilities in respect of deferred revenues arising from the
conduct or operation of the Business, and all other liabilities shall not be
counted as current liabilities of any Business Unit for purposes hereof.
"Worldwide Purchase Price" shall have the meaning ascribed to such term in
the first paragraph of Article II.
ARTICLE II
PURCHASE AND SALE OF THE BUSINESS
Pursuant to the transactions contemplated by this Agreement, Buyer and the
other Purchasing Companies shall pay to Parent, Seller and the Selling
Subsidiaries $1,000,000,000 (the "Worldwide Purchase Price") (which amount shall
be subject to adjustment as set forth herein) on the terms and subject to the
conditions set forth herein, as follows:
SECTION 2.1. PURCHASE AND SALE OF THE BUSINESS UNITS. (a) On the terms and
subject to the conditions of this Agreement, each of Parent and Seller shall, or
shall cause the applicable Selling Subsidiaries to, sell, convey, transfer,
assign and deliver to Buyer or such direct or indirect Subsidiaries of Buyer as
Buyer may designate (Buyer and such designated Subsidiaries being collectively
referred to as the "Purchasing Companies"), and Buyer shall, or shall cause the
other Purchasing Companies to, purchase from Parent, Seller and the Selling
Subsidiaries, all the assets constituting Acquired Assets at the time of the
relevant Closing with respect to the relevant Business Unit, free and clear of
any Liens (other than Permitted Liens), for a purchase price equal to the
Business Unit Purchase Price with respect to such Business Unit.
(b) Except with respect to the Business Unit located in the U.S., the
transfer of each Business Unit (including the Acquired Assets, Assumed
Liabilities and Covered Employees relating thereto) will be effected pursuant to
short-form acquisition agreements (the "Country Acquisition Agreements") on a
country-by-country basis. Each Country Acquisition Agreement shall be in
substantially the same form as the form of Country Acquisition Agreement
attached as Exhibit B to this Agreement, except, as Buyer and Parent shall
reasonably agree, for (i) the deletion of provisions which are inapplicable to
such Business Unit, (ii) such changes as may be necessary to satisfy the
requirements of applicable local law and (iii) such changes as may be reasonably
agreed upon by Parent and Buyer regarding employees and employee benefits
matters in order to adapt such agreement to the particular circumstances of the
relevant Business Unit and country; PROVIDED that such changes shall be
consistent with the principles
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underlying the corresponding provisions of this Agreement and the Employee
Matters Agreement. The parties shall prepare and enter into the Country
Acquisition Agreements as soon as reasonably practicable after the date of this
Agreement. Notwithstanding the foregoing, all assignments of Real Property
Leases shall be made by the parties entering into an Assignment and Assumption
Agreement in the form and content of Exhibit C-1 hereto (with such modifications
as may be required by the particular jurisdiction in which each Leased Real
Property is located).
SECTION 2.2. TAX TREATMENT. (a) Buyer, Parent and Seller recognize their
mutual obligations pursuant to Section 1060 of the Code to timely file IRS
Form 8594 (the "Asset Acquisition Statement") with each of their respective
Federal income tax returns. Buyer and Seller shall mutually agree upon the
allocation of the Worldwide Purchase Price in a manner consistent with
Schedule 2.2 and the provisions of Section 1060 of the Code, which allocation
shall be revised from time to time to reflect any adjustment to the Worldwide
Purchase Price required by this Agreement or otherwise by applicable law. Buyer,
Parent and Seller agree that, to the extent that the Worldwide Purchase Price is
so adjusted, Buyer, Parent and Seller, for all Tax purposes (including for
purposes of completing Form 8594) shall allocate such adjustment to the item or
items to which it is principally attributable.
(b) Except as otherwise required pursuant to a Final Determination, Buyer,
the other Purchasing Companies, Parent and Seller agree to be bound by and act
in accordance with the allocations of the Worldwide Purchase Price set forth in
the Purchase Price Schedule for all Tax purposes, including for purposes of any
Returns, including any forms or reports (including IRS Form 8594) required to be
filed pursuant to Section 1060 of the Code or any comparable provision of local,
state or foreign law, to refrain from taking any position inconsistent with any
such Return or the Purchase Price Schedule, and to cooperate in the preparation
of, and to timely file, any such forms or reports required to be filed pursuant
to Section 1060 or any such comparable provision in the manner required by
applicable law.
ARTICLE III
CLOSINGS; ASSUMPTION OF LIABILITIES
SECTION 3.1. CLOSINGS. (a) Each of the closings (the "Closings") of the
purchase and sale of the Acquired Assets with respect to the Business Units,
shall be held at 10:00 a.m. on the third Business Day after satisfaction or
waiver of the conditions set forth in Sections 4.1 and 4.2 (excluding those
conditions intended to be satisfied at such Closing) with respect to the
relevant Closing. No other Closing shall take place prior to the date of the
Initial Closing. Each of Parent, Seller and Buyer shall use all commercially
reasonable efforts to cause each Closing other than the Initial Closing to occur
as soon as reasonably practicable, and in any event no later than 60 calendar
days following the Initial Closing Date.
(b) The U.S. Closing shall take place at the offices of Cravath, Swaine &
Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, and each
other Closing shall take place at such location or at such other location as may
be designated by Buyer, subject to Parent's consent (which shall not be
unreasonably withheld or delayed).
(c) At each Closing, (i) Buyer or one or more of the other Purchasing
Companies as Buyer may designate shall pay or cause to be paid to Parent, Seller
or one or more of their respective Subsidiaries as may be designated by Parent,
in immediately available funds by wire transfer to one or more bank accounts
designated in writing by Parent at least two Business Days prior to the date of
such Closing, cash in U.S. dollars in an amount equal to the Business Unit
Purchase Price set forth on the Purchase Price Schedule with respect to the
relevant Business Unit LESS, in the case of the Initial Closing, an amount equal
to the Retained Amount and (ii) Parent and Seller shall cause to be delivered to
the relevant Purchasing Company all bills of sale, assignments and other
instruments of transfer or conveyance as may be required under applicable law or
as Buyer may reasonably request to transfer to
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such Purchasing Company the Acquired Assets contemplated to be transferred at
such Closing (which shall include a list of the Acquired Assets with respect
thereto).
(d) Concurrently with payment of the purchase price to Parent, Seller and
the applicable Selling Subsidiaries on the Initial Closing Date, Parent shall
pay to Buyer an amount in immediately available funds equal to 18% of the
deferred revenues arising from the operation or conduct of the Business that are
both (i) set forth on the Balance Sheet and (ii) in respect of which any of
Parent, Seller or the Selling Subsidiaries has previously received payment prior
to the date of the Balance Sheet.
(e) Notwithstanding anything in Section 9.3 to the contrary, if the Closing
with respect to any Business Unit does not occur on the Initial Closing Date,
Parent, Seller and Buyer shall take, and shall cause their Subsidiaries to take,
all actions necessary or reasonably requested by the other such party to ensure
that the business relationships existing prior to the Initial Closing Date
between such Business Unit and the other Business Units continue after the
Initial Closing Date until the date of the relevant Subsequent Closing on the
same terms (to the maximum extent permitted by law) as those in effect
immediately prior to the Initial Closing Date.
SECTION 3.2. ASSUMPTION OF ASSUMED LIABILITIES. At the applicable Closings,
Buyer shall, and shall cause the other Purchasing Companies to, deliver to
Parent, Seller or the relevant Selling Subsidiary all assumption agreements and
other instruments as may be required under applicable law or reasonably
requested by Parent to effect the assumption of the Assumed Liabilities;
PROVIDED that the terms of such instruments shall not result in an increase in
the obligations of Buyer or the other Purchasing Companies beyond those
expressly set forth in this Agreement.
SECTION 3.3. EXCLUSION OF LIABILITIES. Notwithstanding any provision of this
Agreement to the contrary, the Excluded Liabilities are excluded from the
Assumed Liabilities and neither Buyer nor the other Purchasing Companies shall
assume or be liable for any Excluded Liability, and all Excluded Liabilities
shall be retained by and shall be obligations and commitments of Parent, Seller
and the Selling Subsidiaries.
SECTION 3.4. HOLDBACK OF RETAINED AMOUNT. Each of Parent and Seller hereby
agrees that, notwithstanding anything contained herein to the contrary, (a) the
Worldwide Purchase Price to be paid by Buyer for the Business shall be reduced
by the Retained Amount and (b) such amount shall be withheld and may be reduced
by Buyer in accordance with Section 11.6. No interest shall accrue on amounts
withheld by Buyer; PROVIDED that this sentence shall not limit the effect of the
interest payment provisions contained in Section 11.7.
SECTION 3.5. WORKING CAPITAL ADJUSTMENT. (a) Within 60 days after the last
Closing to occur, Parent shall prepare and deliver to Buyer a closing statement
(the "Closing Statement"), consisting of the Working Capital Amount as of the
date of the Closing with respect to each Business Unit (each, as the same may be
modified pursuant to this Section 3.5, a "Country WC Statement") together with
unqualified reports of Parent's auditors with respect to each Country WC
Statement and the Closing Statement to the effect that each such Statement has
been prepared in accordance with the terms of this Agreement, including those
specified in the definition of the term "Working Capital Amount".
Buyer shall cause the employees of the Business to assist Parent and its
auditors in the preparation of the Closing Statement and shall provide Parent
and its auditors reasonable access, during normal business hours and upon
reasonable prior notice, to the personnel, properties, books and records of the
Business for such purpose.
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During the 60-day period following Buyer's receipt of the Closing Statement,
Buyer, the other Purchasing Companies and their auditors shall be permitted to
review the working papers relating to the Closing Statement and Parent, Seller
and their respective Subsidiaries shall cooperate with Buyer, the other
Purchasing Companies and their auditors to provide them with any other
information used in preparing the Closing Statement reasonably requested by
Buyer, the other Purchasing Companies or their auditors. The Country WC
Statements and the Closing Statement shall become final and binding upon the
parties on the 60th day following delivery thereof, unless Buyer gives written
notice of its disagreement ("Notice of Disagreement") with respect thereto.
During the 20 Business Day period following the delivery of a Notice of
Disagreement, Parent and Buyer shall seek in good faith to resolve in writing
any differences which they may have with respect to the matters specified in the
Notice of Disagreement. If during such 20 Business Day period Parent and Buyer
agree in writing on the correct determination of the Country WC Statements and
the Closing Statement, such determination shall be final and binding on the
parties for all purposes hereunder. If Parent and Buyer have not resolved such
differences by the end of such 20 Business Day period, Parent and Buyer shall
submit, in writing, to an independent public accounting firm (the "Accounting
Firm") their briefs detailing their views as to the correct form of the Country
WC Statements and Closing Statement, and the Accounting Firm shall determine the
final form of the Country WC Statements and Closing Statement, which
determination shall be final and binding on the parties for all purposes
hereunder. The Accounting Firm shall be Deloitte & Touche LLP or, if such firm
is unable or unwilling to act, Arthur Andersen LLP or, if such firm is unable or
unwilling to act, such other independent public accounting firm as shall be
agreed upon by the parties hereto in writing. Parent and Buyer shall use
commercially reasonable efforts to cause the Accounting Firm to render a
decision resolving the matters submitted to it within 20 Business Days following
the submission of the matters. Parent, Seller and Buyer agree that judgment may
be entered upon the determination of the Accounting Firm in any court having
jurisdiction over the party against which such determination is to be enforced.
The cost of any dispute resolution (including the fees and expenses of the
Accounting Firm) pursuant to this Section shall be borne equally by Buyer, on
the one hand, and Parent and Seller, on the other hand. The fees and
disbursements of the auditors and other advisors of each party hereto incurred
in connection with their review of the Closing Statement and review of any
Notice of Disagreement shall be borne by such party.
(b) The Worldwide Purchase Price shall be decreased by the amount by which
the aggregate Working Capital Amount on the Closing Statement is less than the
WC Amount and the Worldwide Purchase Price shall be increased by one-half ( 1/2)
of the amount by which the aggregate Working Capital Amount on the Closing
Statement exceeds the WC Amount (in each case, the "WC Adjustment").
(c) If the aggregate Working Capital Amount on the Closing Statement is less
than the WC Amount, Parent and Seller shall, within 2 Business Days after the
Closing Statement becomes final and binding on the parties, make payment by wire
transfer to an account specified by Buyer in immediately available funds of the
amount of the WC Adjustment together with interest thereon from the Initial
Closing Date to the date of payment at a rate equal to 6% per annum. Such
interest shall be calculated on the basis of a year of 365 days and the actual
number of days elapsed.
(d) If the aggregate Working Capital Amount on the Closing Statement exceeds
the WC Amount, Buyer shall, within 2 Business Days after the Closing Statement
becomes final and binding on the parties, make payment by wire transfer to an
account specified by Parent in immediately available funds of the amount of the
WC Adjustment together with interest thereon from the Initial Closing Date to
the date of payment at a rate equal to 6% per annum. Such interest shall be
calculated on the basis of a year of 365 days and the actual number of days
elapsed.
SECTION 3.6. BUSINESS UNIT PURCHASE PRICES. Parent, Seller and Buyer
acknowledge and agree that, in the event the purchase and sale of any Business
Unit does not occur on the Initial Closing Date, the
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Business Unit Purchase Price with respect to such Business Unit shall not be
paid, and the Assumed Liabilities relating to such Business Unit shall not be
assumed, on the Initial Closing Date, but shall be paid and assumed,
respectively, at the Subsequent Closing relating to such Business Unit.
ARTICLE IV
CONDITIONS TO CLOSING
SECTION 4.1. CONDITIONS TO BUYER'S OBLIGATION. The obligation of Buyer to
consummate, or to cause the relevant Purchasing Company to consummate, each
Closing is subject to the satisfaction (or waiver by Buyer) as of such Closing
of the following conditions; PROVIDED that in no event shall any Closing be
consummated prior to the Initial Closing Date:
(i) The Parent Stockholder Approval shall have been obtained.
(ii) The representations and warranties of Parent and Seller in this
Agreement (without regard to any qualifications therein as to materiality or
Business Material Adverse Effect) shall be true and correct, in each case as
of the date of this Agreement and as of the date of each Closing as though
made on such date (or, in the case of each representation and warranty which
expressly speaks as of an earlier date, as of the earlier date as of which
such representation and warranty speaks), unless the failure of such
representations and warranties to be true and correct, individually or in
the aggregate, could not reasonably be expected to have a Business Material
Adverse Effect. With respect to each Closing, each of Parent and Seller
shall have delivered to Buyer a certificate on its behalf dated the date of
such Closing, and signed by an authorized officer or other signatory
representing and confirming that the foregoing condition has been satisfied.
(iii) Each of Parent and Seller shall have performed, and shall have
caused the Selling Subsidiaries to have performed, in all material respects
all covenants, obligations and agreements required by the Transaction
Agreements to be performed or complied with by Parent, Seller or the Selling
Subsidiaries, as the case may be, by the time of such Closing. Each of
Parent and Seller shall have delivered to Buyer a certificate on its behalf
dated the date of such Closing and signed by an authorized officer or other
signatory representing and confirming that the foregoing condition has been
satisfied.
(iv) There shall not be pending or threatened any suit, action or
proceeding by any person that has a reasonable likelihood of success
(A) seeking to restrain or prohibit the acquisition by Buyer or any of its
Subsidiaries of any of the Acquired Assets or the Business or any other
material transaction contemplated by the Transaction Agreements or seeking
to obtain from Buyer or any of its Subsidiaries any damages that are
material (individually or in the aggregate) in relation to the value of the
Business, taken as a whole, (B) seeking to prohibit or limit the ownership
or operation by Buyer or any of its Subsidiaries of any material portion of
the business or assets of Buyer or any of its material Subsidiaries or the
Business, or to compel Buyer or any of its Subsidiaries to dispose of or
hold separate any material portion of the business or assets of Buyer or any
of its Subsidiaries or the Business, in each case as a result of any of the
transactions contemplated by the Transaction Agreements, (C) seeking to
impose limitations on the ability of Buyer or any of its Subsidiaries to
acquire or hold, or exercise full rights of ownership of, the Acquired
Assets or (D) seeking to prohibit Buyer or any of its Subsidiaries from
effectively controlling in any material respect the Business.
(v) No action shall have been taken, or any statute, rule, regulation or
order shall have been enacted or entered or deemed applicable to the
transactions contemplated by the Transaction Agreements, and no temporary
restraining order or preliminary or permanent injunction or other order
(each, an "Injunction") shall have been issued by any Governmental Entity,
(A) granting any
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of the relief referred to in clauses (A) through (D) of
Section 4.1(iv) above or (B) which otherwise could reasonably be expected to
have a Business Material Adverse Effect.
(vi) With respect to each Closing, the waiting period under the HSR Act
shall have expired or been terminated and the EU Approval shall have been
obtained. All other material (individually or in the aggregate)
authorizations, consents, Permits, orders or approvals of, or declarations
or filings with, or expirations of waiting periods imposed by, any
Governmental Entity reasonably necessary in connection with the consummation
of such Closing shall have been obtained or made.
(vii) All material (individually or in the aggregate) consents, waivers,
authorizations and approvals of any person necessary to transfer all of the
Acquired Assets (other than with respect to Assigned Contracts) to Buyer or
any other Purchasing Company (without regard to the effect of, or any
reference to, Section 9.1) or otherwise shall have been duly obtained and
shall be in full force and effect on the Initial Closing Date.
(viii) Since the date of this Agreement, there shall not have occurred a
Business Material Adverse Change. With respect to each Closing, each of
Parent and Seller shall have delivered to Buyer a certificate on its behalf
dated the date of such Closing, and signed by an authorized officer or other
signatory representing and confirming that the foregoing condition has been
satisfied.
(ix) No less than 108 out of the 142 most significant customer Assigned
Contracts, which are set forth on Schedule 4.1(ix) hereto, shall be assigned
and transferred to Buyer or other Purchasing Company (in each case without
regard to Section 9.1(a)), or irrevocable consents or approvals to such
assignment shall have been obtained, in the case of Assigned Contracts to be
assigned and transferred at Closings subsequent to the Initial Closing, at
the Initial Closing without giving rise to a breach or other contravention
of the rights of any third party.
SECTION 4.2. CONDITIONS TO PARENT AND SELLER'S OBLIGATION. The obligation of
each of Parent and Seller to consummate, or to cause the relevant Selling
Subsidiary to consummate, each Closing is subject to the satisfaction (or waiver
by Parent and/or Seller, as applicable) as of such Closing of the following
conditions; PROVIDED that in no event shall any Closing be consummated prior to
the Initial Closing Date:
(i) The Parent Stockholder Approval shall have been obtained.
(ii) The representations and warranties of Buyer in this Agreement
(without regard to any qualifications therein as to materiality or Buyer
Material Adverse Effect) shall be true and correct, in each case as of the
date of this Agreement and as of the date of each Closing as though made on
such date (or, in the case of each representation and warranty which
expressly speaks as of an earlier date, as of the earlier date as of which
such representation and warranty speaks, unless the failure of such
representations and warranties to be true and correct, individually or in
the aggregate, could not reasonably be expected to have a Buyer Material
Adverse Effect. With respect to each Closing, Buyer shall have delivered to
Parent and Seller a certificate on behalf of Buyer dated the date of such
Closing and signed by an authorized officer of Buyer representing and
confirming that the foregoing condition has been satisfied.
(iii) Buyer shall have performed, and shall have caused the other
Purchasing Companies to have performed, in all material respects all
covenants, obligations and agreements required by the Transaction Agreements
to be performed or complied with by Buyer or the other Purchasing Companies,
as the case may be, by the time of such Closing. Buyer shall have delivered
to Parent and Seller a certificate on behalf of Buyer dated the date of such
Closing and signed by an authorized officer of Buyer representing and
confirming that the foregoing condition has been satisfied.
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(iv) With respect to each Closing, the waiting period under the HSR Act
shall have expired or been terminated and the EU Approval shall have been
obtained. All other material (individually or in the aggregate)
authorizations, consents, Permits, orders or approvals of, or declarations
or filings with, or expirations of waiting periods imposed by, any
Governmental Entity reasonably necessary in connection with the consummation
of the Closing shall have been obtained or made.
(v) There shall not be pending or threatened any suit, action or
proceeding by any Governmental Entity that has a reasonable likelihood of
success (A) seeking to restrain or prohibit the disposition by Parent,
Seller or any of the Selling Subsidiaries of any of the Acquired Assets or
the Business or any of the other material transactions contemplated by the
Transaction Agreements or (B) seeking to obtain from Parent, Seller or any
of the Selling Subsidiaries any damages to the extent relating to the
transactions contemplated by the Transaction Agreements that are material
(individually or in the aggregate) in relation to the value of Parent and
its Subsidiaries, taken as a whole
(vi) No statute, rule, regulation or order shall have been enacted or
entered or deemed applicable to the transactions contemplated by the
Transaction Agreements which has the effect of prohibiting the consummation
of any of such transactions and no Injunction shall have been issued by any
Governmental Entity prohibiting any of the transactions contemplated by the
Transaction Agreements.
SECTION 4.3. FRUSTRATION OF CLOSING CONDITIONS. Neither Buyer nor Parent nor
Seller may rely on the failure of any condition set forth in this Article IV to
be satisfied if such failure was caused by such party's failure to act in good
faith or to use its commercially reasonable efforts, as and to the extent
required by Section 9.3, to cause each Closing to occur.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
Each of Parent and Seller hereby jointly and severally represents and
warrants to Buyer as follows:
SECTION 5.1. ORGANIZATION, STANDING AND AUTHORITY. (a) PARENT AND SELLER.
Each of Parent and Seller is a corporation duly organized, validly existing and
in good standing under the laws of Delaware. Each of Parent and Seller has all
requisite corporate power and authority to conduct the Business in the United
States of America as it is currently conducted and to own, lease or operate the
assets and properties used in connection therewith. Parent is the holder of all
of the issued and outstanding capital stock of Seller. Each of Parent and Seller
is duly authorized, qualified or licensed to do business as a foreign
corporation and is in good standing in every jurisdiction wherein, by reason of
the nature of the Business or the character of the Acquired Assets, such
qualification is necessary or desirable, except for failures to be so
authorized, qualified, licensed or in good standing which, individually or in
the aggregate, could not reasonably be expected to have a Business Material
Adverse Effect. Subject, in the case of the sale of the property and assets of
Parent, Seller and the Selling Subsidiaries to Buyer pursuant to this Agreement,
to Parent obtaining the Parent Stockholder Approval, each of Parent and Seller
has all requisite corporate power and authority to enter into the Transaction
Agreements to which it is a party, to comply with the terms of such Transaction
Agreements and to consummate the transactions contemplated thereby. All
corporate acts and other proceedings required to be taken by each of Parent and
Seller to authorize the execution, delivery and performance of the Transaction
Agreements to which it is a party and the consummation of the transactions
contemplated thereby have been duly and properly taken, subject, in the case of
the sale of the property and assets of Parent, Seller and the Selling
Subsidiaries to Buyer pursuant to this Agreement, to Parent obtaining the Parent
Stockholder Approval. The Board of Directors of Parent, by resolution duly
adopted, has declared the sale of such property and assets to Buyer to be
expedient and for the best interests of Parent, and deems it advisable and in
the best interests of its stockholders to consummate, and has approved, the
Transaction Agreements and the transactions contemplated thereby on the terms
and conditions set
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forth in the Transaction Agreements. Each of the Transaction Agreements to which
each of Parent and Seller is a party has been duly executed and delivered by it
and constitutes its legal, valid and binding obligation enforceable against it
in accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including concepts of materiality, reasonableness, good
faith and fair dealing regardless of whether considered in a proceeding in
equity or at law). Other than the Selling Subsidiaries, none of the Affiliates
of Seller or Parent is presently engaged in the operation of the Business.
(b) SELLING SUBSIDIARIES. Each of the Selling Subsidiaries is duly
organized, validly existing and, in the case of the U.S. Business Unit, in good
standing under the laws of its jurisdiction of organization. Each of the Selling
Subsidiaries has all requisite corporate power and authority to conduct the part
of the Business currently conducted by it as it is currently conducted and to
own, lease or operate the assets and properties used in connection therewith.
Each of the Selling Subsidiaries has all requisite corporate power and authority
to enter into the Transaction Agreements to which it is a party, to comply with
the terms of such Transaction Agreements and to consummate the transactions
contemplated thereby. All corporate acts and other proceedings required to be
taken by each of the Selling Subsidiaries to authorize the execution, delivery
and performance of the Transaction Agreements to which it is or is contemplated
by the Transaction Agreements to be a party and the consummation of the
transactions contemplated thereby have been duly and properly taken. Each of the
Transaction Agreements to which a Selling Subsidiary is or is contemplated by
the Transaction Agreements to be a party when duly executed and delivered by the
relevant Selling Subsidiary shall constitute the legal, valid and binding
obligation of such Selling Subsidiary, enforceable against such Selling
Subsidiary in accordance with its terms (subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws affecting creditors' rights generally from time to time in effect and to
general principles of equity, including concepts of materiality, reasonableness,
good faith and fair dealing regardless of whether considered in a proceeding in
equity or at law).
SECTION 5.2. NO VIOLATION; CONSENTS AND APPROVALS. (a) Except as set forth
on Schedule 5.2, the execution and delivery of this Agreement by each of Parent
and Seller does not, and the execution and delivery by each of Parent, Seller
and the Selling Subsidiaries of the Other Transaction Agreements to which it is
a party and the consummation of the transactions contemplated thereby and
compliance with the terms thereof will not, (i) conflict with or result in any
violation of any provision of the certificate of incorporation or by-laws of
Parent or Seller or the comparable organizational documents of the Selling
Subsidiaries, (ii) conflict with, result in a violation or breach of, or
constitute a default (with or without notice or lapse of time or both), or give
rise to any right of, or result in, a termination, right of first refusal,
amendment, revocation, cancelation or acceleration, or loss of material benefit,
or to increased, guaranteed, accelerated or additional rights or entitlements of
any person, or result in the creation of any Lien on any asset or in or upon any
property of Parent, Seller or the Selling Subsidiaries under, any Contract or
Permit to which Parent, Seller or the Selling Subsidiaries is a party, except
for any such conflict, violation, breach, default, loss, right, entitlement or
Lien which, individually or in the aggregate, could not reasonably be expected
to have a Business Material Adverse Effect, or (iii) conflict with or result in
a violation of, or give rise to the loss of a material benefit, or result in the
creation of any Lien on any asset or any property of the Parent, Seller or the
Selling Subsidiaries under, any judgment, order, decree, writ, injunction,
statute, law, ordinance, rule or regulation applicable to Parent, Seller or any
of the Selling Subsidiaries or to the property or assets of Parent, Seller or
any of the Selling Subsidiaries, except for any such conflict, violation, loss
or Lien which, individually or in the aggregate, could not reasonably be
expected to have a Business Material Adverse Effect.
(b) Except as set forth on Schedule 5.2, no consent, approval, license,
Permit, order, authorization of, registration, declaration or filing with, or
notice to, any domestic or foreign court, administrative or
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regulatory agency or commission or other governmental authority or
instrumentality (whether local, municipal, provincial, Federal or otherwise)
(each, a "Governmental Entity") is required to be obtained or made by or with
respect to Parent, Seller or any of their respective Subsidiaries in connection
with the execution and delivery of the Transaction Agreements or the
consummation of the transactions contemplated thereby or compliance with the
terms thereof, other than (i) those required to be made or obtained pursuant to
the HSR Act in the U.S. and the EC Merger Regulation in Austria, Belgium,
France, Denmark, Germany, Italy, Ireland, the Netherlands, Norway, Portugal,
Spain, Sweden and the United Kingdom (the "EU Approval"), (ii) the filing by
Parent with the SEC of a proxy statement relating to the Parent Stockholder
Meeting (the "Parent Proxy Statement"), and (iii) such other consents,
approvals, licenses, permits, orders, authorizations, registrations,
declarations or filings the failure of which to be obtained or made could not
reasonably be expected, individually or in the aggregate, to have a Business
Material Adverse Effect.
SECTION 5.3. FINANCIAL STATEMENTS. (a) Schedule 5.3(a)(i) sets forth the
Balance Sheet for the Business as of December 31, 2000 (the "Balance Sheet"),
including the notes thereto, and the unaudited statements of operations and cash
flows relating to the Business for the twelve months ended December 31, 2000 and
the twelve months ended December 31, 1999, including the notes thereto,
(collectively, the "Financial Statements"). The Financial Statements have been
prepared in accordance with GAAP (except as specifically described on
Schedule 5.3(a)(i)) consistently applied and on that basis fairly present the
financial condition and results of operations of the Business as of the date
thereof and for the period indicated, and are derived from the Books and
Records.
(b) Except as set forth on Schedule 5.3(b), the Business does not have any
material (individually or in the aggregate) liabilities, obligations or
commitments of any nature (whether accrued, absolute, contingent, asserted or
otherwise) not reflected on the face of the Balance Sheet, except for
liabilities, obligations and commitments incurred in the ordinary course of
business consistent with past practice since December 31, 2000, and not in
violation of this Agreement.
SECTION 5.4. ABSENCE OF CHANGES OR EVENTS. As of the date of this Agreement,
except as set forth on Schedule 5.4(a), since December 31, 2000, there has been
no set of facts, change, development, event, effect, condition or occurrence
which, individually or in the aggregate, has had or could reasonably be expected
to constitute a Business Material Adverse Effect. Since December 31, 2000, as of
the date of this Agreement, Parent, Seller and the Selling Subsidiaries have
carried on the Business in the ordinary course of business consistent with past
practice. Since December 31, 2000, except as set forth on Schedule 5.4(b), as of
the date of this Agreement neither Parent nor Seller nor any of their respective
Subsidiaries has, in each case insofar as the Business is concerned:
(i) failed to pay any creditor any amount arising from the operation of
the Business owed to such creditor when due, other than good faith disputes
reserved against in accordance with GAAP and trade payables arising in the
ordinary course of business and not past due more than 45 days;
(ii) failed to discharge or satisfy any Lien on any of the Acquired
Assets other than Permitted Liens;
(iii) permitted, allowed or suffered any Acquired Asset to become
subjected to any Lien of any nature whatsoever other than Permitted Liens;
(iv) sold, leased, licensed or otherwise disposed of any of the assets
of the Business (or entered into any contract to do any of the foregoing),
except Inventory and obsolete or worn out equipment sold in the ordinary
course of business consistent with past practice which was not otherwise
material (individually or in the aggregate) to the Business or canceled any
material indebtedness or waived any material claims or rights of material
value;
(v) disposed of any material Intellectual Property used, or held for
use, or intended to be used, in the conduct or operation of the Business or
allowed any material rights with respect to such Intellectual Property to
lapse for a period of 180 days prior to the applicable Closing;
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(vi) defaulted on any material obligation relating to the conduct or
operation of the Business;
(vii) granted any allowances or discounts outside the ordinary course of
business consistent with past practice or sold Inventory materially in
excess of reasonably anticipated consumption for the near term outside the
ordinary course of business consistent with past practice;
(viii) changed the employee compensation and benefits structure of the
Business in a manner that adversely affects in a material (individually or
in the aggregate) respect the cost structure of the Business, taken as a
whole;
(ix) incurred or assumed any liabilities, obligations or indebtedness or
guaranteed any such liabilities, obligations or indebtedness, other than in
the ordinary course of business, in each case, with respect to the Business
or which would, if incurred during the fiscal year of the Business ended
December 31, 2000, be required in accordance with GAAP to be reflected on
the face of the Balance Sheet;
(x) suffered any damage, destruction or loss, whether or not covered by
insurance, that, individually or in the aggregate, could reasonably be
expected to have a Business Material Adverse Effect;
(xi) effected any material write down of any of the material assets of
the Business; or
(xii) entered into any agreement or made any commitment to do any of the
foregoing.
SECTION 5.5. PRODUCTS. Except for exceptions to the following that could not
reasonably be expected to be material (individually or in the aggregate) to the
Business, each of the products produced or sold by Parent, Seller and the
Selling Subsidiaries in connection with the Business (i) is, and at all times up
to and including the sale thereof has been, in compliance in all material
respects with all applicable Federal, state, local and foreign laws and
regulations, (ii) is, and at all relevant times has been, fit for the ordinary
purposes for which it is intended to be used and (iii) when used in accordance
with its associated documentation, is capable of correctly processing, providing
and/or receiving date data within and between the twentieth and twenty-first
centuries, data for non-English speaking countries (including those that use
double-byte characters), and data specific to a particular country's language.
There is no material design defect with respect to any of such products.
SECTION 5.6. TAXES. Except as set forth on Schedule 5.6, (a) none of the
Acquired Assets is "tax exempt use property" within the meaning of
Section 168(h) of the Code; (b) none of the Acquired Assets is a lease made
pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954; (c) neither
Parent nor Seller nor any of their respective Affiliates has made with respect
to Parent, Seller or any Selling Subsidiaries, or any assets of the Business any
consent under Section 341 of the Code; (d) none of the Acquired Assets to be
transferred by persons other than U.S. persons (as defined in
Section 7701(a)(30) of the Code) is a "United States Real Property Interest" as
defined in Section 897 of the Code; (e) no Liens (other than Permitted Liens)
for material Taxes have been filed and no material claims for Taxes have been
asserted in writing with respect to the Business, the Acquired Assets or the
Assumed Liabilities; (f) Parent, Seller and each of the Selling Subsidiaries and
any affiliated group, within the meaning of Section 1504 of the Code, of which
Parent, Seller or any of the Selling Subsidiaries is or has been a member,
(i) has filed or caused to be filed in a timely manner (within any applicable
extension periods) all material Tax returns, reports and forms required to be
filed by the Code or by applicable state, local or foreign Tax laws and
(ii) all Taxes due on such returns, reports and forms have been timely paid in
full or will be timely paid in full by the due date thereof; (g) none of Parent,
Seller or any of Selling Subsidiaries has been a member of an affiliated group,
within the meaning of Section 1504 of the Code, filing a consolidated Federal
income tax return (other than a group the common parent of which was Parent);
and (h) none of Parent, Seller or any of the Selling Subsidiaries has any
liability for the Taxes of any Person (other than any of Parent, Seller or any
of the Selling Subsidiaries) under Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law) or pursuant to any tax allocation or
sharing agreement.
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SECTION 5.7. TITLE TO ASSETS AND REAL PROPERTY LEASES. (a) Either Parent,
Seller or a Selling Subsidiary has good and valid title to, or, with respect to
real property and interests in real property, a leasehold interest in, all the
Acquired Assets, in each case free and clear of all mortgages, liens, options,
charges, easements, leases, subleases, title defects, security interests,
charges, claims, rights of first refusal, options and encumbrances of any kind
("Liens") except (i) those disclosed on Schedule 5.7(a), (ii) mechanics',
carriers', workmen's, repairmen's or other similar liens arising or incurred in
the ordinary course of business, (iii) conditional sales contracts (covering
personalty and equipment, but not real property) and equipment leases entered
into in the ordinary course of business, (iv) Liens for Taxes, assessments and
other governmental charges which are not due and payable or which may thereafter
be paid without penalty and (v) other Liens which do not impair the continued
use and operation of any Acquired Asset in the conduct of the Business (the
items described in clauses (i) through (v) above are hereinafter referred to
collectively as "Permitted Liens"). None of the Liens described in clauses
(i) through (v), individually or in the aggregate, materially impairs, or could
reasonably be expected to materially impair, the continued use and operation of
the Acquired Assets (other than immaterial Acquired Assets) to which they relate
in the conduct of the Business as presently conducted. This Section 5.7(a) does
not relate to matters with respect to Real Property Leases, which are the
subject of Section 5.7(b) below.
(b) Schedule 5.7(b) sets forth a complete list of all leases, subleases and
occupancy agreements (collectively, as same may have been amended or
supplemented, "Real Property Leases") and also identifies real property and
interests in real property leased by Parent, Seller or the Selling Subsidiaries
and used, held for use or intended to be used in the operation or conduct of the
Business (individually, a "Leased Real Property"), and identifies each of the
Real Property Leases by date thereof (as well as the dates of any amendments,
modifications and supplements thereto), the original parties thereto (and, in
the event of any assignments, the current parties thereto), the expiration date
of the term thereof, and whether any unexercised, extant renewal option(s) exist
thereunder (and, in the event that any of the Real Property Leases are
subleases, identifies the underlying prime leases), and identifies any
nondisturbance agreements, reciprocal easement or operating agreements relating
thereto. True, correct and complete descriptions of any easements and copies of
the Real Property Leases and any operating agreements and any other instruments
and agreements identified in Schedule 5.7(b) have been delivered to Buyer. Each
of the Real Property Leases, and each such instrument and agreement, is in full
force and effect, and neither (as applicable) Parent, Seller nor any of the
Selling Subsidiaries which are party to such Real Property Lease, or party to or
beneficiary of such instrument and agreement, nor, to the knowledge of Parent or
Seller, any of the other parties thereto, has received or given any notice of
default thereunder which is extant (I.E., same was not cured or waived within
the applicable grace period), and, to the knowledge of Parent or Seller, no
event has occurred which, with the giving of notice or the passage of time, or
both, would constitute a material default by Parent, Seller or any Selling
Subsidiary under any Real Property Lease or under any such instrument and
agreement. Parent, Seller or Selling Subsidiary has good and valid title to the
leasehold estates under the Real Property Leases in all Leased Property (such
Leased Property being sometimes referred to herein, individually, as a "Business
Property"), in each case free and clear of all Liens, except the following
Liens: (i) such as are set forth in Schedule 5.7(b), (ii) leases, subleases and
similar agreements set forth in Schedule 5.8, (iii) easements, covenants,
rights-of-way and other similar restrictions of record and (iv) (A) zoning,
building and other similar restrictions, (B) Liens that have been placed by any
developer, landlord or other third party on property over which Parent, Seller
or their respective Subsidiaries has easement rights or on any Leased Property
and subordination or similar agreements relating thereto and (C) unrecorded
easements, covenants, rights-of-way and other similar restrictions. None of the
items set forth in clauses (i) through (iv) above, individually or in the
aggregate, materially impairs, or could reasonably be expected to materially
impair, the continued use and operation of the Leased Real Property to which
they relate in the conduct of the Business as presently conducted.
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SECTION 5.8. CONTRACTS. (a) Except as set forth on the subsection of
Schedule 5.8(a), referencing the subsection of this Section 5.8(a) set forth
below, there is no Contract that constitutes or contains an Acquired Asset or an
Assumed Liability that is:
(i) a Contract providing for future performance in consideration of
amounts previously paid;
(ii) a Contract that is material, individually or in the aggregate, to
the Assigned Contracts, taken as a whole, and that provides for future
performance with materially less than the standard charges to be due for
such performance or with materially lower than standard profit margins, in
each case measured as of the date on which such Contract was entered into;
(iii) a Contract falling within a category for which Parent, Seller or
any Selling Subsidiary has standard form agreements (as such form agreements
existed on the date on which such Contract was entered, which form
agreements have been made available to Buyer) that deviates from such
standard form agreements in a manner that (A) materially increases the
actual or potential liabilities or costs of Parent, Seller or any Selling
Subsidiary or (B) materially limits the actual or potential rights or
benefits of Parent, Seller or any Selling Subsidiary, in each case as
compared to those which would have arisen if there had been no such
deviation from the relevant standard form agreement;
(iv) a Contract granting the other party or any third person "most
favored nation" status;
(v) a Contract pursuant to which following the applicable Closing would
limit the ability of Buyer or any other Purchasing Company to compete with
any person or to engage in any activity or business, or pursuant to which
any benefit is required to be given or lost as a result of so competing or
engaging;
(vi) a Contract providing for "exclusivity" or under which Parent,
Seller or any Selling Subsidiary is restricted, or which after the
applicable Closing would restrict Buyer, any other Purchasing Company or any
of their respective Affiliates, with respect to distribution, marketing,
development or manufacture;
(vii) a license or franchise granted by Parent, Seller or any Selling
Subsidiary pursuant to which Parent, Seller or any Selling Subsidiary has
agreed to provide any third party with access to source code or to provide
for source code to be put in escrow or to refrain from granting license or
franchise rights to any other person;
(viii) a Contract providing for liquidated damages;
(ix) a Contract granting a third party any license to Intellectual
Property that is not limited to the internal use of such third party other
than any such Contract with a value added reseller or a distributor entered
into in the ordinary course of business consistent with past practice;
(x) a Contract that guarantees a result or commits to performance
levels;
(xi) a Contract which (A) has aggregate future sums due from Parent,
Seller or any Selling Subsidiary in excess of $50,000 (or the equivalent
amount in any other applicable currency based on the Applicable Spot Rate as
of the date five Business Days prior to the date hereof) and is not
terminable by Parent, Seller or any such Selling Subsidiary for a cost of
less than $25,000 (or the equivalent amount in any other applicable currency
based on the Applicable Spot Rate as of the date five Business Days prior to
the date hereof) or (B) is otherwise material to the Business as presently
conducted;
(xii) a Contract providing for payments of royalties to third parties
that is not terminable on 90 days or less notice;
(xiii) an employment agreement or employment Contract that is not
terminable at will by Parent, Seller or any Selling Subsidiary both without
any penalty and without any obligation of
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Parent, Seller or any such Selling Subsidiary to pay severance or other
amounts other than base salary, accrued commissions, on-target earnings,
vacation pay and legally mandated benefits;
(xiv) (A) an employee collective bargaining agreement or other Contract
with any labor union, (B) a plan, program or a Contract that provides for
the payment of bonus, severance, termination or similar type of compensation
or benefits upon the termination or resignation of any employee of the
Business or (C) a plan, program or Contract that provides for medical or
life insurance benefits for former employees of the Business or for current
employees of the Business upon their retirement from, or termination of
employment with, the Business (other than health coverage continuation
provided under the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended);
(xv) a Contract providing for confidential treatment by the Parent,
Seller or any Selling Subsidiary of third party information other than
non-disclosure agreements entered into by the Parent, Seller or any such
Selling Subsidiary in the ordinary course of business consistent with past
practice;
(xvi) a Contract under which Parent, Seller or any Selling Subsidiary has
(A) incurred any indebtedness for borrowed money that is currently owing or
(B) given any guarantee of any such indebtedness;
(xvii) a Contract creating or granting a Lien (including Liens upon
properties acquired under conditional sales, capital leases or other title
retention or security devices);
(xviii) a Contract (A) that contains a prohibition on the assignment of
all or any portion thereof by Parent, Seller or any Selling Subsidiary to
any other person (without regard to any exception permitting assignments to
Subsidiaries or Affiliates) or (B) that the consummation of any of the
transactions contemplated by the Transaction Agreements or the execution and
delivery or effectiveness of the Transaction Agreements will conflict with,
result in a violation or breach of, or constitute a default under (with or
without notice or lapse of time or both), or give rise under such Contract
to any right of, or result in, a termination, right of first refusal,
amendment, revocation, cancelation or acceleration, or loss of material
benefit, or to increased, guaranteed, accelerated or additional rights or
entitlements of any person;
(xix) except to the extent included in the preceding subparagraph
(xviii), a Contract that requires consent, waiver, approval or authorization
of or notice to a third party in the event of or with respect to the
consummation of any of the transactions contemplated by the Transaction
Agreements or the execution and delivery or effectiveness of the Transaction
Agreements;
(xx) a Contract containing (whether in the Contract itself or by
operation of law) any provisions dealing with a "change of control" or
similar event with respect to the Parent, Seller or any Selling Subsidiary
or all or any part of the Business which would apply in any way to the
Business, the Acquired Assets, Buyer or any Purchasing Company following any
Closing, in each case to the extent such provision(s) would apply to the
consummation of the transactions contemplated by the Transaction Agreements;
(xxi) a Contract with (A) any shareholder of Seller or any Selling
Subsidiary or, to the knowledge of Parent or Seller, Parent, (B) any
Affiliate of Parent, Seller or any Selling Subsidiary or of any shareholder
of Parent, Seller or any Selling Subsidiary or (C) any director, officer or
employee of Parent, Seller or any Selling Subsidiary or of any Affiliate of
Parent, Seller or any Selling Subsidiary (other than (A) employment
agreements otherwise covered above, offer letters of at will employment or
benefit plans or (B) invention assignments, confidentiality agreements or
non disclosure agreements for the benefit of Parent, Seller or the Selling
Subsidiaries);
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(xxii) a Contract not containing a waiver of incidental, consequential,
punitive and special damages in favor of Parent, Seller or the Selling
Subsidiaries (and their respective assignees) in all circumstances;
(xxiii) a Contract entered into in the last five years in connection with
the settlement or other resolution of any suit, claim, action, investigation
or proceeding; and
(xxiv) a Contract not made in the ordinary course of business.
(b) Except as set forth on Schedule 5.8(b) or for exceptions which could not
reasonably be expected to be material, individually or in the aggregate, to such
Assigned Contract, each Assigned Contract is valid, binding and in full force
and effect and is enforceable by Parent, Seller or a Selling Subsidiary, as
applicable, in accordance with its terms (subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws affecting creditors' rights generally from time to time in effect and to
general principles of equity, including concepts of materiality, reasonableness,
good faith and fair dealing regardless of whether considered in a proceeding in
equity or at law). Except as set forth on Schedule 5.8(b), Parent, Seller and
the Selling Subsidiaries have performed in all material respects all obligations
required to be performed by them under the Assigned Contracts, and no event has
occurred that would render them (with or without the lapse of time or the giving
of notice, or both) in breach in any material respect or default thereunder and,
to the knowledge of Parent and Seller as of the date hereof, no event has
occurred that would render any other party to an Assigned Contract (with or
without the lapse of time or the giving of notice, or both) in breach in any
material respect or default thereunder. As of the date hereof, neither Parent
nor Seller nor any Selling Subsidiary has, except as disclosed on
Schedule 5.8(b), received any written notice of the intention of any party to
terminate any Assigned Contract or that any party considers that Parent, Seller
or their respective Subsidiaries is in breach in any material respect or default
thereunder or in potential breach in any material respect or default thereunder.
Complete and correct copies of all the Assigned Contracts identified on
Schedule 5.8(a), together with all modifications and amendments thereto to the
date of this Agreement, have been made available to Buyer.
(c) The effect of Section 9.1 and clause (v) of the definition of the term
"Excluded Assets" in determining whether an asset or liability constitutes an
Assigned Contract, Acquired Asset or Assumed Liability shall be excluded for all
purposes of this Section 5.8.
SECTION 5.9. LITIGATION. Except for the claims that are the subject of the
Litigation Settlement Agreement, Schedule 5.9 sets forth a complete and correct
list of all claims, actions, suits or judicial, administrative and regulatory
proceedings or investigations pending or, to the knowledge of Parent and Seller,
threatened by or against Parent, Seller or any Selling Subsidiary affecting the
Business or the Acquired Assets (i) which involves an amount in controversy in
excess of $50,000 (or the equivalent amount in any other applicable currency
based on the Applicable Spot Rate as of the date five Business Days prior to the
date hereof), (ii) which, as of the date hereof, seeks material injunctive
relief, (iii) which may give rise to any legal restraint on or prohibition
against or limit the material benefits to Buyer of the transactions contemplated
by the Transaction Agreements or (iv) which if resolved in accordance with
plaintiff's demands could reasonably be expected to have a Business Material
Adverse Effect. There is no injunction, order, judgment, writ or decree to which
Parent, Seller or any of their respective Subsidiaries is a party or subject to,
or in default under which, individually or in the aggregate, could reasonably be
expected to have a Business Material Adverse Effect. This Section 5.9 does not
relate to matters with respect to Taxes, which are the subject of Section 5.6,
or Acquired Intellectual Property, which are the subject of Section 5.13.
SECTION 5.10. EMPLOYEE AND RELATED MATTERS; ERISA. (a) Schedule 5.10(a)
contains a true and complete list of all "employee welfare benefit plans" (as
defined in Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), "employee pension benefit plans"
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(as defined in Section 3(2) of ERISA) ("Pension Plans") and any other bonus,
pension, profit-sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock appreciation, restricted stock, stock option,
phantom stock, performance, retirement, thrift, savings, stock bonus, cafeteria,
paid time-off, perquisite, fringe benefit, vacation, severance, disability,
death benefit, hospitalization, medical, welfare benefit or other plan, program,
policy, arrangement or understanding, and each employment, consulting, deferred
compensation, severance, termination or indemnification agreements or
arrangements but expressly excluding any governmental plan or program that
requires mandatory payment of social insurance taxes or similar contributions to
a governmental fund with respect to wages of any employee (collectively,
"Benefit Plans") that are maintained or contributed to or required to be
maintained or contributed to by Parent, Seller or any of their respective
Subsidiaries or any person or entity that, together with Parent, Seller or any
of their respective Subsidiaries, is treated as a single employer (a "Commonly
Controlled Entity") under Section 414(b), (c), (m) or (o) of the Code or
Section 4001 of ERISA. Parent and Seller have made available (or in the case of
Benefit Plans principally covering non-U.S. Covered Employees (each, a "Non-U.S.
Benefit Plan"), will make available within ten Business Days following the date
hereof) to Buyer true, correct and complete copies of (1) each such Benefit Plan
(or, in the case of any such unwritten Benefit Plan, a description thereof),
(2) the most recent annual report on Form 5500 filed with the IRS with respect
to each such Benefit Plan (if any such report was required), (3) the most recent
summary plan description or similar document for each such Benefit Plan for
which such summary plan description is required or was otherwise provided to
plan participants or beneficiaries and (4) each trust agreement and insurance
annuity contract relating to any such Benefit Plan. Each Benefit Plan has been
administered in accordance with its terms. Parent, Seller and their respective
Subsidiaries and all the Benefit Plans are in substantial compliance in all
material respects with all applicable provisions of ERISA and the Code and all
other applicable laws.
(b) (i) No Benefit Plan is a "multiemployer plan" (as such term is defined
in Section 3(37) of ERISA (a "Multiemployer Plan"), (ii) no Pension Plan is
subject to Title IV of ERISA, (iii) each Pension Plan intended to qualify under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service, and no such letter has been revoked, nor has
revocation been threatened, nor has any such Plan been amended since the date of
its most recent letter in any respect that would adversely affect its
qualification or increase its costs, and (iv) there is no pending, or to the
knowledge of Parent and Seller, threatened litigation relating to the Benefit
Plans.
(c) (i) None of Parent, Seller, any of their respective Subsidiaries, any
officer of Parent, Seller or any of their respective Subsidiaries or any of the
Benefit Plans which are subject to ERISA, including the Pension Plans, any
trusts created thereunder or any trustee or administrator thereof, has engaged
in a "prohibited transaction" (as such term is defined in Section 406 of ERISA
or Section 4975 of the Code) or any other breach of fiduciary responsibility
that could reasonably be expected to subject Parent, Seller, any of their
respective Subsidiaries or any officer of Parent, Seller or any of their
respective Subsidiaries to the Tax or penalty on prohibited transactions imposed
by such Section 4975 or to any liability under Section 502(i) or 502(l) of
ERISA, (ii) none of such Benefit Plans and trusts has been terminated, nor has
there been any "reportable event" (as that term is defined in Section 4043 of
ERISA) for which the 30-day reporting requirement has not been waived with
respect to any Benefit Plan during the last five years, and no notice of a
reportable event will be required to be filed in connection with the
transactions contemplated by this Agreement (including the Employee Matters
Agreement), (iii) neither Parent nor Seller nor any of their respective
Subsidiaries has incurred a "complete withdrawal" or a "partial withdrawal" (as
such terms are defined in Sections 4203 and 4205, respectively, of ERISA) since
the effective date of such Sections 4203 and 4205 with respect to any
Multiemployer Plan, and (iv) all contributions and premiums required to be made
under the terms of any Benefit Plan as of the date hereof have been timely made.
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(d) With respect to any Benefit Plan (other than a Non-U.S. Benefit Plan)
that is an employee welfare benefit plan, (i) no such Benefit Plan is unfunded
or funded through a "welfare benefit fund" (as such term is defined in
Section 419(e) of the Code), (ii) each such Benefit Plan that is a "group health
plan" (as such term is defined in Section 5000(b)(1) of the Code), complies with
the applicable requirements of Section 4980B(f) of the Code and (iii) each such
Benefit Plan may be amended or terminated without liability to Parent, Seller or
any of their respective Subsidiaries. Neither Parent nor Seller nor any of their
respective Subsidiaries has any obligations for retiree health and life benefits
under any Benefit Plan.
(e) Except as set forth on Schedule 5.10(e), neither the execution and
delivery of this Agreement nor the obtaining of the Parent Stockholder Approval
nor the consummation of the transactions contemplated by this Agreement will
(x) entitle any Covered Employee to severance pay, (y) accelerate the time of
payment or vesting or trigger any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount payable or
trigger any other obligation pursuant to, any of the Benefit Plans in respect of
any Covered Employee or (z) result in any breach or violation of, or a default
under, any of the Benefit Plans.
(f) With respect to each Non-U.S. Benefit Plan (i) the fair market value of
the assets of each Non-U.S. Benefit Plan required to be funded and the liability
of each insurer for any Non-U.S. Benefit Plan required to be financed through
insurance, together with any accrued contributions, is sufficient to procure or
provide for the accrued benefit obligations, as of the date of the most recent
valuation of such Non-U.S. Benefit Plan, and no transaction contemplated by the
Transaction Agreements shall reduce the amount of such assets or insurance set
aside for such obligations (other than with respect to payments or distributions
made to terminating plan participants in the ordinary course); (ii) all employer
and employee contributions required to be made under the terms of such Non-U.S.
Benefit Plan or any contract or labor or collective bargaining agreement or
applicable law have been made or, if applicable, accrued in accordance with
local law, past practice and generally accepted accounting principles in the
local jurisdiction (and, to the extent unpaid, are reflected in the Closing
Balance Sheet); and (iii) to the knowledge of Parent and Seller, any such
Non-U.S. Benefit Plan required to be registered under applicable law has been
registered and has been maintained in good standing with applicable regulatory
authorities.
SECTION 5.11. COMPLIANCE WITH LAWS. (a) Except for exceptions to the
following which, individually or in the aggregate, could not reasonably be
expected to have a Business Material Adverse Effect, the Business has in effect
all certificates, permits, licenses, franchises approvals, qualifications,
registrations, certifications, and other similar authorizations from any
Governmental Entity ("Permits") that are necessary or desirable for the conduct
of the Business as currently conducted and the ownership of the assets and the
properties of the Business. The Permits that are material (individually or in
the aggregate) to the Business or the Acquired Assets, in each case taken as a
whole, are set forth on Schedule 5.11(a). Parent, Seller and the Selling
Subsidiaries have complied and are in compliance in all material respects with
all existing laws, rules, regulations, Permits, ordinances, orders, judgments,
writs, injunctions, statutes and decrees applicable to the existence, condition
(financial or otherwise), operations, properties, assets or business of the
Business and no condition or state of facts exists that could reasonably be
expected to give rise to a violation of, or a material liability or default
under, any of the foregoing. The execution and delivery of this Agreement by
each of Parent and Seller does not, and the execution and delivery by each of
Parent, Seller and the Selling Subsidiaries of the Other Transaction Agreements
to which it is a party and the consummation of the transactions contemplated
hereby and thereby and compliance with the terms hereof and thereof are not
reasonably likely to cause the revocation or cancelation of any such Permit,
except for such revocations or cancelations that, individually or in the
aggregate, could not reasonably be expected to be material (individually or in
the aggregate) to the Business. Neither Parent nor Seller nor any Selling
Subsidiary has received any written communication during the past three years
from any person that alleges that the Business is not in compliance in all
material respects with, or is subject to any liability under, any
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existing laws, rules, regulations, Permits, ordinances, orders, judgments,
writs, injunctions, statutes or decrees applicable to the existence, condition
(financial or otherwise), operations, properties, assets or business of the
Business or relating to the revocation or modification of any material Permit.
Except as set forth on Schedule 5.11(a), neither Parent nor Seller nor any
Selling Subsidiary has received any written notice that any investigation or
review by any Governmental Entity is pending with respect to any of the Acquired
Assets or the Business or that any such investigation or review is contemplated.
This Section 5.11(a) does not relate to matters with respect to Taxes, which are
the subject of Section 5.6, labor matters, which are the subject of
Section 5.12, Intellectual Property, which are the subject of Section 5.13 or
environmental matters, which are the subject of Section 5.11(b).
(b) Except as set forth on Schedule 5.11(b),
(i) the Business is in compliance in all material respects with all
Environmental Laws;
(ii) the Business holds and is in compliance in all material respects
with all Permits required under Environmental Laws ("Environmental
Permits");
(iii) neither Parent nor Seller nor any of their respective Subsidiaries
has received any written communication that alleges that the Business is
subject to liability under Environmental Laws;
(iv) neither Parent nor Seller nor any of their respective Subsidiaries
is subject to, with respect to the Business or Acquired Assets, any
judgment, decree or order relating to compliance with any Environmental Law
or to any investigation, remediation, reclamation, Release or monitoring of,
or in connection with, any Hazardous Substance;
(v) no Lien has been attached, asserted or, to the knowledge of Parent
or Seller, threatened, to or against any of the Leased Real Property
pursuant to any Environmental Law;
(vi) there has been no treatment, storage, disposal, arrangement for
disposal or Release of any Hazardous Substance in, on, at or under any
property in connection with the Business or the Acquired Assets at any time
that could reasonably be expected to result in liability under Environmental
Law;
(vii) with respect to the Business and the Acquired Assets, neither
Parent nor Seller nor any of their respective Subsidiaries has received an
information request regarding, or has been named a potentially responsible
party for, any Federal National Priorities List site (as defined under
Environmental Law) or any other site under analogous state or foreign law;
and
(viii) there are not now, and to the knowledge of Parent or Seller, there
never have been, any aboveground or underground storage tanks at, on or
under any of the Leased Real Property.
SECTION 5.12. LABOR MATTERS. Except as set forth in Schedule 5.12,
(i) there is not any pending or threatened, and during the past 12 months there
has not been any, labor dispute or strike, work stoppage or lockout with respect
to the Business; (ii) neither Parent nor Seller nor any Selling Subsidiary is
engaged in any unlawful labor practice in connection with the conduct of the
Business; (iii) there are not any unfair labor practice charges against Parent,
Seller or any Selling Subsidiary pending before the National Labor Relations
Board or any similar sovereign, state or local agency in connection with the
conduct of the Business; and (iv) there are not any proceedings in connection
with the conduct of the Business pending before the Equal Employment Opportunity
Commission or any similar foreign, state or local agency responsible for the
prevention of unlawful employment practices, in the case of each of clauses (i),
(ii), (iii) and (iv) above which is material (individually or in the aggregate)
to the Business. Schedule 5.12 sets forth a list of each collective bargaining
agreement to which Covered Employees are subject, other than non-U.S. Covered
Employees that are subject to national trade union agreements.
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SECTION 5.13. INTELLECTUAL PROPERTY, ETC. (a) Schedule 5.13(a) sets forth a
true and complete list of all Acquired Intellectual Property organized, where
applicable, under categories labeled "software", "patents", "trademarks" and
"copyrights"; (it being understood that any Acquired Intellectual Property not
so listed shall nonetheless constitute Acquired Assets). With respect to all
Acquired Intellectual Property that is registered or subject to an application
for registration, Schedule 5.13(a) sets forth a list of all jurisdictions in
which such Acquired Intellectual Property is registered or registrations applied
for and all registration and application numbers. Except as set forth in
Schedule 5.13(a), (i) all the Acquired Intellectual Property consisting of
patents, trademarks or copyrights has been duly registered in, filed in or
issued by the appropriate Governmental Entity where such registration, filing or
issuance is necessary or desirable for the conduct of the Business as presently
conducted and all necessary affidavits of continuing use have been filed and all
necessary maintenance fees have been paid to continue all rights in effect,
(ii) Parent, Seller or any of the Selling Subsidiaries is the sole and exclusive
owner of, and Parent, Seller and the Selling Subsidiaries have the right to use,
execute, reproduce, display, perform, modify, enhance, distribute, prepare
derivative works of and to make, have made, sell, convey, transfer or assign,
without payment to any other person, all the Acquired Intellectual Property and
the consummation of the transactions contemplated by the Transaction Agreements
do not and will not conflict with, alter or impair any such rights, and
(iii) during the past 3 years neither Parent nor Seller nor any of the Selling
Subsidiaries has received any written or oral communication from any person
asserting any ownership interest in any Acquired Intellectual Property. All of
the Acquired Intellectual Property is merchantable and fit for its intended
purpose. All of the software (including any data) included in the Acquired
Intellectual Property is free of viruses and other harmful code and none of such
software (including any data) contains any material (individually or in the
aggregate) errors, bugs or defects.
(b) Except as set forth on Schedule 5.13(b) or except for any such license
entered into in the ordinary course of business consistent with past practice,
none of Parent, Seller or any of the Selling Subsidiaries has granted any
license of any kind relating to the Acquired Intellectual Property or the
marketing or distribution thereof. None of Parent, Seller or any of the Selling
Subsidiaries is bound by or a party to any option, license or similar Contract
relating to the Intellectual Property of any other person for the use of such
Acquired Intellectual Property in the conduct of the Business, except as set
forth in Schedule 5.13(b) and except for "shrink-wrap" license agreements
relating to computer software licensed in the ordinary course of the Business.
Neither the Acquired Intellectual Property nor the conduct of the Business as
presently conducted violate, conflict with or infringe in any material respect
the Intellectual Property of any other person. No claims are pending or, to the
knowledge of Parent and Seller, threatened, against Parent, Seller or any of the
Selling Subsidiaries by any person with respect to the ownership, validity or
enforceability or use in the Business of any Intellectual Property and
(ii) during the past 3 years Parent, Seller and their respective Affiliates have
not received any written communication alleging that Parent, Seller or any of
their respective Affiliates has in the conduct of the Business violated any
rights relating to Intellectual Property of any person.
(c) All Acquired Intellectual Property has been maintained in confidence in
accordance with protection procedures customarily used in the industry to
protect rights of like importance. All former and current members of management
and key personnel of the Business, including all former and current employees,
agents, consultants and independent contractors who have contributed to or
participated in the conception and development of the Acquired Intellectual
Property (collectively, "Personnel"), have executed and delivered to Parent,
Seller or one of their respective Affiliates a proprietary information agreement
restricting such person's right to disclose proprietary information of Parent,
Seller and their respective Affiliates and assigning all rights in the Acquired
Intellectual Property to Parent, Seller or one of their respective Affiliates,
and waiving all moral rights in any works in which moral rights may exist. No
former or current Personnel has filed, asserted or, to the knowledge of Parent
or Seller, threatened any claim against Parent, Seller or any of the Selling
Subsidiaries in connection with such person's involvement in the conception and
development of any of
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the Acquired Intellectual Property. None of the current employees of Parent,
Seller or any of the Selling Subsidiaries has any patents issued or applications
pending for any device, process, design or invention of any kind now used or
needed by Parent, Seller or any of the Selling Subsidiaries in the furtherance
of the Business, which patents or applications have not been assigned to Parent,
Seller or the Selling Subsidiaries.
(d) To the knowledge of Parent or Seller, no person is infringing or
otherwise violating any right of Parent or any of its Subsidiaries in any
material respect with respect to any Intellectual Property owned by or licensed
to Parent or any of its Subsidiaries.
SECTION 5.14. SUFFICIENCY OF ASSETS. The Acquired Assets and the Excluded
Contracts, comprise all the assets primarily employed by Parent, Seller or the
Selling Subsidiaries in connection with the Business. The Acquired Assets are
sufficient for the conduct of Business immediately following the last Closing to
occur in substantially the same manner as currently conducted and there are no
assets which are material to the conduct of the Business as currently conducted
other than the Acquired Assets and the Excluded Contracts.
SECTION 5.15. CONDITION OF ACQUIRED ASSETS. The Acquired Assets are in
normal operating condition and repair (ordinary wear and tear and immaterial
defects excluded).
SECTION 5.16. INVENTORY. Each item of Inventory, whether reflected on the
Balance Sheet or subsequently acquired, as of the date hereof, (a) is free of
any material defect or deficiency, (b) is in good, usable and currently
marketable condition (subject, in the case of raw materials and work-in-process,
to the completion of the production process) and are and will be in quantities
sufficient for the normal operation of the Business in accordance with past
practice and (c) is properly stated on the books and records of the Business at
the lesser of cost and fair market value, with adequate obsolescence reserves,
all as determined in accordance with GAAP. Except as set forth in
Schedule 5.16, from December 31, 2000 to the date of this Agreement, there have
not been any write-ups or write-downs of the value of, or establishment of any
reserves against, any inventory of the Business, except for write-downs and
reserves in the ordinary course of business and consistent with past practice.
SECTION 5.17. RECEIVABLES. As of the date of this Agreement, all the
Acquired A/R (a) represent actual indebtedness or other obligations incurred by
the applicable account debtors and (b) have arisen from bona fide transactions
in the ordinary course of the Business. As of the date of this Agreement, all
the Acquired A/R, to the knowledge of Parent and Seller, are good and
collectible at the aggregate recorded amounts thereof, net of any applicable
reserves for doubtful accounts reflected on the face of the Balance Sheet or as
will be set forth on the face of the Closing Statement.
SECTION 5.18. INSURANCE. Parent, Seller or the Selling Subsidiaries maintain
policies of fire and casualty, liability and other forms of insurance with
respect to the Business in such amounts, with such deductibles and against such
risks and losses as are customary for businesses such as the Business. The
insurance policies maintained by Parent, Seller and the Selling Subsidiaries
with respect to the Business are listed in Schedule 5.18. All such policies are
in full force and effect, all premiums due and payable thereon have been paid,
and no notice of cancelation or termination has been received with respect to
any such policy which has not been replaced on substantially similar terms prior
to the date of such cancelation. There is no claim pending under any such
policies as to which coverage has been questioned, denied or disputed. Such
insurance is of the type and in the amounts customarily carried by persons
conducting businesses similar to the Business.
SECTION 5.19. BROKERS. No broker, investment banker, financial advisor or
other person, other than Credit Suisse First Boston Corporation and SG Cowen
Securities Corporation, the fees and expenses of which will be paid by Parent
and/or Seller, is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the Transaction Agreements or
the
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transactions contemplated thereby based upon arrangements made by or on behalf
of Parent, Seller or the Selling Subsidiaries.
SECTION 5.20. SUPPLIERS. Except as set forth in Schedule 5.20, between the
date of the Balance Sheet and the date of this Agreement, in the conduct of the
Business neither Parent nor Seller nor any of the Selling Subsidiaries has
entered into or made any contract or commitment for the purchase of merchandise
other than in the ordinary course of business consistent with past practice.
Except for the suppliers named in Schedule 5.20, as of the date of this
Agreement, the Business has not purchased, from any single supplier, goods or
services for which the aggregate purchase price exceeds 5% of the total amount
of goods and services purchased by the Business during its most recent full
fiscal year. Except as set forth in Schedule 5.20, between the date of the
Balance Sheet and the date of this Agreement, there has not been (i) any
material adverse change in the business relationship of the Business with any
supplier of merchandise named in Schedule 5.20 or (ii) any change in any
material term (including credit terms) of the supply agreements or related
arrangements with any such supplier.
SECTION 5.21. CUSTOMERS; RESELLERS. Except for the customers and resellers
named in Schedule 5.21, as of the date of this Agreement the Business does not
have any customer or reseller to whom it made more than 5% of its sales during
its most recent full fiscal year. Except as set forth in Schedule 5.21, between
the date of the Balance Sheet and the date of this Agreement, there has not been
(i) any material adverse change in the business relationship of the Business
with any customer or reseller named in Schedule 5.21 or (ii) any change in any
material term (including credit terms) of the sales agreements or related
agreements with any such customer or reseller. During the past three years
preceding the date of this Agreement, Parent, Seller and the Selling
Subsidiaries have not received any written customer complaint concerning the
products and services of the Business, nor have they had any such products
returned by a purchaser thereof, other than complaints and returns made in the
ordinary course of business that, individually or in the aggregate, could not
reasonably be expected to have a Business Material Adverse Effect.
SECTION 5.22. SEC DOCUMENT; UNDISCLOSED LIABILITIES. Parent has filed all
required reports, schedules, forms, statements and other documents with the SEC
since January 1, 1998 (including all filed reports, schedules, forms, statements
and other documents whether or not required, the "Parent SEC Documents"). As of
their respective dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended, or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC Documents, and, with
respect to any matter relating to the Business, none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent that information contained in any Parent SEC
Document has been revised or superseded by a later filed Parent SEC Document
which was filed and publicly available prior to the date of this Agreement, with
respect to any matter relating to the Business, none of the Parent SEC Documents
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Parent included in the Parent SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of Parent
and its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end adjustments). Except for
exceptions to the following which, individually or in the aggregate, could not
reasonably be expected to have a Business Material
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Adverse Effect, neither Parent nor any of its Subsidiaries has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) required by GAAP to be recognized or disclosed on a consolidated
balance sheet of Parent and its consolidated Subsidiaries or in the notes
thereto and which are not so recognized or disclosed.
SECTION 5.23. VOTING REQUIREMENTS. The affirmative vote at the Parent
Stockholder Meeting or any adjournment or postponement thereof of the holders of
a majority of the votes represented by the outstanding shares on the applicable
record date of Common Stock of Parent, par value $0.01 per share ("Parent Common
Stock"), in favor of this Agreement and the transactions contemplated hereby
(the "Parent Stockholder Approval") is the only vote or consent of the holders
of any class or series of the capital stock of Parent which may be necessary to
approve the Transaction Agreements and the transactions contemplated thereby.
The affirmative vote of the holders of any class of capital stock of Parent is
not necessary to approve any transaction contemplated by the Transaction
Agreements (other than as set forth in this Section 5.23).
SECTION 5.24. OPINIONS OF FINANCIAL ADVISORS. Parent has received the
opinion of Credit Suisse First Boston Corporation to the effect that, as of
April 24, 2001, the Worldwide Purchase Price is fair to Parent from a financial
point of view. Parent has received the opinion of SG Cowen Securities
Corporation to the effect that, as of April 24, 2001, the Worldwide Purchase
Price is fair to Parent from a financial point of view.
SECTION 5.25. STATE TAKEOVER STATUTES. No state takeover statute or similar
statute or regulation applies to the execution and delivery by Parent and Seller
of the Transaction Agreements or the consummation by Parent and Seller of the
transactions contemplated by the Transaction Agreements in accordance with the
Transaction Agreements.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Parent and Seller as follows:
SECTION 6.1. ORGANIZATION, STANDING AND AUTHORITY. (a) BUYER. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of New York. Buyer has all requisite corporate power and authority to enter into
the Transaction Agreements to which it is a party and to consummate the
transactions contemplated thereby. All corporate acts and other proceedings
required to be taken by Buyer to authorize the execution, delivery and
performance of the Transaction Agreements to which it is a party and the
consummation of the transactions contemplated thereby have been duly and
properly taken. Each of the Transaction Agreements to which Buyer is a party has
been duly executed and delivered by Buyer and constitutes the legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and to general principles of equity, including
concepts of materiality, reasonableness, good faith and fair dealing regardless
of whether considered in a proceeding in equity or at law).
(b) PURCHASING COMPANIES. Each of the Purchasing Companies (other than
Buyer) will, as of the date of the applicable Closing and as of any earlier date
on which such Purchasing Company shall have executed and delivered any
Transaction Agreement, (i) be duly organized and validly existing under the laws
of its jurisdiction of organization and (ii) have all requisite corporate power
and authority to enter into the Transaction Agreements to which it is a party,
to comply with the terms of such Transaction Agreements and to consummate the
transactions contemplated thereby, and as of such dates all corporate acts and
other proceedings required to be taken by such Purchasing Companies to authorize
the execution, delivery and performance of such Transaction Agreements and the
consummation of the
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transactions contemplated thereby shall have been duly and properly taken. Each
of the Transaction Agreements when duly executed and delivered by the relevant
Purchasing Companies (other than Buyer) shall constitute the legal, valid and
binding obligation of such Purchasing Companies, enforceable against such
Purchasing Companies in accordance with its terms (subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other similar laws affecting creditors' rights generally from time to time in
effect and to general principles of equity, including concepts of materiality,
reasonableness, good faith and fair dealing regardless of whether considered in
a proceeding in equity or at law).
SECTION 6.2. NO VIOLATION; CONSENTS AND APPROVALS. (a) Except as set forth
on Schedule 6.2, the execution and delivery of this Agreement by Buyer does not,
and the execution and delivery by each of Buyer and the other Purchasing
Companies of the Other Transaction Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby and compliance
with the terms hereof and thereof will not, (i) conflict with or result in any
violation of any provision of the certificate of incorporation or by-laws or
comparable organizational documents of Buyer or any other Purchasing Company,
(ii) conflict with, result in a violation or breach of, or constitute a default
(with or without notice or lapse of time or both), or give rise to any right of
termination, right of first refusal, amendment, revocation, cancelation or
acceleration, or loss of material benefit, or to increased, guaranteed,
accelerated or additional rights or entitlements of any person or result in the
creation of any Lien on any asset or any property of Buyer or any other
Purchasing Company under, any loan or credit agreement, note, bond, mortgage,
indenture, benefit plan, deed of trust, license, lease, sublease, contract,
purchase order, commitment or agreement, written or unwritten (collectively,
"Contracts") or Permit, to which Buyer or any other Purchasing Company is a
party, except for any such conflict, violation, breach, default, loss or right,
entitlement or Lien which, individually or in the aggregate, could not
reasonably be expected to result in a Buyer Material Adverse Effect or
(iii) conflict with or result in a violation of, or give rise to the loss of a
material benefit or result in the creation of any Lien on any asset or property
of Buyer or the other Purchasing Companies under, any judgment, order, decree,
writ, injunction, statute, law, ordinance, rule or regulation applicable to
Buyer or any other Purchasing Company or to the property or assets of Buyer or
any other Purchasing Company, except for any such conflict, violation, loss or
Lien which, individually or in the aggregate, could not reasonably be expected
to have a Buyer Material Adverse Effect.
(b) Except as set forth on Schedule 6.2, no consent, approval, license,
permit, order or authorization of, registration, declaration or filing with, or
notice to, any Governmental Entity is required to be obtained or made by or with
respect to Buyer or any other Purchasing Company in connection with the
execution and delivery of the Transaction Agreements or the consummation of the
transactions contemplated thereby, other than (i) (A) those required to be made
or obtained pursuant to the HSR Act in the U.S. and (B) the EU Approval and
(ii) such other consents, approvals, licenses, permits, orders, authorizations,
registrations, declarations or filings the failure of which to be obtained or
made could not reasonably be expected to have, individually or in the aggregate,
a Buyer Material Adverse Effect.
SECTION 6.3. BROKERS. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Transaction Agreements or the
transactions contemplated thereby based upon arrangements made by or on behalf
of Buyer or any of its Subsidiaries.
SECTION 6.4. AVAILABILITY OF FUNDS. Buyer and the other Purchasing Companies
have funds or access to funds that are sufficient to effect the Closings on the
terms contemplated hereby.
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ARTICLE VII
COVENANTS OF PARENT AND SELLER
Each of Parent and Seller covenants and agrees as follows:
SECTION 7.1. ACCESS. (a) Prior to the applicable Closing, Parent and Seller
shall, and shall cause their respective Subsidiaries to, give each of the
Purchasing Companies and its employees, counsel, accountants, investment bankers
and other representatives and advisors (collectively, "Representatives") full
access upon reasonable advance notice and during normal business hours to all
offices and other facilities used in the Business and to all books, records,
agreements, documents, information, personnel, data and files to the extent
relating to the Business, and during such period shall furnish to the
Representatives any information concerning the Business as they may reasonably
request (including, to the extent practicable, by electronic means). Following
the date of this Agreement and prior to the applicable Closing, Buyer may (but
shall not be required to), following reasonable notice to Parent and Seller,
contact and interview any Covered Employee and review the personnel records and
such other information concerning such Covered Employee as Buyer may reasonably
request. No investigation by Buyer or any of its Subsidiaries and no other
receipt of information by Buyer or its Subsidiaries shall operate as a waiver or
otherwise affect any representation or warranty of Parent or Seller or any
covenant or other provision in this Agreement.
(b) After each Closing, Parent and Seller will, and will cause their
respective Subsidiaries to, give Buyer and its Subsidiaries and their
Representatives reasonable access, during normal business hours and upon
reasonable notice, to all books, documents, information, data, files and other
records relating to (i) the operation of the Business prior to such Closing,
(ii) the Acquired Assets or (iii) the Assumed Liabilities, and to furnish copies
thereof, which Buyer or its Subsidiaries or their Representatives reasonably
request, including in connection with claims, proceedings, actions,
investigations, audits and other regulatory or legal proceedings involving
(x) the operation of the Business after such Closing, (y) the Acquired Assets or
(z) the Assumed Liabilities, and Parent and Seller shall furnish reasonable
assistance (at Buyer's expense) (including access to personnel) to Buyer and its
Subsidiaries and their Representatives in connection with such claims and other
proceedings. Parent and Seller shall not, and shall not permit any of the
Selling Subsidiaries to, destroy any such records prior to the seventh
anniversary of the applicable Closing, and in any event will not destroy or
permit the destruction of any such records without providing Buyer with notice
detailing the contents of such records, and providing Buyer with the opportunity
to obtain such records, at least 60 days prior to the destruction thereof.
SECTION 7.2. ORDINARY CONDUCT. (a) Except for matters set forth in
Schedule 7.2 or otherwise expressly permitted or required by the terms of this
Agreement, from the date of this Agreement to the applicable Closing, Parent and
Seller shall conduct, and shall cause the Selling Subsidiaries to conduct, the
Business in the usual, regular and ordinary course consistent with past practice
and use all commercially reasonable efforts to keep intact the Business, keep
available the services of the Covered Employees and preserve the relationships
of the Business with customers, suppliers, licensors, licensees, distributors,
resellers and others with whom the Business deals to the end that the Business
and the goodwill of the Business shall be unimpaired at the applicable Closing.
Prior to the applicable Closing, Parent and Seller shall not, and shall cause
their respective Affiliates not to, take any action that would, or that could
reasonably be expected to, result in any of the conditions set forth in
Article IV not being satisfied. In addition (and without limiting the generality
of the foregoing), during such period prior to the applicable Closing, except as
set forth in Schedule 7.2 or otherwise expressly permitted by the terms of this
Agreement, Parent and Seller shall not, and shall not permit any of their
respective Affiliates to, in each case insofar as the Business is concerned:
(i) amend any certificate of incorporation, by-laws or other similar
governing instrument of any Subsidiary the equity or other ownership
interests of which are included in the Acquired Assets;
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(ii) adopt or amend any Benefit Plan or enter into, adopt, extend, renew
or amend any collective bargaining agreement or other Contract with any
labor organization, union or association, or any Covered Employee, except in
each case as required by law, or grant to any Covered Employee any increase
in compensation or benefits, except for any such increase which (A) is made
in connection with annual salary reviews, (B) is consistent with past
practice and (C) is not in excess of 10% in the aggregate with respect to
any Covered Employee;
(iii) (A) release or otherwise terminate the employment of any Covered
Employee, (B) transfer any Covered Employee out of the Business or
(C) solicit for employment any Covered Employee to engage in a business
other than the Business, except in the case of clause (A) for any
terminations for cause or terminations or transfers as a result of any
Covered Employee's willful and material violations of Parent's, Seller's or
any Selling Subsidiary's policies and procedures, as in effect on the date
of this Agreement;
(iv) incur or assume any liabilities, obligations or indebtedness or
guarantee any such liabilities, obligations or indebtedness, other than in
the ordinary course of business and consistent with past practice;
(v) (A) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, company, partnership, limited
liability company, trust, joint venture, business association or other
business organization or division thereof or otherwise acquire any assets
(other than Inventory) that, in any such case, are material (individually or
in the aggregate) to the Business or (B) make or incur or commit to make or
incur any capital expenditure that, individually, is in excess of $250,000
or make or incur or commit to make or incur any such expenditures which, in
the aggregate, are in excess of the budget agreed to by Parent and Buyer and
set forth in Schedule 7.2(v);
(vi) enter into any lease of real property or any renewal of an existing
lease of real property that may constitute Leased Real Property;
(vii) pay, discharge, modify or satisfy any claims, liabilities or
obligations (whether accrued, absolute, contingent, asserted or otherwise)
outside of the ordinary course of business consistent with past practice
other than those claims, liabilities or obligations which are required by
their terms as in effect on the date of this Agreement to be paid,
discharged, modified or satisfied to the extent such claims, liabilities or
obligations are reflected or reserved against in the Balance Sheet (or in
the notes thereto), PROVIDED that Parent and Seller shall not, and shall not
permit their respective Affiliates to pay, loan or advance any amount to, or
enter into any agreement or arrangement with, or make any payments to or on
behalf of, Parent, Seller or their respective Affiliates which would have an
adverse impact on, or adverse consequences to, the Business after the date
of the relevant Closing;
(viii) make loans, advances or capital contributions to, or investments
in, any other person;
(ix) enter into, extend or renew (A) any Contract or amendment thereof
(1) which contains any provision listed in Section 5.8 (iv), (v), (vi), (x),
(xii), (xiv)(B) and (C), (xviii)(B), (xx) and (xxiv), (2) which contains any
other provision listed in Section 5.8 unless such Contract or amendment is
necessary to operate the Business as it was operated in the ordinary course
consistent with past practice immediately prior to the date of this
Agreement or (3) which restricts the ability of the Business to own,
operate, sell, transfer, pledge or otherwise dispose of or encumber any
Acquired Asset, (B) any Contract or amendment thereof that grants any party
the right or ability to access, license or use all or a material portion of
the Intellectual Property of any Business Unit, (C) any Contract providing
for the services of any dealer, distributor, sales representative, or
similar representative, or (D) any other Contract, other than, in the case
of
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clauses (C) or (D), in the ordinary course of business consistent with past
practice with a term not in excess of one year; or accelerate, terminate,
modify, waive, relinquish, assign or cancel any material (individually or in
the aggregate) Contract;
(x) engage in any other transaction involving the Business or the
Acquired Assets other than in the ordinary course of business consistent
with past practice;
(xi) settle or compromise (A) any suit or claim relating to the
transactions contemplated by the Transaction Agreements or threatened suit
or claim relating to the transactions contemplated by the Transaction
Agreements or (B) other than any such litigation set forth on Schedule 5.9,
any material litigation or material threatened litigation;
(xii) accelerate the billing or collection or other realization of cash
or Excluded Assets from the Acquired Assets or accelerate the provision of
goods and services of the Business or delay the payment of liabilities which
would become Assumed Liabilities or grant any allowance or discount, in each
case outside the ordinary course of business consistent with past practice;
(xiii) write down any of its material assets, including any Acquired
Intellectual Property, or make any change in any accounting principal,
method or practice (financial, Tax or otherwise) other than those required
by GAAP or applicable law;
(xiv) take any action or fail to take any action which would result in
the material loss or reduction in value of the Acquired Intellectual
Property, taken as a whole;
(xv) take any action that would or that could reasonably be expected to
result in (A) any representation and warranty of Parent, Seller or the
Selling Subsidiaries set forth in this Agreement that is qualified as to
materiality becoming untrue, (B) any such representation and warranty that
is not so qualified becoming untrue in any material respect or (C) any
condition to the transactions contemplated hereby and set forth in
Section 4.1 not being satisfied; or
(xvi) authorize any of, or commit or agree to take, whether in writing or
otherwise, to do any of, the foregoing actions.
(b) AFFIRMATIVE COVENANTS. Until the applicable Closing, Parent and Seller
shall, and shall cause the Selling Subsidiaries to:
(i) upon any damage, destruction or loss to any material Acquired Asset,
apply any and all insurance proceeds received with respect thereto to the
prompt repair, replacement and restoration thereof to the condition of such
Acquired Asset before such event; and
(ii) continue to audit and update distributor and "reseller" royalty
reports in the ordinary course of business consistent with past practice.
(c) CONSULTATION AND NOTICE. (i) In connection with the continuing operation
of the Business between the date of this Agreement and the applicable Closing,
Parent and Seller shall, and shall cause the Selling Subsidiaries to, consult in
good faith on a reasonably regular basis with the Representatives of the
Purchasing Companies to report material (individually or in the aggregate)
operational developments, the general status of relationships with customers and
resellers of the Business and the general status of ongoing operations pursuant
to procedures reasonably requested by such Representatives. Parent and Seller
acknowledge that any such consultation shall not constitute a waiver by any
Purchasing Company of any rights it may have under this Agreement (including any
such rights under Section 4.1 or Article XI), and that the Purchasing Companies
shall not have any liability or responsibility for any actions of Parent,
Seller, the Selling Subsidiaries or any of their respective Representatives with
respect to matters that are the subject of such consultations.
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(ii) Parent and Seller shall promptly notify Buyer of:
(A) Parent and Seller shall promptly advise Buyer in writing of the
occurrence of any matter or event that (I) is, or that could reasonably
be expected to be, material (individually or in the aggregate) to the
business, assets, properties, condition (financial or otherwise), or
results of operations of the Business or (II) could reasonably be
expected to result in (a) any representation and warranty of Parent,
Seller or the Selling Subsidiaries set forth in this Agreement that is
qualified as to materiality becoming untrue, (b) any such representation
and warranty that is not so qualified becoming untrue in any material
respect or (c) any condition to the transactions contemplated hereby and
set forth in Section 4.1 not being satisfied;
(B) any written notice or other written communication from any person
(other than a Governmental Entity) alleging that the consent of such
person is required in connection with the transactions contemplated by
the Transaction Agreements;
(C) any written notice or other written communication from any
customer, distributor or reseller of the Business to the effect that such
customer or reseller is terminating or otherwise materially adversely
modifying its relationship with Parent, Seller or any of their respective
Subsidiaries as a result of the transactions contemplated by the
Transaction Agreements;
(D) except as otherwise prohibited by applicable law, any notice or
other communication from any Governmental Entity in connection with the
transactions contemplated by the Transaction Agreements; and
(E) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or
involving or otherwise affecting Parent, Seller, any of their respective
Subsidiaries or the Business that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to
Section 5.9 or that relate to the consummation of the transactions
contemplated by the Transaction Agreements.
SECTION 7.3. CONFIDENTIALITY. Parent and Seller shall keep confidential and
shall cause their respective Subsidiaries to, and shall use commercially
reasonable efforts to cause their Affiliates and their respective officers,
directors, employees and advisors to, keep confidential all non-public
information relating to the Business, the Acquired Assets or the Assumed
Liabilities, except as required by compulsory legal process. Each of Parent and
Seller shall enforce any confidentiality agreement to which it is a party
relating to the Business, the Acquired Assets or the Assumed Liabilities on
Buyer's behalf and, following the relevant Closing, at Buyer's request and cost.
SECTION 7.4. PREPARATION OF THE PARENT PROXY STATEMENT; STOCKHOLDER MEETING.
(a) As promptly as practicable following the date of this Agreement, Parent
shall prepare and, no later than April 30, 2001, file with the SEC the
preliminary Parent Proxy Statement. Notwithstanding anything contained in this
Agreement to the contrary, Parent shall file with the SEC the definitive Parent
Proxy Statement and shall cause the mailing of the definitive Parent Proxy
Statement to the stockholders of Parent to occur on or prior to the tenth
calendar day following the filing of the preliminary Parent Proxy Statement with
the SEC. Each of Buyer and Parent shall use commercially reasonable efforts to
respond as promptly as practicable to any comments of the SEC with respect to
the Parent Proxy Statement. Each of Buyer and Parent shall furnish all
information concerning it to the other as may be reasonably requested in
connection with the preparation, filing and distribution of the Parent Proxy
Statement. Parent shall promptly notify Buyer upon the receipt of any comments
from the SEC or its staff or any request from the SEC or its staff for
amendments or supplements to the Parent Proxy Statement and shall provide Buyer
with copies of all correspondence between it and its representatives, on the one
hand, and the SEC and its staff, on the other hand. Notwithstanding the
foregoing, prior to filing or mailing the Parent Proxy Statement (or any
amendment or supplement thereto) or responding
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to any comments of the SEC with respect thereto, Parent (i) shall provide Buyer
an opportunity to review and comment on such document or response, (ii) shall
include in such document or response all comments reasonably proposed by Buyer
and (iii) shall not file or mail such document or respond to the SEC prior to
receiving the approval of Buyer, which approval shall not be unreasonably
withheld or delayed.
(b) Parent agrees that none of the information included or incorporated by
reference in the Parent Proxy Statement will (except to the extent revised or
superseded by amendments or supplements contemplated hereby), at the date the
Parent Proxy Statement is filed with the SEC or mailed to the stockholders of
Parent or at the time of the Parent Stockholder Meeting, or at the time of any
amendment or supplement thereof, 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 therein, in light of the circumstances under which
they are made, not misleading, except that no covenant is made by Parent hereto
with respect to statements made in the Parent Proxy Statement based on
information supplied in writing by or on behalf of Buyer for inclusion or
incorporation by reference therein. Buyer agrees that none of such information
will (except to the extent revised or superseded by amendments or supplements
contemplated hereby), at the date the Parent Proxy Statement is filed with the
SEC or mailed to the stockholders of Parent or at the time of the Parent
Stockholder Meeting, or at the time of any amendment or supplement thereof,
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
therein, in light of the circumstances under which they are made, not
misleading. The Parent Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
(c) Parent shall, as promptly as practicable after the date of this
Agreement, establish a record date (which will be as promptly as reasonably
practicable following the date of this Agreement) for, duly call, give notice
of, convene and hold a meeting of its stockholders, which meeting Parent shall
cause to occur no later than the 20th Business Day following the mailing of the
Parent Proxy Statement (the "Parent Stockholder Meeting"), for the purpose of
obtaining the Parent Stockholder Approval regardless of whether a Parent Adverse
Recommendation Change has been made; PROVIDED, HOWEVER, that (i) if Parent is
unable to obtain a quorum of its stockholders at such time, Parent may extend
the date of the Parent Stockholder Meeting by no more than five Business Days
and Parent shall use its commercially reasonable efforts during such
five-Business Day period to obtain such a quorum as soon as practicable and
(ii) Parent may delay the Parent Stockholder Meeting to the extent (and only to
the extent) Parent reasonably determines that such delay is required by
applicable law to comply with comments made by the SEC with respect to the
Parent Proxy Statement. The notice of such Parent Stockholder Meeting shall
state that a resolution to approve the Transaction Agreements and the
transactions contemplated thereby will be considered at the Parent Stockholder
Meeting. Subject to Section 7.5(b)(i), Parent shall, through its Board of
Directors, recommend to holders of Parent Common Stock that they approve the
Transaction Agreements and the transactions contemplated thereby and shall
include such recommendation in the Parent Proxy Statement. Without limiting the
generality of the foregoing, Parent agrees that its obligations pursuant to this
Section 7.4(c) shall not be affected by the commencement, public proposal,
public disclosure or communication to Parent or any other person of any Takeover
Proposal. In the event the stockholders of Parent do not approve the amendment
of Parent's certificate of incorporation to change Parent's corporate name from
"Informix Corporation", Buyer agrees to provide Parent with authorization to use
the name "Informix Corporation" for references to its corporate name which are
required by applicable law; PROVIDED, HOWEVER, that Parent agrees to use
commercially reasonable efforts to avoid confusion with the Business and Buyer's
ownership and use of the Acquired Assets, including the name "Informix" and
source of origin of goods. Parent further agrees to continue to use its
commercially reasonable efforts to obtain the approval of its stockholders to
such amendment to Parent's certificate of incorporation to change its corporate
name.
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SECTION 7.5. NO SOLICITATION BY PARENT. (a) Parent shall not, nor shall it
permit any of its Subsidiaries to, or authorize or permit any director, officer
or employee of Parent or any of its Subsidiaries or any investment banker,
attorney, accountant or other advisor or representative of Parent or any of its
Subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage, or
take any other action knowingly to facilitate, any Takeover Proposal or
(ii) enter into, continue or otherwise participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or otherwise cooperate in any way with, any Takeover Proposal; PROVIDED,
HOWEVER, that at any time prior to obtaining the Parent Stockholder Approval,
the Board of Directors of Parent may, in response to a bona fide written
Takeover Proposal that such Board of Directors determines in good faith
constitutes or is reasonably likely to lead to a Superior Proposal (as defined
below), and which Takeover Proposal was unsolicited and did not otherwise result
from a breach of this Section 7.5, and subject to compliance with Sections
7.5(c) and (d), (x) furnish, or cause its Subsidiaries to furnish information
with respect to Parent and its Subsidiaries to the person making such Takeover
Proposal (and its representatives) pursuant to a customary confidentiality
agreement, PROVIDED that all such information has been or is provided on a prior
or substantially concurrent basis to Buyer, and (y) participate in discussions
or negotiations with the person making such Takeover Proposal (and its
representatives) regarding such Takeover Proposal.
The term "Takeover Proposal" means any inquiry, proposal or offer from any
person relating to, or that is reasonably likely to lead to, any direct or
indirect acquisition, in one transaction or a series of transactions, including
any merger, consolidation, tender offer, exchange offer, binding share exchange,
business combination, recapitalization, liquidation, dissolution, joint venture
or similar transaction, of (A) assets or businesses that constitute or represent
20% or more of the total revenue, operating income, EBITDA or assets of Parent
and its Subsidiaries, taken as a whole, or (B) 20% or more of the outstanding
shares of Parent Common Stock or any class or series of capital stock of (or
other equity or voting interests in) any of Parent or its Subsidiaries directly
or indirectly holding the assets or businesses referred to in clause (A) above,
other than the transactions contemplated by the Transaction Agreements.
The term "Superior Proposal" means any bona fide written offer not solicited
by or on behalf of Parent or any of its Subsidiaries made by a third party that,
upon acceptance thereof, would be binding on Parent or any such Subsidiary and
if consummated would result in such third party acquiring, directly or
indirectly, (i) shares representing more than 50% of the value and voting power
of the capital stock of Parent or all or substantially all the assets of Parent
and its Subsidiaries, taken as a whole or (ii) all or substantially all of the
assets of the Business, in either case for consideration consisting of cash
and/or securities and/or assumption of indebtedness or other obligations that
the Board of Directors of Parent determines in its good faith judgment (after
consultation with a financial advisor of nationally recognized reputation) to be
of a higher value than the transactions contemplated by the Transaction
Agreements, after taking into account all matters such Board of Directors
determines to be material, including the benefits to Parent and its Subsidiaries
from the Alliance Agreement and the value of Parent and its Subsidiaries
following the consummation of such transactions, from a financial point of view
to the stockholders of Parent (after taking into account any amendments or
modifications to this Agreement and the Other Transaction Agreements proposed by
Buyer that, upon acceptance thereof, would be binding on Parent, Seller and
Buyer).
(b) Neither the Board of Directors of Parent nor any committee thereof shall
(or shall agree or resolve to) (i) (A) withdraw or modify in a manner adverse to
Buyer or propose publicly to withdraw or modify in a manner adverse to Buyer the
recommendation or declaration of advisability by such Board of Directors or any
such committee of the Transaction Agreements, or the transactions contemplated
thereby, unless such Board of Directors or a committee thereof determines in
good faith that the failure to take such action would result in a breach of its
fiduciary duties under applicable law or (B) subject to the last sentence of
this Section 7.5(b), recommend, or propose publicly to
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recommend, the approval or adoption of any Takeover Proposal unless such Board
of Directors or a committee thereof determines in good faith that such Takeover
Proposal constitutes a Superior Proposal (any such action taken in accordance
with this clause (i) being referred to herein as a "Parent Adverse
Recommendation Change"), (ii) adopt or approve, or propose publicly to adopt or
approve, any Takeover Proposal, or withdraw its approval of the Transaction
Agreements and the transactions contemplated thereby, or propose publicly to
withdraw its approval of the Transaction Agreements and the transactions
contemplated thereby or (iii) cause or permit Parent to enter into any letter of
intent, memorandum of understanding, agreement in principle, acquisition
agreement, merger agreement, option agreement, joint venture agreement,
partnership agreement or other agreement (each, a "Parent Acquisition
Agreement") constituting or related to, or which is intended to or is reasonably
likely to lead to, any Takeover Proposal (other than a confidentiality agreement
referred to in Section 7.5(a)). Notwithstanding anything in this Section 7.5 to
the contrary, no action may be taken pursuant to Section 7.5(b)(i)(B) until
after the fifth business day following Buyer's receipt of written notice (a
"Notice of Superior Proposal") from Parent advising Buyer that the Board of
Directors of Parent has received a Superior Proposal and specifying the terms
and conditions of the Superior Proposal (it being understood and agreed that any
amendment relating to pricing or value or any other material term of a Superior
Proposal shall require a new Notice of Superior Proposal and a new five business
day period).
(c) In addition to the obligations of Parent set forth in paragraphs
(a) and (b) of this Section 7.5, Parent promptly and in any event with 24 hours
shall advise Buyer in writing of any Takeover Proposal, of any request for
information that Parent reasonably believes could reasonably be expected to lead
to or contemplates a Takeover Proposal or any inquiry Parent reasonably believes
could reasonably be expected to lead to any Takeover Proposal, the terms and
conditions of such Takeover Proposal, request or inquiry (including any
subsequent material amendment or modification to such terms and conditions) and
the identity of the person making any such Takeover Proposal, request or
inquiry. Parent shall keep Buyer informed in all material respects on a current
basis of the status and details (including amendments or proposed amendments) of
any such Takeover Proposal, request or inquiry.
(d) This Section 7.5 shall not prohibit Parent from (i) taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or (ii) making any disclosure to Parent's
stockholders if, in the good faith judgment of the Board of Directors of Parent,
after consultation with outside counsel, failure to so disclose would be
inconsistent with applicable law; PROVIDED, HOWEVER, that in no event shall
Parent or its Board of Directors or any committee thereof take, agree to take or
resolve to take any action prohibited by Section 7.5(b).
SECTION 7.6. EXPENSES. (a) Whether or not the transactions contemplated
hereby are consummated, and except as otherwise expressly provided in the
Transaction Agreements, all costs and expenses incurred in connection with the
Transaction Agreements and the transactions contemplated thereby shall be paid
by the party incurring such costs or expenses.
(b) In the event that (i)(A) a Takeover Proposal has been made to Parent or
its stockholders or any person has announced an intention (whether or not
conditional and whether or not withdrawn) to make a Takeover Proposal,
(B) thereafter this Agreement is terminated by either of Parent or Buyer
pursuant to Section 12.1(iv) (A) (but only if a vote to obtain the Parent
Stockholder Approval or the Parent Stockholder Meeting has not been held) or
Section 12.1(iv)(B), and (C) within 12 months after such termination, Parent or
any of its Subsidiaries enters into any Parent Acquisition Agreement with
respect to, or consummates, any Takeover Proposal (solely for purposes of this
Section 7.6(b)(i)(C), the term "Takeover Proposal" shall have the meaning set
forth in the definition of Takeover Proposal contained in Section 7.5(a) except
that all references to 20% shall be deemed references to 35%) or (ii) this
Agreement is terminated by Buyer pursuant to Section 12.1(v), then Parent shall
pay to Buyer a fee equal to $35 million (the "Termination Fee") by wire transfer
of same-day funds to an account designated by Buyer (A) in the case of a
termination by Buyer pursuant to Section 12.1(v), within two
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business days after such termination and (B) in the case of a payment as a
result of any event referred to in Section 7.6(b)(i)(C), upon the first to occur
of such events.
(c) In the event that either of Parent or Buyer terminates this Agreement
pursuant to Section 12.1(iv)(B), regardless of whether the circumstances set
forth in Section 7.6(b)(i)(A) shall have occurred, Parent shall reimburse Buyer
for all of Buyer's fees and expenses not in excess of $5 million in connection
with the evaluation and pursuit of the transactions contemplated by the
Transaction Agreements by wire transfer of same-day funds to an account
designated by Buyer within two business days after such termination. The amount
of any fee paid by Parent to Buyer shall be credited against any subsequent
payment by Parent to Buyer of the Termination Fee pursuant to Section 7.6(b).
SECTION 7.7. INTELLECTUAL PROPERTY. (a) Each of Parent and Seller reserves
for itself and their respective Subsidiaries, a non-exclusive, perpetual,
nontransferable (except in the case of a transfer together with all or
substantially all of the assets of Parent and Seller), paid up, royalty-free,
worldwide, irrevocable license under the patents and patent applications listed
on Schedule 5.13(a), reissues and continuing applications thereof, and patents
issuing on the aforementioned applications, to make, have made, use, import,
offer to sell and sell, lease, license, distribute, copy, reproduce, modify,
execute, display, perform, translate into any language or form, and prepare
derivative works of software products, excluding database management software
products. For clarity purposes, the parties agree that, for the purpose of this
Section 7.7 and Section 10.1(a) only, the Parent's, Seller's, and their
respective Subsidiaries' versions of Media360, Axielle, DataStage XE,
DataEngine, and WebSuccess products as of the date of this Agreement are not
database management software products.
(b) Effective as of the Initial Closing Date, Parent and Seller, on behalf
of themselves and their respective Subsidiaries, hereby grant to Buyer and its
Subsidiaries a license under: (i) the patents listed on Schedule 7.7, reissues
and continuing applications thereof and patents issuing on such applications;
and (ii) to the extent not included in clause (i), any patents issuing on patent
applications owned or licensable by Parent, Seller or their respective
Subsidiaries, filed on or after the date of this Agreement and entitled to an
effective filing date within one year after the Initial Closing Date; to make,
have made, use, import, offer to sell, sell, lease, license, distribute, copy,
reproduce, modify, execute, display, perform, translate into any language or
form, and prepare derivative works of, any products. Such license shall be
non-exclusive, perpetual, nontransferable (except in the case of transfer
together with all or substantially all of the assets of a business unit of
Buyer), paid up, royalty free, worldwide, and irrevocable. The license to the
patents in clause (i) above is unrestricted as to the field of use and includes
all fields. The license to the patents in clause (ii) above is restricted to the
field of database management software products.
(c) (i) Buyer and its Subsidiaries hereby covenant not to sue Parent and
Seller and their respective Subsidiaries for two years from the Initial Closing
Date for patent infringement of any United States or foreign patent owned by
Buyer or its Subsidiaries where such infringement is caused by the making,
having made, using, or selling of Media 360, Axielle, DataStageXE, DataEngine,
or Websuccess products or their follow on versions.
(ii) Parent, Seller and their respective Subsidiaries hereby covenant
not to sue Buyer or its Subsidiaries for two years from the Initial Closing
Date for patent infringement of any United States or foreign patent owned by
Parent, Seller or their respective Subsidiaries where such infringement is
caused by the making, having made, using, or selling of Buyer's or its
Subsidiaries' current products or their follow on versions.
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ARTICLE VIII
COVENANTS OF BUYER
Buyer covenants and agrees as follows:
SECTION 8.1. CONFIDENTIALITY. Buyer acknowledges that the information
provided or to be provided to it by or on behalf of Parent and Seller in
connection with the transactions contemplated by the Transaction Agreements is
subject to the terms of the confidentiality agreement dated as of January 17,
2001 (the "Confidentiality Agreement"), between Parent and Buyer, the terms of
which are incorporated herein by reference.
SECTION 8.2. BULK TRANSFER LAWS. Buyer, Parent and Seller each hereby waive
compliance by Parent and Seller with the provisions of the "bulk sales", "bulk
transfer" or similar laws of any state. Each of Parent and Seller agrees to
indemnify and hold Buyer harmless against any and all claims, losses, damages,
liabilities, costs and expenses incurred by Buyer or any of its Affiliates as a
result of any failure to comply with any such "bulk sales", "bulk transfer" or
similar laws.
ARTICLE IX
MUTUAL COVENANTS
Each of Parent, Seller and Buyer covenants and agrees as follows:
SECTION 9.1. CONSENTS; EXCLUDED CONTRACTS. (a) Notwithstanding anything in
any of the Transaction Agreements to the contrary, none of the Transaction
Agreements shall constitute an agreement to assign or transfer any interest in
any asset, claim, right or benefit the transfer of which is otherwise
contemplated hereby if such an assignment or transfer or attempt to make such an
assignment or transfer without the consent or approval of a third party would
constitute a breach or other contravention of the rights of such third party, or
affect adversely the rights of any party hereto or any of their Affiliates, as
the case may be, thereunder (such assets being collectively referred to herein
as "Restricted Assets"); and any transfer or assignment to Buyer or any
Purchasing Company by Parent, Seller or any Selling Subsidiary of any interest
under any such Restricted Asset shall be made subject to such consent or
approval being obtained. Parent, Seller and Buyer shall use commercially
reasonable efforts, and shall cause their Subsidiaries to use commercially
reasonable efforts, to obtain such consents or approvals prior to the applicable
Closing; PROVIDED, HOWEVER, that Buyer shall not be required to incur any out of
pocket cost or expense in connection with such efforts and Parent, Seller, and
their respective Subsidiaries shall not be required to pay any consent fees or
make any other financial accommodation to any person in order to obtain any such
consents or approvals. In the event any such consent or approval is not obtained
by five Business Days prior to the applicable Closing, (i) Parent and Seller
shall inform Buyer at such time of such fact and continue at Buyer's request to
cooperate with Buyer in attempting to obtain any such consent or approval and
(ii) at the applicable Closing, Parent and Seller shall at their expense effect
alternative arrangements in the form of a license, sublease, or operating
agreement in form and substance satisfactory to Buyer until such time as such
consent or approval has been obtained which results in a Purchasing Company
receiving all the benefits and bearing all the ordinary course costs,
liabilities and other obligations with respect to any such Restricted Asset, and
(iii) notwithstanding anything in the Transaction Agreements to the contrary,
unless and until any such consent or approval with respect to any Restricted
Asset is obtained, such Restricted Asset shall not constitute an Acquired Asset
and any associated liability shall not constitute an Assumed Liability for any
purpose under the Transaction Agreements (except for purposes of Section 5.3 of
this Agreement).
(b) Unless any such Contract is listed on Schedule 9.1(b)(i), which Schedule
may be amended from time to time following the date hereof by Buyer,
notwithstanding anything in any of the Transaction Agreements to the contrary,
none of the Transaction Agreements shall constitute an
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agreement to assign or transfer any interest in any asset, claim, right or
benefit the transfer of which would result in Buyer, any other Purchasing
Company or any of their respective Subsidiaries becoming subject to (x) any
Contract in English or accompanied by an English language translation the
accuracy of which has been certified by an officer of Parent or Seller of the
type set forth in Section 5.8(a)(i) through Section 5.8(a)(viii) and
Section 5.8(a)(xii), (y) any non-English Contract (unless accompanied by an
English language translation the accuracy of which has been certified by an
officer of Parent of Seller) of any type set forth in Section 5.8 or (z) any
Contract listed on Schedule 9.1(b)(ii), which shall consist of Contracts not
reviewed by Buyer prior to the date of this Agreement (and Buyer hereby agrees
to review such Contracts following the date of this Agreement for inclusion on
Schedule 9.1(b)(i)) (each such Contract, an "Excluded Contract"); and any
transfer or assignment to Buyer or any other Purchasing Company by Parent,
Seller or any Selling Subsidiary of any interest under any such Excluded
Contract shall be void and of no force or effect. Buyer shall provide Parent and
Seller with Buyer's justifications for excluding each Excluded Contract and
shall provide Parent's executive officers with an opportunity to discuss such
justifications with the General Manager of Buyer's Data Management Solutions
business in light of the economic and other consequences to Parent and Seller of
such exclusion. Parent, Seller and Buyer shall use commercially reasonable
efforts, and shall cause their Subsidiaries to use commercially reasonable
efforts, to obtain such waiver, modification or amendment as may be necessary to
cause such Contract not to constitute an Excluded Contract prior to the
applicable Closing; PROVIDED, HOWEVER, that Buyer shall not be required to incur
any out of pocket cost or expense in connection with such efforts. In the event
any such waiver, modification or amendment is not obtained by five Business Days
prior to the applicable Closing, (i) Parent and Seller shall inform Buyer at
such time of such fact and continue at Buyer's request to cooperate with Buyer
in attempting to obtain any such waiver, modification or amendment and (ii) at
the applicable Closing, Parent and Seller shall at their expense effect
alternative arrangements as may be required in order to place Buyer in the
position Buyer would have been in with respect to any such Excluded Contract
(including both the benefits and burdens thereof (other than any such burden
that resulted or would result in such Contract constituting an Excluded
Contract)) if such waiver, modification or amendment had been obtained at no
cost to Buyer. Notwithstanding whether or not Parent or Seller notified Buyer or
any other Purchasing Company of any such Excluded Contract pursuant to
Section 5.8 or otherwise, such Excluded Contract shall constitute Excluded
Assets. To the extent Buyer or any other Purchasing Company becomes aware
following any Closing that an Excluded Contract was inadvertently assigned or
transferred to Buyer or any other Purchasing Company, such Excluded Contract
shall be transferred back to Parent, Seller or the relevant Selling Subsidiary
as an Excluded Asset in accordance with Section 9.6. Notwithstanding any action
Buyer or any other Purchasing Company may have taken in performance of such
Excluded Contract or otherwise, the provisions of this Section 9.1(b) regarding
the implementation of alternative arrangements shall apply to such Excluded
Contract and the Purchasing Companies shall retain all of their rights under
Article XI with respect to any of the foregoing.
SECTION 9.2. PUBLICITY. Parent, Seller and Buyer each agree that no public
release or announcement concerning the transactions contemplated by the
Transaction Agreements shall be issued by such party or any of its Subsidiaries
or any of their Representatives without the prior written consent of the other
such party, except as required by applicable law or the rules or regulations of
any securities exchange on which securities of such party are listed, in which
case the party that is required (or whose Subsidiaries or Representatives are
required) to make the release or announcement shall allow the other such party
reasonable time to comment on such release or announcement in advance of such
issuance; PROVIDED, HOWEVER, that each of Parent and Buyer may, following
reasonable prior consultation with the other party, make internal announcements
to their respective employees.
SECTION 9.3. COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions of this Agreement, including Section 9.1, each of Parent, Seller and
Buyer shall use all commercially reasonable efforts to cause each Closing to
occur, including using its commercially reasonable efforts to
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obtain all material consents, permits, authorizations and approvals of, and to
make all necessary filings, notifications or registrations with, all
Governmental Entities and other persons which are necessary for the consummation
of the transactions contemplated by the Transaction Agreements. Without limiting
the generality of the foregoing, if the Initial Closings occur and any other
Closing does not occur at the time of the Initial Closings, each of Parent,
Seller and Buyer shall use all commercially reasonable efforts to cause such
other Closing to occur as promptly as practicable thereafter.
SECTION 9.4. REGULATORY MATTERS. Without limiting the generality of
Section 9.3, each of Parent, Seller and Buyer shall (a) promptly after the date
of this Agreement make any filing with the FTC and the DOJ required under the
HSR Act with respect to the transactions contemplated by the Transaction
Agreements, (b) promptly after the date of this Agreement, make or cause its
Subsidiaries to make any filing or notice required under any other antitrust,
competition, merger or other law or regulation applicable to the Transaction
Agreements or the transactions contemplated thereby and (c) provide any
supplemental information requested in connection with the HSR Act or such other
laws or regulations promptly after such request is made. Each of Parent, Seller
and Buyer shall, and shall cause its Subsidiaries to, furnish to the other such
information and assistance as the other may reasonably request in connection
with its preparation of any filing or submission which is necessary under the
HSR Act or such other laws or regulations or which is otherwise requested by the
FTC or DOJ or other Governmental Entity in the course of any review of the
transactions contemplated by the Transaction Agreements. Parent, Seller and
Buyer shall keep each other apprised of the status of any communications with,
and inquiries or requests for additional information from, the FTC and DOJ or
other Governmental Entity. For purposes of this Agreement, the "commercially
reasonable efforts" of any party shall not require such party to agree to any
prohibition, limitation or other requirement of the type described in
Section 4.1(iv) or to enter into any litigation with any Governmental Entity.
SECTION 9.5. INTERCOMPANY ARRANGEMENTS. Parent, Seller and Buyer acknowledge
and agree that, immediately prior to the Closings with respect to any Business
Unit, all Contracts (other than those constituting the Transaction Agreements)
between such Business Unit, on the one hand, and Parent, Seller or any of their
respective Subsidiaries (exclusive of any Business Unit), on the other hand,
shall be terminated or settled, as the case may be, and be of no further force
or effect, notwithstanding any terms thereof to the contrary.
SECTION 9.6. FURTHER ASSURANCES. From time to time after each Closing, and
for no further consideration, each of Parent, Seller and Buyer shall, and shall
cause its Subsidiaries to, execute, acknowledge and deliver such assignments,
transfers, consents, assumptions and other documents and instruments and take
such other actions as may reasonably be deemed necessary or desirable by the
other party to consummate the transactions contemplated hereby (including
(i) transferring back to Parent, Seller or the relevant Selling Subsidiary any
Excluded Asset or Excluded Liability, which Excluded Asset or Excluded Liability
was inadvertently transferred to a Purchasing Company at the Closings and
(ii) transferring to the relevant Purchasing Company any Acquired Asset or
Assumed Liability contemplated by this Agreement to be transferred to such
Purchasing Company at the Closings which was not so transferred at the
Closings).
SECTION 9.7. OTHER TRANSACTION AGREEMENTS. Subject to the terms and
conditions hereof, each of Parent, Seller and Buyer shall cause its Subsidiaries
who are parties to Other Transaction Agreements to perform, pay and satisfy all
of their respective obligations and liabilities thereunder as and when due.
SECTION 9.8. TAX MATTERS. (a) One half of all real, personal and
intellectual property transfer, documentary, sales, use, registration,
value-added, stamp duty and other similar Taxes (including interest, penalties
and additions to Tax) incurred in connection with the transactions contemplated
by the Transaction Agreements ("Transfer Taxes") shall be borne by Parent and
Seller and the other half, up to an aggregate of $2,000,000 for all such
transactions, shall be borne by Buyer (or other Purchasing
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Company, as applicable) and the balance of any such Transfer Taxes shall be
borne by Parent and Seller; PROVIDED, HOWEVER, that (i) any such Transfer Taxes
incurred in connection with the transfer of the Acquired Assets and the Business
of the Business Unit located in the Republic of Ireland shall be borne solely by
Parent and Seller and (ii) the Purchasing Company that acquires the Acquired
Intellectual Property of such Business Unit located in the Republic of Ireland
shall not be resident or domiciled in the Republic of Ireland by virtue of
incorporation or place of management and control.
(b) Each of Parent and Seller shall deliver to Buyer at each Closing a
Certificate in form and substance satisfactory to Buyer, duly executed and
acknowledged, certifying any facts that would exempt the transactions
contemplated hereby from withholding pursuant to the provisions of the Foreign
Investment in Real Property Tax Act.
(c) Buyer, Parent and Seller shall, and shall cause their respective
Subsidiaries and Affiliates to, cooperate with respect to Tax matters.
(d) In the case of any Return with respect to a Straddle Period required to
be filed by Buyer or a Purchasing Company after the Closing for the applicable
Business Unit, Seller shall pay Buyer or the applicable Purchasing Company the
amount of any Excluded Tax that is or would otherwise be payable with respect to
such Return at least five Business Days prior to the date such payment is or
would otherwise be due (the "Due Date"); PROVIDED that Buyer shall furnish
Parent and Seller with a copy of such Return and Buyer's calculations with
respect to such Excluded Taxes within a reasonable period of time (but no less
than 10 days) prior to the relevant Due Date, and Buyer shall make such
revisions to such Returns as are reasonably requested by Parent or Seller.
SECTION 9.9. ACCOUNTS. (a) Each of Parent and Seller hereby constitutes and
appoints, effective as of the applicable Closing, Buyer and the other Purchasing
Companies and assigns them as true and lawful attorney of Parent, Seller and the
Selling Subsidiaries with full power of substitution (i) to collect for the
account of Buyer any Acquired Assets and (ii) to institute and prosecute all
proceedings which Buyer and its Subsidiaries may in their sole discretion deem
proper in order to enforce any right, title or interest in, to or under the
Acquired Assets, and to defend or compromise any and all actions, suits or
proceedings in respect of the Acquired Assets.
(b) All payments and reimbursements received by Parent, Seller or the
Selling Subsidiaries or any Affiliate thereof in connection with or arising out
of the Acquired Assets or Assumed Liabilities after the applicable Closing shall
be held by such person in trust for the benefit of Buyer and, promptly upon
receipt by such person of any such payment or reimbursement such person shall
pay over to Buyer or the other Purchasing Companies, as applicable, the amount
of such payment or reimbursement without right of setoff.
(c) All payments and reimbursements received by Buyer or the other
Purchasing Companies or their Affiliates in connection with or arising out of
the Excluded Assets or Excluded Liabilities after the applicable Closing shall
be held by such person in trust for the benefit of Parent or Seller, as
applicable, and, promptly upon receipt by such person of any such payment or
reimbursement, such person shall pay over to Parent or Seller, as applicable,
the amount of such payment or reimbursement without right of setoff.
(d) Each of Parent and Seller covenants and agrees that it shall, and shall
cause the Selling Subsidiaries to, promptly forward to Buyer any mail (physical,
electronic or otherwise), facsimile or telephone inquiries of actual or
potential clients, customers, suppliers and vendors of or relating to the
Business, including customer orders.
SECTION 9.10. REAL ESTATE MATTERS. (a) Parent, Seller and Buyer shall enter
into, or cause the relevant other Purchasing Companies or Selling Subsidiaries
(as applicable) to enter into, the agreements referred to in Schedule 9.10
hereof covering the assignment and subleasing of leasehold interests and
licensing of occupancy rights in Real Estate Leases to be listed in such
Schedule 9.10, in
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each case at the time of the applicable Closings for the countries in which such
properties are located. Such agreements shall be substantially in the form of
Exhibits C-1, C-2, C-3, C-4 and C-5, as applicable, with such deviations
therefrom, or additions thereto, as are set forth or contemplated in such
Schedule 9.10 or as are otherwise reasonably agreed upon by Buyer and Parent.
(b) In any instance where Seller or a Selling Subsidiary is not able to
provide to a Purchasing Company a lease, sublease or occupancy license for at
least six (6) months after the applicable Closing, Parent, Seller or such
Selling Subsidiaries shall use its best efforts to obtain an extension of the
relevant lease, sublease or occupancy license for at least such six-month period
(but not longer than one year without, in instances where a lease or sublease is
to be assigned (or a sublease is to be made) to Buyer or other Purchasing
Company, first obtaining Buyer's written consent thereto).
(c) Between the date of this Agreement and the applicable Closing, Buyer and
Parent shall determine whether a Real Estate Lease listed on Schedule 9.10 will
be assigned to Buyer (and partially subleased or licensed back to Parent, Seller
or a Selling Subsidiary) or, in the alternative, whether Buyer will sublease or
license a portion of the space described in a particular Real Estate Lease. The
parties shall make these determinations by applying the following guidelines.
Buyer shall determine the amount of space at each leased location which Buyer
requires to operate and conduct the Business ("Buyer's Required Space"). For
each leased location, the Buyer's Required Space shall be no less than that
fraction of the Total Space whose numerator is the sum of the number of
Transferred Employees plus the number of Contractors who will continue to
provide services to the Buyer after the Closing and whose denominator is the
total Seat Capacity (as defined in the Seller's real estate and facility
database, an extract of which is attached hereto on Schedule 9.10). The balance
of space at each location, whether currently vacant or used by Seller or Parent
for its operations or otherwise ("Seller's Retained Space"), together with
Buyer's Required Space, is referred to herein as the "Total Space". Based on an
analysis of the Total Space and existing Seat Capacity at each location, the
parties shall segment the Total Space between them by applying the following
ground rules: (i) for a "major" location in which the Buyer's Required Space is
predominate (such as, for example (but not limited to) Menlo Park, CA, Oakland,
CA, Denver, CO, Miami, Fl, Lenexa, KS, Portland, OR, Mexico City, Mexico,
Beijing, Singapore, Sydney, Australia, Tokyo, Japan, Bedfont Lakes, UK, Dublin,
Ireland, Munich, Germany, Paris, France -the Tour Frantome building), Seller
shall assign to Buyer and Buyer shall assume the Real Estate Lease (and the
Total Space described therein) at that location, and shall simultaneously
sublease or license back the Seller's Retained Space to Seller; (ii) for all
locations other than major locations (such as, for example, Atlanta, Edison,
N.J., New York City and Madrid), Buyer shall sublease or license Buyer's
Required Space from Seller; and (iii) for each location covered by a Real Estate
Lease listed in Schedule 9.10, the annual budgeted real estate costs, including
rental, escalation and other costs charged under that Real Estate Lease, shall
be allocated between Seller and Buyer as follows: Buyer's allocation shall equal
the ratio of Buyer's Required Space divided by the Total Space multiplied by
100% of the budgeted real estate costs. Seller's allocation shall be budgeted
real estate costs not allocated to Buyer.
(d) If any demising walls are required by law or by the landlord or are
requested by Seller in connection with any sublease or license or sublease-back
or license-back, the cost of such demising walls and any other costs arising out
of the activities described in subparagraph (e) below, shall be paid for by
Seller. If demising walls are requested by Buyer, Buyer shall pay the costs
described above. In either case, the demising walls shall be constructed only to
the extent (i) any necessary landlord consent is obtained, and (ii) the parties
to such sublease or license agree on the location of the demising walls.
(e) Supplementing subparagraph (d), the parties hereby agree that they shall
cooperate and use commercially reasonable efforts to consolidate each of their
respective Required Space at any given location (such as by making arrangement
whereby parties are on contiguous floors or consolidating into certain buildings
at multi-building locations). The parties agree that this will facilitate the
landlord consent required for each Real Estate Lease, maximize the opportunity
for Buyer, Seller or the
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applicable Selling Subsidiary (as the case may be) to dispose of any portion of
Seller's Retained Space to third parties and optimize each party's respective
ongoing business function.
(f) Notwithstanding the foregoing, Parent and Seller shall not be
responsible for, and Seller's Retained Space shall not include, space in any
facility which is in the range of normal excess real estate capacity (which
excess, for purposes of this Agreement, shall normally be considered to be 5% of
the minimum Buyer's Required Space at the facility). Buyer, Parent and Seller
shall cooperate and use commercially reasonable efforts to eliminate or reduce,
to the extent practicable, the actual costs of the excess capacity in a
cost-effective and expedient manner, including through consolidation or
relocation, where feasible and appropriate.
ARTICLE X
NONCOMPETITION
SECTION 10.1. NONCOMPETITION. Each of Parent and Seller understands that
Buyer shall be entitled to protect and preserve the going concern value of the
Business to the extent permitted by law and that Buyer would not have entered
into the Transaction Agreements absent the provisions of this Article X and,
therefore, for a period of five years (subject to the limitations set forth
below) from the Initial Closing Date, Parent and Seller shall not, and shall
cause each of their respective Subsidiaries not to, and shall use commercially
reasonable efforts to cause their respective Affiliates not to, directly or
indirectly:
(a) prior to the consummation of a Change of Control which is effected on or
after the six-month anniversary of the Initial Closing Date, engage in
activities or businesses, or establish any new businesses, in any country in or
to which the Business develops, distributes, manufactures, markets or sells its
products or services on the date hereof, directly or indirectly through
Subsidiaries or Affiliates, that compete in any respect with the Business
("Competitive Activities"), including not (i) developing, distributing,
manufacturing, marketing or selling products or services of the type sold by the
Business, (ii) soliciting any customer or prospective customer of the Business
to purchase any products or services sold by the Business or products or
services, competitive therewith from anyone other than Buyer and its
Subsidiaries, and (iii) assisting any person in any way to do, or attempt to do,
anything prohibited by clause (i) or (ii) above; PROVIDED, HOWEVER, that the
foregoing shall not prohibit Parent, Seller or any of their respective
Subsidiaries or Affiliates from engaging in Competitive Activities that relate
to RDBMS products that are embedded in, or products that are "bundled with,"
Ascential products so long as (x) the primary purpose of such Competitive
Activities is the sale, or the provision of services in respect of, such
Ascential products that do not compete with the Business and (y) none of Parent,
Seller or any of their respective Subsidiaries or Affiliates engages in any
marketing or promotion of RDBMS products, it being understood that (i) for the
six-month period following the Initial Closing Date, at which time the
restrictions in this clause (i) shall lapse, such prohibited marketing or
promotion shall include selling activities in which Parent or Seller or any of
their respective Subsidiaries or Affiliates participates in a sales campaign (as
opposed to routine sales calls) that includes customer meetings with any
suppliers of RDBMS products and advertising activities in which Parent or Seller
or any of their respective Subsidiaries or Affiliates is featured exclusively
with any single supplier of RDBMS products and (ii) such prohibition on
marketing and promotion shall not restrict any marketing or promotional
materials the primary purpose of which is the marketing or promotion of
Ascential products if such materials include ordinary course references to
non-exclusive Ascential business partner relationships and Ascential product
interoperability with third party products; or
(b) except to the extent prohibited by applicable law, engage in any action,
activity or course of conduct that is substantially detrimental to the Business
or its business reputation, including (i) soliciting, recruiting or hiring any
employees of the Business or persons who have worked for the
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Business and (ii) soliciting or encouraging any employee of the Business to
leave the employment of the Business; PROVIDED, that, the foregoing shall not
prohibit Parent, Seller or any of their respective Subsidiaries or Affiliates
from hiring any employee who has ceased to be employed by the Business for at
least 12 months;
PROVIDED, HOWEVER, that this Section 10.1(b) shall terminate and be of no
further force or effect upon (x) the consummation of a Change of Control which
occurs on or after the eighteen-month anniversary of the date of the Initial
Closing Date or (y) on the eighteen-month anniversary of the Initial Closing
Date, if a Change of Control shall have been consummated prior to such
anniversary.
ARTICLE XI
INDEMNIFICATION
SECTION 11.1. INDEMNIFICATION BY PARENT AND SELLER. Parent and Seller shall,
jointly and severally, or shall cause the relevant Selling Subsidiaries to,
indemnify Buyer and its Affiliates and each of their respective officers,
directors, employees, stockholders, agents and representatives against and hold
them harmless from (whether in connection with a Third Party Claim or a Direct
Claim) any loss, claim, damage, liability (whether asserted or unasserted,
absolute or contingent), cost, expense, obligations, judgments, Liens,
injunctions, charges, orders, decrees, rulings, dues, assessments, Taxes, fines,
penalties, fees and amounts paid in settlement (including reasonable fees and
expenses of counsel consistent with Section 11.5(a)(ii)) (each a "Loss" and,
collectively, "Losses") as incurred (payable promptly upon written request) by
any such indemnified party arising from, in connection with or otherwise with
respect to (i) subject to Section 13.6, any failure of any representation or
warranty of Parent, Seller or any of the Selling Subsidiaries contained in the
Transaction Agreements or any certificate delivered by or on behalf of Parent or
Seller in connection therewith to be true and correct in all respects (it being
agreed that for purposes of such right to indemnification, the representations
and warranties of Parent, Seller and any of the Selling Subsidiaries shall be
deemed not qualified by any references therein to materiality generally or to
whether or not any breach would result or could reasonably be expected to result
in a Buyer Material Adverse Effect or a Business Material Adverse Effect);
(ii) any breach of any obligation of Parent, Seller or any of the Selling
Subsidiaries contained in the Transaction Agreements; (iii) any of the Excluded
Liabilities; or (iv) the operation or ownership of the Excluded Assets;
PROVIDED, HOWEVER, that Parent, Seller and the Selling Subsidiaries shall not be
required to indemnify or hold harmless any person, and shall not have any
liability, under clause (i) above (A) unless the aggregate of all Losses
relating thereto for which Parent, Seller or the Selling Subsidiaries would, but
for this proviso, be liable exceeds on a cumulative basis an amount equal to
$10,000,000, and then only to the extent of any such excess, (B) for any
individual item where the Loss is less than $50,000 and (C) subject to
Section 11.10, for any Losses in excess of the Worldwide Purchase Price paid in
accordance with Section 3.1(c) in the aggregate.
SECTION 11.2. INDEMNIFICATION BY BUYER. From and after the applicable
Closing, Buyer shall, or shall cause the other Purchasing Companies to,
indemnify Parent, Seller and each of their respective Affiliates and each of
their respective officers, directors, employees, stockholders, agents and
representatives against and hold them harmless from (whether in connection with
a Third Party Claim or a Direct Claim) any Loss as incurred (payable promptly
upon written request) by any such indemnified party arising from, in connection
with or otherwise with respect to (i) subject to Section 13.6, any failure of
any representation or warranty of Buyer or any of its Affiliates contained in
the Transaction Agreements or any certificate delivered by or on behalf of Buyer
in connection therewith to be true and correct in all material respects (it
being agreed that for the purposes of such right to indemnification, the
representations and warranties of Buyer and the other Purchasing Companies shall
be deemed not qualified by any reference therein to materiality generally or to
whether or not any breach would result or could reasonably be expected to result
in a Buyer Material Adverse Effect or a Business Material Adverse Effect),
(ii) any breach of any obligation of Buyer, any
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Purchasing Company or any of their respective Affiliates contained in the
Transaction Agreements; (iii) any of the Assumed Liabilities or (iv) the
operation of the Business after the relevant Closing; PROVIDED, HOWEVER, that
Buyer and the other Purchasing Companies shall not be required to indemnify or
hold harmless any person, and shall not have any liability, under clause (i)
above (A) unless the aggregate of all Losses relating thereto for which Buyer or
the other Purchasing Companies would, but for this proviso, be liable exceeds on
a cumulative basis an amount equal to $10,000,000, and then only to the extent
of any such excess, (B) for any individual item where the Loss is less than
$50,000 and (C) for any Losses in excess of the Worldwide Purchase Price paid in
accordance with Section 3.1(c) in the aggregate.
SECTION 11.3. LOSSES NET OF INSURANCE. The amount of any Loss for which
indemnification is provided under this Article XI shall be net of any amounts
actually recovered by the indemnified party under insurance policies with
respect to such Loss and any such amounts actually recovered by any indemnified
party to the extent relating to any Loss previously paid by any indemnifying
party hereunder shall be paid over promptly to such indemnifying party.
SECTION 11.4. TERMINATION OF INDEMNIFICATION. The obligations to indemnify
and hold harmless any party (i) pursuant to clause (i) of each of Sections
11.1(a) and 11.2(a) shall terminate when the applicable representation or
warranty terminates pursuant to Section 13.6 and (ii) pursuant to the other
clauses of Sections 11.1(a) and 11.2(a) shall not terminate; PROVIDED, HOWEVER,
that such obligations to indemnify and hold harmless shall not terminate with
respect to any item as to which the person to be indemnified shall have, before
the expiration of the applicable period, made a Third Party Claim or Direct
Claim, as applicable.
SECTION 11.5. PROCEDURES RELATING TO THIRD PARTY AND DIRECT INDEMNIFICATION
CLAIMS. (a) THIRD PARTY CLAIMS. (i) In order for a person (the "indemnified
party") to be entitled to any indemnification pursuant to this Article XI in
respect of, arising out of or involving a claim or demand made by any person
other than a party hereto against the indemnified party (a "Third Party Claim"),
such indemnified party must notify the indemnifying party in writing of the
Third Party Claim promptly, and in any event within 20 Business Days, after
receipt by such indemnified party of notice of the Third Party Claim; PROVIDED,
HOWEVER, that failure to give such notification shall not affect the
indemnification provided under this Agreement except to the extent the
indemnifying party shall have been actually and materially prejudiced as a
result of such failure. Thereafter, the indemnified party shall deliver to the
indemnifying party promptly, and in any event within ten Business Days, after
the indemnified party's receipt thereof, copies of all notices and documents
(including court papers) received by the indemnified party relating to the Third
Party Claim; PROVIDED, HOWEVER, that failure to make such delivery shall not
affect the indemnification provided under this Agreement except to the extent
the indemnifying party shall have been actually and materially prejudiced as a
result of such failure.
(ii) If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense thereof
and, if it so chooses and acknowledges its obligation to fully indemnify the
indemnified party therefor in accordance with this Agreement, to assume and
control the defense thereof with counsel selected by the indemnifying party
and reasonably acceptable to the indemnified party (which acceptance shall
not be unreasonably withheld or delayed.) Should the indemnifying party so
elect to assume the defense of a Third Party Claim, the indemnifying party
shall not be liable to the indemnified party for legal expenses subsequently
incurred by the indemnified party in connection with the defense thereof. If
the indemnifying party assumes such defense, the indemnified party shall
have the right to participate in the defense thereof and to employ at its
own expense counsel not reasonably objected to by the indemnifying party
separate from the counsel employed by the indemnifying party, it being
understood that the indemnifying party shall control such defense, subject
to the remaining terms of this Section 11.5(a)(ii). The indemnifying party
shall be liable for the reasonable fees and expenses of one primary counsel,
and to the extent reasonably required in connection with such
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Third Party Claim, one or more local counsel, and such other counsel as may
be reasonably required due to a conflict among indemnified parties, in each
case employed by the indemnified party for any period during which the
indemnifying party has not assumed the defense thereof. If the indemnifying
party chooses to defend or prosecute any Third Party Claim, all the parties
hereto shall cooperate and shall cause their Affiliates to cooperate in the
defense or prosecution thereof. Such cooperation shall include the retention
and (upon the indemnifying party's request) the provision to the
indemnifying party of records and information that are reasonably relevant
to such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Whether or not the indemnifying party assumes
the defense of a Third Party Claim, the indemnified party shall not admit
any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the indemnifying party's prior written consent
(which consent shall not be unreasonably withheld or delayed). If the
indemnifying party assumes the defense of a Third Party Claim, the
indemnified party shall agree to any settlement, compromise or discharge of
such Third Party Claim that the indemnifying party may recommend and that by
its terms (or pursuant to a binding commitment of the indemnifying party)
obligates the indemnifying party to pay the full amount (subject to any
limitation on payment contained in this Article XI) of such liability in
connection with such Third Party Claim, which releases the indemnified party
completely in connection with such Third Party Claim. Notwithstanding the
foregoing, the indemnifying party shall not be entitled to assume the
defense of any Third Party Claim (and shall be liable for the reasonable
fees and expenses of one primary counsel, and to the extent reasonably
required in connection with such Third Party Claim, one or more local
counsel, and such other counsel as may be reasonably required due to a
conflict among indemnified parties, incurred by the indemnified party in
defending such Third Party Claim) if the Third Party Claim seeks an order,
injunction or other equitable relief or relief for other than money damages
against the indemnified party that the indemnified party reasonably
determines, after conferring with its outside counsel, cannot be separated
from any related claim for money damages. If such equitable relief or other
relief portion of the Third Party Claim can be so separated from that for
money damages, the indemnifying party shall be entitled to assume the
defense of the portion relating to money damages.
Notwithstanding the foregoing in this Section 11.5(a)(ii), if a Third Party
Claim includes or could include both a claim for Taxes that are Excluded Taxes
and a claim for Taxes that are Assumed Liabilities, and such claim for Taxes
that are Excluded Taxes is not separable from such claim for Taxes that are
Assumed Liabilities, Parent and/or Seller, as applicable (if the claim for Taxes
that are Excluded Taxes exceeds or could reasonably be expected to exceed in
amount the claim for Taxes that are Assumed Liabilities), or otherwise the Buyer
(Parent and/or Seller or Buyer, as the case may be, the "Controlling Party"),
shall be entitled to control the defense of such Third Party Claim (such Third
Party Claim, a "Tax Claim"). In such case, the other party (the "Non-Controlling
Party") shall be entitled to participate fully (at the Non-Controlling Party's
sole expense) in the conduct of such Tax Claim and the Controlling Party shall
not settle such Tax Claim without the consent of such Non-Controlling Party
(which consent shall not be unreasonably withheld or delayed). The costs and
expenses of conducting the defense of such Tax Claim shall be reasonably
apportioned based on the relative amounts of the claim for Taxes that are
Excluded Taxes and the claim for Taxes that are Assumed Liabilities.
(b) DIRECT CLAIMS. In the event any indemnified party should have an
indemnification claim against any indemnifying party under the Transaction
Agreements that does not involve a Third Party Claim being asserted against or
sought to be collected from such indemnified party (a "Direct Claim"), the
indemnified party shall deliver notice of such Direct Claim to the indemnifying
party. The failure by any indemnified party so to notify the indemnifying party
shall not relieve the indemnifying party from any liability that it may have to
such indemnified party, except to the extent that the indemnifying party
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has been actually and materially prejudiced by such failure. If the indemnifying
party does not notify the indemnified party within 15 Business Days following
its receipt of such notice that the indemnified party disputes such Direct
Claim, such Direct Claim specified by the indemnified party in such notice shall
be conclusively deemed a liability of the indemnifying party under this
Article XI and the indemnifying party shall pay the amount of such liability to
the indemnified party on demand, or in the case of any notice in which the
amount of the Direct Claim is estimated, on such later date when the amount of
such Direct Claim is finally determined; PROVIDED that in any such case such
payment shall be made in accordance with Section 11.9. If the indemnifying party
disputes its liability with respect to such Direct Claim in a timely manner, the
indemnifying party and the indemnified party shall proceed in good faith to
negotiate a resolution of such dispute.
SECTION 11.6. REDUCTION OF RETAINED AMOUNT. (a) The parties acknowledge and
agree that the Retained Amount shall be held by Buyer in its sole control and
dominion, for the periods required by this Agreement, as security for Parent and
Seller's obligations under this Agreement, including this Article XI. Buyer is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply all or a portion of the Retained Amount
at any time held against any indemnification obligation set forth in any Third
Party Claim or Direct Claim delivered pursuant to Section 11.5 by any
indemnified party specified in Section 11.1; PROVIDED that Buyer shall provide
Parent and Seller with five calendar days prior written notice of any such
set-off and application of all or a portion of the Retained Amount, including a
reasonably detailed explanation supporting such action. The rights of any
indemnified party under the preceding sentence are in addition to any other
rights and remedies (including other rights of set-off) that such person may
have.
(b) The Retained Amount shall be reduced from time to time by (i) any amount
that has been determined by a court of final jurisdiction to be owing by Parent
or Seller to any indemnified party specified in Section 11.1 or (ii) any amount
that Parent or Seller has agreed in writing shall be setoff and applied against
the Retained Amount and the amount of any such reduction under this
Section 11.6(b) shall be permanently retained by Buyer.
(c) Subject to Section 11.10, each of Parent and Seller acknowledge and
agree that its obligations to Buyer under this Agreement, including this
Article XI, are not limited to, or "capped" by, the Retained Amount.
SECTION 11.7. DISTRIBUTIONS FOLLOWING THE EIGHTEEN-MONTH ANNIVERSARY OF THE
LAST CLOSING. (a) Promptly after the date that is eighteen months following the
Initial Closing Date, Buyer will notify Parent and Seller in writing of the
Projected Indemnity Amount as of such date. As promptly as practicable following
delivery of such notice, an amount (the "Initial Distribution Amount") equal to
(i) the Retained Amount (determined as of the date of such calculation) minus
(ii) an amount equal to such Projected Indemnity Amount, together with interest
on such Initial Distribution Amount computed at a rate per annum equal to 6%
from the date of the Initial Closing Date to the date of payment, shall be
transferred and delivered to Parent, Seller or one or more Selling Subsidiaries
as may be designated by Parent.
(b) Promptly after the expiration of each successive period of 180 days
following the date that is eighteen months following the Initial Closing Date
until such time as all Third Party and Direct Claims are finally resolved, Buyer
will notify Parent and Seller in writing of the Projected Indemnity Amount as of
such date. As promptly as practicable following delivery of such notice, an
amount (the "Subsequent Distribution Amount") equal to (i) the Remaining Amount
(as the same may be reduced from time to time) minus (ii) an amount equal to
such Projected Indemnity Amount, together with interest on such Subsequent
Distribution Amount, computed at a rate per annum equal to 6% from the Initial
Closing Date to the date of payment, shall be transferred and delivered to
Parent, Seller or one or more Selling Subsidiaries as may be designated by
Parent in accordance with the principles set forth in Section 11.7(a) above
(except that for this purpose all references in Section 11.7(a) above to the
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"Initial Distribution Amount" shall be deemed to be references to the
"Subsequent Distribution Amount" at such time). The "Remaining Amount" as of any
date shall mean the amount equal to (x) the Retained Amount minus (y) the sum of
(I) the Initial Distribution Amount and (II) the aggregate of all Subsequent
Distribution Amounts transferred and delivered prior to such date pursuant to
this Section 11.7.
SECTION 11.8. FINAL DISTRIBUTION OF RETAINED AMOUNT. Buyer shall promptly
notify Parent and Seller in writing after such time as there are no amounts due
or to be distributed to Parent, Seller or any Selling Subsidiary pursuant to
Article XI of this Agreement, at which time Buyer's obligations under
Section 11.7 shall expire.
SECTION 11.9. INDEMNITY PAYMENTS. Any indemnity payment hereunder (i) shall
be made by wire transfer to an account specified by Buyer in immediately
available funds together with interest thereon from the date of delivery of
notice of the Third Party Claim or Direct Claim, as applicable, by any
indemnified party to the date of payment at a rate equal to 6% per annum (such
interest shall be calculated on the basis of a year of 365 days and the actual
number of days elapsed), (ii) shall be made on an after-tax basis and
(iii) shall be treated as an adjustment to the Worldwide Purchase Price and the
applicable Business Unit Purchase Price for Tax purposes unless otherwise
provided in a Final Determination.
SECTION 11.10. EXCLUSIVE REMEDY; LIMITATIONS ON INDEMNIFICATION. The
Retained Amount shall be the exclusive remedy in respect of Losses incurred by
any indemnified party pursuant to Section 11.1(i) to the extent relating to the
failure of any representation or warranty contained in Sections 5.1 through
Section 5.5, Sections 5.7 through 5.10, Section 5.11(a) and Sections 5.12
through 5.25 to be true and correct in all respects (it being agreed that for
purposes of any right to indemnification, the representations and warranties of
Parent, Seller and any of the Selling Subsidiaries shall be deemed not qualified
by any references therein to materiality generally or to whether or not any
breach would result or could reasonably be expected to result in a Buyer
Material Adverse Effect or a Business Material Adverse Effect).
ARTICLE XII
TERMINATION
SECTION 12.1. TERMINATION. (a) Notwithstanding anything in this Agreement to
the contrary, this Agreement may be terminated and the transactions contemplated
hereby abandoned at any time prior to the Initial Closing Date whether before or
after the Parent Stockholder Approval has been obtained upon written notice
(other than in the case of Section 12.1(i) below) from the terminating party to
the non-terminating party specifying the subsection of this Section 12.1
pursuant to which such termination is effected:
(i) by mutual written consent of Parent and Buyer;
(ii) by Buyer upon written notice to Parent if any of the conditions to
the U.S. Closing set forth in Section 4.1 shall have become incapable of
fulfillment and shall not have been waived in writing by Buyer;
(iii) by Parent upon written notice to Buyer if any of the conditions to
the U.S. Closing set forth in Section 4.2 shall have become incapable of
fulfillment and shall not have been waived in writing by Parent;
(iv) by either Parent or Buyer:
(A) upon written notice to the other such party if the U.S. Closing
does not occur on or prior to April 24, 2002; PROVIDED, HOWEVER, that the
right to terminate this Agreement pursuant to this
Section 12.1(iv) (A) shall not be available to any party hereto if the
failure to
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consummate the U.S. Closing by such date was caused by the breach of this
Agreement by such party; or
(B) if the Parent Stockholder Approval shall not have been obtained
at the Parent Stockholder Meeting;
(v) by Buyer in the event:
(A) a Parent Adverse Recommendation Change has occurred; or
(B) Parent's Board of Directors fails to publicly reaffirm its
recommendation of the Transaction Agreements and the transactions
contemplated thereby within ten Business Days of a written request by
Buyer to provide such reaffirmation;
(vi)(a) by Parent, if Buyer breaches or fails to perform in any respect any
of its representations, warranties or covenants contained in this Agreement
and such breach or failure to perform (x) would give rise to the failure of
a condition set forth in Section 4.2(ii) or Section 4.2(iii) and (y) cannot
be or has not been cured within 30 days following delivery by Parent of
written notice of such breach or failure to perform or (b) by Buyer, if
Parent or Seller breaches or fails to perform in any respect any of its
representations, warranties or covenants contained in this Agreement and
such breach or failure to perform (1) would give rise to the failure of a
condition set forth in Section 4.1(ii) or Section 4.1(iii) and (2) cannot be
or has not been cured within 30 days following delivery by Buyer of written
notice of such breach or failure to perform; or
(b) by either Parent or Buyer if any Injunction granting any of the
relief set forth in clauses (A) through (D) of Section 4.1(iv) shall be in
effect and shall have become a final non-appealable order, decree or ruling;
PROVIDED that the party seeking to terminate this Agreement pursuant to this
clause shall have used commercially reasonable efforts to prevent the entry
of and to remove such Injunction; or
(vii) by Parent and Seller if (x) any Governmental Entity shall commence,
and not have subsequently withdrawn, any litigation seeking to prohibit any
of the transactions contemplated by the Transaction Agreements and
(y) Buyer shall not have agreed to defend such litigation within 30 days of
the commencement thereof or at any time following such agreement Buyer shall
have abandoned such defense.
(b) Notwithstanding anything in this Agreement to the contrary, this
Agreement may be terminated by Buyer upon written notice to Parent and Seller
with respect to any Business Unit in any country or territory the Closing of
which does not occur on or prior to the one year anniversary of the Initial
Closing Date.
SECTION 12.2. OTHER TRANSACTION AGREEMENTS; MATERIAL TO BE RETURNED. (a) In
the event that this Agreement is terminated by Parent or Buyer pursuant to
Section 12.1, the transactions contemplated by the Transaction Agreements shall
be terminated, without further action by any party hereto, and each of Parent
and Buyer shall immediately enter into, or cause its relevant Affiliates to
enter into, written consents to terminate each of the Other Transaction
Agreements (other than the Confidentiality Agreement).
(b) Furthermore, in the event that this Agreement is terminated as provided
herein:
(i) Buyer shall return all documents and other material received from
Parent, Seller or their respective Subsidiaries or any of their respective
Representatives relating to the Business or the transactions contemplated by
the Transaction Agreements, whether obtained before or after the execution
of this Agreement, to Parent or, at its option, destroy such documents and
material;
(ii) Buyer agrees that all confidential information received by Buyer,
or any Purchasing Company or their respective Affiliates or Representatives
with respect to the Business or the Transaction Agreements or the
transactions contemplated thereby shall be treated in accordance with the
Confidentiality Agreement which shall remain in full force and effect
notwithstanding the termination of this Agreement;
A-52
(iii) Parent and Seller shall return all documents and other material
received from Buyer or its Subsidiaries or any of their Representatives
relating to Buyer or the transactions contemplated by the Transaction
Agreements, whether obtained before or after the execution of this
Agreement, to Buyer, or at its option, destroy such documents and material;
and
(iv) Parent agrees that all confidential information received by Parent
or its Affiliates or their Representatives with respect to Buyer or the
Transaction Agreements or the transactions contemplated thereby shall be
treated in accordance with the Confidentiality Agreement which shall remain
in full force and effect notwithstanding the termination of this Agreement.
SECTION 12.3. EFFECT OF TERMINATION. Upon the termination hereof, this
Agreement shall become void and of no further force and effect, except for the
provisions of (i) Sections 5.5 and 6.3 relating to brokers, (ii) Section 8.1
relating to confidentiality, (iii) Section 9.2 relating to publicity,
(iv) Section 7.6 relating to certain expenses and (v) this Article XII. Nothing
in this Article XII shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this Agreement or to
impair the right of any party to compel specific performance by any other party
of its obligations under this Agreement.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. ASSIGNMENT. Neither this Agreement nor any rights or
obligations hereunder may be assigned or otherwise transferred by any party
(including by operation of law) without the prior written consent of the other
parties hereto, and any assignment or transfer without such consent shall be
null and void and of no effect, except that Buyer may assign its right to
purchase the Acquired Assets or any portion thereof hereunder to an Affiliate of
Buyer without the prior written consent of Parent, Seller or the Selling
Subsidiaries; PROVIDED, HOWEVER, that no assignment shall limit the assignor's
obligations hereunder.
SECTION 13.2. NO THIRD PARTY BENEFICIARIES. Except as provided in
Article XI, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any person, other than the parties hereto and such
permitted assigns, any legal or equitable rights hereunder, whether as third
party beneficiaries or otherwise.
SECTION 13.3. AMENDMENTS. This Agreement may be amended by the parties
hereto at any time, whether before or after the Parent Stockholder Approval has
been obtained; PROVIDED, HOWEVER, that after the Parent Stockholder Approval has
been obtained, there shall be made no amendment that by law requires further
approval by the stockholders of Parent without the further approval of such
stockholders. No amendment to this Agreement shall be effective unless it shall
be in writing and signed by Parent and Buyer (and Parent agrees to cause Seller
to execute any such amendment). Parent and Buyer agree that no amendment to any
Other Transaction Agreement shall be effective unless it shall have been
approved in writing by each of Parent and Buyer.
SECTION 13.4. CONSENTS AND APPROVALS. For any matter under this Agreement
requiring the consent or approval of any party to be valid and binding on the
parties hereto, such consent or approval must be in writing.
SECTION 13.5. WAIVERS. No failure or delay of any party in exercising any
right or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. Subject to
Section 11.6, the rights and remedies of the parties hereunder are cumulative
and are not exclusive of any rights or remedies which they would otherwise have
hereunder. None of the Transaction Agreements (or any
A-53
provision thereof) may be waived except pursuant to a writing executed by the
waiving party; PROVIDED, HOWEVER, that after the Parent Stockholder Approval has
been obtained, there shall be made no waiver that by law requires further
approval by the stockholders of Parent without the further approval of such
stockholders.
SECTION 13.6. SURVIVAL OF REPRESENTATIONS. The representations and
warranties in the Transaction Agreements (except for the representations and
warranties contained in Sections 5.1 and 5.7) shall survive the Closings solely
for purposes of Article XI hereof and such representations and warranties shall
terminate on the day that is two years after the Initial Closing Date; PROVIDED,
HOWEVER, that if any Third Party or Direct Claim for indemnification which
relates to a representation or warranty is made prior to the time such
representation or warranty terminates under this Section 13.6, then such
representation and warranty shall survive solely in connection with such Claim
until such time as such Claim has been finally resolved in accordance with the
terms of this Agreement. The representations and warranties contained in
Sections 5.1 and 5.7 shall remain in full force and effect without regard to
time.
SECTION 13.7. NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent by facsimile or sent, postage prepaid, by registered, certified or
express mail or reputable overnight courier service and shall be deemed given
when so delivered by hand or sent by facsimile, or if mailed, three days after
mailing (one Business Day in the case of express mail or overnight courier
service), as follows (or at such other address for a party as shall be specified
by notice given in accordance with this Section 13.7):
(i) if to Buyer:
International Business Machines Corporation
New Orchard Road
Armonk, New York 10504
Attention: General Counsel
Facsimile: (914) 499-6252
with copies to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attention: Scott A. Barshay
Fax: (212) 474-3700
(ii) if to Parent or Seller:
Informix Corporation
50 Washington Street
Westboro, MA 01581
Attention: Chief Executive Officer
Facsimile: (650) 926-6562
with copies to:
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, CA 94111-2562
Attention: John M. Newell
Fax: (415) 395-8095
A-54
SECTION 13.8. EXHIBITS AND SCHEDULES; INTERPRETATION. The headings contained
in this Agreement or in any Exhibit or Schedule hereto and in the table of
contents to this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. All Exhibits and
Schedules annexed hereto or referred to herein are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Any capitalized
terms used in any Schedule or Exhibit but not otherwise defined therein, shall
have the meaning as defined in this Agreement. When a reference is made in this
Agreement to a Section, Article, Exhibit or Schedule, such reference shall be to
a Section or Article of, or an Exhibit or Schedule to, this Agreement unless
otherwise indicated. For all purposes hereof, the terms "include", "includes"
and "including" shall be deemed followed by the words "without limitation". Any
reference to an "applicable Closing" in any provision of this Agreement shall be
deemed to be a reference to the Closing relating to the Business Unit (or the
Acquired Assets, Assumed Liabilities or Covered Employees relating thereto)
which is the subject of such provision or the country in which such Business
Unit is located. Any reference to any date or time set forth herein with respect
to any Business Unit shall be a reference to the local time at the contemplated
place of the Closing with respect to such Business Unit. In the event of any
conflict between this Agreement and any Country Acquisition Agreement, the terms
of this Agreement shall control.
SECTION 13.9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts (including by facsimile), all of which shall be considered one and
the same agreement, and shall become effective when one or more such
counterparts have been signed by each of the parties and delivered to the other
parties.
SECTION 13.10. ENTIRE AGREEMENT. The Transaction Agreements, including the
schedules, exhibits, annexes and attachments thereto, together with the
Confidentiality Agreement, contain the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and thereof
and supersede all prior agreements and understandings relating to such subject
matter.
SECTION 13.11. SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
SECTION 13.12. CONSENT TO JURISDICTION. Buyer irrevocably submits, and
agrees to cause the other Purchasing Companies to irrevocably submit to, and
each of Parent and Seller irrevocably submits, and agrees to cause the Selling
Subsidiaries to irrevocably submit to, to the exclusive jurisdiction of (i) the
state courts of New York, and (ii) the Federal courts located in the State of
New York, for the purposes of any suit, action or other proceeding arising out
of the Transaction Agreements or any transaction contemplated thereby (and each
agrees that no such action, suit or proceeding relating to the Transaction
Agreements shall be brought by it or any of its Subsidiaries except in such
courts). Buyer further agrees, and agrees to cause the other Purchasing
Companies to agree, and each of Parent and Seller further agrees, and agrees to
cause the Selling Subsidiaries to agree, that service of any process, summons,
notice or document by U.S. registered mail to such person's respective address
set forth above shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted to
jurisdiction as set forth above in the immediately preceding sentence. Buyer
irrevocably and unconditionally waives (and agrees not to plead or claim), and
agrees to cause the other Purchasing Companies to irrevocably and
unconditionally waive (and not to plead or claim), and each of Parent and Seller
irrevocably and unconditionally waives (and agrees not to plead or claim), and
agrees to cause the Selling Subsidiaries to irrevocably waive, any objection to
the laying of venue of any action, suit or proceeding arising out of the
Transaction Agreements or the transactions contemplated thereby in (i) the state
courts of New York or (ii) the Federal courts located in the State of New York
or that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum. Buyer shall cause the other Purchasing
Companies to
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stipulate, and each of Parent and Seller shall cause the Selling Subsidiaries to
stipulate, that, for purposes of any such suit, action or other proceeding, the
Country Acquisition Agreements shall be deemed governed by, and to be construed
in accordance with, the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
SECTION 13.13. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to the laws that might otherwise govern under applicable principles of conflict
of laws thereof, except for such provisions where the laws of the State of
Delaware are mandatorily applicable, which provisions shall be governed by and
construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have caused this Master Purchase Agreement
to be duly executed as of the date first above written.
INTERNATIONAL BUSINESS MACHINES CORPORATION,
by /s/ LEE A. DAYTON
-------------------------------------------------
Name: Lee A. Dayton
Title: VICE PRESIDENT,
CORPORATE DEVELOPMENT AND REAL ESTATE
INFORMIX CORPORATION,
by /s/ PETER GYENES
-------------------------------------------------
Name: Peter Gyenes
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
INFORMIX SOFTWARE, INC.,
by /s/ JAMES FOY
-------------------------------------------------
Name: James Foy
Title: PRESIDENT
A-56
Annex B
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
April 24, 2001
Board of Directors
Informix Corporation
50 Washington Street
Westborough, Massachusetts 01581
Members of the Board:
You have asked us to advise you with respect to the fairness, from a financial
point of view, to Informix Corporation ("Informix") of the Consideration (as
defined below) set forth in the Master Purchase Agreement, dated as of
April 24, 2001 (the "Master Agreement"), among Informix, Informix
Software, Inc., a wholly owned subsidiary of Informix ("Informix Software"), and
International Business Machines Corporation ("IBM"). The Master Agreement
provides for, among other things, the sale of the Acquired Assets (as defined in
the Master Agreement) by Informix and certain of its subsidiaries to IBM through
various worldwide closings in exchange for the aggregate payment of
$1.0 billion in cash (the "Consideration"), subject to adjustments as set forth
in the Master Agreement, and the assumption by IBM of the Assumed Liabilities
(as defined in the Master Agreement) (the "Transaction").
In arriving at our opinion, we have reviewed the Master Agreement and certain
related documents, as well as certain publicly available business and financial
information relating to Informix. We also have reviewed certain other
information relating to Informix, including financial forecasts, provided to or
discussed with us by Informix, and have met with the management of Informix to
discuss the business and prospects of Informix. We also have considered certain
financial and stock market data of Informix and we have compared those data with
similar data for publicly held companies in businesses similar to Informix, and
we have considered, to the extent publicly available, the financial terms of
certain other transactions which have been effected. We also considered such
other information, financial studies, analyses and investigations and financial,
economic and market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. We have
been advised, and have assumed, that the financial forecasts for Informix have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of Informix as to the future financial
performance of Informix. You also have advised us, and we have assumed, that the
Transaction will be consummated in its entirety in accordance with the terms of
the Master Agreement, without waiver, amendment or modification of any material
term, condition or agreement. We have not been requested to make, and have not
made, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of Informix, nor have we been furnished with any such
evaluations or appraisals. Our opinion is necessarily based upon information
available to us, and financial, economic, market and other conditions as they
exist and can be evaluated, on the date hereof. In connection with our
engagement, we were requested to solicit indications of interest from, and held
discussions with, third parties regarding the possible acquisition of all or a
part of Informix. Our opinion does not address the relative merits of the
Transaction as compared to other business strategies that might be available to
Informix, nor does it address the underlying business decision of Informix to
proceed with the Transaction.
B-1
Board of Directors
Informix Corporation
April 24, 2001
Page 2
We have acted as financial advisor to Informix in connection with the
Transaction and will receive a fee for our services, a significant portion of
which is contingent upon the consummation of the Transaction. We also will
receive a fee upon delivery of this opinion. We and our affiliates have in the
past provided and are currently providing financial services to IBM unrelated to
the proposed Transaction, for which services we have received and will receive
compensation. In the ordinary course of business, we and our affiliates may
actively trade the securities of Informix and IBM for our own and such
affiliates' accounts and for the accounts of customers and, accordingly, may at
any time hold long or short positions in such securities.
It is understood that this letter is for the information of the Board of
Directors of Informix in connection with its evaluation of the Transaction and
does not constitute a recommendation to any stockholder as to how such
stockholder should vote or act on any matter relating to the Transaction.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Consideration is fair, from a financial point of view, to Informix.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
B-2
ANNEX C
[SG COWEN LETTERHEAD]
April 24, 2001
Board of Directors
Iroquois Corporation
50 Washington Street
Westboro, MA 01581
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to Informix Corporation (the "Company"), of the Consideration (as defined
below) to be received by the Company in connection with the sale of
substantially all of the assets comprising the Company's business division,
Informix Software (the "Business"), pursuant to the terms of that certain Master
Purchase Agreement, dated as of April 24, 2001 (the "Agreement"), by and among
the Company, Informix Software and International Business Machines Corporation
(the "Buyer").
As more specifically set forth in the Agreement, and subject to the terms,
conditions and adjustments set forth in the Agreement, the Buyer will purchase
the Business (the "Transaction") for $1 billion in cash (subject to certain
adjustments, the "Consideration"). The Agreement provides that if the Working
Capital (as defined in the Agreement) of the Business as of the last closing to
occur is less than $124 million the Company will pay Buyer an amount equal to
such shortfall, and if the Working Capital at such time exceeds $124 million,
Buyer will pay the Company an amount equal to one-half of such excess amount. In
addition, at the closing, the Company will pay Buyer a cash amount equal to 18%
of collected deferred revenue relating to the Business that is reflected on the
Company's December 31, 2000 balance sheet. The Buyer will pay certain severance
costs associated with the Transaction.
SG Cowen Securities Corporation ("SG Cowen"), as part of its investment
banking business, is continually engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. In the
ordinary course of our business, we and our affiliates may actively trade the
securities of the Company and Buyer for our own account and for the accounts of
our customers and, accordingly, may at any time hold a long or short position in
such securities.
We are acting as co-financial advisor to the Board of Directors of the
Company in connection with the Transaction and will receive a fee from the
Company for our services pursuant to the terms of our engagement letter with the
Company, dated as of August 9, 2000, as amended as of September 1, 2000. A
portion of our fee is contingent upon the consummation of the Transaction. We
will also receive a fee for providing this opinion. SG Cowen and its affiliates
in the ordinary course of business have from time to time provided, and in the
future may continue to provide, commercial and investment banking services to
the Company and Buyer and have received fees for the rendering of such services.
In connection with our opinion, we have reviewed and considered such
financial and other matters as we have deemed relevant, including, among other
things:
- a draft of the Agreement dated April 20, 2001;
C-1
Board of Directors
Informix Corporation
April 24, 2001
Page 2
- certain publicly available information for the Company, including its
annual reports filed on Form 10-K for each of the years ended
December 31, 1998, 1999 and 2000 and its quarterly reports filed on Form
10-Q for each of the quarters ended March 31, June 30 and September 30,
1998, 1999 and 2000 and certain other relevant financial and operating
data furnished to SG Cowen by Company management;
- certain internal financial analyses, financial forecasts, reports and
other information concerning the Business prepared by the Company;
- First Call estimates ("First Call Estimates") and financial projections in
Wall Street analyst reports ("Wall Street Projections") for the Company;
- discussions we have had with certain members of the management of the
Company concerning the historical and current business operations,
financial conditions and prospects of the Business and such other matters
we deemed relevant;
- certain operating results of the Business as compared to operating results
of certain publicly traded companies we deemed relevant;
- certain financial terms of the Transaction as compared to the financial
terms of certain selected business combinations we deemed relevant;
- based on the financial forecasts/projections prepared by the Company, the
cash flows generated by the Business on a stand-alone basis to determine
the present value of the discounted cash flows; and
- such other information, financial studies, analyses and investigations and
such other factors that we deemed relevant for the purposes of this
opinion.
SG Cowen has solicited indication of interests from other third parties with
respect to the Business.
In conducting our review and arriving at our opinion, we have, with your
consent, assumed and relied, without independent investigation, upon the
accuracy and completeness of all financial and other information provided to us
by the Company, or which is publicly available. We have not undertaken any
responsibility for the accuracy, completeness or reasonableness of, nor have we
independently verified, such information. In addition, we have not conducted nor
have we assumed any obligation to conduct any physical inspection of the
properties or facilities of the Company. We have further relied upon the
assurance of management of the Company that they are unaware of any facts that
would make the information provided to us incomplete or misleading in any
respect. We have, with your consent, assumed that the financial forecasts which
we examined were reasonably prepared by the management of the Company on bases
reflecting the best currently available estimates and good faith judgments as to
the future performance of the Business and that such forecasts provide a
reasonable basis for our opinion.
We have not made or obtained any independent evaluations, valuations or
appraisals of the assets or liabilities of the Company, nor have we been
furnished with such materials. In rendering our opinion, we have not considered
the effects of any legal matters relating to the Company or the Buyer. Our
services to the Company in connection with the proposed sale were comprised of
providing general financial advisory services and rendering an opinion from a
financial point of view of the
C-2
Board of Directors
Informix Corporation
April 24, 2001
Page 3
Consideration. Our opinion was necessarily based upon economic and market
conditions and other circumstances as they existed and could be evaluated by us
on the date that we rendered our opinion. It should be understood that although
subsequent developments may affect our opinion, we do not have any obligation to
update, revise or reaffirm our opinion and we expressly disclaim any
responsibility to do so.
For purposes of rendering our opinion we have assumed in all respects
material to our analysis, that the representations and warranties of each party
contained in the Agreement are true and correct, that each party will perform
all of the covenants and agreements required to be performed by it under the
Agreement and that all conditions to the consummation of the Transaction will be
satisfied without waiver thereof. We have assumed that the final form of the
Agreement will be substantially similar to the last draft reviewed by us prior
to rendering our opinion. We have also assumed that all governmental, regulatory
and other consents and approvals contemplated by the Agreement will be obtained
and that in the course of obtaining any of those consents no restrictions will
be imposed or waivers made that would have an adverse effect on the contemplated
benefits of the Transaction.
It is understood that this letter is intended for the benefit and use of the
Board of Directors of the Company in its consideration of the Transaction and
may not be used for any other purpose or reproduced, disseminated, quoted or
referred to at any time, in any manner or for any purpose without our prior
written consent. This letter does not constitute a recommendation to any
stockholder as to how such stockholder should vote with respect to the
Transaction or to take any other action in connection with the Transaction or
otherwise. We have not been requested to opine as to, and our opinion does not
in any manner address, the Company's underlying business decision to effect the
Transaction, the value of the remaining business of the Company or the Company's
decision on the use of the proceeds from the Transaction. We do not express any
opinion nor have we performed any analysis of the effects, financial or
otherwise, of the Alliance Agreement (as defined in the Agreement). Furthermore,
we express no view as to the price or trading range for shares of the common
stock of the Company following the consummation of the Transaction.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that, as of April 23, 2001,
the Consideration to be received in the Transaction is fair, from a financial
point of view, to the Company.
Very truly yours,
SG Cowen Securities Corporation
C-3
[FORM OF PROXY] PRELIMINARY COPY
INFORMIX CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 8, 2001
The undersigned hereby appoints Peter Gyenes and Gary Lloyd, and each of
them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Informix Corporation, which
the undersigned may be entitled to vote at the special meeting of stockholders
of Informix Corporation to be held at the Wyndham Westborough Hotel, 5400
Computer Drive, Westborough, Massachusetts on June 8, 2001 at 10:00 a.m., local
time, and at any and all postponements, continuations and adjournments thereof
with all powers that the undersigned would possess if personally present, upon
and in respect of the following materials and in accordance with the following
instructions, with discretionary authority as to any and all other matters that
may properly come before the meeting.
THE UNDERSIGNED HEREBY DIRECTS AND AUTHORIZES SAID PROXIES, AND EACH OF
THEM, OR THEIR SUBSTITUTES, TO VOTE AS SPECIFIED BELOW WITH RESPECT TO THE
PROPOSALS LISTED IN THE PARAGRAPH ON THE REVERSE SIDE, OR IF NO SPECIFICATION IS
MADE, TO VOTE IN FAVOR THEREFOR.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
PROPOSALS, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC
INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
The undersigned hereby acknowledges receipt of: (1) notice of special
meeting of stockholders of Informix Corporation, and (2) accompanying proxy
statement.
(continued on reverse side)
Please mark your votes as indicated in [X] this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS.
FOR AGAINST ABSTAIN
To approve the sale of our database business to / / / / / /
International Business Machines pursuant to the master
purchase agreement and related agreements
To approve an amendment to our restated certificate of / / / / / /
incorporation to change our corporate name to
"Ascential Software Corporation"
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their titles. If signer is
a corporation, please give full corporate name and have a duly authorized
officer sign, stating title. If signer is a partnership, please sign in
partnership name by authorized person.
Dated: , 2001
- - ----------------------------------------------------
- - ----------------------------------------------------
Signature(s)
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.