- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO
SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
-------------------
TIVOLI SYSTEMS INC.
(Name of Subject Company)
TOPAZ ACQUISITION CORP.
INTERNATIONAL BUSINESS MACHINES CORPORATION
(Bidders)
-------------------
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
-------------------
888722105
(CUSIP Number of Class of Securities)
-------------------
LAWRENCE R. RICCIARDI, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
INTERNATIONAL BUSINESS MACHINES CORPORATION
OLD ORCHARD ROAD
ARMONK, NEW YORK 10504
(914) 765-1900
(Name, Address and Telephone Number of Persons Authorized to
Receive Notices and Communications on Behalf of Bidders)
-------------------
COPY TO:
ROBERT L. SEELIG, ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019
(212) 474-1860
-------------------
JANUARY 30, 1996
(Date of Event Which Requires Filing Statement on Schedule 13D)
-------------------
CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE
$816,371,575....................................... $163,275
* For purposes of calculating amount of filing fee only. The amount assumes
the purchase of 17,186,770 shares of Common Stock, par value $0.01 per
share. Such number of shares represents all the shares outstanding as of
December 31, 1995, plus the number of shares issuable upon the exercise of
all options and warrants.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
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Page 1 of 8 pages
Exhibit Index on page 8
<PAGE>
14D-1 AND 13D
CUSIP
NO. 888722105 PAGE 2 OF 8 PAGES
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
TOPAZ ACQUISITION CORP. (13-3868901)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) or 2(f) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
530,441
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
APPROXIMATELY 3.6% OF THE SHARES OUTSTANDING AS OF
JANUARY 26, 1996*
10 TYPE OF REPORTING PERSON
CO
* See footnote on following page.
Page 2 of 8 Pages
Exhibit Index on Page 8
<PAGE>
14D-1 AND 13D
CUSIP
NO. 888722105 PAGE 3 OF 8 PAGES
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
INTERNATIONAL BUSINESS MACHINES CORPORATION (13-0871985)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
530,441
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
APPROXIMATELY 3.6% OF THE SHARES OUTSTANDING AS OF
JANUARY 26, 1996*
10 TYPE OF REPORTING PERSON
CO
* On January 30, 1996, International Business Machines Corporation ("IBM") and
Topaz Acquisition Corp. (the "Purchaser") entered into a Stockholder Agreement
(the "Stockholder Agreement") with all directors and executive officers of the
Company (collectively, the "Selling Stockholders"), pursuant to which the
Selling Stockholders have agreed to sell to Purchaser at a price of $47.50 per
share of Common Stock, par value $0.01 per share (the "Shares"), or such
higher price per Share as may be offered by the Purchaser in the Offer, all
Shares owned by them. The Selling Stockholders also have unconditionally
agreed to tender into the Offer, and not to withdraw therefrom, their Shares.
In addition, each Selling Stockholder has granted an irrevocable proxy with
respect to the Shares subject to the Stockholder Agreement to IBM to vote such
Shares under certain circumstances. The Purchaser's right to purchase and vote
the Shares subject to the Stockholder Agreement is reflected in Rows 7 and 9
of each of the tables above. The Stockholder Agreement is described more fully
in Section 12 of the Offer to Purchase dated February 2, 1996 (the "Offer to
Purchase").
Page 3 of 8 Pages
Exhibit Index on Page 8
<PAGE>
This Tender Offer Statement on Schedule 14D-1 also constitutes a Statement
on Schedule 13D with respect to the acquisition by the Purchaser and IBM of
beneficial ownership of the Shares subject to the Stockholder Agreement. The
cover page above and item numbers and responses thereto below are in accordance
with the requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Tivoli Systems Inc., a Delaware
corporation (the "Company"), which has its principal executive offices at 9442
Capital of Texas Highway North, Arboretum Plaza One, Suite 500, Austin, TX
78759.
(b) This Schedule 14D-1 relates to the offer by the Purchaser to purchase
all outstanding Shares at a price of $47.50 per Share, net to the seller in cash
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase and in the related Letter of Transmittal (which, together
with any amendments and supplements thereto, collectively constitute the
"Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively. Information concerning the number of outstanding Shares is set
forth in "Introduction" of the Offer to Purchase and is incorporated herein by
reference.
(c) Information concerning the principal market in which the Shares are
traded and the high and low sales prices of the Shares for each quarterly period
since the Shares were first publicly traded is set forth in Section 6 ("Price
Range of the Shares; Dividends on the Shares") of the Offer to Purchase and is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 14D-1 is being filed by the Purchaser, a Delaware corporation,
and IBM, a New York corporation. The Purchaser is a wholly owned subsidiary of
IBM. Information concerning the principal business and the address of the
principal offices of the Purchaser and IBM is set forth in Section 9 ("Certain
Information Concerning the Purchaser and IBM") of the Offer to Purchase and is
incorporated herein by reference.
The information set forth in Section 9 ("Certain Information Concerning the
Purchaser and IBM") and Section 15 ("Certain Legal Matters") of the Offer to
Purchase is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 11 ("Contacts and Transactions with
the Company; Background of the Offer") and Section 12 ("Purpose of the Offer;
The Merger Agreement; The Stockholder Agreement; Plans for the Company") of the
Offer to Purchase is incorporated herein by reference.
(b) The information set forth in Section 11 ("Contacts and Transactions with
the Company; Background of the Offer") and Section 12 ("Purpose of the Offer;
The Merger Agreement; The Stockholder Agreement; Plans for the Company") of the
Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
Page 4 of 8 Pages
Exhibit Index on Page 8
<PAGE>
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)--(e) The information set forth in Section 12 ("Purpose of the Offer; The
Merger Agreement; The Stockholder Agreement; Plans for the Company") of the
Offer to Purchase is incorporated herein by reference.
(f) and (g) The information set forth in Section 7 ("Effect of the Offer on
the Market for the Shares; Stock Quotation; Exchange Act Registration; Margin
Regulations") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in "Introduction", Section 9 ("Certain
Information Concerning the Purchaser and IBM") and Section 12 ("Purpose of the
Offer; The Merger Agreement; The Stockholder Agreement; Plans for the Company")
of the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in "Introduction", Section 9 ("Certain
Information Concerning the Purchaser and IBM"), Section 11 ("Contacts and
Transactions with the Company; Background of the Offer") and Section 12
("Purpose of the Offer; The Merger Agreement; The Stockholder Agreement; Plans
for the Company") of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Introduction" and in Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning the
Purchaser and IBM") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 12 ("Purpose of the Offer; The
Merger Agreement; The Stockholder Agreement; Plans for the Company") of the
Offer to Purchase is incorporated herein by reference.
(b) and (c) The information set forth in Section 15 ("Certain Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Effect of the Offer on the
Market for the Shares; Stock Quotation; Exchange Act Registration; Margin
Regulations") of the Offer to Purchase is incorporated herein by reference.
(e) None.
Page 5 of 8 Pages
Exhibit Index on Page 8
<PAGE>
(f) The information set forth in the Offer to Purchase, the Letter of
Transmittal, the Agreement and Plan of Merger dated as of January 30, 1996,
among the Purchaser, IBM and the Company, and the Stockholder Agreement dated as
of January 30, 1996, among the Purchaser, IBM and all directors and executive
officers, copies of which are attached hereto as Exhibits (a)(1), (a)(2), (c)(1)
and (c)(2), respectively, is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Banks, Trust Companies and
Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
(a)(7) Form of Summary Advertisement dated February 2, 1996.
(a)(8) Text of Press Release dated January 31, 1996, issued by the Company and IBM.
(a)(9) Other material made available on IBM's WorldWideWeb (Internet) home page
(URL=http://www.ibm.com) on January 31, 1996, including a "Dear Software
Colleague" letter.
(b) Credit Agreement, dated as of December 22, 1993, as amended as of March 1,
1995, among IBM, Chemical Bank, as Administrative Agent, and the syndicate
of lenders party thereto.
(c)(1) Agreement and Plan of Merger dated as of January 30, 1996, among the
Purchaser, IBM and the Company.
(c)(2) Stockholder Agreement dated as of January 30, 1996, among the Purchaser, IBM
and all directors and executive officers of the Company.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
Page 6 of 8 Pages
Exhibit Index on Page 8
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: February 2, 1996
TOPAZ ACQUISITION CORP.,
By /s/ LEE A. DAYTON
...................................
Name: Lee A. Dayton
Title: President
INTERNATIONAL BUSINESS MACHINES
CORPORATION,
By /s/ JOHN E. HICKEY
...................................
Name: John E. Hickey
Title: Vice President, Assistant
General Counsel and Secretary
Page 7 of 8 Pages
Exhibit Index on Page 8
<PAGE>
EXHIBIT INDEX
<TABLE><CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT NAME NUMBER
- ------- -------------------------------------------------------------------------- ------
<S> <C> <C>
(a)(1) Offer to Purchase.........................................................
(a)(2) Letter of Transmittal.....................................................
(a)(3) Notice of Guaranteed Delivery.............................................
(a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees.....
(a)(5) Letter to Clients for use by Brokers, Dealers, Banks, Trust Companies and
Other Nominees............................................................
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.......................................................
(a)(7) Form of Summary Advertisement dated February 2, 1996......................
(a)(8) Text of Press Release dated January 31, 1996, issued by the Company and
IBM.......................................................................
(a)(9) Other material made available on IBM's WorldWideWeb (Internet) home page
(URL=http://www.ibm.com) on January 31, 1996, including a "Dear Software
Colleague" letter.........................................................
(b) Credit Agreement, dated as of December 22, 1993, as amended as of March 1,
1995, among IBM, Chemical Bank, as Administrative Agent, and the syndicate
of lenders party thereto..................................................
(c)(1) Agreement and Plan of Merger dated as of January 30, 1996, among the
Purchaser, IBM and the Company............................................
(c)(2) Stockholder Agreement dated as of January 30, 1996, among the Purchaser,
IBM and all directors and executive officers of the Company...............
(d) None......................................................................
(e) Not applicable............................................................
(f) None......................................................................
</TABLE>
Page 8 of 8 Pages
Exhibit Index on Page 8
Exhibit (a)(1)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Tivoli Systems Inc.
at
$47.50 Net Per Share
by
Topaz Acquisition Corp.
a wholly owned subsidiary of
International Business Machines Corporation
-------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, MARCH 1, 1996, UNLESS THE OFFER IS EXTENDED.
-------------------
THE BOARD OF DIRECTORS OF TIVOLI SYSTEMS INC. (THE "COMPANY") HAS UNANIMOUSLY
APPROVED THE OFFER AND THE MERGER REFERRED TO HEREIN AND DETERMINED THAT
THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE
COMPANY ACCEPT THE OFFER AND TENDER
THEIR SHARES.
-------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES THAT WOULD CONSTITUTE A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY
DILUTED BASIS ON THE DATE OF PURCHASE AND (2) ANY WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE
OFFER HAVING EXPIRED OR BEEN TERMINATED.
-------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (as defined herein) should either (1) complete and sign the Letter of
Transmittal or a facsimile copy thereof in accordance with the instructions in
the Letter of Transmittal, have such stockholder's signature thereon guaranteed
if required by Instruction 1 to the Letter of Transmittal, mail or deliver the
Letter of Transmittal (or such facsimile), or, in the case of a book-entry
transfer effected pursuant to the procedure set forth in Section 2, an Agent's
Message (as defined herein), and any other required documents to the Depositary
and either deliver the certificates for such Shares to the Depositary along with
the Letter of Transmittal (or facsimile) or deliver such Shares pursuant to the
procedure for book-entry transfer set forth in Section 2 prior to the expiration
of the Offer or (2) request such stockholder's broker, dealer, bank, trust
company or other nominee to effect the transaction for such stockholder. A
stockholder having Shares registered in the name of a broker, dealer, bank,
trust company or other nominee must contact such broker, dealer, bank, trust
company or other nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available or who cannot comply in a timely manner
with the procedure for book-entry transfer, or who cannot deliver all required
documents to the Depositary prior to the expiration of the Offer, may tender
such Shares by following the procedure for guaranteed delivery set forth in
Section 2.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or to the Dealer Manager at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase.
-------------------
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO.
Incorporated
February 2, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE><CAPTION>
PAGE
----
<S> <C>
Introduction.......................................................................... 1
The Tender Offer...................................................................... 3
1. Terms of the Offer................................................................. 3
2. Procedure for Tendering Shares..................................................... 5
3. Withdrawal Rights.................................................................. 8
4. Acceptance for Payment and Payment................................................. 8
5. Certain Federal Income Tax Consequences............................................ 9
6. Price Range of the Shares; Dividends on the Shares................................. 11
7. Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act
Registration; Margin Regulations................................................... 11
8. Certain Information Concerning the Company......................................... 12
9. Certain Information Concerning the Purchaser and IBM............................... 14
10. Source and Amount of Funds........................................................ 15
11. Contacts and Transactions with the Company; Background of the Offer............... 16
12. Purpose of the Offer; The Merger Agreement; The Stockholder Agreement; Plans for
the Company....................................................................... 18
13. Dividends and Distributions....................................................... 27
14. Certain Conditions of the Offer................................................... 27
15. Certain Legal Matters............................................................. 29
16. Fees and Expenses................................................................. 31
17. Miscellaneous..................................................................... 31
Schedule I--Directors and Executive Officers of IBM and the Purchaser................. S-1
</TABLE>
<PAGE>
To the Holders of Common Stock
of Tivoli Systems Inc.:
INTRODUCTION
Topaz Acquisition Corp., a Delaware corporation (the "Purchaser"), which is
a wholly owned subsidiary of International Business Machines Corporation, a New
York corporation ("IBM"), hereby offers to purchase all outstanding shares of
Common Stock, par value $0.01 per share (the "Shares"), of Tivoli Systems Inc.,
a Delaware corporation (the "Company"), at a price of $47.50 per Share, net to
the seller in cash, without interest thereon (the "Offer Price"), upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of Morgan Stanley & Co. Incorporated
("Morgan Stanley"), which is acting as Dealer Manager (the "Dealer Manager"),
The Chase Manhattan Bank, N.A., which is acting as the Depositary (the
"Depositary"), and Morrow & Co., Inc., which is acting as Information Agent (the
"Information Agent"), incurred in connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND
THE MERGER (AS DEFINED BELOW) AND DETERMINED THAT THE TERMS OF THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE
COMPANY AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND TENDER THEIR SHARES.
GOLDMAN, SACHS & CO. ("GOLDMAN") HAS ACTED AS THE COMPANY'S FINANCIAL
ADVISOR. THE OPINION OF GOLDMAN IS SET FORTH IN FULL AS AN EXHIBIT TO THE
COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE
14D-9"), WHICH IS BEING MAILED TO STOCKHOLDERS OF THE COMPANY HEREWITH. THE
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS OF THE COMPANY IN ARRIVING AT ITS
DECISION TO APPROVE THE OFFER AND THE MERGER AND TO RECOMMEND THAT STOCKHOLDERS
OF THE COMPANY ACCEPT THE OFFER ARE DESCRIBED IN THE SCHEDULE 14D-9.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) THAT NUMBER OF SHARES (THE "MINIMUM NUMBER OF SHARES") THAT WOULD CONSTITUTE
A MAJORITY OF ALL OUTSTANDING SHARES DETERMINED ON A FULLY DILUTED BASIS ON THE
DATE OF PURCHASE (THE "MINIMUM CONDITION") AND (II) ANY WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER (THE "HSR ACT") APPLICABLE TO THE PURCHASE OF SHARES
PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED. THE PURCHASER RESERVES
THE RIGHT (SUBJECT TO OBTAINING THE CONSENT OF THE COMPANY AND THE APPLICABLE
RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION")), WHICH IT PRESENTLY HAS NO INTENTION OF EXERCISING, TO WAIVE OR
REDUCE THE MINIMUM CONDITION AND TO ELECT TO PURCHASE, PURSUANT TO THE OFFER,
LESS THAN THE MINIMUM NUMBER OF SHARES. SEE SECTIONS 1 AND 14.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of January 30, 1996 (the "Merger Agreement"), among IBM, the Purchaser and
the Company pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company (the "Merger"), with the Company surviving the Merger (as
such, the "Surviving Corporation") as a wholly owned subsidiary of IBM. In the
Merger, each outstanding Share (other than Shares owned by the Company, any
subsidiary of the Company, IBM, the Purchaser or any other subsidiary of IBM or
by stockholders, if any, who are entitled to and who properly exercise
dissenters' rights under Delaware law) will be converted into the right to
receive
1
<PAGE>
from the Surviving Corporation the Offer Price in cash, without interest (the
"Merger Consideration"). See Section 12.
The Merger is subject to a number of conditions, including approval by
stockholders of the Company, if such approval is required by applicable law. If
the Purchaser acquires 90% or more of the outstanding Shares pursuant to the
Offer or otherwise, the Purchaser would be able to effect the Merger pursuant to
the short-form merger provisions of the Delaware General Corporation Law (the
"DGCL"), without prior notice to, or any action by, any other stockholder of the
Company. See Section 12.
In connection with the execution of the Merger Agreement, the Purchaser and
IBM entered into a Stockholder Agreement dated as of January 30, 1996 (the
"Stockholder Agreement"), with all the directors and executive officers of the
Company (collectively, the "Selling Stockholders"), pursuant to which such
Selling Stockholders have unconditionally agreed to tender into the Offer, and
not to withdraw therefrom, 530,441 Shares. In addition, the Selling Stockholders
have agreed to sell to the Purchaser, and the Purchaser has agreed to purchase,
all the Selling Stockholders' Shares at a price per Share of $47.50, or such
higher price per Share as may be offered by the Purchaser in the Offer, provided
that (i) such obligation to purchase is subject to the Purchaser having accepted
Shares for payment under the Offer and the Minimum Condition having been
satisfied, which conditions may be waived by the Purchaser in its sole
discretion, and (ii) such obligation to sell is subject to the Minimum Condition
having been satisfied or a Takeover Proposal (as defined herein) having been
made. Under the Stockholder Agreement, each Selling Stockholder has also granted
an irrevocable proxy for the benefit of the Purchaser with respect to the Shares
subject to the Stockholder Agreement owned by such Selling Stockholder to vote
such Shares against certain competing transactions.
The Merger Agreement and the Stockholder Agreement are more fully described
in Section 12.
The Company has informed the Purchaser that, as of December 31, 1995, there
were 14,943,580 Shares issued and outstanding, 2,072,415 Shares reserved for
issuance upon the exercise of outstanding options to purchase Shares ("Stock
Options") and a maximum of 100,000 Shares issuable upon the exercise of
outstanding warrants to purchase Shares ("Warrants"). In addition, there were
70,775 Shares reserved for issuance upon the exercise of Stock Options granted
since December 31, 1995. Based upon the foregoing, the Purchaser believes that
approximately 8,593,386 Shares constitute a majority of the outstanding Shares
on a fully diluted basis. Accordingly, the Minimum Condition will be satisfied
if at least 8,062,945 Shares (other than the Shares subject to the Stockholder
Agreement), or approximately 54.0% of the outstanding shares as of January 26,
1996 (approximately 46.9% of the Shares on a fully diluted basis), are validly
tendered and not withdrawn prior to the Expiration Date. If the Minimum
Condition is satisfied and the Purchaser accepts for payment Shares tendered
pursuant to the Offer, the Purchaser will be able to elect a majority of the
members of the Company's Board of Directors and to effect the Merger without
the affirmative vote of any other stockholder of the Company.
Certain Federal income tax consequences of the sale of Shares pursuant to
the Offer and the conversion of Shares pursuant to the Merger are described in
Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
2
<PAGE>
THE TENDER OFFER
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn in accordance with Section 3. The
term "Expiration Date" means 12:00 midnight, New York City time, on Friday,
March 1, 1996, unless and until the Purchaser shall have extended the period of
time during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by the
Purchaser, will expire.
In the Merger Agreement the Purchaser has agreed that it will not, without
the consent of the Company, extend the Offer, except that, without the consent
of the Company, the Purchaser may extend the Offer (a) if at the Expiration Date
any of the conditions to the Purchaser's obligation to accept Shares for payment
are not satisfied or waived, until such time as such conditions are satisfied or
waived, (b) for any period required by any rule, regulation, interpretation or
position of the Commission or the staff thereof applicable to the Offer and (c)
for any reason on one or more occasions for an aggregate period of not more than
25 business days beyond the latest expiration date that would otherwise be
permitted under the terms of the Merger Agreement as described in this sentence.
As used in this Offer to Purchase, "business day" has the meaning set forth in
Rule 14d-1 under the Exchange Act.
In addition, the Purchaser has agreed in the Merger Agreement that it will
not, without the consent of the Company, (a) reduce the number of Shares subject
to the Offer, (b) reduce the Offer Price, (c) add to the conditions set forth in
Section 14, (d) change the form of consideration payable in the Offer or (e)
amend any other term of the Offer in any manner adverse to the Company's
stockholders.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, the Purchaser reserves the right (but shall not
be obligated), at any time and from time to time, and regardless of whether or
not any of the events or facts set forth in Section 14 hereof shall have
occurred, (a) to extend the period of time during which the Offer is open, and
thereby delay acceptance for payment of and the payment for any Shares, by
giving oral or written notice of such extension to the Depositary and (b) to
amend the Offer in any other respect by giving oral or written notice of such
amendment to the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT THE PURCHASER EXERCISES ITS
RIGHT TO EXTEND THE OFFER.
If by 12:00 midnight, New York City time, on Friday, March 1, 1996 (or any
date or time then set as the Expiration Date), any or all of the conditions to
the Offer have not been satisfied or waived, the Purchaser reserves the right
(but shall not be obligated), subject to the terms and conditions contained in
the Merger Agreement and to the applicable rules and regulations of the
Commission, (a) to terminate the Offer and not accept for payment or pay for any
Shares and return all tendered Shares to tendering stockholders, (b) to waive
all the unsatisfied conditions and accept for payment and pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn, (c)
to extend the Offer and, subject to the right of stockholders to withdraw Shares
until the Expiration Date, retain the Shares that have been tendered during the
period or periods for which the Offer is extended or (d) to amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, waiver, amendment or termination will be
followed as promptly as practicable by public announcement. In the case of an
extension, Rule 14e-l(d) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires that the announcement be issued no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act. Subject to
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applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that any material change in the information published, sent or
given to stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change) and without limiting the manner in which the Purchaser may choose to
make any public announcement, the Purchaser will not have any obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service.
If the Purchaser extends the Offer or if the Purchaser is delayed in its
acceptance for payment of or payment (whether before or after its acceptance for
payment of Shares) for Shares or it is unable to pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser,
and such Shares may not be withdrawn except to the extent tendering stockholders
are entitled to withdrawal rights as described in Section 3. However, the
ability of the Purchaser to delay the payment for Shares that the Purchaser has
accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which
requires that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, with the Company's consent, a waiver of the Minimum Condition), the
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the offer or information concerning
the offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. With
respect to a change in price or a change in the percentage of securities sought,
a minimum period of 10 business days is generally required to allow for adequate
dissemination to stockholders.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition, the expiration or termination of all waiting periods imposed by the
HSR Act and the other conditions set forth in Section 14. Subject to the terms
and conditions contained in the Merger Agreement, the Purchaser reserves the
right (but shall not be obligated) to waive any or all such conditions. However,
if the Purchaser waives or amends the Minimum Condition (which action may not be
taken without the Company's consent) during the last five business days during
which the Offer is open, the Purchaser will be required to extend the Expiration
Date so that the Offer will remain open for at least five business days after
the announcement of such waiver or amendment is first published, sent or given
to holders of Shares and may also be required to extend the Offer if other
conditions are waived, depending upon the materiality of the waiver.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed by the Purchaser to record holders of
Shares, and will be furnished to brokers, dealers, banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder lists, or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
The Purchaser is not offering to purchase any of the Stock Options or the
Warrants, and neither the Purchaser nor the Company is establishing any special
arrangements to facilitate exercises in connection with the Offer. Holders of
Stock Options or Warrants who wish to tender Shares in the Offer must first
exercise such Stock Options or Warrants, in each case in accordance with the
terms and provisions thereof, and then tender the Shares received upon such
exercise pursuant to the Offer. Holders of Stock Options or Warrants who
exercise such Stock Options or Warrants will not have the right to revoke an
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effective exercise and contingent exercises will not be valid. Holders of Stock
Options and Warrants who wish to tender Shares issuable pursuant to such
securities are responsible for exercising such securities in sufficient time
that such Shares can be delivered to the Depositary in a timely manner as
required by the Offer. The parties to the Merger Agreement have agreed upon
certain additional rights and benefits to be provided to holders of Stock
Options after the Closing. See Section 12. NEITHER THE COMPANY NOR ITS BOARD OF
DIRECTORS MAKES ANY RECOMMENDATION TO ANY HOLDER OF STOCK OPTIONS OR WARRANTS AS
TO WHETHER TO EXERCISE ANY OR ALL SUCH STOCK OPTIONS OR WARRANTS, AS THE CASE
MAY BE.
2. PROCEDURE FOR TENDERING SHARES
Valid Tender. For a stockholder validly to tender Shares pursuant to the
Offer, either (a) a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, together with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message (as defined below),
and any other required documents, must be received by the Depositary at one of
its addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either certificates for tendered Shares must be received by
the Depositary at one of such addresses or such Shares must be delivered
pursuant to the procedures for book-entry transfer set forth below (and a
Book-Entry Confirmation (as defined below) received by the Depositary), in each
case prior to the Expiration Date, or (b) the tendering stockholder must comply
with the guaranteed delivery procedures set forth below.
The Depositary will establish accounts with respect to the Shares at The
Depository Trust Company, the Midwest Securities Trust Company and the
Philadelphia Depository Trust Company (the "Book-Entry Transfer Facilities") for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in any of the
Book-Entry Transfer Facilities' systems may make book-entry delivery of Shares
by causing a Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with such Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of Shares may be
effected through book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message, and any other required documents, must, in any case, be
transmitted to, and received by, the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date,
or the tendering stockholder must comply with the guaranteed delivery procedures
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at a Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation". DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgement from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
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Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (a) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
any of the Book-Entry Transfer Facilities' systems whose name appears on a
security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (b) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(such participant, an "Eligible Institution"). In all other cases, all
signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the
certificates for Shares are registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made or certificates
for Shares not tendered or not accepted for payment are to be returned to a
person other than the registered holder of the certificates surrendered, the
tendered certificates must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name or names of the registered
holders or owners appear on the certificates, with the signatures on the
certificates or stock powers guaranteed as aforesaid. See Instructions 1 and 5
to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to all such Shares),
together with a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or, in
the case of a book-entry transfer, an Agent's Message, and any other
required documents are received by the Depositary within three trading days
after the date of execution of such Notice of Guaranteed Delivery. A
"trading day" is any day on which the Nasdaq National Market (the "Nasdaq
National Market") operated by the National Association of Securities
Dealers, Inc. (the "NASD") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (a) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (b) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (c) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
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The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering stockholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing a Letter of Transmittal as set forth above, the
tendering stockholder will irrevocably appoint designees of the Purchaser as
such stockholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities or rights issued or issuable in respect
of such Shares on or after January 30, 1996. All such proxies will be considered
coupled with an interest in the tendered Shares. Such appointment will be
effective when, and only to the extent that, the Purchaser accepts for payment
Shares tendered by such stockholder as provided herein. Upon such appointment,
all prior powers of attorney, proxies and consents given by such stockholder
with respect to such Shares or other securities or rights will, without further
action, be revoked and no subsequent powers of attorney, proxies, consents or
revocations may be given (and, if given, will not be deemed effective). The
designees of the Purchaser will thereby be empowered to exercise all voting and
other rights with respect to such Shares and other securities or rights in
respect of any annual, special or adjourned meeting of the Company's
stockholders, actions by written consent in lieu of any such meeting or
otherwise, as they in their sole discretion deem proper. The Purchaser reserves
the right to require that, in order for Shares to be deemed validly tendered,
immediately upon the Purchaser's acceptance for payment of such Shares, the
Purchaser must be able to exercise full voting, consent and other rights with
respect to such Shares and other securities or rights, including voting at any
meeting of stockholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of or payment for which may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the absolute right to waive
any defect or irregularity in the tender of any Shares of any particular
stockholder whether or not similar defects or irregularities are waived in the
case of other stockholders. No tender of Shares will be deemed to have been
validly made until all defects or irregularities relating thereto have been
cured or waived. None of the Purchaser, IBM, the Depositary, the Information
Agent, the Dealer Manager or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. The Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
Backup Withholding. In order to avoid "backup withholding" of Federal income
tax on payments of cash pursuant to the Offer, a stockholder surrendering Shares
in the Offer must, unless an exemption applies, provide the Depositary with such
stockholder's correct taxpayer identification number ("TIN") on a Substitute
Form W-9 and certify under penalties of perjury that such TIN is correct and
that such stockholder is not subject to backup withholding. If a stockholder
does not provide such stockholder's correct TIN or fails to provide the
certifications described above, the Internal Revenue Service (the "IRS") may
impose a penalty on such stockholder and payment of cash to such stockholder
pursuant to the Offer may be subject to backup withholding of 31%. All
stockholders surrendering Shares pursuant to the Offer should complete and sign
the main signature form and the Substitute Form W-9 included as part of the
Letter of Transmittal to provide the information and certification necessary to
avoid backup withholding (unless an applicable exemption exists and is proved in
a manner satisfactory to the Purchaser and the Depositary). Certain stockholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. Noncorporate foreign
stockholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign
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Status, a copy of which may be obtained from the Depositary, in order to avoid
backup withholding. See Instruction 9 to the Letter of Transmittal.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after Monday, April 1, 1996.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedure
for book-entry transfer as set forth in Section 2, any notice of withdrawal must
also specify the name and number of the account at the appropriate Book-Entry
Transfer Facility to be credited with the withdrawn Shares and otherwise comply
with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of
Shares may not be rescinded, and any Shares properly withdrawn will thereafter
be deemed not validly tendered for purposes of the Offer. However, withdrawn
Shares may be retendered by again following one of the procedures described in
Section 2 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. None of the
Purchaser, IBM, the Depositary, the Information Agent, the Dealer Manager or any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not properly withdrawn in
accordance with Section 3 promptly after the Expiration Date. All determinations
concerning the satisfaction of such terms and conditions will be within the
Purchaser's sole discretion, which determinations will be final and binding. See
Sections 1 and 14. The Purchaser expressly reserves the right to delay
acceptance for payment of or payment for Shares in order to comply in whole or
in part with any applicable law, including, without limitation, the HSR Act. Any
such delays will be effected in compliance with Rule 14e-l(c) under the Exchange
Act (relating to a bidder's obligation to pay for or return tendered securities
promptly after the termination or withdrawal of such bidder's offer).
IBM filed a Notification and Report Form with respect to the Offer under the
HSR Act on February 1, 1996. The Company expects to file soon its Notification
and Report Form. The waiting period under the HSR Act with respect to the Offer
will expire at 11:59 p.m., New York City time, on the 15th day after the date
such form is filed unless early termination of the waiting period is granted.
However, the Antitrust Division of the Department of Justice (the "Antitrust
Division") or the Federal
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Trade Commission (the "FTC") may extend the waiting period by requesting
additional information or documentary material from IBM or the Company. If such
a request is made, such waiting period will expire at 11:59 p.m., New York City
time, on the 10th day after substantial compliance by IBM or the Company with
such request. See Section 15 hereof for additional information concerning the
HSR Act and the applicability of the antitrust laws to the Offer.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (a) certificates for
(or a timely Book-Entry Confirmation with respect to) such Shares, (b) a Letter
of Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or, in the case of a book-entry
transfer, an Agent's Message, and (c) any other documents required by the Letter
of Transmittal. The per Share consideration paid to any stockholder pursuant to
the Offer will be the highest per Share consideration paid to any other
stockholder pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. Payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after termination or withdrawal of a tender offer),
the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to exercise, and duly exercise, withdrawal rights as
described in Section 3.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, certificates for any such Shares will be returned, without expense to
the tendering stockholder (or, in the case of Shares delivered by book-entry
transfer of such Shares into the Depositary's account at a Book-Entry Transfer
Facility pursuant to the procedure set forth in Section 2, such Shares will be
credited to an account maintained at the appropriate Book-Entry Transfer
Facility), as promptly as practicable after the expiration or termination of the
Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to IBM, or to one or more direct or indirect wholly owned
subsidiaries of IBM, the right to purchase Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for Federal income tax purposes under the Internal Revenue Code of
1986, as amended (the "Code"), and may also be a taxable transaction under
applicable state, local or foreign income or other tax laws. Generally, for
Federal income tax purposes, a tendering stockholder will recognize gain or loss
equal to the difference
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between the amount of cash received by the stockholder pursuant to the Offer or
the Merger and the aggregate tax basis in the Shares tendered by the stockholder
and purchased pursuant to the Offer or converted in the Merger, as the case may
be. Gain or loss will be calculated separately for each block of Shares tendered
and purchased pursuant to the Offer or converted in the Merger, as the case may
be.
If Shares are held by a stockholder as capital assets, gain or loss
recognized by the stockholder will be capital gain or loss, which will be
long-term capital gain or loss if the stockholder's holding period for the
Shares exceeds one year. Under present law, long-term capital gains recognized
by an individual stockholder will generally be taxed at a maximum Federal
marginal tax rate of 28%, and long-term capital gains recognized by a corporate
stockholder will be taxed at a maximum Federal marginal tax rate of 35%. In
addition, under present law the ability to use capital losses to offset ordinary
income is limited.
The Revenue Reconciliation Bill of 1995 (the "Bill"), which was vetoed by
President Clinton, would have generally reduced the maximum Federal marginal
income tax rate on long-term capital gains (for sales after December 31, 1994)
to 19.8% for individual stockholders and to 28% for corporate stockholders. In
addition, the Bill would have further restricted the ability to use capital
losses to offset ordinary income. As budget negotiations between Congress and
the President are ongoing, it cannot be predicted whether any reduction in the
tax rate for capital gains (or any additional restrictions on the ability to use
capital losses against ordinary income) will be enacted or, if enacted, when any
such reduction (or restrictions) will be effective. Stockholders are urged to
consult with their tax advisors regarding the applicable rate of taxation and
their ability to use capital losses against ordinary income.
A stockholder that tenders Shares may be subject to 31% backup withholding
unless the stockholder provides its TIN and certifies that such number is
correct or properly certifies that it is awaiting a TIN, or unless an exemption
applies. Exemptions are available for stockholders that are corporations and for
certain foreign individuals and entities. A stockholder that does not furnish a
required TIN may be subject to a penalty imposed by the IRS. See "Backup
Withholding" under Section 2.
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the Federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS. If
backup withholding results in an overpayment of tax, a refund can be obtained by
the stockholder upon filing an income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX
TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE COMPANIES,
TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A
HOLDER OF SHARES IN LIGHT OF INDIVIDUAL CIRCUMSTANCES. STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO
THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME
AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER.
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6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
The Shares are traded in the over-the-counter market and prices are quoted
on the Nasdaq National Market under the symbol TIVS, and have been at all times
since March 10, 1995, the date on which the Company completed its initial public
offering. The following table sets forth, for each of the periods indicated, the
high and low last reported sales prices per Share as reported by the Nasdaq
National Market and the Dow Jones News Retrieval Service.
TIVOLI SYSTEMS INC.
SALES PRICES
-----------------
HIGH LOW
------ ------
1995
First Quarter (since March 10, 1995).............. $39 3/4 $23 7/8
Second Quarter.................................... 41 1/2 30 1/4
Third Quarter..................................... 45 27 1/4
Fourth Quarter.................................... 36 1/4 24 1/2
1996
First Quarter (through February 1, 1996).......... 47 3/4 32 3/8
On January 30, 1996, the last full trading day before the public
announcement of the execution of the Merger Agreement, the last reported sales
price of the Shares on the Nasdaq National Market was $37 3/4 per Share. On
February 1, 1996, the last full trading day before commencement of the Offer,
the last reported sales price of the Shares on the Nasdaq National Market was
$47 per Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
THE SHARES.
The Company has informed the Purchaser that it has never paid any dividends
on the Shares.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION; EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS
Market for the Shares. The purchase of Shares pursuant to the Offer will
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public.
Stock Quotation. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements of the NASD for
continued inclusion in the Nasdaq National Market, which require that an issuer
have at least 200,000 publicly held shares, held by at least 400 shareholders or
300 shareholders of round lots, with a market value of at least $1,000,000, and
have net tangible assets of at least $1,000,000, $2,000,000 or $4,000,000,
depending on profitability levels during the issuer's four most recent fiscal
years. If these standards are not met, the Shares might nevertheless continue to
be included in the NASD's Nasdaq Stock Market (the "Nasdaq Stock Market") with
quotations published in the Nasdaq "additional list" or in one of the "local
lists", but if the number of holders of the Shares were to fall below 300, or if
the number of publicly held Shares were to fall below 100,000 or there were not
at least two registered and active market makers for the Shares, the NASD's
rules provide that the Shares would no longer be "qualified" for Nasdaq Stock
Market reporting and the Nasdaq Stock Market would cease to provide any
quotations. Shares held directly or indirectly by directors, officers or
beneficial owners of more than 10% of the Shares are not considered as being
publicly held for this purpose. According to the Company, as of January 26,
1996, there were approximately 311 holders of record of Shares and there were
14,926,128 Shares outstanding. If, as a result of the purchase of Shares
pursuant to the Offer or otherwise, the Shares no longer meet the requirements
of the NASD for continued inclusion in the Nasdaq National Market or in any
11
<PAGE>
other tier of the Nasdaq Stock Market and the Shares are no longer included in
the Nasdaq National Market or in any other tier of the Nasdaq Stock Market, as
the case may be, the market for Shares could be adversely affected.
In the event that the Shares no longer meet the requirements of the NASD for
continued inclusion in any tier of the Nasdaq Stock Market, it is possible that
the Shares would continue to trade in the over-the-counter market and that price
quotations would be reported by other sources. The extent of the public market
for the Shares and the availability of such quotations would, however, depend
upon the number of holders of Shares remaining at such time, the interests in
maintaining a market in Shares on the part of securities firms, the possible
termination of registration of the Shares under the Exchange Act, as described
below, and other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its stockholders and to the Commission and would make certain
provisions of the Exchange Act no longer applicable to the Company, such as the
short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement pursuant to Section 14(a) of the
Exchange Act in connection with stockholders' meetings and the related
requirement of furnishing an annual report to stockholders and the requirements
of Rule 13e-3 under the Exchange Act with respect to "going private"
transactions. Furthermore, the ability of "affiliates" of the Company and
persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act of
1933 may be impaired or eliminated. The Purchaser intends to seek to cause the
Company to apply for termination of registration of the Shares under the
Exchange Act as soon after the completion of the Offer as the requirements for
such termination are met.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted
from all stock exchanges and the registration of the Shares under the Exchange
Act will be terminated following the consummation of the Merger.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans made
by brokers.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal offices at 9442
Capital of Texas Highway North, Arboretum Plaza One, Suite 500, Austin, Texas
78759. The Company is a leading supplier of systems and applications management
software and services for managing distributed client/server environments.
Set forth below is certain selected consolidated financial information with
respect to the Company and its subsidiaries excerpted from the information
contained in the Company Prospectus and the Company's Quarterly Report on Form
10-Q for the nine-month period ended September 30, 1995 (the "Company 1995
10-Q"). More comprehensive financial information is included in the Company
Prospectus, the Company 1995 10-Q and other documents filed by the Company with
the Commission, and the following summary is qualified in its entirety by
reference to the Company Prospectus, the Company 1995 10-Q and such other
documents and all the financial information (including any related
12
<PAGE>
notes) contained therein. The Company Prospectus, the Company 1995 10-Q and such
other documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below under "Available Information".
TIVOLI SYSTEMS INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share data)
<TABLE><CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ------------------
1994 1993 1992 1995 1994
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues.................................. $26,878 $12,746 $ 4,699 $33,837 $18,247
Operating income (loss)................... 1,522 (735) (1,904) 2,837 1,018
Net income (loss)......................... 1,380 (735) (1,885) 3,288 976
Balance Sheet Data:(1)
Working capital........................... $ 3,652 $ 3,075 $ 2,443 $31,190
Total assets.............................. 15,908 8,201 4,721 56,200
Common stockholders' equity (deficit)..... (5,700) (7,267) (6,439) 42,869
</TABLE>
- ------------
(1) At period end.
On January 24, 1996, the Company issued the following press release,
according to published sources:
"AUSTIN, Texas, Jan. 24, 1996--Tivoli Systems Inc. today reported revenues
of $15.7 million for the fourth quarter ended December 31, 1995 compared to
revenues of $8.6 million for the fourth quarter of 1994. Net income for the
quarter was $2.2 million or $0.14 per share. For the corresponding quarter in
1994, the company reported net income of $0.4 million or $0.03 per share.
"Revenues for the fiscal year ended December 31, 1995 were $49.6 million,
compared to $26.9 million for fiscal 1994. Net income for fiscal 1995 was $5.5
million or $0.35 per share, up from $1.4 million or $0.10 per share for fiscal
1994. The following table provides additional detail on Tivoli's fourth quarter
and fiscal 1995 results (in thousands, except per share data):
<TABLE><CAPTION>
YEAR ENDED DEC. 31, QUARTER ENDED DEC. 31,
------------------------------ -----------------------------
1995 1994 INCREASE 1995 1994 INCREASE
------- ------- -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Revenues............................ $49,576 $26,878 84% $15,739 $8,631 82%
Operating Income.................... 4,853 1,522 219 2,016 504 300
Net Income.......................... 5,515 1,380 300 2,227 404 451
Net Income per share................ 0.35 0.10 250 0.14 0.03 367
</TABLE>
" 'We are pleased with our results in the fourth quarter, culminating an
exceptional year for Tivoli,' said Frank Moss, Tivoli CEO and president. 'We're
encouraged by the sales momentum this quarter, as evidenced by a shortened
average sales cycle, an increased average sales price and a strong pipeline with
a range of small and large deals. Our products have been well received, our
competitive wins are mounting and industry recognition continues to point to
Tivoli as a leading distributed management solution,' said Moss. 'Additionally,
our strategic investments in key areas of the business are producing positive
results in international operations, alternative channel development,
professional services here and abroad, as well as technical support,' Moss said.
" 'Our customer list continues to expand into a broad range of industries,'
said Moss. 'Notable among our fourth quarter wins were America Online, Chrysler
Corporation, Bell South and Hanscom Air Force Base,' said Moss.
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<PAGE>
"During the fourth quarter, Tivoli announced a number of strategic products
to meet the growing demand for distributed systems and applications management.
'In October, we announced TME for NT, the first solution to allow customers to
manage their heterogeneous enterprises comprised of Windows NT, UNIX, NetWare
and Windows 3.X stations from either UNIX or NT environments,' Moss said. In
December, Tivoli delivered version 1.0 of the Applications Management
Specification (AMS) and toolkit, enabling the generation of management-ready
applications for tools such as PowerBuilder. Additionally, the test phase of
Tivoli's AMS Module for SAP R/3 was very well received in the fourth quarter.
"Also in December, Tivoli made a minority investment in net.Genesis, a
developer of utilities and tools for the World Wide Web. 'Internet and Intranet
management represent a significant opportunity for Tivoli,' Moss said. 'We plan
to explore development and distribution initiatives with net.Genesis as part of
our Internet strategy to be unveiled in Q1. With Tivoli's proven management
technology, we're well positioned to move quickly into the Internet market,'
said Moss.
"Tivoli Systems Inc. (NASDAQ:TIVS) is a leading supplier of systems and
applications management software and services for managing distributed
client/server environments. The company's product family, the Tivoli Management
Environment, is used by Fortune 1000 companies worldwide to make client/server
work by removing systems management as a barrier to success. Headquartered in
Austin, Texas, Tivoli distributes its products worldwide through a network of
domestic and international sales offices, international distributors and systems
integrators. World Wide Web: http://www.tivoli.com."
Available Information. The Company is subject to the informational
requirements of the Exchange Act and, in accordance therewith, is required to
file reports relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options and other matters, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is disclosed in the Company Prospectus and filed
with the Commission. Such information should be available for inspection at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, DC 20549, and at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, NY 10048 and Citicorp Center,
500 West Madison Street (Suite 1400), Chicago, IL 60661. Copies of such
information should be obtainable, by mail, upon payment of the Commission's
customary charges, by writing to the Commission's principal office at 450 Fifth
Street, N.W., Washington, DC 20549. Such material should also be available for
inspection at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington,
DC 20006.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the Commission and other publicly
available information. Although the Purchaser and IBM do not have any knowledge
that any such information is untrue, neither the Purchaser nor IBM takes any
responsibility for the accuracy or completeness of such information or for any
failure by the Company to disclose events that may have occurred and may affect
the significance or accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND IBM
The Purchaser, a Delaware corporation, which is a wholly owned subsidiary of
IBM, was organized to acquire the Company and has not conducted any unrelated
activities since its organization. The principal office of the Purchaser is
located at the principal office of IBM. All outstanding shares of capital stock
of the Purchaser are owned by IBM.
IBM is a New York corporation with its principal office located at Old
Orchard Road, Armonk, NY 10504. IBM has two fundamental missions. First, IBM
strives to lead in the creation, development
14
<PAGE>
and manufacture of the industry's most advanced information technologies,
including computer systems, software, networking systems and microelectronics.
Second, IBM translates these advanced technologies into value for its customers
worldwide through its sales and professional services units in North America,
Europe/Middle East/Africa, Asia Pacific and Latin America.
Available Information. IBM is subject to the informational requirements of
the Exchange Act and, in accordance therewith, files reports relating to its
business, financial condition and other matters. Information, as of particular
dates, concerning IBM's directors and officers, their remuneration, stock
options and other matters, the principal holders of IBM's securities and any
material interest of such persons in transactions with IBM is required to be
disclosed in proxy statements distributed to IBM's stockholders and filed with
the Commission. Such reports, proxy statements and other information should be
available for inspection at the Commission and copies thereof should be
obtainable from the Commission in the same manner as is set forth with respect
to the Company in Section 8. Such material should also be available for
inspection at the offices of The New York Stock Exchange, Inc., 20 Broad Street,
New York, NY 10005.
10. SOURCE AND AMOUNT OF FUNDS
The Purchaser estimates that the total amount of funds required to purchase
pursuant to the Offer the number of Shares that are outstanding on a fully
diluted basis and to pay fees and expenses related to the Offer and the Merger
will be approximately $800 million. The Purchaser plans to obtain all funds
needed for the Offer and the Merger through a capital contribution. IBM intends
to use its available cash on hand to make this capital contribution.
If for any reason IBM's available cash should not be sufficient, IBM has
additional financing options available to it, including access to the capital
markets as well as a $10 billion revolving credit facility (the "Revolving
Credit Facility"). The Revolving Credit Facility is provided pursuant to a
Credit Agreement (the "Credit Agreement") dated as of December 22, 1993, as
amended as of March 1, 1995, among IBM, Chemical Bank, as Administrative Agent,
and the syndicate of lenders party thereto (the "Lenders"). As of December 31,
1995, approximately $1.066 billion was outstanding under the Revolving Credit
Facility, all of which had been borrowed by foreign subsidiaries of IBM.
Pursuant to the Credit Agreement, IBM or any subsidiary of IBM that is
designated as a borrower thereunder (the "Subsidiary Borrowers") can request the
Lenders to make "ABR Loans" and "Eurodollar Loans" to such person.
ABR Loans made pursuant to the Revolving Credit Facility bear interest on
any day at a rate per annum equal to the greatest of (i) Chemical Bank's prime
rate in effect on such day, (ii) the "Base CD Rate" in effect on such day plus
1% and (iii) the Federal Funds Effective Rate (as defined in the Credit
Agreement) in effect on such day plus 0.50%. The "Base CD Rate" for any day is a
per annum rate of interest based on the secondary market rate for three-month
certificates of deposit in effect on such day, adjusted by reference to the
reserve requirements prescribed by the Federal Reserve Board for depository
institutions in respect of new non-personal time deposits having a maturity of
30 days or more, and by reference to the annual assessment rate payable by a
well-capitalized member of the Bank Insurance Fund to the Federal Deposit
Insurance Corporation.
Eurodollar Loans made pursuant to the Revolving Credit Facility bear
interest at a per annum rate determined on the basis of the rate for dollar
deposits appearing on Telerate Page 3750 plus a spread ranging from 0.1700% per
annum to 0.6250% per annum, depending upon the aggregate amount drawn under the
Revolving Credit Facility and IBM's long-term unsecured debt rating.
In addition to ABR Loans and Eurodollar Loans, the Credit Agreement provides
that IBM and each Subsidiary Borrower may request the Lenders to make
"Competitive Loans", which are uncommitted advances at competitive rates made on
an auction basis.
15
<PAGE>
The Credit Agreement provides for the payment by IBM of a facility fee on
the aggregate commitment of the Lenders under the Revolving Credit Facility,
regardless of utilization, at a rate ranging from 0.0800% per annum to 0.3750%
per annum, depending upon IBM's long-term unsecured debt rating.
The Credit Agreement contains customary conditions to borrowing,
representations and warranties, covenants and events of default.
IBM has unconditionally guaranteed the obligations of each of the Subsidiary
Borrowers under the Credit Agreement. The commitment of the Lenders expires on
the fifth anniversary of the date of the Credit Agreement.
The foregoing description of the Revolving Credit Facility is qualified in
its entirety by reference to the text of the Credit Agreement filed as an
exhibit to the Tender Offer Statement on Schedule 14D-1 of the Purchaser filed
with the Commission in connection with the Offer (the "Schedule 14D-1") and is
incorporated herein by reference.
11. CONTACTS AND TRANSACTIONS WITH THE COMPANY; BACKGROUND OF THE OFFER
At various times during 1994 and 1995, representatives of IBM and
representatives of the Company met to discuss a possible development and
marketing alliance. No formal agreements resulted from these meetings.
In August of 1995, representatives of IBM and representatives of the
Company, including its Chief Executive Officer, Franklin H. Moss, again met to
discuss possible cooperative arrangements, including an equity investment by IBM
in the Company, joint venture arrangements or an acquisition of the Company by
IBM. Subsequently, IBM and the Company executed a bilateral Confidential
Disclosure Agreement and a non-reliance letter each dated August 16, 1995, and
an agreement dated September 11, 1995, giving IBM the right to make an offer to
acquire the Company in the event that a third party made an offer or if the
Board of Directors of the Company decided to sell the Company.
On September 18, 1995, IBM representatives met with Mr. Moss and Eric L.
Jones, the Company's Chairman, to discuss a possible acquisition of the Company
by IBM. They explored organizational structures and development goals for a
merged entity. Mr. Moss and Mr. Jones indicated that they wanted an assurance
that IBM was seriously interested in exploring the possibility of an acquisition
before there would be any exchange of confidential information between the
companies.
On September 21, 1995, a representative of IBM told Mr. Moss that John M.
Thompson, Senior Vice President and Group Executive of IBM, planned to review an
acquisition of the Company with the IBM Corporate Executive Committee on
September 25.
On September 29, 1995, representatives of IBM and representatives of the
Company prepared an agenda for a meeting that would begin on October 3, 1995, to
discuss certain confidential information relating to the Company. On October 3,
1995, representatives of IBM met with Mr. Jones and other representatives of the
Company.
On October 24, 1995, Mr. Thompson and Mr. Moss met and discussed management
issues relating to an acquisition of the Company by IBM. Mr. Moss indicated that
the Company wanted to know whether IBM would soon proceed with an acquisition of
the Company. On October 27, 1995, Mr. Thompson called Mr. Moss and told him
that, at that time, IBM was still studying the acquisition of the Company but
was not then prepared to proceed.
On December 8, 1995, Mr. Thompson called Mr. Moss and advised him that IBM
was prepared to discuss a possible acquisition of the Company. Mr. Moss
indicated that the Company's Board had discussed the possibility of being
acquired and was amenable to further discussions.
16
<PAGE>
On December 12, 1995, Mr. Thompson met with Mr. Moss and discussed
organizational structure and mission for the Company following an acquisition by
IBM and compensation and retention matters. They also discussed preliminary
ranges of price that IBM and the Company might be willing to consider, but no
agreements were reached.
During the period from December 17, 1995 to January 22, 1996,
representatives of IBM and representatives of the Company continued to hold
discussions regarding, among other things, employee and executive compensation
and benefits matters, post-acquisition organizational structure and price. On
January 23, 1996, Mr. Thompson advised Mr. Moss that IBM would not be prepared
to discuss price until after the meeting of IBM's Board of Directors on January
30, 1996.
During the period from January 26 to January 30, 1996, representatives of
IBM and representatives of the Company continued to discuss compensation and
benefits matters and post-acquisition organizational structure. In addition,
during this period, representatives of IBM met with representatives of the
Company to continue IBM's due diligence review of the Company, and the
respective legal advisors of IBM and the Company met and negotiated
documentation for the contemplated transactions.
On January 30, 1996, the Board of Directors of IBM approved the transactions
and the purchase price. Following approval by IBM's Board of Directors, the
transactions were then presented to and approved by the Board of Directors of
the Company. On the same date the transactions were also approved by the Board
of Directors of the Purchaser.
Following approval by the Boards of Directors of the Company, IBM and the
Purchaser, the Merger Agreement and the other definitive agreements were
executed and delivered on January 30, 1996, and the transaction was publicly
announced before financial markets in the United States opened on January 31,
1996.
Except as described in this Offer to Purchase (including Schedule I hereto),
none of the Purchaser, IBM or, to the best knowledge of the Purchaser, any of
the persons listed in Schedule I hereto, or any associate or majority-owned
subsidiary of the Purchaser, IBM or any of the persons so listed, beneficially
owns any equity security of the Company, and none of the Purchaser, IBM or, to
the best knowledge of the Purchaser, any of the other persons referred to above,
or any of the respective directors, executive officers or subsidiaries of any of
the foregoing, has effected any transaction in any equity security of the
Company during the past 60 days. The Purchaser and IBM disclaim beneficial
ownership of any Shares owned by any pension plan of IBM or any affiliate of
IBM.
Except as described in this Offer to Purchase, as of the date hereof (a)
there have not been any contacts, transactions or negotiations between the
Purchaser or IBM, any of their respective subsidiaries or, to the best knowledge
of the Purchaser, any of the persons listed in Schedule I hereto, on the one
hand, and the Company or any of its directors, officers or affiliates, on the
other hand, that are required to be disclosed pursuant to the rules and
regulations of the Commission and (b) none of the Purchaser, IBM or, to the best
knowledge of the Purchaser, any of the persons listed in Schedule I hereto has
any contract, arrangement, understanding or relationship with any person with
respect to any securities of the Company. During the Offer, the Purchaser and
IBM intend to have ongoing contacts and negotiations with the Company and its
directors, officers and stockholders.
17
<PAGE>
12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT; THE STOCKHOLDER AGREEMENT;
PLANS FOR THE COMPANY
Purpose. The purpose of the Offer is to enable IBM to acquire control of,
and the entire equity interest in, the Company. The Offer, as the first step in
the acquisition of the Company, is intended to facilitate the acquisition of all
the Shares. The purpose of the Merger is to acquire all Shares not tendered and
purchased pursuant to the Offer, the Stockholder Agreement or otherwise.
The Merger Agreement. The Merger Agreement provides that following the
satisfaction or waiver of the conditions described below under "Conditions to
the Merger", the Purchaser will be merged with and into the Company, and each
then outstanding Share (other than Shares owned by the Company, any subsidiary
of the Company, IBM, the Purchaser, any other subsidiary of IBM or by
stockholders, if any, who are entitled to and who properly exercise dissenters'
rights under Delaware law) will be converted into the right to receive an amount
in cash equal to the price per Share paid pursuant to the Offer.
Vote Required To Approve Merger. The DGCL requires, among other things,
that the adoption of any plan of merger or consolidation of the Company must be
approved by the Board of Directors and generally by the holders of the Company's
outstanding voting securities. The Board of Directors of the Company has
approved the Offer and the Merger; consequently, the only additional action of
the Company that may be necessary to effect the Merger is approval by the
Company's stockholders if the "short-form" merger procedure described below is
not available. Under the DGCL, the affirmative vote of holders of a majority of
the outstanding Shares (including any Shares owned by the Purchaser) is
generally required to approve the Merger. If the Purchaser acquires, through the
Offer, the Stockholder Agreement or otherwise, voting power with respect to a
majority of the outstanding Shares (which would be the case if the Minimum
Condition were satisfied and the Purchaser were to accept for payment Shares
tendered pursuant to the Offer), it would have sufficient voting power to effect
the Merger without the vote of any other stockholder of the Company.
The DGCL also provides that if a parent company owns at least 90% of
each class of stock of a subsidiary, the parent company can effect a short-form
merger with that subsidiary without the action of the other stockholders of the
subsidiary. Accordingly, if, as a result of the Offer, the Stockholder Agreement
or otherwise, the Purchaser owns at least 90% of the outstanding Shares, the
Purchaser could, and intends to, effect the Merger without prior notice to, or
any action by, any other stockholder of the Company.
Conditions to the Merger. The Merger Agreement provides that the Merger
is subject to the satisfaction of certain conditions, including the following:
(a) if required by applicable law, the Merger Agreement and the transactions
contemplated thereby shall have been approved by the affirmative vote of the
holders of a majority of the Shares; (b) no statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other Federal,
state or local government or any court, tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency,
domestic, foreign or supranational (a "Governmental Entity") or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect; provided, however, that each of the Company, the Purchaser and IBM shall
have used reasonable efforts to prevent the entry of any such injunction or
other order and to appeal as promptly as possible any injunction or other order
that may be entered; and (c) the Purchaser shall have previously accepted for
payment and paid for Shares pursuant to the Offer.
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<PAGE>
Termination of the Merger Agreement. The Merger Agreement may be
terminated at any time prior to the effective time of the Merger, whether before
or after approval of the terms of the Merger Agreement by the stockholders of
the Company:
(1) by mutual written consent of IBM and the Company;
(2) by either IBM or the Company if (a)(i) as a result of the failure of
any of the conditions to the Offer, the Offer shall have terminated or
expired in accordance with its terms without the Purchaser having accepted
for payment any Shares pursuant to the Offer or (ii) the Purchaser shall not
have accepted for payment any Shares pursuant to the Offer prior to May 31,
1996, provided, however, that the right to terminate the Merger Agreement
pursuant to either clause (2)(a)(i) or (2)(a)(ii) shall not be
available to any party whose failure to perform any of its obligations under
the Merger Agreement results in the failure of any such condition or if the
failure of such condition results from facts or circumstances that
constitute a breach of representation or warranty under the Merger Agreement
by such party; or (b) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the acceptance for payment of, or
payment for, Shares pursuant to the Offer or the Merger and such order,
decree or ruling or other action shall have become final and nonappealable;
(3) by IBM or the Purchaser (a) prior to the purchase of Shares pursuant
to the Offer in the event of a breach by the Company of any representation,
warranty, covenant or other agreement contained in the Merger Agreement
which (i) would give rise to the failure of a condition set forth in
paragraph (e) or (f) of Section 14 and (ii) cannot be or has not been cured
within 20 days after the giving of written notice to the Company; or (b) if
either IBM or the Purchaser is entitled to terminate the Offer as a result
of (i) the Board of Directors of the Company or any committee thereof having
withdrawn or modified in a manner adverse to IBM or the Purchaser its
approval or recommendation of the Offer, the Merger or the Merger Agreement,
or approved or recommended any Takeover Proposal (as defined below), (ii)
the Company having entered into any agreement with respect to any Superior
Proposal (as defined below) under circumstances described below under
"Takeover Proposals" or (iii) the Board of Directors of the Company or any
committee thereof having resolved to take any of the actions described in
clauses (3)(b)(i) or (3)(b)(ii); or
(4) by the Company (i) in connection with entering into a definitive
agreement in accordance with the terms of the Merger Agreement as described
below under "Takeover Proposal", provided it has complied with all
provisions thereof, including the notice provisions therein, and that it
makes simultaneous payment of the Initial Termination Fee (as defined below
under "Fees and Expenses") or (ii) if IBM or the Purchaser shall have
breached in any material respect any of their respective representations,
warranties, covenants or other agreements contained in the Merger Agreement,
which breach or failure to perform is incapable of being cured or has not
been cured within 20 days after the giving of written notice to IBM or the
Purchaser, except, in any case, such breaches and failures which are not
reasonably likely to affect adversely IBM's or the Purchaser's ability to
complete the Offer or the Merger.
Takeover Proposals. The Merger Agreement provides that the Company will
not, nor will it permit any of its subsidiaries to, authorize or permit any of
its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its subsidiaries, directly or indirectly, (1) to solicit, initiate or encourage
(including by way of furnishing information), or take any other action to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Takeover Proposal or (2) to
participate in any discussions or negotiations regarding any Takeover Proposal;
provided, however, that
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if, at any time prior to the acceptance for payment of Shares pursuant to the
Offer, the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to the Company's stockholders under applicable
law, the Company may, in response to an unsolicited Takeover Proposal, and
subject to compliance with the notification provisions discussed below, (i)
furnish information with respect to the Company to any person pursuant to a
confidentiality agreement in a form approved by the Company and IBM (such
approval not to be unreasonably withheld) and (ii) participate in negotiations
regarding such Takeover Proposal. The Merger Agreement defines "Takeover
Proposal" as any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of 20% or more of the assets of the
Company and its subsidiaries or 20% or more of any class of equity securities of
the Company or any of its subsidiaries, any tender offer or exchange offer that
if consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any of its subsidiaries, any
merger, consolidation, business combination, sale of substantially all the
assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries, other than the transactions
contemplated by the Merger Agreement, or any other transaction the consummation
of which could reasonably be expected to impede, interfere with, prevent or
materially delay the Offer or the Merger or which would reasonably be expected
to dilute materially the benefits to IBM of the transactions contemplated
thereby.
The Merger Agreement provides further that, except as described below,
neither the Board of Directors of the Company nor any committee thereof shall
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to
IBM, the approval or recommendation by such Board of Directors or such committee
of the Offer, the Merger Agreement or the Merger, (ii) approve or recommend, or
propose to approve or recommend, any Takeover Proposal or (iii) cause the
Company to enter into any agreement with respect to any Takeover Proposal.
Notwithstanding the foregoing, in the event that prior to the acceptance for
payment of Shares pursuant to the Offer the Board of Directors of the Company
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the Company's
stockholders under applicable law, such Board of Directors may (subject to the
other provisions regarding Takeover Proposals) withdraw or modify its approval
or recommendation of the Offer, the Merger Agreement or the Merger, approve or
recommend a Superior Proposal, cause the Company to enter into an agreement with
respect to a Superior Proposal or terminate the Merger Agreement, in each case
at any time after the second business day following IBM's receipt of written
notice (a "Notice of Superior Proposal") advising IBM that the Board of
Directors of the Company has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal. In the event that a Notice of Superior
Proposal is delivered and any material term or condition of the Superior
Proposal described therein is subsequently changed, the Company must deliver a
supplemental Notice of Superior Proposal describing such change and may withdraw
or modify its approval or recommendation of the Offer, the Merger Agreement and
the Merger, approve or recommend the modified Superior Proposal or cause the
Company to enter into an agreement with respect to the modified Superior
Proposal only at a time that is after the second business day following IBM's
receipt of the supplemental Notice of Superior Proposal. In addition, if the
Company proposes to enter into an agreement with respect to any Takeover
Proposal, it must concurrently with entering into such agreement pay, or cause
to be paid, to IBM the Initial Termination Fee. See "Fees and Expenses". For
purposes of the Merger Agreement, a "Superior Proposal" means any bona fide
proposal to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than 50% of the Shares then outstanding or all or
substantially all the assets of the Company and otherwise on terms which the
Board of Directors of the Company determines in its good faith judgment (based
on the advice of a financial advisor of nationally recognized reputation) to be
more favorable to the Company's stockholders than the Offer and the Merger.
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In addition to the obligations of the Company described in the preceding
two paragraphs, the Merger Agreement provides that the Company shall immediately
advise IBM orally and in writing of any request for information or of any
Takeover Proposal, the material terms and conditions of such request or Takeover
Proposal and the identity the person making any such request or Takeover
Proposal. The Company is further required under the terms of the Merger
Agreement to keep IBM fully informed of the status and details (including
amendments or proposed amendments) of any such request or Takeover Proposal.
The Merger Agreement provides that nothing contained therein shall
prohibit the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to the Company's stockholders if, in the good faith judgment of
the Board of Directors of the Company, after consultation with outside counsel,
failure to so disclose would be inconsistent with its fiduciary duties to the
Company's stockholders under applicable law; provided, however, that neither the
Company nor its Board of Directors nor any committee thereof shall, except as
permitted by the Merger Agreement and as described above, withdraw or modify, or
propose to withdraw or modify, its position with respect to the Merger or
approve or recommend, or propose to approve or recommend, a Takeover Proposal.
Fees and Expenses. The Merger Agreement provides that the Company will
pay, or cause to be paid, in same day funds to IBM $5,000,000 (the "Initial
Termination Fee") upon demand if (i) IBM or the Purchaser terminates the Merger
Agreement by reason of (A) the Board of Directors of the Company or any
committee thereof having withdrawn or modified in a manner adverse to IBM or the
Purchaser its approval or recommendation of the Offer, the Merger or the Merger
Agreement or approved or recommended any Takeover Proposal, (B) the Company
having entered into any agreement with respect to any Superior Proposal in
accordance with the Merger Agreement or (C) the Board of Directors of the
Company or any committee thereof having resolved to take any of the actions in
either clause (i)(A) or (i)(B), (ii) the Company terminates the Merger Agreement
in connection with entering into a definitive agreement with respect to any
Takeover Proposal in accordance with the provisions described under "Takeover
Proposals" above or (iii) prior to the termination of the Merger Agreement
(other than by the Company by reason of IBM or the Purchaser having breached, in
any material respect, any of their respective representations, warranties,
covenants or other agreements contained in the Merger Agreement, which failure
to perform is incapable of being cured or has not been cured within 20 days
after the giving of written notice to IBM or Purchaser, as applicable, except,
in any case, such breaches and failures which are not reasonably likely to
affect adversely IBM's or the Purchaser's ability to complete the Offer or the
Merger), a Takeover Proposal shall have been made and within one year of such
termination, a transaction constituting a Takeover Proposal is consummated or
the Company shall have entered into an agreement with respect to, approved or
recommended or taken any action to facilitate such Takeover Proposal. In
addition, if the Company becomes obligated to pay the Initial Termination Fee
and a transaction constituting a Takeover Proposal is consummated within 12
months of the termination of the Merger Agreement, the Company shall pay, or
cause to be paid, in same day funds to Parent upon consummation of such
transaction the sum of (i) IBM's out-of-pocket expenses in connection with the
Offer, the Merger or the consummation of any of the transactions contemplated by
the Merger Agreement in an amount up to but not exceeding $2,000,000 and (ii)
$15,000,000.
The Merger Agreement also provides that if (i) the waiting period under
the HSR Act applicable to the purchase of the Shares shall not have expired or
terminated or (ii) there shall be any threatened, instituted or pending
antitrust litigation by the U.S. government (or any agency or commission
thereof) challenging on antitrust grounds the acquisition by IBM or the
Purchaser of any Shares (or any related transaction) and, in the case of each of
the preceding clauses (i) and (ii), if IBM by reason of the foregoing terminates
the Merger Agreement, then IBM shall pay $5,000,000 in same day funds to the
Company upon demand.
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Conduct of Business by the Company. The Merger Agreement provides that,
except as otherwise expressly contemplated by the Merger Agreement or to the
extent that IBM shall otherwise consent in writing, until such time as IBM's
designees constitute a majority of the Board of Directors of the Company, (a)
the Company and its subsidiaries will, subject to certain exceptions set forth
in the Merger Agreement, carry on their respective businesses in the ordinary
course (it being understood that the foregoing does not cover future events
resulting from public announcement of the Offer and the Merger) and use all
reasonable efforts to preserve intact their current business organizations, keep
available the services of their current officers and employees and preserve
their relationships with customers, suppliers and others having business
dealings with them; (b) the Company will not, and will not permit any of its
subsidiaries to, (i) declare or pay any dividends on, or make other
distributions in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock of the Company or (iii) repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or its subsidiaries
or any other securities thereof or any rights, warrants or options to acquire
any such shares or other securities except pursuant to existing contracts; (c)
the Company will not, and will not permit any of it subsidiaries to, issue,
deliver, sell, pledge or encumber, or authorize the issuance, delivery, sale,
pledge or encumbrance of, any shares of its capital stock of any class or any
securities convertible into, or rights, warrants, calls, subscriptions or
options to acquire, any such shares or convertible securities, or any other
ownership interest in the Company, other than (i) the issuance of Shares upon
the exercise of Stock Options outstanding on the date of the Merger Agreement in
accordance with their terms or (ii) the issuance of Shares upon the exercise of
Warrants outstanding on the date of the Merger Agreement in accordance with
their terms; (d) the Company will not, and it will not permit any of its
subsidiaries to, amend or propose to amend its certificate of incorporation or
its by-laws (or similar organizational documents); (e) the Company will not, and
it will not permit any of its subsidiaries to, acquire or agree to acquire (i)
(by merger, consolidation, acquisition of stock or assets or by any other
manner) any business, corporation, partnership, joint venture, association or
other business organization or division thereof or (ii) any assets that are
material, individually or in the aggregate, to the Company and its subsidiaries
taken as a whole, except purchases of inventory in the ordinary course of
business consistent with past practice; (f) the Company will not, and it will
not permit any of its subsidiaries to, sell, lease, license, encumber or
otherwise dispose of, or agree to sell, lease, license, encumber or otherwise
dispose of, any of its assets, other than sales or licenses of its products to
customers and dispositions of equipment, in each case in the ordinary course of
business consistent with past practice; (g) the Company will not, and it will
not permit any of its subsidiaries to, (i) incur or guarantee indebtedness for
borrowed money or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company (or any of its subsidiaries),
guarantee any debt securities of others, enter into any "keep-well" or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing,
except for working capital borrowings incurred in the ordinary course of
business consistent with past practice or (ii) make any loans, advances or
capital contributions to, or investments in, any other person, other than (A)
with respect to both of the foregoing clauses (i) and (ii), to the Company or
any direct or indirect wholly owned subsidiary of the Company or (B) any
advances to employees in accordance with past practice; (h) the Company will
confer with IBM on a regular basis as reasonably requested by IBM, report on
operational matters and promptly advise IBM of any material adverse change with
respect to the Company and will promptly provide to IBM (or its counsel) copies
of all filings made by the Company with any Governmental Entity in connection
with the Merger Agreement and the transactions contemplated thereby; (i) the
Company will not make any tax election that would have a material adverse effect
or settle or compromise any material income tax liability of the Company or any
of its subsidiaries; (j) neither the Company nor any of its subsidiaries will
make or agree to make any new capital expenditure or expenditures other than in
accordance with the Company's 1996 Operating Plan; (k) the Company will not, and
it will not permit any of its subsidiaries to, discharge any claims, liabilities
or obligations, other than the discharge of certain liabilities of the Company
in the ordinary course of business consistent with past practice or in
accordance with their terms; (l) the
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Company will not, and it will not permit any of its subsidiaries to, modify,
amend or terminate any material contract or agreement to which the Company or
such subsidiary is a party, waive, release or assign any material rights or
claims or grant any rights to intellectual property except for licenses in the
ordinary course of business consistent with past practice; (m) the Company and
its subsidiaries will not, except as may be required by law and except as
otherwise specifically permitted, (A) enter into, adopt, amend or terminate any
Company Benefit Plan (as defined) or other employee benefit plan or any
agreement, arrangement, plan or policy for the benefit of any director, officer
or current or former employee, (B) except for normal increases or bonuses in the
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company, increase in any manner the compensation or fringe
benefits of, or pay any bonus to, any director, officer or employee or (C) pay
any benefit not required by any plan or arrangement as currently in effect
(including the granting of, acceleration of exercisability of or vesting of
stock options, stock appreciation rights or restricted stock); and (n) neither
the Company nor any of its subsidiaries will authorize any of, or commit or
agree to take any of, the foregoing actions.
In addition to the foregoing, the Company has agreed that it will not
take any action, or permit any of its subsidiaries to take any action, that
would result in (a) any of the representations and warranties of the Company set
forth in the Merger Agreement that are qualified as to materiality becoming
untrue, (b) any of such representations and warranties that are not so qualified
becoming untrue in any material respect or (c) any of the conditions to the
Offer set forth in Section 14 not being satisfied.
Board of Directors. The Merger Agreement provides that promptly upon the
acceptance for payment of, and payment for, any Shares by the Purchaser pursuant
to the Offer, the Purchaser shall be entitled to designate, subject to
compliance with Section 14(f) of the Exchange Act, a majority of the directors
on the Company's Board of Directors, and the Company and its Board of Directors
shall, at such time, take all such action needed to cause the Purchaser's
designees to be appointed to, and to constitute a majority of, the Company's
Board of Directors. Subject to applicable law, the Company has agreed to take
all action requested by IBM necessary to effect any such election, including
mailing to its stockholders the Information Statement containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, which Information Statement is attached as Schedule I to the
Schedule 14D-9.
Stock Options. Pursuant to the Merger Agreement, the Company has agreed
to amend, if necessary, each of the Company's stock option plans to provide that
each Stock Option issued pursuant to such stock option plan, whether vested or
unvested, shall remain outstanding after the effectiveness of the Merger and
shall be assumed by IBM. IBM has agreed to assume such Stock Options (a) such
that IBM is a corporation "assuming a stock option in a transaction to which
Section 424(a) applied" within the meaning of Section 424 of the Code or (b) to
the extent that Section 424 of the Code does not apply to any such Stock
Options, such that IBM would be such a corporation were Section 424 of the Code
applicable to such option. Under the Merger Agreement, each such Stock Option
assumed by IBM shall be exercisable upon the same terms and conditions as under
the applicable stock option plan of the Company and the applicable option
agreement issued thereunder, except that (a) such option shall be exercisable
for that number of shares of common stock of IBM equal to the product of (i) the
number of shares of common stock of the Company for which such option was
exercisable and (ii) the Offer Price divided by the average closing price of
common stock of IBM on the New York Stock Exchange Composite Tape for the 30
consecutive trading days prior to the effectiveness of the Merger (such
quotient, the "Conversion Number"), and (b) the per share exercise price of such
option shall be equal to the per share exercise price of such option as of the
date of the Merger Agreement divided by the Conversion Number.
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The Company has advised IBM that, in general, the Company intends to
accelerate the exercisability of up to 50% of the unexercisable Stock Options
outstanding as of January 30, 1996. In addition, with respect to any Shares held
by employees or other eligible individuals that are subject to the Company's
repurchase right (the "Repurchase Right"), the Company has assigned, as of the
effective time of the Merger, such Repurchase Right with respect to all of such
Shares to IBM under the Merger Agreement. However, the Company has advised IBM
that, prior to the effective time of the Merger, the Company intends, in
general, to terminate such Repurchase Right for up to 50% of the Shares subject
to the Repurchase Right as of January 30, 1996.
The Merger Agreement provides that if it is determined that compliance
with any of the provisions described above would cause any individual subject to
Section 16 of the Exchange Act to become subject to the profit recovery
provisions thereof, any Stock Options held by such individual will be canceled
or purchased, as the case may be, at the effectiveness of the Merger or at such
later time as may be necessary to avoid application of such profit recovery
provisions, and such individual will be entitled to receive from the Company or
the Surviving Corporation an amount equal to the excess, if any, of (a) the
Offer Price over (b) the per Share exercise price of such Stock Option
multiplied by the number of Shares subject thereto, and IBM, the Purchaser and
the Company have agreed to cooperate so as to achieve the intent of such
provisions without giving rise to such profit recovery.
Benefits. In the Merger Agreement, IBM and the Purchaser have agreed
that they will take such reasonable actions as are necessary to allow eligible
employees of the Company to participate in benefit programs of IBM including
severance and alternative benefit programs substantially comparable to those
applicable to comparable employees of IBM on similar terms as soon as
practicable after the effective time of the Merger. To the extent reasonably
possible, IBM and the Purchaser have agreed that the eligible employees of the
Company shall receive service credit under IBM's vacation and severance
programs, but not under IBM's pension plans and post-retirement welfare benefit
plans, for the duration of their service with the Company.
Indemnification and Insurance. In the Merger Agreement, IBM and the
Purchaser have agreed that all rights to indemnification for acts or omissions
occurring prior to the effectiveness of the Merger that are in existence as of
the date of the Merger Agreement in favor of the current or former directors or
officers of the Company and its subsidiaries as provided in their respective
certificates of incorporation or by-laws or contractual arrangements or as
otherwise provided by applicable law shall survive the Merger and shall continue
in full force and effect in accordance with their terms. Pursuant to the Merger
Agreement, IBM will, for a period of six years from the effectiveness of the
Merger, unless IBM agrees in writing to guarantee the indemnification
obligations set forth above, maintain in effect the Company's current directors'
and officers' liability insurance covering those persons who are currently
covered by the Company's directors' and officers' liability insurance policy
except that, to the extent that such coverage is not obtainable at less than or
equal to 200% of the current per annum cost, IBM will be obligated to purchase
only so much coverage as may then be obtained for such amount.
Reasonable Efforts. The Merger Agreement provides that each of the
parties will use its reasonable efforts to take, or cause to be taken, all
actions necessary to comply promptly with all legal requirements which may be
imposed on itself with respect to the Offer and the Merger and will promptly
cooperate with and furnish information to each other in connection with any such
requirements imposed upon any of them or any of their subsidiaries in connection
with the Offer and the Merger and will, and will cause its subsidiaries to, use
its reasonable efforts to take all reasonable actions necessary to obtain (and
will cooperate with each other in obtaining) any consent, authorization, order
or approval of, or any exemption by, any Governmental Entity or other public or
private third party required to be obtained or made by any of them or any of
their subsidiaries in connection with the Offer and the Merger or the taking of
any action contemplated thereby or by the Merger Agreement,
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except that no party need waive any substantial rights or agree to any
substantial limitation on its operations or to dispose of any assets.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties.
Procedure for Termination, Amendment, Extension or Waiver. The Merger
Agreement provides that in the event the Purchaser's designees are appointed or
elected to the Board of Directors of the Company as described above under "Board
of Directors", after the acceptance for payment of Shares pursuant to the Offer
and prior to the effective time of the Merger, the affirmative vote of the
directors of the Company not designated by IBM or Purchaser is required for the
Company to amend or terminate the Merger Agreement, exercise or waive any of its
rights or remedies under the Merger Agreement, extend the time for performance
of the Purchaser's and IBM's respective obligations under the Merger Agreement.
The Stockholder Agreement. Pursuant to the Stockholder Agreement, the
Selling Stockholders have unconditionally agreed to tender into the Offer, and
not to withdraw therefrom, 530,441 Shares. In addition, the Selling Stockholders
have agreed to sell to the Purchaser, and the Purchaser has agreed to purchase,
the foregoing number of Shares at a price per Share of $47.50, or such higher
price per Share as may be offered by the Purchaser in the Offer, provided that
(i) such obligation to purchase is subject to the Purchaser having accepted
Shares for payment under the Offer and the Minimum Condition having been
satisfied, which conditions may be waived by the Purchaser in its sole
discretion, and (ii) such obligation to sell is subject to the Minimum Condition
having been satisfied or a Takeover Proposal (as defined herein) having been
made.
Each of the Selling Stockholders has agreed not to: (i) transfer (which term
includes, without limitation, any sale, gift, pledge or other disposition),
consent to any transfer of, or enter into any contract, option or other
arrangement with respect to the transfer of, Shares subject to the Stockholder
Agreement owned by such Selling Stockholder; (ii) grant any proxy,
power-of-attorney or other authorization or consent in or with respect to such
Shares; (iii) deposit any such Shares into a voting trust or enter into a voting
agreement or arrangement with respect to any such Shares; or (iv) take any other
action that would in any way restrict, limit or interfere with the performance
of its obligations under the Stockholder Agreement or the transactions
contemplated thereby. Each of the Selling Stockholders has also agreed not to
solicit, initiate or encourage the submission of any Takeover Proposal and not
to take certain other actions with respect to any Takeover Proposal.
Under the Stockholder Agreement, each Selling Stockholder has granted an
irrevocable proxy with respect to the Shares subject to the Stockholder
Agreement to IBM to vote such Shares against (i) any merger agreement or merger
(other than the Merger Agreement and the Merger), consolidation, combination,
sale of substantial assets, reorganization, joint venture, recapitalization,
dissolution, liquidation or winding up of or by the Company and (ii) any
amendment of the Company's Amended and Restated Certificate of Incorporation or
By-laws or other proposal or transaction (including any consent solicitation to
remove or elect any directors of the Company) involving the Company or any of
its subsidiaries, which amendment or other proposal or transaction would in any
manner impede, frustrate, prevent or nullify, or result in a breach of any
covenant, representation or warranty or any other obligation or agreement of the
Company under or with respect to, the Offer, the Merger, the Merger Agreement or
any of the other transactions contemplated by the Merger Agreement.
Noncompetition Agreements. Four of the Company's executive officers,
including its CEO, have entered into noncompetition agreements with IBM.
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Plans for the Company. IBM's current intention is to keep the Company's
headquarters in Austin, Texas, and to retain the management team. It is
anticipated that the management team will be assigned the responsibility for
IBM's related software products. In addition, IBM expects that the Company will
continue to make its products available on as wide a range of hardware and
operating system platforms as possible.
At the completion of the acquisition of the Company, the total purchase
price relating to the Shares acquired will be allocated based on the fair value
of the Company's assets acquired and liabilities assumed. As part of this
process, IBM intends to obtain an independent valuation of both the existing
software products of the Company and its research and development relating to
software in progress that has not reached technological feasibility as of the
acquisition date. The amount of the purchase price assigned to the existing
software products of the Company will be amortized over the estimated economic
lives of these products in accordance with existing accounting policies of IBM
(which amortization will not be deductible for tax purposes). The amounts
assigned to the software research and development that is in progress at the
acquisition date could be a significant portion of the acquisition price and
could result in a one-time, non-cash charge against IBM's earnings (which charge
will not be deductible for tax purposes). The charge will be taken in the
quarter in which the acquisition is completed. The specific amount of the charge
cannot be determined at this time based on currently available information.
However, IBM expects that the charge could have a significant impact on the net
earnings of IBM in the quarter in which the acquisition is completed.
Appraisal Rights. Holders of Shares do not have appraisal rights as a result
of the Offer. However, if the Merger is consummated, holders of Shares at the
effective time of the Merger will have certain rights pursuant to the provisions
of Section 262 of the DGCL ("Section 262") to dissent and demand appraisal of
their Shares. Under Section 262, dissenting stockholders who comply with the
applicable statutory procedures will be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any. Any such judicial determination of the fair value of Shares
could be based upon factors other than, or in addition to, the price per Share
to be paid in the Merger or the market value of the Shares. The value so
determined could be more or less than the price per Share to be paid in the
Merger.
The foregoing summary of Section 262 does not purport to be complete and is
qualified in its entirety by reference to Section 262. FAILURE TO FOLLOW THE
STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR PERFECTING APPRAISAL RIGHTS MAY
RESULT IN THE LOSS OF SUCH RIGHTS.
Going Private Transactions. The Commission has adopted Rule 13e-3 under the
Exchange Act which is applicable to certain "going private" transactions. The
Purchaser does not believe that Rule 13e-3 will be applicable to the Merger
unless the Merger is consummated more than one year after the termination of the
Offer. If applicable, Rule 13e-3 requires, among other things, that certain
financial information concerning the fairness of the Merger and the
consideration offered to minority stockholders in such transaction be filed with
the Commission and disclosed to stockholders prior to the consummation of the
Merger.
Other Matters. Following consummation of the Merger, IBM intends to cause
the Surviving Corporation to be merged into IBM.
Except as otherwise described in this Offer to Purchase, the Purchaser and
IBM have no current plans or proposals that would relate to, or result in, any
extraordinary corporate transaction involving the Company, such as a merger,
reorganization or liquidation involving the Company or any of its subsidiaries,
a sale or transfer of a material amount of assets of the Company or any of its
subsidiaries, any change in the Company's capitalization or dividend policy or
any other material change in the Company's business, corporate structure or
personnel.
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13. DIVIDENDS AND DISTRIBUTIONS
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the two succeeding paragraphs, and
nothing herein shall constitute a waiver by the Purchaser or IBM of any of its
rights under the Merger Agreement or a limitation of remedies available to the
Purchaser or IBM for any breach of the Merger Agreement, including termination
thereof.
If, on or after January 30, 1996, the Company should (a) split, combine or
otherwise change the Shares or its capitalization, (b) acquire or otherwise
cause a reduction in the number of outstanding Shares or other securities or (c)
issue or sell additional Shares, shares of any other class of capital stock,
other voting securities or any securities convertible into, or rights, warrants
or options, conditional or otherwise, to acquire any of the foregoing, other
than Shares issued pursuant to the exercise of outstanding Company Stock Options
or warrants, then, subject to the provisions of Section 14, the Purchaser, in
its sole discretion, may make such adjustments as it deems appropriate in the
Offer Price and other terms of the Offer, including, without limitation, the
number or type of securities offered to be purchased.
If, on or after January 30, 1996, the Company should declare or pay any cash
dividend on the Shares or other distribution on the Shares, or issue with
respect to the Shares any additional Shares, shares of any other class of
capital stock, other voting securities or any securities convertible into, or
rights, warrants or options, conditional or otherwise, to acquire, any of the
foregoing, payable or distributable to stockholders of record on a date prior to
the transfer of the Shares purchased pursuant to the Offer to the Purchaser or
its nominee or transferee on the Company's stock transfer records, then, subject
to the provisions of Section 14, (a) the Offer Price may, in the sole discretion
of the Purchaser, be reduced by the amount of any such cash dividend or cash
distribution and (b) the whole of any such noncash dividend, distribution or
issuance to be received by the tendering stockholders will (i) be received and
held by the tendering stockholders for the account of the Purchaser and will be
required to be promptly remitted and transferred by each tendering stockholder
to the Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer, or (ii) at the direction of the Purchaser, be
exercised for the benefit of the Purchaser, in which case the proceeds of such
exercise will promptly be remitted to the Purchaser. Pending such remittance and
subject to applicable law, the Purchaser will be entitled to all rights and
privileges as owner of any such noncash dividend, distribution, issuance or
proceeds and may withhold the entire Offer Price or deduct from the Offer Price
the amount or value thereof, as determined by the Purchaser in its sole
discretion.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to the Purchaser's obligation to pay for or
return tendered Shares after the termination or withdrawal of the Offer), to pay
for any Shares tendered pursuant to the Offer unless (i) the Minimum Condition
shall have been satisfied and (ii) any waiting period under the HSR Act
applicable to the purchase of Shares pursuant to the Offer shall have expired or
been terminated. Furthermore, notwithstanding any other term of the Offer or the
Merger Agreement, the Purchaser shall not be required to accept for payment or,
subject as aforesaid, to pay for any Shares not theretofore accepted for payment
or paid for, and may terminate the Offer if, at any time on or after the date of
the Merger Agreement and before the acceptance of such Shares for payment or the
payment therefor, any of the following conditions exists (other than as a result
of any action or inaction of IBM or any of its subsidiaries that constitutes a
breach of the Merger Agreement):
(a) there shall be threatened, instituted or pending by any person or
Governmental Entity any suit, action or proceeding (i) challenging the
acquisition by IBM or the Purchaser of any Shares under the Offer or
pursuant to the Stockholder Agreement, seeking to restrain or prohibit the
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making or consummation of the Offer or the Merger or the performance of any
of the other transactions contemplated by the Merger Agreement or the
Stockholder Agreement (including the voting provision thereunder), or
seeking to obtain from the Company, IBM or the Purchaser any damages that
are material in relation to the Company and its subsidiaries taken as a
whole, (ii) seeking to prohibit or materially limit the ownership or
operation by the Company, IBM or any of their respective subsidiaries of a
material portion of the software business or assets of the Company and its
subsidiaries, taken as a whole, or IBM and its subsidiaries, taken as a
whole, or to compel the Company or IBM to dispose of or hold separate any
material portion of the software business or assets of the Company and its
subsidiaries, taken as a whole, or IBM and its subsidiaries, taken as a
whole, as a result of the Offer or any of the other transactions
contemplated by the Merger Agreement or the Stockholder Agreement, (iii)
seeking to impose material limitations on the ability of IBM or the
Purchaser to acquire or hold, or exercise full rights of ownership of, any
Shares to be accepted for payment pursuant to the Offer or purchased under
the Stockholder Agreement including, without limitation, the right to vote
such Shares on all matters properly presented to the stockholders of the
Company or (iv) seeking to prohibit IBM or any of its subsidiaries from
effectively controlling in any material respect any material portion of the
software business or operations of the Company and its subsidiaries, taken
as a whole;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any
Governmental Entity or court, other than the application to the Offer or the
Merger of applicable waiting periods under the HSR Act, that is reasonably
likely to result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (iv) of paragraph (a) above;
(c) there shall have occurred any change (or any development that,
insofar as reasonably can be foreseen, is reasonably likely to result in any
change) that, individually or in the aggregate with any other such changes,
is materially adverse to the business, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, other than
a change resulting from the announcement of the Offer or the Merger;
(d) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to IBM or the Purchaser
its approval or recommendation of the Offer, the Merger or the Merger
Agreement, or approved or recommended any Takeover Proposal, (ii) the
Company shall have entered into any agreement with respect to any Superior
Proposal in accordance with the Merger Agreement or (iii) the Board of
Directors of the Company or any committee thereof shall have resolved to
take any of the foregoing actions (see "The Merger Agreement--Takeover
Proposals" in Section 12);
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case at the date of the Merger Agreement and at the scheduled or extended
expiration of the Offer;
(f) the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or covenant of the Company to be performed or complied with by it
under the Merger Agreement; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms.
The foregoing conditions are for the sole benefit of the Purchaser and IBM
and may, subject to the terms of the Merger Agreement, be waived by the
Purchaser and IBM in whole or in part at any time and from time to time in their
sole discretion. The failure by IBM or the Purchaser at any time to
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exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
15. CERTAIN LEGAL MATTERS
Except as described in this Section 15, based on a review of publicly
available filings made by the Company with the Commission and other publicly
available information concerning the Company and discussions of representatives
of IBM with representatives of the Company, neither the Purchaser nor IBM is
aware of any license or regulatory permit that appears to be material to the
business of the Company and its subsidiaries, taken as a whole, that might be
adversely affected by the Purchaser's acquisition of Shares (and the indirect
acquisition of the stock of the Company's subsidiaries) as contemplated herein
or of any approval or other action by any Governmental Entity that would be
required or desirable for the acquisition or ownership of Shares by the
Purchaser as contemplated herein. Should any such approval or other action be
required or desirable, the Purchaser and IBM currently contemplate that such
approval or other action will be sought, except as described below under "State
Takeover Laws". While, except as otherwise expressly described in this Section
15, the Purchaser does not presently intend to delay the acceptance for payment
of or payment for Shares tendered pursuant to the Offer pending the outcome of
any such matter, there can be no assurance that any such approval or other
action, if needed, would be obtained or would be obtained without substantial
conditions or that failure to obtain any such approval or other action might not
result in consequences adverse to the Company's business or that certain parts
of the Company's business might not have to be disposed of if such approvals
were not obtained or such other actions were not taken or in order to obtain any
such approval or other action. If certain types of adverse action are taken with
respect to the matters discussed below, the Purchaser could decline to accept
for payment or pay for any Shares tendered. See Section 14 for certain
conditions to the Offer.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, stockholders, executive offices or places of business in such states. In
Edgar v. MITE Corp., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS Corp.
v. Dynamics Corp. of America, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions. Subsequently, a number of Federal courts ruled
that various state takeover statutes were unconstitutional insofar as they apply
to corporations incorporated outside the state of enactment.
Section 203 of the DGCL. Section 203 of the DGCL, in general, prohibits a
Delaware corporation such as the Company from engaging in a "Business
Combination" (defined as a variety of transactions, including mergers, as set
forth below) with an "Interested Stockholder" (defined generally as a person
that is the beneficial owner of 15% or more of a corporation's outstanding
voting stock) for a period of three years following the date that such person
became an Interested Stockholder unless, among other things, prior to the date
such person became an Interested Stockholder, the board of directors of the
corporation approved either the Business Combination or the transaction that
resulted in the stockholder becoming an Interested Stockholder. The Company's
Board of Directors has approved the Merger Agreement, the Stockholder Agreement
and the Purchaser's acquisition of Shares pursuant to the Offer and the
Stockholder Agreement. Therefore, Section 203 of the DGCL is inapplicable to the
Merger.
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Based on information supplied by the Company, the Purchaser does not believe
that any other state takeover statutes purport to apply to the Offer or the
Merger. Neither the Purchaser nor IBM has currently complied with any state
takeover statute or regulation. The Purchaser reserves the right to challenge
the applicability or validity of any state law purportedly applicable to the
Offer or the Merger and nothing in this Offer to Purchase or any action taken in
connection with the Offer or the Merger is intended as a waiver of such right.
If it is asserted that any state takeover statute is applicable to the Offer or
the Merger and an appropriate court does not determine that it is inapplicable
or invalid as applied to the Offer or the Merger, the Purchaser might be
required to file certain information with, or to receive approvals from, the
relevant state authorities, and the Purchaser might be unable to accept for
payment or pay for Shares tendered pursuant to the Offer, or be delayed in
consummating the Offer or the Merger. In such case, the Purchaser may not be
obligated to accept payment or pay for any Shares tendered pursuant to the
Offer. See Section 14.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated following the
expiration of a 15-calendar day waiting period following the filing by IBM and
the Company of a Notification and Report Form with respect to the Offer, unless
IBM or the Company receives a request for additional information or documentary
material from the Antitrust Division or the FTC or unless early termination of
the waiting period is granted. IBM made such filing on February 1, 1996. The
Company expects to make such filing soon. If, within the initial 15-day waiting
period, either the Antitrust Division or the FTC requests additional information
or material from IBM or the Company concerning the Offer, the waiting period
will be extended and would expire at 11:59 p.m., New York City time, on the
tenth calendar day after the date of substantial compliance by IBM or the
Company with such request. Only one extension of the waiting period pursuant to
a request for additional information is authorized by the HSR Act. Thereafter,
such waiting period may be extended only by court order or with the consent of
IBM and the Company. In practice, complying with a request for additional
information or material can take a significant amount of time. In addition, if
the Antitrust Division or the FTC raises substantive issues in connection with a
proposed transaction, the parties frequently engage in negotiations with the
relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while such
negotiations continue. Expiration or termination of the applicable waiting
period under the HSR Act is a condition to the Purchaser's obligation to accept
for payment and pay for Shares tendered pursuant to the Offer.
The provisions of the HSR Act would similarly apply to any purchase, other
than pursuant to the Offer, of the Shares subject to the Stockholder Agreement,
except that the initial waiting period for any purchase of such Shares (other
than purchases effected through a tender pursuant to the Offer) would expire 30
calendar days following the filing of HSR Act Notification and Report Forms by
IBM and the Company and a request for additional information or material from
IBM or the Company during the initial 30-day waiting period would extend the
waiting period until 11:59 p.m. New York City time on the 20th calendar day
after the date of substantial compliance by IBM and the Company with such
request. If the purchase of Shares pursuant to the Stockholder Agreement is
effected through a tender of such Shares pursuant to the Offer, the HSR
requirements applicable to the Offer described in the prior paragraph would
apply rather than the requirements described in this paragraph.
The Merger would not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after the Purchaser's acquisition of
Shares pursuant to the Offer, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the
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Merger or seeking the divestiture of Shares acquired by the Purchaser or the
divestiture of substantial assets of the Company or its subsidiaries or IBM or
its subsidiaries. Private parties may also bring legal action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if such a
challenge is made, of the result thereof.
Other Foreign Laws. The Company and certain of its subsidiaries conduct
business in several foreign countries where regulatory filings or approvals may
be required or desirable in connection with the consummation of the Offer.
Certain of such filings or approvals, if required or desirable, may not be made
or obtained prior to the expiration of the Offer. The Purchaser is seeking
further information regarding the applicability of any such laws and currently
intends to take such action as may be required or desirable. If any foreign
Governmental Entity takes any action prior to the completion of the Offer that
might have certain adverse effects, the Purchaser will not be obligated to
accept for payment or pay for any Shares tendered. See Section 14.
16. FEES AND EXPENSES
Morgan Stanley is acting as Dealer Manager in connection with the Offer and
is providing certain financial advisory services to the Purchaser and IBM in
connection with the Offer. IBM has agreed to pay Morgan Stanley reasonable and
customary compensation for such services. IBM has also agreed to reimburse
Morgan Stanley for its out-of-pocket expenses, including the reasonable fees and
expenses of its counsel and any other advisor retained by Morgan Stanley, in
connection with its engagement and to indemnify Morgan Stanley and certain
related persons against certain liabilities and expenses, including certain
liabilities and expenses under the Federal securities laws.
In the ordinary course of its business, Morgan Stanley engages in securities
trading, market-making and brokerage activities and may, at any time, hold long
or short positions and may trade or otherwise effect transactions in securities
of the Company. As of January 31, 1996, Morgan Stanley had a long position of
7,900 Shares and a short position of 5,550 Shares held for its own accounts.
The Purchaser and IBM have retained Morrow & Co., Inc. to act as the
Information Agent and The Chase Manhattan Bank, N.A., to serve as the Depositary
in connection with the Offer. The Information Agent and the Depositary each will
receive reasonable and customary compensation for their services, be reimbursed
for certain reasonable out-of-pocket expenses and be indemnified against certain
liabilities and expenses in connection therewith, including certain liabilities
and expenses under the Federal securities laws.
Neither the Purchaser nor IBM will pay any fees or commissions to any broker
or dealer or other person (other than the Dealer Manager and the Information
Agent) in connection with the solicitation of tenders of Shares pursuant to the
Offer. Brokers, dealers, banks and trust companies will be reimbursed by the
Purchaser upon request for customary mailing and handling expenses incurred by
them in forwarding material to their customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. Neither the Purchaser nor IBM is aware of any jurisdiction in
which the making of the Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. To the extent the Purchaser or
IBM becomes aware of any state law that would limit the class of offerees in the
Offer, the Purchaser will amend the Offer and, depending on the timing of such
amendment, if any, will extend the Offer to provide adequate dissemination of
such information to holders of Shares prior to the expiration of the Offer. In
any jurisdiction the securities, blue sky or other laws of which require the
Offer to be made by a licensed broker or dealer, the Offer is
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being made on behalf of the Purchaser by the Dealer Manager or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR IBM NOT CONTAINED HEREIN OR IN THE
LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser and IBM have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act, together with exhibits,
furnishing certain additional information with respect to the Offer, and may
file amendments thereto. In addition, the Company expects to file soon the
Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act, together with
exhibits, setting forth its recommendation with respect to the Offer and the
reasons for such recommendation and furnishing certain additional related
information. Such Schedules and any amendments thereto, including exhibits,
should be available for inspection and copies should be obtainable in the manner
set forth in Sections 8 and 9 (except that such material will not be available
at the regional offices of the Commission).
TOPAZ ACQUISITION CORP.
February 2, 1996
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
IBM AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF IBM. The name, business address,
present principal occupation or employment and five-year employment history of
each of the directors and executive officers of IBM are set forth below. All
such directors and executive officers listed below are citizens of the United
States except Mr. Dormann, who is a citizen of Germany, Mr. Gerber, who is a
citizen of Switzerland, Mr. van Wachem, who is a citizen of the Netherlands, and
Mr. Thompson, who is a citizen of Canada. Unless otherwise indicated, the
principal business address of each director or executive officer is
International Business Machines Corporation, Old Orchard Road, Armonk, NY 10504.
<TABLE><CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME, AGE AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------------ -----------------------------------------------------
<S> <C>
Louis V. Gerstner, Jr. (53)......... Chairman of the Board and Chief Executive Officer of
IBM since 1993. From 1989 until joining IBM, he was
Chairman of the Board and Chief Executive Officer of
RJR Nabisco Holdings Corp. He is a director of
Bristol-Myers Squibb Company and The New York Times
Company. Mr. Gerstner is a member of the board of
Lincoln Center for the Performing Arts and Vice
Chairman of the Board of the New American School
Development Corp. Mr. Gerstner is also a member of
The Council on Foreign Relations and a Board member
of The America/China Society and The Japan Society.
Cathleen Black (51)................. Director of IBM since 1995. President, Hearst
Hearst Magazines Magazines, a division of The Hearst Corporation,
959 8th Avenue beginning January 1996. From 1991 to 1996, she served
New York, NY 10019 as President and Chief Executive Officer of Newspaper
Association of America. Until then, Ms. Black had
been Executive Vice President/Marketing for Gannett
Company, Inc., since 1985 and President, then
publisher, of USA TODAY since 1983. She is a director
of The Coca-Cola Company, the Advertising Council and
the United Way of America and a Trustee of the
University of Notre Dame.
Harold Brown (68)................... Director of IBM from 1972 to 1977 and since 1981.
Center for Strategic and Counselor, Center for Strategic and International
International Studies Studies, Washington, D.C., and a general partner in
Suite 400 Warburg, Pincus & Company. He is former U.S.
1800 K Street, N.W. Secretary of Defense and former U.S. Secretary of the
Washington, DC 20006 Air Force. He is a director of Alumax Inc., Cummins
Engine Company, Inc., Philip Morris Companies Inc.
and Mattel, Inc.; a member of the National Academy of
Sciences and the National Academy of Engineering; a
trustee and President Emeritus of the California
Institute of Technology.
</TABLE>
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<PAGE>
<TABLE><CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME, AGE AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------------ -----------------------------------------------------
<S> <C>
Juergen Dormann (56)................ Director of IBM since January 1996. Chairman of the
Hoechst AG Management Board of Hoechst AG. Mr. Dormann joined
Frankfurt G65926 Hoechst in 1963 and was elected Finance and
Germany Accounting Director in 1987 and to his present
position in 1994. He is a director of Wacker Chemie
GmbH, Allianz Lebensversicherungs AG and Rheinische
Hypothekenbank AG.
Fritz Gerber (66)................... Director of IBM since 1989. Chairman and Chief
Roche Holding Ltd Executive Officer of Roche Holding Ltd since 1978. He
P.O. Box GH-4002 was Executive Chairman of Zurich Insurance Company
Basel until 1995. He joined Zurich Insurance Company in
Switzerland 1958, became Chief Executive Officer in 1969, and
Chairman of the Board of Directors in 1977. He is a
director of Nestle S.A. and Credit Suisse. He is a
member of the International Advisory Council of The
Chase Manhattan Bank and of the European Advisory
Council of Tenneco Europe, Limited, and he holds
membership in various economic and cultural
organizations such as the European Round Table.
Nannerl O. Keohane (55)............. Director of IBM since 1986. President and professor
Office of the President of political science at Duke University. She was
207 Allen Building formerly President of Wellesley College, and a former
Box 90001 faculty member at Swarthmore College and Stanford
Duke University University. She is a member of The Council on Foreign
Durham, NC 27708-0001 Relations and the American Academy of Arts and
Sciences and a trustee of the Colonial Williamsburg
Foundation. Dr. Keohane is a member of the MIT
Corporation and has served as Vice President of the
American Political Science Association.
Charles F. Knight (60).............. Director of IBM since 1993. He joined Emerson
Emerson Electric Co. Electric Co. in 1972 as Vice Chairman and was elected
8000 West Florissant Avenue Chief Executive Officer in 1973 and Chairman in 1974.
P.O. Box 4100 He is a director of SBC Communications Inc., Anheuser
St. Louis, MO 63136-8506 Busch Companies, Inc., and The British Petroleum
Company p.l.c.
Lucio A. Noto (57).................. Director of IBM since 1995. Chairman and Chief
Mobil Corporation Executive Officer of Mobil Corporation. Mr. Noto
3225 Gallows Road joined Mobil in 1962 and was elected to Mobil's board
Fairfax, VA 22037 in 1988. He was elected Chief Financial Officer in
1989, President and Chief Operating Officer in 1993,
and to his present position in 1994. He also serves
as Chairman of Mobil's executive committee. Mr. Noto
is a member of The Council on Foreign Relations.
John B. Slaughter (61).............. Director of IBM since 1988. President of Occidental
Office of the President College. He is a former chancellor of the University
Occidental College of Maryland and a former director of the National
1600 Campus Road Science Foundation. He is a director of the Atlantic
Los Angeles, CA 90041 Richfield Company, Avery Dennison Corporation,
Monsanto
</TABLE>
S-2
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<TABLE><CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME, AGE AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------------ -----------------------------------------------------
<S> <C>
Company and Northrop Corporation. He is a member of
the National Academy of Engineering, a member of the
American Academy of Arts and Sciences, a fellow of
the American Association for the Advancement of
Science, and a fellow of the Institute of Electrical
and Electronics Engineers.
Alex Trotman (62)................... Director of IBM since 1994. Chairman and Chief
Ford Motor Company Executive Officer of the Ford Motor Company. Mr.
American Road Trotman joined Ford of Britain in 1955 and was
Dearborn, MI 48121-1899 elected President of Ford Asia-Pacific in 1983 and
Chairman of Ford of Europe in 1988. He became
President and Chief Operating Officer of Ford
Automotive Group and a director in 1993. He was
subsequently elected to his present position in 1993.
Lodewijk C. van Wachem (64)......... Director of IBM since 1992. Chairman of the
Royal Dutch Petroleum supervisory board of Royal Dutch Petroleum Company.
Company In 1992, Mr. van Wachem retired as President of Royal
P.O. Box 162 Dutch Petroleum, a post he had held since 1982. He is
2501 AN The Hague a director of ATCO Ltd., CS Holdings and Zurich
Netherlands Versicherungs- Gesellschaft; and a member of the
supervisory boards of AKZO N.V., Philips Electronics
N.V. and Bavarian Motor Works A.G.
Charles M. Vest (54)................ Director of IBM since 1994. President and professor
Massachusetts Institute of of mechanical engineering at the Massachusetts
Technology Institute of Technology. Dr. Vest was formerly the
President's Office Provost and Vice President for Academic Affairs of
Room 3-208 the University of Michigan. He is a director of E.I.
77 Massachusetts Avenue du Pont de Nemours and Company, a fellow of the
Cambridge, MA 02139 American Association for the Advancement of Science,
a member of the National Academy of Engineering and
the Corporation of Woods Hole Oceanographic
Institution, and a trustee of Wellesley College.
J. Thomas Bouchard (55)............. Senior Vice President, Human Resources of IBM since
1994. Previously Mr. Bouchard was Senior Vice
President, Chief Human Resources Officer of U.S.
West, Inc. from 1989 to 1994.
Nicholas M. Donofrio (50)........... Senior Vice President and Group Executive of IBM
since 1995. Mr. Donofrio was General Manager, Large
Scale Computing Division, from 1994 to 1995; IBM
Senior Vice President and General Manager, Large
Scale Computing Division, from 1993 to 1994; IBM
Senior Vice President and General Manager, Enterprise
Systems, 1993; IBM Vice President and General
Manager, Enterprise Systems, from 1991 to 1993; IBM
Vice President and President, Data Systems Division,
1991; IBM Vice President and President, Advanced
Workstations Division, from 1988 to 1991.
</TABLE>
S-3
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<TABLE><CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME, AGE AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------------ -----------------------------------------------------
<S> <C>
J. Bruce Harreld (45)............... Senior Vice President, Strategy of IBM since 1995.
Mr. Harreld was President of Boston Chicken Company
from 1993 to 1995, Senior Vice President, Marketing
and Information Services of Kraft General Foods from
1992 to 1993 and Senior Vice President, Chief
Information Officer of Kraft General Foods from 1989
to 1992.
Paul M. Horn (49)................... Senior Vice President, Research of IBM since 1996.
Dr. Horn was Vice President, Storage Systems Division
and Director, Almaden Research Center from 1994 to
1995, Director, Advanced Semiconductor Technology Lab
from 1992 to 1994 and Director, Silicon Technology
from 1990 to 1992.
Ned C. Lautenbach (51).............. Senior Vice President and Group Executive, Worldwide
Sales and Services of IBM and Chairman, IBM World
Trade Corporation since 1995. Mr. Lautenbach was IBM
Senior Vice President and Group Executive and
Chairman, IBM World Trade Corporation, from 1993 to
1995; IBM Senior Vice President and Chairman, IBM
World Trade Corporation, 1993; IBM Senior Vice
President and President and Representative Director,
Asia Pacific, from 1992 to 1993; IBM Vice President
and President and Representative Director, Asia
Pacific, from 1991 to 1992; IBM Vice President and
Senior Managing Director, Operations, Asia Pacific,
1991: IBM Vice President and General Manager,
Application Solutions, from 1988 to 1991.
Lawrence R. Ricciardi (55).......... Senior Vice President and General Counsel of IBM
since 1995. Mr. Ricciardi was President and General
Counsel of RJR Nabisco Holdings Corp. from 1993 to
1995, Co-Chairman and Chief Executive Officer and
General Counsel from March to May 1993, and Executive
Vice President and General Counsel of RJR Nabisco
Holdings Corp. from 1989 to 1993.
Robert M. Stephenson (57)........... Senior Vice President and Group Executive of IBM
since 1995. Mr. Stephenson was also General Manager,
IBM North America in 1995 and IBM Vice President &
Representative Director then General Manager, IBM
Asia Pacific from 1993 to 1995; IBM Vice President
and President, Services Sector Division, Application
Solutions from 1991 to 1993; and IBM Vice President
and Assistant General Manager, Operations, Finance &
Planning, IBM U.S. from 1989 to 1991.
G. Richard Thoman (51).............. Senior Vice President and Chief Financial Officer of
IBM since 1995. Mr. Thoman was IBM Senior Vice
President and Group Executive from 1993 to 1995. He
was President,
</TABLE>
S-4
<PAGE>
<TABLE><CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME, AGE AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------------ -----------------------------------------------------
<S> <C>
Nabisco International, from 1992 until joining IBM in
1993. From 1989 to 1992 he was Co-Chief Executive
Officer, American Express Travel Related Services and
Chief Executive Officer, American Express
International.
John M. Thompson (53)............... Senior Vice President and Group Executive of IBM and
Chairman, IBM Canada, since 1994. Mr. Thompson was
IBM Senior Vice President and Group Executive and
Chairman, IBM Canada, from 1993 to 1994; IBM Senior
Vice President and General Manager, Applications
Business Systems and Chairman, IBM Canada, 1993; IBM
Vice President and General Manager, Applications
Business Systems and Chairman, IBM Canada, from 1991
to 1993; IBM Vice President, Corporate Marketing and
Services and Chairman, IBM Canada, 1991; IBM Vice
President and Chairman, IBM Canada, from 1990 to
1991; IBM Vice President, Chairman and Chief
Executive Officer, Americas Group, from 1989 to 1990.
Patrick A. Toole (58)............... Senior Vice President and Group Executive of IBM
since 1994. Mr. Toole was IBM Senior Vice President,
Manufacturing and Development, from 1992 to 1994; IBM
Senior Vice President and General Manager, Worldwide
Manufacturing and Development Operations, from 1990
to 1992; IBM Senior Vice President and General
Manager, Operations, IBM U.S., 1990; IBM Senior Vice
President and General Manager, Technology Products,
from 1988 to 1990.
James M. Alic (53).................. Vice President and Controller of IBM since 1995. Mr.
Alic was Chairman of Reed Exhibition Companies from
1994 to 1995, President from 1991 to 1994 and a
Partner in Snowflake Development from 1987 to 1991.
John E. Hickey (52)................. Vice President, Assistant General Counsel and
Secretary of IBM since 1994. Mr. Hickey was IBM
Secretary and Assistant General Counsel from 1990 to
1994 and Assistant General Counsel from 1989 to 1990.
Jeffrey D. Serkes (37).............. Vice President and Treasurer of IBM since 1995. Mr.
Serkes was Assistant Treasurer of IBM from 1994 to
1995. Previously, he was Vice President and Deputy
Treasurer of RJR Nabisco. Inc., from 1993 to 1994;
Vice President and Assistant Treasurer--Corporate
Finance from 1991 to 1993; Director--Capital Markets
from 1989 to 1991.
</TABLE>
S-5
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The name, business
address, present principal occupation or employment and five-year employment
history of each of the directors and executive officers of the Purchaser are set
forth below. The business address of each such director and executive officer is
Topaz Acquisition Corp. in care of International Business Machines Corporation,
Old Orchard Road, Armonk, NY 10504. All such directors and executive officers
listed below are citizens of the United States.
<TABLE><CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME, AGE AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------------ -----------------------------------------------------
<S> <C>
Lee A. Dayton (52).................. Director and President of the Purchaser. Vice
President, Corporate Development and Real Estate of
IBM since 1996. Mr. Dayton was General Manager, Real
Estate and Business Development of IBM from 1994 to
1996; General Manager, Real Estate and Procurement
Services, General Manager, Real Estate Services, and
IBM Director, Real Estate and Construction Staff,
from 1990 to 1994; Senior Managing Director, Asia
Pacific, from 1988 to 1990.
Donald D. Westfall (57)............. Director, Vice President and Secretary of the
Purchaser. Associate General Counsel of IBM since
1988.
Archie W. Colburn (43).............. Director, Vice President, Treasurer and Assistant
Secretary of the Purchaser. Business Development
Executive of IBM since 1995. Mr. Colburn was Business
Development Consultant of IBM from 1994 to 1995;
Business Development Associate from 1989 to 1994.
</TABLE>
S-6
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
THE CHASE MANHATTAN BANK, N.A.
(800) 355-2663
<TABLE>
<S> <C> <C>
By Mail: By Overnight Delivery: By Hand:
Box 3032 c/o Chase Securities (9:00 a.m.-5:00 p.m.
4 Chase MetroTech Center Processing Corp. New York City time)
Brooklyn, NY 11245 Ft. Lee Executive Park 1 Chase Manhattan Plaza
1 Executive Drive Floor 1-B
(6th Floor) Nassau and Liberty Streets
Ft. Lee, NJ 07024 New York, NY 10081
By Facsimile Transmission:
(201) 592-4372
Confirm by Telephone:
(201) 592-4370
</TABLE>
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You may also contact your broker,
dealer, bank, trust company or other nominee for assistance concerning the
Offer.
The Information Agent for the Offer is:
MORROW & CO., INC
909 Third Avenue
20th Floor
New York, NY 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage Firms
please call:
(800) 662-5200
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO.
Incorporated
1585 Broadway
New York, NY 10036
(212) 761-4699
Exhibit (a)(2)
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
of
Tivoli Systems Inc.
Pursuant to the Offer to Purchase Dated February 2, 1996
by
Topaz Acquisition Corp.
a wholly owned subsidiary of
International Business Machines Corporation
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, MARCH 1, 1996, UNLESS THE OFFER IS EXTENDED.
TO: THE CHASE MANHATTAN BANK, N.A., DEPOSITARY
(800) 355-2663
<TABLE>
<S> <C> <C>
By Mail: By Overnight Delivery: By Hand:
Box 3032 c/o Chase Securities (9:00 a.m.--5:00 p.m.
4 Chase MetroTech Center Processing Corp. New York City time)
Brooklyn, NY 11245 Fort Lee Executive Park 1 Chase Manhattan Plaza
1 Executive Drive Floor 1-B
(6th Floor) Nassau and Liberty Streets
Fort Lee, NJ 07024 New York, NY 10081
</TABLE>
By Facsimile Transmission:
(201) 592-4372
Confirm by Telephone:
(201) 592-4370
------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates for Shares
(as defined below) are to be forwarded herewith or, unless an Agent's Message
(as defined in Section 2 of the Offer to Purchase (as defined below)) is
utilized, if delivery of Shares is to be made by book-entry transfer to an
account maintained by the Depositary at a Book-Entry Transfer Facility as
defined in and pursuant to the procedures set forth in Section 2 of the Offer to
Purchase. Stockholders who deliver Shares by book-entry transfer are referred to
herein as "Book-Entry Stockholders" and other stockholders are referred to
herein as "Certificate Stockholders". Stockholders whose certificates for Shares
are not immediately available or who cannot deliver either the certificates for,
or a Book-Entry Confirmation (as defined in Section 2 of the Offer to Purchase)
with respect to, their Shares and all other documents required hereby to the
Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase) must tender their Shares in accordance with the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
<PAGE>
<TABLE><CAPTION>
DESCRIPTION OF SHARES TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS
NAME(S) APPEAR(S) ON CERTIFICATE(S)) SHARES TENDERED
(ATTACH ADDITIONAL LIST IF NECESSARY)
<S> <C> <C> <C>
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
TOTAL SHARES
</TABLE>
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares described
above are being tendered. See Instruction 4.
<PAGE>
<TABLE>
<S> <C>
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT
MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING
(ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY
TRANSFER):
Name of Tendering Institution
-------------------------------------------------------------
Check box of Book-Entry Transfer Facility:
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
Account Number
----------------------------------------------------------------------------
Transaction Code Number
-------------------------------------------------------------------
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s)
------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
----------------------------------------
Name of Institution that Guaranteed Delivery
----------------------------------------------
If delivered by book-entry transfer check box:
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
Account Number
----------------------------------------------------------------------------
Transaction Code Number
-------------------------------------------------------------------
</TABLE>
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Topaz Acquisition Corp., a Delaware
corporation (the "Purchaser"), which is a wholly owned subsidiary of
International Business Machines Corporation, a New York corporation, the
above-described shares of Common Stock, par value $0.01 per share (the
"Shares"), of Tivoli Systems Inc., a Delaware corporation (the "Company"), upon
the terms and subject to the conditions set forth in the Purchaser's Offer to
Purchase dated February 2, 1996 (the "Offer to Purchase"), and this Letter of
Transmittal (which, together with any amendments or supplements thereto or
hereto, collectively constitute the "Offer"), receipt of which is hereby
acknowledged.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of, and payment for, the Shares tendered herewith in accordance with the
terms of the Offer, the undersigned hereby sells, assigns and transfers to, or
upon the order of, the Purchaser all right, title and interest in and to all the
Shares that are being tendered hereby (and any and all other Shares or other
securities or rights issued or issuable in respect thereof on or after January
30, 1996), and irrevocably constitutes and appoints The Chase Manhattan Bank,
N.A. (the "Depositary"), the true and lawful agent and attorney-in-fact of the
undersigned, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to the full extent
of the undersigned's rights with respect to such Shares (and any such other
Shares or securities or rights), (a) to deliver certificates for such Shares
(and any such other Shares or securities or rights) or transfer ownership of
such Shares (and any such other Shares or securities or rights) on the account
books maintained by a Book-Entry Transfer Facility together, in any such case,
with all accompanying evidences of transfer and authenticity to, or upon the
order of, the Purchaser, (b) to present such Shares (and any such other Shares
or securities or rights) for transfer on the Company's books and (c) to receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any such other Shares or securities or rights), all in accordance
with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the tendered Shares
(and any and all other Shares or other securities or rights issued or issuable
in respect of such Shares on or after January 30, 1996) and, when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good title
thereto, free and clear of all liens, restrictions, claims and encumbrances, and
the same will not be subject to any adverse claim. The undersigned will, upon
request, execute any additional documents deemed by the Depositary or the
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the tendered Shares (and any and all such other Shares or securities
or rights).
All authority conferred or agreed to be conferred pursuant to this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
<PAGE>
The undersigned hereby irrevocably appoints Lee A. Dayton, Donald D.
Westfall and Archie W. Colburn, and each of them, and any other designees of the
Purchaser, the attorneys-in-fact and proxies of the undersigned, each with full
power of substitution, to vote at any annual, special or adjourned meeting of
the Company's stockholders or otherwise in such manner as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion deem
proper with respect to, to execute any written consent concerning any matter as
each such attorney-in-fact and proxy or his substitute shall in his sole
discretion deem proper with respect to, and to otherwise act as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion deem
proper with respect to, the Shares tendered hereby that have been accepted for
payment by the Purchaser prior to the time any such action is taken and with
respect to which the undersigned is entitled to vote (and any and all other
Shares or other securities or rights issued or issuable in respect of such
Shares on or after January 30, 1996). This appointment is effective when, and
only to the extent that, the Purchaser accepts for payment such Shares as
provided in the Offer to Purchase. This power of attorney and proxy are
irrevocable and are granted in consideration of the acceptance for payment of
such Shares in accordance with the terms of the Offer. Upon such acceptance for
payment, all prior powers of attorney, proxies and consents given by the
undersigned with respect to such Shares (and any such other Shares or securities
or rights) will, without further action, be revoked and no subsequent powers of
attorney, proxies, consents or revocations may be given (and, if given, will not
be deemed effective) by the undersigned.
The undersigned understands that the valid tender of Shares pursuant to any
of the procedures described in Section 2 of the Offer to Purchase and in the
Instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment in the name(s) of the registered
holder(s) appearing under "Description of Shares Tendered". Similarly, unless
otherwise indicated under "Special Delivery Instructions", please mail the check
for the purchase price and/or return any certificates for Shares not tendered or
accepted for payment (and accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing under "Description of Shares
Tendered". In the event that both "Special Delivery Instructions" and "Special
Payment Instructions" are completed, please issue the check for the purchase
price and/or return any certificates for Shares not tendered or accepted for
payment (and any accompanying documents, as appropriate) in the name of, and
deliver such check and/or return such certificates (and any accompanying
documents, as appropriate) to, the person or persons so indicated. Please credit
any Shares tendered herewith by book-entry transfer that are not accepted for
payment by crediting the account at the Book-Entry Transfer Facility designated
above. The undersigned recognizes that the Purchaser has no obligation pursuant
to "Special Payment Instructions" to transfer any Shares from the name of the
registered holder thereof if the Purchaser does not accept for payment any of
the Shares so tendered.
/ / CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE
BEEN LOST OR DESTROYED AND SEE INSTRUCTION 11.
Number of Shares represented by the lost or destroyed certificates:
-----------
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not accepted for
payment and/or the check for the purchase price of Shares accepted for payment
are to be issued in the name of someone other than the undersigned.
Issue: / / Check
/ / Certificate(s) to:
Name ______________________________________
(PLEASE PRINT)
Address ___________________________________
___________________________________________
(INCLUDE ZIP CODE)
___________________________________________
(EMPLOYER IDENTIFICATION OR SOCIAL
SECURITY NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not accepted for
payment and/or the check for the purchase price of Shares accepted for payment
are to be sent to someone other than the undersigned, or to the undersigned at
an address other than that above.
Mail: / / Check
/ / Certificate(s) to:
Name ______________________________________
(PLEASE PRINT)
Address ___________________________________
___________________________________________
(INCLUDE ZIP CODE)
___________________________________________
(EMPLOYER IDENTIFICATION OR SOCIAL
SECURITY NUMBER)
<PAGE>
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
______________________________________________________________
______________________________________________________________
(Signature(s) of Stockholder(s))
Dated: ________________, 1996
(Must be signed by registered holder(s) as name(s)
appear(s) on the certificate(s) for the Shares or on a
security position listing or by person(s) authorized to
become registered holder(s) by certificates and
documents transmitted herewith. If signature is by
trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, please
provide the following information and see Instruction 5.)
Name(s)
-----------------------------------------------------
--------------------------------------------------------------
(Please Print)
Capacity (Full Title)
----------------------------------------
Address
------------------------------------------------------
--------------------------------------------------------------
(Include Zip Code)
Daytime Area Code and Telephone No.
--------------------------
Employer Identification or
Social Security Number
---------------------------------------
(See Substitute Form W-9)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
--------------------------------------------------------------
Authorized Signature
--------------------------------------------------------------
Name (Please Print)
--------------------------------------------------------------
Name of Firm
--------------------------------------------------------------
Address
--------------------------------------------------------------
(Include Zip Code)
--------------------------------------------------------------
Daytime Area Code and Telephone No.
Dated: , 1996
---------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this Section, includes any
participant in any of the Book-Entry Transfer Facilities' systems whose name
appears on a security position listing as the owner of the Shares) of Shares
tendered herewith, unless such registered holder(s) has completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (b) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(such participant, an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
stockholders either if certificates are to be forwarded herewith or, unless an
Agent's Message (as defined below) is utilized, if delivery of Shares is to be
made pursuant to the procedures for book-entry transfer set forth in Section 2
of the Offer to Purchase. For a stockholder validly to tender Shares pursuant to
the Offer, either (a) a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, together with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and any other
required documents, must be received by the Depositary at one of its addresses
set forth herein prior to the Expiration Date and either certificates for
tendered Shares must be received by the Depositary at one of such addresses or
Shares must be delivered pursuant to the procedures for book-entry transfer set
forth herein (and a Book-Entry Confirmation received by the Depositary), in each
case prior to the Expiration Date, or (b) the tendering stockholder must comply
with the guaranteed delivery procedures set forth below and in Section 2 of the
Offer to Purchase.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary or complete the procedures for book-entry transfer prior to the
Expiration Date may tender their Shares by properly completing and duly
executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase. Pursuant to such
procedures, (a) such tender must be made by or through an Eligible Institution,
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchaser, must be received by the
Depositary prior to the Expiration Date and (c) the certificates for all
tendered Shares in proper form for transfer (or a Book-Entry Confirmation with
respect to all such Shares), together with a Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message, and
any other required documents, must be received by the Depositary within three
trading days after the date of execution of such Notice of Guaranteed Delivery
as provided in Section 2 of the Offer to Purchase. A "trading day" is any day on
which the Nasdaq National Market operated by the National Association of
Securities Dealers, Inc. is open for business.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, that states that such Book-Entry Transfer Facility has
received an express acknowledgement from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
<PAGE>
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or facsimile hereof), waive any right to receive any
notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE STOCKHOLDERS ONLY). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares that are to be tendered in the box entitled "Number
of Shares Tendered". In any such case, new certificate(s) for the remainder of
the Shares that were evidenced by the old certificate(s) will be sent to the
registered holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as soon as practicable after the acceptance for payment
of, and payment for, the Shares tendered herewith. All Shares represented by
certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder of the Shares
tendered hereby, the signature must correspond with the name as written on the
face of the certificate(s) without any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to the
Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to, or
certificates for Shares not tendered or accepted for payment are to be issued
to, a person other than the registered owner(s). Signatures on such certificates
or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the certificates listed, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates. Signatures on such certificates or stock powers must be guaranteed
by an Eligible Institution.
<PAGE>
6. STOCK TRANSFER TAXES. The Purchaser will pay any stock transfer taxes
with respect to the transfer and sale of Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or accepted for payment are to be
registered in the name of, any person(s) other than the registered owner(s), or
if tendered certificates are registered in the name(s) of any person(s) other
than the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered owner(s) or such person(s))
payable on account of the transfer to such person(s) will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of, and/or certificates for Shares not accepted for payment are to be
returned to, a person other than the signer of this Letter of Transmittal or if
a check is to be sent and/or such certificates are to be returned to a person
other than the signer of this Letter of Transmittal or to an address other than
that shown above, the appropriate boxes on this Letter of Transmittal should be
completed.
8. WAIVER OF CONDITIONS. The Purchaser reserves the absolute right in its
sole discretion to waive any of the specified conditions of the Offer, in whole
or in part, in the case of any Shares tendered.
9. 31% BACKUP WITHHOLDING. In order to avoid backup withholding of Federal
income tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such stockholder's correct taxpayer identification number ("TIN") on
Substitute Form W-9 below in this Letter of Transmittal and certify under
penalties of perjury that such TIN is correct and that such stockholder is not
subject to backup withholding. If a stockholder does not provide such
stockholder's correct TIN or fails to provide the certifications described
above, the Internal Revenue Service (the "IRS") may impose a $50 penalty on such
stockholder and payment of cash to such stockholder pursuant to the Offer may be
subject to backup withholding of 31%.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the Federal income tax liability
of the person subject to the backup withholding, provided that the required
information is given to the IRS. If backup withholding results in an overpayment
of tax, a refund can be obtained by the stockholder upon filing an income tax
return.
The stockholder is required to give the Depositary the TIN (i.e., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are held in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN is
provided to the Depositary. However, such amounts will be refunded to such
stockholder if a TIN is provided to the Depositary within 60 days.
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for more instructions.
<PAGE>
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent or the Dealer Manager at their respective
addresses set forth below.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing
Shares has been lost, destroyed or stolen, the stockholder should promptly
notify the Depositary by checking the box immediately preceding the special
payment/special delivery instructions and indicating the number of Shares lost.
The stockholder will then be instructed as to the steps that must be taken in
order to replace the certificate. This Letter of Transmittal and related
documents cannot be processed until the procedures for replacing lost or
destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH
ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN
AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED
SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT
TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION
DATE, OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES FOR
GUARANTEED DELIVERY.
<PAGE>
<TABLE><CAPTION>
PAYER'S NAME: THE CHASE MANHATTAN BANK, N.A.
<S> <C> <C>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW Social Security Number(s)
OR
-------------------------
Employer Identification
Number(s)
Part 2--Certification--Under penalties of Part 3--
perjury, I certify that: Awaiting TIN
(1) the number shown on this form is my / /
correct Taxpayer Identification Number (or
I am waiting for a number to be issued to
me) and
(2) I am not subject to backup withholding
because (a) I am exempt from backup
withholding or (b) I have not been
notified by the Internal Revenue Service
("IRS") that I am subject to
backup withholding as a result of a Part 4--
failure to report all interest or Exempt TIN
dividends or (c) the IRS has notified me / /
that I am no longer subject to backup
withholding.
Department of the Certification instructions--You must cross out item (2) in Part 2 above if
Treasury Internal you have been notified by the IRS that you are subject to backup
Revenue Service withholding because of under reporting interest or dividends on your tax
returns. However, if after being notified by the IRS that you were subject
Payer's Request for to backup withholding you received another notification from the IRS
Taxpayer Identification stating that you are no longer subject to backup withholding, do not cross
Number (TIN) out such item (2). If you are exempt from backup withholding, check the box
in Part 4 above.
SIGNATURE DATE , 1996
---------------------------------- ---------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand
that, if I do not provide a taxpayer identification number to the Depositary,
31% of all reportable payments made to me will be withheld, but will be refunded
if I provide a certified taxpayer identification number within 60 days.
, 1996
- --------------------------------- -----------------------------
Signature Date
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION.
<PAGE>
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue
20th Floor
New York, NY 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage Firms
please call:
(800) 662-5200
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO.
Incorporated
1585 Broadway
New York, NY 10036
(212) 761-4699
Exhibit (a)(3)
NOTICE OF GUARANTEED DELIVERY
for
Tender of Shares of Common Stock
of
Tivoli Systems Inc.
As set forth in Section 2 of the Offer to Purchase (as defined below), this
form or one substantially equivalent hereto must be used to accept the Offer (as
defined below) if certificates for shares of Common Stock, par value $0.01 per
share (the "Shares"), of Tivoli Systems Inc., a Delaware corporation (the
"Company"), are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach the Depositary prior to the Expiration Date (as
defined in Section 1 of the Offer to Purchase). This form may be delivered by
hand to the Depositary or transmitted by telegram, facsimile transmission or
mail to the Depositary and must include a guarantee by an Eligible Institution
(as defined in Section 2 of the Offer to Purchase). See Section 2 of the Offer
to Purchase.
The Depositary:
THE CHASE MANHATTAN BANK, N.A.
(800) 355-2663
<TABLE><CAPTION>
By Mail: By Overnight Delivery: By Hand:
<S> <C> <C>
Box 3032 c/o Chase Securities (9:00 a.m.--5:00 p.m.
4 Chase MetroTech Center Processing Corp. New York City time)
Brooklyn, NY 11245 Fort Lee Executive Park 1 Chase Manhattan Plaza
1 Executive Drive Floor 1-B
(6th Floor) Nassau and Liberty Streets
Fort Lee, NJ 07024 New York, NY 10081
Facsimile Transmission:
(201) 592-4372
Confirm by Telephone:
(201) 592-4370
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Topaz Acquisition Corp., a Delaware
corporation (the "Purchaser"), which is a wholly owned subsidiary of
International Business Machines Corporation, a New York corporation, upon the
terms and subject to the conditions set forth in the Purchaser's Offer to
Purchase dated February 2, 1996 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer"), receipt of which is hereby
acknowledged, the number of Shares set forth below, all pursuant to the
guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase.
Number of Shares Name(s) of Record Holder(s):
----------------------------
-------------------------------
-------------------------------
Certificate Nos.
(if available):
----------------------------- -------------------------------
Please Print
- --------------------------------------------- Address(es):
------------------
- --------------------------------------------- -------------------------------
(CHECK ONE BOX IF SHARES Zip Code
WILL BE TENDERED BY BOOK-ENTRY TRANSFER)
/ / The Depository Trust Company
Daytime Area Code
/ / Midwest Securities Trust Company and Tel. No.:
/ / Philadelphia Depository Trust Company ---------------
Account Number Signature(s):
------------------------------ ----------------
Dated:
--------------------------------------- -------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program, hereby guarantees to deliver to the
Depositary either the certificates representing the Shares tendered hereby, in
proper form for transfer, or a Book-Entry Confirmation (as defined in the Offer
to Purchase) with respect to such Shares, in any such case together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase), and any other required documents, within
three trading days after the date hereof.
The Eligible Institution that completes this form must communicate this
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
Name of Firm:
------------------------- -------------------------------
Authorized Signature
Address:
------------------------------ Name:
---------------------------
Please Print
- --------------------------------------- Title:
Zip Code ---------------------------
Area Code and Tel No.: Dated:
---------------- ---------------------------
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES
FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
Exhibit (a)(4)
Morgan Stanley & Co.
Incorporated
1585 BROADWAY
NEW YORK, NEW YORK 10036
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Tivoli Systems Inc.
at
$47.50 Net Per Share
by
Topaz Acquisition Corp.
a wholly owned subsidiary of
International Business Machines Corporation
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, MARCH 1, 1996, UNLESS THE OFFER IS EXTENDED.
February 2, 1996
To Brokers, Dealers, Banks,
Trust Companies and other Nominees:
We have been engaged by Topaz Acquisition Corp., a Delaware corporation (the
"Purchaser"), which is a wholly owned subsidiary of International Business
Machines Corporation, a New York corporation ("IBM"), to act as Dealer Manager
in connection with the Purchaser's offer to purchase all outstanding shares of
Common Stock, par value $0.01 per share (the "Shares"), of Tivoli Systems Inc.,
a Delaware corporation (the "Company"), at $47.50 per Share, net to the seller
in cash, without interest thereon, upon the terms and subject to the conditions
set forth in the Purchaser's Offer to Purchase dated February 2, 1996 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which, together
with any amendments or supplements thereto, collectively constitute the
"Offer"). Please furnish copies of the enclosed materials to those of your
clients for whom you hold Shares registered in your name or in the name of your
nominee.
Enclosed herewith are copies of the following documents:
1. Offer to Purchase dated February 2, 1996;
2. Letter of Transmittal to be used by stockholders of the Company in
accepting the Offer;
3. The Letter to Stockholders of the Company from the President and
Chief Executive Officer of the Company accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9;
4. A printed form of letter that may be sent to your clients for whose
account you hold Shares in your name or in the name of a nominee, with space
provided for obtaining such clients' instructions with regard to the Offer;
5. Notice of Guaranteed Delivery;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to The Chase Manhattan Bank, N.A., the
Depositary.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES THAT WOULD REPRESENT A MAJORITY OF ALL OUTSTANDING SHARES ON
A FULLY DILUTED BASIS ON THE DATE OF PURCHASE AND (2) ANY WAITING PERIOD UNDER
<PAGE>
THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE
OFFER HAVING EXPIRED OR BEEN TERMINATED.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
MARCH 1, 1996, UNLESS THE OFFER IS EXTENDED BY THE PURCHASER.
The Board of Directors of the Company has unanimously approved the Offer and
the Merger (as defined below) and determined that the terms of the Offer and the
Merger are fair to, and in the best interests of, the stockholders of the
Company and unanimously recommends that stockholders of the Company accept the
Offer and tender their Shares.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of January 30, 1996 (the "Merger Agreement"), among IBM, the Purchaser and
the Company pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company, with the Company surviving the merger as a wholly owned
subsidiary of IBM (the "Merger"). In the Merger, each outstanding Share (other
than Shares owned by the Company as treasury stock or by any subsidiary of the
Company, IBM, the Purchaser or any other subsidiary of IBM or by stockholders,
if any, who are entitled to and who properly exercise dissenters' rights under
Delaware law) will be converted into the right to receive $47.50 per Share,
without interest, as set forth in the Merger Agreement and described in the
Offer to Purchase.
Payment for Shares accepted for payment pursuant to the Offer will in all
cases be made only after timely receipt by the Depositary of (a) certificates
for (or a timely Book-Entry Confirmation (as defined in the Offer to Purchase)
with respect to) such Shares, (b) a Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or, in the case of a book-entry transfer effected pursuant to the
procedure set forth in Section 2 of the Offer to Purchase, an Agent's Message
(as defined in the Offer to Purchase), and (c) any other documents required by
the Letter of Transmittal. Accordingly, tendering stockholders may be paid at
different times depending upon when certificates for Shares or Book-Entry
Confirmations with respect to Shares are actually received by the Depositary.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES
TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
Neither the Purchaser nor IBM will pay any fees or commissions to any broker
or dealer or other person (other than the Dealer Manager and the Information
Agent as described in the Offer to Purchase) in connection with the solicitation
of tenders of Shares pursuant to the Offer. You will be reimbursed upon request
for customary mailing and handling expenses incurred by you in forwarding the
enclosed offering materials to your customers.
Questions and requests for additional copies of the enclosed material may be
directed to the Information Agent or to the Dealer Manager at their respective
addresses and telephone numbers set forth on the back cover of the enclosed
Offer to Purchase.
Very truly yours,
MORGAN STANLEY & CO.
Incorporated
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, IBM, THE DEPOSITARY, THE
INFORMATION AGENT OR THE DEALER MANAGER OR AUTHORIZE YOU OR ANY OTHER PERSON TO
GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH
RESPECT TO THE OFFER NOT CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF
TRANSMITTAL.
Exhibit (a)(5)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Tivoli Systems Inc.
at
$47.50 Net Per Share
by
Topaz Acquisition Corp.
a wholly owned subsidiary of
International Business Machines Corporation
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, MARCH 1, 1996, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated February 2,
1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") relating to the offer by Topaz Acquisition Corp., a Delaware
corporation (the "Purchaser"), which is a wholly owned subsidiary of
International Business Machines Corporation, a New York corporation ("IBM"), to
purchase for cash all outstanding shares of Common Stock, par value $0.01 per
share (the "Shares"), of Tivoli Systems Inc., a Delaware corporation (the
"Company"), upon the terms and subject to the conditions set forth in the Offer.
Also enclosed is the Letter to Stockholders of the Company from the President
and Chief Executive Officer of the Company accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish to tender any of or all the
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is directed to the following:
1. The offer price is $47.50 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions of the
Offer.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company has unanimously approved the Offer
and the Merger (as defined below) and determined that the terms of the
Offer and the Merger are fair to, and in the best interests of, the
stockholders of the Company and unanimously recommends that the
stockholders of the Company accept the Offer and tender their Shares.
<PAGE>
4. The Offer is being made pursuant to the Agreement and Plan of Merger
dated as of January 30, 1996 (the "Merger Agreement"), among IBM, the
Purchaser and the Company pursuant to which, following the consummation
of the Offer and the satisfaction or waiver of certain conditions, the
Purchaser will be merged with and into the Company, with the Company
surviving the merger as a wholly owned subsidiary of IBM (the "Merger").
In the Merger, each outstanding Share (other than Shares owned by the
Company as treasury stock or by any subsidiary of the Company, IBM, the
Purchaser or any other subsidiary of IBM or by stockholders, if any, who
are entitled to and who properly exercise dissenters' rights under
Delaware law) will be converted into the right to receive $47.50 per
Share, without interest, as set forth in the Merger Agreement and
described in the Offer to Purchase.
5. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, MARCH 1, 1996, UNLESS THE OFFER IS EXTENDED BY THE
PURCHASER (THE "EXPIRATION DATE").
6. The Offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn prior to the expiration of the Offer
that number of Shares that would represent a majority of all outstanding
Shares on a fully diluted basis on the date of purchase and (2) any
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the regulations thereunder applicable to the
purchase of Shares pursuant to the Offer having expired or been
terminated.
7. Any stock transfer taxes applicable to a sale of Shares to the Purchaser
will be borne by the Purchaser, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
Your instructions to us should be forwarded promptly to permit us to submit
a tender on your behalf prior to the Expiration Date.
If you wish to have us tender any of or all the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form on the detachable part hereof. An envelope to return
your instructions to us is enclosed. If you authorize the tender of your Shares,
all such Shares will be tendered unless otherwise specified on the detachable
part hereof. Your instructions should be forwarded to us in ample time to permit
us to submit a tender on your behalf prior to the Expiration Date.
Payment for Shares accepted for payment pursuant to the Offer will in all
cases be made only after timely receipt by The Chase Manhattan Bank, N.A. (the
"Depositary"), of (a) certificates for (or a timely Book-Entry Confirmation (as
defined in the Offer to Purchase) with respect to) such Shares, (b) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or, in the case of a book-entry transfer
effected pursuant to the procedure set forth in Section 2 of the Offer to
Purchase, an Agent's Message, and (c) any other documents required by the Letter
of Transmittal. Accordingly, tendering stockholders may be paid at different
times depending upon when certificates for Shares or Book-Entry Confirmations
with respect to Shares are actually received by the Depositary. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE
PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING SUCH PAYMENT.
The Offer is not being made to, nor will tenders be accepted from, or on
behalf of, holders of Shares in any jurisdiction in which the making or
acceptance of the Offer would not be in compliance with the laws of such
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer is being
made on behalf of the Purchaser by Morgan Stanley & Co. Incorporated, the Dealer
Manager for the Offer, or one or more registered brokers or dealers that are
licensed under the laws of such jurisdiction.
2
<PAGE>
Instructions with Respect to the
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Tivoli Systems Inc.
The undersigned acknowledge(s) receipt of your letter, the Offer to Purchase
of Topaz Acquisition Corp. dated February 2, 1996 (the "Offer to Purchase"), and
the related Letter of Transmittal relating to shares of Common Stock, par value
$0.01 per share (the "Shares"), of Tivoli Systems Inc., a Delaware corporation.
This will instruct you to tender the number of Shares indicated below held
by you for the account of the undersigned, on the terms and subject to the
conditions set forth in the Offer to Purchase and related Letter of Transmittal.
NUMBER OF SHARES TO BE TENDERED:* SIGN HERE
SHARES
- ----------------- -------------------------------
DAYTIME AREA CODE
AND TEL. NO.
----------------------------------- -------------------------------
SIGNATURE(S)
TAXPAYER IDENTIFICATION
NO. OR SOCIAL
SECURITY NO.
----------------------------------- -------------------------------
DATED: , 1996
----------------------------------- -------------------------------
(PLEASE PRINT NAME(S) AND
ADDRESS(ES))
- ------------
* Unless otherwise indicated, it will be assumed that all your Shares are to be
tendered.
Exhibit (a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE><CAPTION>
- ------------------------------------------------------ ---------------------------------------------------------
GIVE THE GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF-- NUMBER OF--
- ------------------------------------------------------ ---------------------------------------------------------
<S> <C> <C> <C>
1. An individual's The individual 8. Sole proprietorship The owner(4)
account account
2. Two or more The actual owner of the 9. A valid trust, estate The legal entity (Do not
individuals (joint account or, if combined or pension trust furnish the identifying
account) funds, any one of the number of the personal
individuals(1) representative or
trustee unless the legal
3. Husband and wife The actual owner of the entity itself is not
(joint account) account or, if joint designated in the
funds, either person(1) account title.)(5)
4. Custodian account of The minor(2) 10. Corporate account The corporation
a minor (Uniform Gift
to Minors Act) 11. Religious, charitable, The organization
or educational
5. Adult and minor The adult, or if the organization account
(joint account) minor is the only
contributor, the 12. Partnership account The partnership
minor(1) held in the name of
the business
6. Account in the name The ward, minor, or
of guardian or incompetent person(3) 13. Association, club, or The organization
committee for a other tax-exempt
designated ward, organization
minor, or incompetent
person 14. A broker or The broker or
registered nominee nominee
7. A. The usual The grantor-trustee(1)
revocable savings 15. Account with the The public entity
trust account Department of
(grantor is also Agriculture in the
trustee) name of a public
entity (such as a
B. So-called trust The actual owner(4) state or local
account that is not government, school
a legal or valid district, or prison)
trust under State that receives agricultural
law program payments
- ------------------------------------------------------ ---------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL BE
CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A state, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a) (1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresi dent partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9 TO
AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE SUBSTITUTE FORM W-9 WITH THE
PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE
OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST,
DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividends, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.
Falsifying certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
(4) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. If you fail to
include any portion of an includible payment for interest, dividends or
patronage dividends in gross income and such failure is due to negligence, a
penalty of 20% is imposed on any portion of an underpayment attributable to that
failure.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
EXHIBIT (a)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated
February 2, 1996, and the related Letter of Transmittal and is not being made
to (nor will tenders be accepted from or on behalf of) holders of Shares in
any jurisdiction in which the making of the Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction. In any
jurisdiction the securities laws of which require the Offer to be made
by a licensed broker or dealer, the Offer shall be deemed made on
behalf of the Purchaser by the Dealer Manager or one or more
registered brokers or dealers licensed under the laws of
such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Tivoli Systems Inc.
at
$47.50 Net Per Share
by
Topaz Acquisition Corp.
a wholly owned subsidiary of
International Business Machines Corporation
Topaz Acquisition Corp., a Delaware corporation (the "Purchaser"), which is
a wholly owned subsidiary of International Business Machines Corporation, a New
York corporation ("IBM"), is offering to purchase all outstanding shares of
Common Stock, par value $0.01 per share (the "Shares"), of Tivoli Systems Inc.,
a Delaware corporation (the "Company"), at $47.50 per Share, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated February 2, 1996, and in the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer").
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, MARCH 1, 1996, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES THAT WOULD CONSTITUTE A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY
DILUTED BASIS ON THE DATE OF PURCHASE AND (2) ANY WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE
OFFER HAVING EXPIRED OR BEEN TERMINATED.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of January 30, 1996 (the "Merger Agreement"), among IBM, the Purchaser and the
Company pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company (the "Merger"). On the effective date of the Merger, each
outstanding Share (other than Shares owned by the Company as treasury stock or
by any subsidiary of the Company, IBM, the Purchaser or any other subsidiary of
IBM or by stockholders, if any, who are entitled to and who properly exercise
dissenters' rights under Delaware law) will be converted into the right to
receive $47.50 in cash, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND
THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR
TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND
TENDER THEIR SHARES.
The Purchaser and IBM have also entered into a Stockholder Agreement dated
as of January 30, 1996 (the "Stockholder Agreement"), with all directors and
executive officers of the Company. Under the Stockholder Agreement, those
stockholders have unconditionally agreed to tender their Shares into the Offer
and have granted an irrevocable proxy to IBM to vote such Shares under certain
circumstances.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn as, if and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance for payment of such Shares. Upon
the terms and subject to the conditions of the Offer, payment for Shares
accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering stockholders. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (a) certificates for such Shares or timely
confirmation of book-entry transfer of such Shares into the Depositary's account
at a Book-Entry Transfer Facility (as defined in the Offer to Purchase) pursuant
to the procedures set forth in Section 2 of the Offer to Purchase, (b) a Letter
of Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or, in the case of a book-entry
transfer, an Agent's Message (as defined in the Offer to Purchase) and (c) any
other documents required by the Letter of Transmittal. Under no circumstances
will interest be paid by the Purchaser on the purchase price of the Shares,
regardless of any delay in making such payment.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Friday, March 1, 1996, unless and until the Purchaser, in its sole discretion
(but subject to the terms of the Merger Agreement), shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date on which the Offer, as so
extended by the Purchaser, shall expire. Subject to the terms of the Merger
Agreement, the Purchaser expressly reserves the right (but shall not be
obligated), at any time or from time to time, and regardless of whether or not
any of the events set forth in Section 14 of the Offer to Purchase shall have
occurred, to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, any Shares, by
giving oral or written notice of such extension to the Depositary. The Purchaser
shall not have any obligation to pay interest on the purchase price for tendered
Shares in the event the Purchaser exercises its right to extend the period of
time during which the Offer is open. There can be no assurance that the
Purchaser will exercise its right to extend the Offer (other than as required by
the Merger Agreement). Any such extension will be followed by a public
announcement thereof no later than 9:00 A.M., New York City time, on the next
business day after the previously scheduled Expiration Date. During any such
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer, subject to the right of a tendering stockholder to withdraw such
stockholder's Shares.
Except as otherwise provided below, tenders of Shares are irrevocable.
Shares tendered prior to the Expiration Date, unless theretofore accepted for
payment and paid for by the Purchaser pursuant to the Offer, may also be
withdrawn at any time after April 1, 1996. For a withdrawal to be effective, a
written, telegraphic or facsimile transmission notice of withdrawal must be
timely received by the Depositary at one of its addresses set forth on the back
cover of the Offer to Purchase and must specify the name of the person having
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder of the Shares to be withdrawn, if different
from the name of the person who tendered the Shares. If certificates for Shares
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Shares have
been tendered by an Eligible Institution (as defined in Section 2 of the Offer
to Purchase), the signatures on the notice of withdrawal must be guaranteed by
an Eligible Institution. If Shares have been delivered pursuant to the
procedures for book-entry transfer as set forth in Section 2 of the Offer to
Purchase, any notice of withdrawal must also specify the name and number of the
account at the appropriate Book-Entry Transfer Facility to be credited with the
withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures. Withdrawals of tenders of Shares may not be rescinded, and any
Shares properly withdrawn will thereafter be deemed not validly tendered for
purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 2 of the Offer to Purchase
at any time prior to the Expiration Date. All questions as to the form and
validity (including time of receipt) of notices of withdrawal will be determined
by the Purchaser in its sole discretion, which determination will be final and
binding.
The Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares and furnished to
brokers, dealers, banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on the stockholder lists or, if applicable, who
are listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) under the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
THE OFFER TO PURCHASE AND LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE
OFFER.
Requests for copies of the Offer to Purchase, the Letter of Transmittal and
all other tender offer materials may be directed to the Information Agent or the
Dealer Manager as set forth below, and copies will be furnished promptly at the
Purchaser's expense. No fees or commissions will be payable to brokers, dealers
or other persons other than the Dealer Manager and the Information Agent for
soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue
20th Floor
New York, New York 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage Firms please call:
(800) 662-5200
The Depositary for the Offer is:
THE CHASE MANHATTAN BANK, N.A.
(800) 355-2663
<TABLE>
By Mail: By Overnight Delivery: By Hand:
<S> <C> <C>
Box 3032 c/o Chase Securities Processing Corp. (9:00 a.m.-5:00 p.m.
4 Chase MetroTech Center Fort Lee Executive Park New York City time)
Brooklyn, New York 11245 1 Executive Drive (6th Floor) 1 Chase Manhattan Plaza, Floor 1-B
Fort Lee, New Jersey 07024 Nassau and Liberty Streets
New York, New York 10081
By Facsimile Transmission: (201) 592-4372
Confirm by Telephone: (201) 592-4370
</TABLE>
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO.
Incorporated
1585 Broadway
New York, New York 10036
(212) 761-4699
February 2, 1996
EXHIBIT (a)(8)
For Release: IMMEDIATE
["IBM" LOGO]
International Business Machines Corporation
Armonk, New York 10504
Contacts: Rob Wilson/Glenn Rossman
IBM
(914) 765-6565
Glenn Rossman
(914) 766-1711 after 1/31
[email protected]
Pat Colpitts
Tivoli Systems
(512) 794-9070
IBM, TIVOLI SYSTEMS ANNOUNCE MERGER AGREEMENT
ARMONK, N.Y., January 31, 1996 . . . IBM and Tivoli Systems
Inc. today announced that they have entered into a definitive
merger agreement under which IBM will shortly commence a cash
tender offer for Tivoli's shares at $47.50 per share. Tivoli,
based in Austin, Texas, is a leading provider of systems
management software and services that help customers reduce the
cost and complexity of managing distributed client/server
networks of personal computers and workstations.
The directors and executive officers of Tivoli have agreed
to sell their shares to IBM. The net cash cost of the
transaction to IBM is expected to be $743 million, including the
purchase of Tivoli's outstanding shares, the vesting of a portion
of the employee stock options, fees and expenses, less Tivoli's
current cash.
- more -
<PAGE>
- 2 -
The merger will combine Tivoli's advanced technology with
IBM's host-based systems management products and global sales,
service and support. Together, the companies will provide
customers with the most comprehensive, open systems management
solution in the industry for network-centric computing.
Systems management software helps companies control their
increasingly complex networks of PCs, workstations and host
computers and the applications that run on them. Key functions
performed by the software include network management, performance
monitoring, problem determination, and administrative tasks such
as new user authorization and software distribution.
"As more and more customers exploit powerful computer
networks for competitive advantage, the need for systems
management products to operate and maintain these networks
becomes critical," said IBM Chairman and Chief Executive Officer
Louis V. Gerstner, Jr. "By combining our strengths, IBM and
Tivoli can provide customers an unmatched line of systems
management solutions and services that are open, easy to
customize and scalable from small departments to the largest
global enterprises. This transition greatly strengthens our
position in the emerging network-centric computing opportunity."
John M. Thompson, senior vice president and software group
executive for IBM, said: "Tivoli is an exciting, high-growth
company with an excellent set of object-oriented offerings for
distributed, client/server environments. CEO Frank Moss and the
- more -
<PAGE>
- 3 -
Tivoli team have quickly extablished themselves as a key partner
for enterprise customers due to their unparalleled expertise in
this area. It is our intent that Frank lead our combined systems
management efforts when this transaction is completed. With this
merger, IBM and Tivoli will be uniquely positioned to provide
customers with the complete set of tools and professional
services they need to manage their network resources from the
desktop, to the host, to the Internet."
Tivoli CEO Frank Moss said: "Demand for distributed systems
management products is exploding, and customers are
enthusiastically adopting the Tivoli Management Environment**.
IBM's golbal reach and complementary management products for
hosts and networks will quickly allow us to achieve a worldwide
leadership position.
"Together with the Tivoli Board of Directors, I believe that
this merger represents a terrific opportunity for our customers,
our employees and our shareholders. On behalf of Tivoli's
people, I look forwared to joining John Thompson and the IBM team
to create the industry's premier systems and network management
solution," Moss added.
The Tivoli Management Environment, a set of systems and
management applications used by Fortune 1000 companies, excels at
providing a broad range of easy-to-use, automated systems
management and administrative tools that simplify the management
of widely dispersed UNIX** and PC clients and servers. IBM's
- more -
<PAGE>
- 4 -
flagship systems management product line, SystemView* Series,
provides extensive network control functions for managing
host-based, UNIX and PC systems.
IBM said that this merger, when completed, will result in a
one-time charge against IBM's earnings. The charge primarily
involves expensing, as called for by accounting requirements, of
amounts assigned to research and development of Tivoli software
that has not reached technological feasibility. The charge will
be taken in the quarter in which the merger is completed. The
specific amount of the charge cannot be determined at this time
based on currently available information.
For Internet users, IBM offers complete information about
the company, its products, services and technology on the World
Wide Web. The IBM Home Page is at http://www.ibm.com. The
fastest, easiest way to get information about IBM software is to
go to the IBM Software Home Page at http://www.software.ibm.com.
Information on Tivoli Systems is available on the World Wide Web
at http://www.tivoli.com.
# # #
013196
* Indicates trademark or registered trademark of International
Business Machines Corporation.
** Tivoli and Tivoli Management Environment are trademarks of
Tivoli Systems Inc. UNIX is a registered trademark in the
United States and other countries licensed exclusively
through X/Open Company Limited.
Exhibit (a)(9)
["IBM" LOGO] Lead Story
IBM executive John M. Thompson explains the merger
to employees
IBM, TIVOLI SYSTEMS ANNOUNCE MERGER AGREEMENT
ARMONK, N.Y., January 31, 1996 . . . IBM and Tivoli Systems
Inc. today announced that they have entered into a definitive
merger agreement under which IBM will shortly commence a cash
tender offer for Tivoli's shares at $47.50 per share. Tivoli,
based in Austin, Texas, is a leading provider of systems
management software and services that help customers reduce the
cost and complexity of managing distributed client/server
networks of personal computers and workstations.
The directors and executive officers of Tivoli have agreed
to sell their shares to IBM. The net cash cost of the
transaction to IBM is expected to be $743 million, including the
purchase of Tivoli's outstanding shares, the vesting of a portion
of the employee stock options, fees and expenses, less Tivoli's
current cash.
- more -
<PAGE>
- 2 -
The merger will combine Tivoli's advanced technology with
IBM's host-based systems management products and global sales,
service and support. Together, the companies will provide
customers with the most comprehensive, open systems management
solution in the industry for network-centric computing.
Systems management software helps companies control their
increasingly complex networks of PCs, workstations and host
computers and the applications that run on them. Key functions
performed by the software include network management, performance
monitoring, problem determination, and administrative tasks such
as new user authorization and software distribution.
"As more and more customers exploit powerful computer
networks for competitive advantage, the need for systems
management products to operate and maintain these networks
becomes critical," said IBM Chairman and Chief Executive Officer
Louis V. Gerstner, Jr. "By combining our strengths, IBM and
Tivoli can provide customers an unmatched line of systems
management solutions and services that are open, easy to
customize and scalable from small departments to the largest
global enterprises. This transition greatly strengthens our
position in the emerging network-centric computing opportunity."
Johm M. Thompson, senior vice president and software group
executive for IBM, said: "Tivoli is an exciting, high-growth
company with an excellent set of object-oriented offerings for
distributed, client/server environments. CEO Frank Moss and the
- more -
<PAGE>
- 3 -
Tivoli team have quickly extablished themselves as a key partner
for enterprise customers due to their unparalleled expertise in
this area. It is our intent that Frank lead our combined systems
management efforts when this transaction is completed. With this
merger, IBM and Tivoli will be uniquely positioned to provide
customers with the complete set of tools and professional
services they need to manage their network resources from the
desktop, to the host, to the Internet."
Tivoli CEO Frank Moss said: "Demand for distributed systems
management products is exploding, and customers are
enthusiastically adopting the Tivoli Management Environment*.
IBM's global reach and complementary management products for
hosts and networks will quickly allow us to achieve a worldwide
leadership position.
"Together with the Tivoli Board of Directors, I believe that
this merger represents a terrific opportunity for our customers,
our employees and our shareholders. On behalf of Tivoli's
people, I look forwared to joining John Thompson and the IBM team
to create the industry's premier systems and network management
solution," Moss added.
The Tivoli Management Environment, a set of systems and
management applications used by Fortune 1000 companies, excels at
providing a broad range of easy-to-use, automated systems
management and administrative tools that simplify the management
of widely dispersed UNIX* and PC clients and servers. IBM's
- more -
<PAGE>
- 4 -
flagship systems management product line, SystemView Series,
provides extensive network control functions for managing
host-based, UNIX and PC systems.
IBM said that this merger, when completed, will result in a
one-time charge against IBM's earnings. The charge primarily
involves expensing, as called for by accounting requirements, of
amounts assigned to research and development of Tivoli software
that has not reached technological feasibility. The charge will
be taked in the quarter in which the merger is completed. The
specific amount of the charge cannot be determined at this time
based on currently available information.
# # #
* Tivoli and Tivoli Management Environment are trademarks of
Tivoli Systems Inc. UNIX is a registered trademark in the
Unites States and other countries licensed exclusively
through X/Open Company Limited.
<PAGE>
[IBM LOGO] LEAD STORY
Dear Software Colleague:
Today, IBM and Tivoli Systems announced the signing of a merger agreement in
which the shareholders of Tivoli will receive $47.50 per share of Tivoli
common stock, a transaction expected to be worth about $743 million, which we
will finance from our cash on hand.
Tivoli is an industry-leading developer of object-oriented software for
distributed systems management. Assuming the Tivoli stockholders accept our
offer, we have an exciting opportunity to catapult IBM and Tivoli to industry
leadership in systems management. Let me try to put this opportunity in
perspective.
Effective systems management has been identified by our customers as critical
to their success as they rely increasingly on distributed client/server and
network-centric computing to run their businesses. They need to automate
systems operational control with sophisticated tools to reduce the cost of
managing their information systems. The industry estimates the cost of
managing a distributed or network-centric environment at triple the cost of
managing a host environment. Customers also want solutions that work across
multiple platforms and are able to grow and meet new requirements such as the
Internet.
Because of these requirements, the worldwide opportunity for systems
management is estimated today at $6 billion. Most of that opportunity - $5
billion - is in host-based management where IBM's SystemView has long been
in a leader. However, growth in host-based management tools is limited.
The real growth opportunity lies in distributed systems management, which
today is $1 billion, growing in excess of 30 percent. With SystemView for
OS/2 and SystemView for AIX, we have begun to establish ourselves as providers
of client/server software for systems management.
Tivoli, on the other hand, is the undisputed technical leader in the fast-
growing distributed area and will be adding Internet solutions to their
product line soon. Tivoli is recognized for innovative, easy-to-use, object-
oriented tools for managing network applications and for an open, flexible
architecture. Tivoli makes it easy for customers to administer network
applications from a centralized console. The Tivoli Management Environment
is built on object technology, and because it's open, it runs on a wide range
of industry platforms such as Sun, HP and Windows NT. Tivoli also works with
major application and database products such as SAP, PowerBuilder, Oracle,
Informix and Sybase.
Together, IBM and Tivoli will be the only company in the industry that offers
our customers fully-integrated, world-class, client/server systems management
solutions. Combining our technologies will enable our mutual customers to
greatly simplify and reduce the cost of managing their systems, networks and
applications. And they will be able to take full advantage of the global
reach and range of IBM's professional service support.
We have worked with Tivoli over the past several months and have found the
Tivoli development and sales teams to be an entrepreneurial, innovative group
with a product set that complements ours beautifully. Tivoli technology,
product line and aggressive entrepreneurial spirit combined with the
SystemView heritage will instantly provide our customers client/server
systems management on multiple platforms.
This merger makes good business sense for both companies. Tivoli gets the
full advantage of the global reach and range of IBM's marketing and service
teams and the broad functionality of our enterprise systems management
solutions. IBM takes a dramatic step forward in providing systems management
solutions for distributed systems on multiple platforms including the
Internet. And together, IBM and Tivoli can provide our worldwide customers
with an end-to-end, integrate line of systems management products and
solutions that are open, easy to customize, scalable from small departments to
large enterprises and available on multiple industry platforms.
If the merger is approved, Frank Moss, CEO of Tivoli, will lead IBM's overall
systems management efforts, reporting to me. As we work out the details, I
will keep you informed. This is an exciting time for the IBM Software Group
and for our customers. With Tivoli, we can reach our goal of becoming number
one in the area of systems management.
John M. Thompson
Senior Vice President and Software Group Executive
IBM
Exhibit (b)
EXECUTION COPY
================================================================================
$10,000,000,000
CREDIT AGREEMENT
among
INTERNATIONAL BUSINESS MACHINES
CORPORATION
The Several Lenders
from Time to Time Parties Hereto
and
CHEMICAL BANK,
as Administrative Agent
Dated as of December 22, 1993
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. DEFINITIONS .................................................... 1
1.1 Defined Terms ..................................................... 1
1.2 Other Definitional Provisions ..................................... 21
SECTION 2. AMOUNT AND TERMS OF US$ FACILITIES ............................. 22
2.1 Revolving Credit Commitments ...................................... 22
2.2 Procedure for Revolving Credit Borrowing .......................... 22
2.3 Conversion and Continuation Options for Revolving Credit Loans .... 23
2.4 Minimum Amounts and Maximum Number of Eurodollar Tranches ......... 24
2.5 Swing Line Loans .................................................. 24
2.6 Optional Prepayments of Revolving Credit Loans and Swing Line Loans 26
2.7 The Competitive Loans ............................................. 26
2.8 Procedure for Competitive Loan Borrowing .......................... 26
2.9 Repayment of US$ Loans; Evidence of Debt .......................... 29
2.10 Interest Rates and Payment Dates ................................. 30
2.11 Fees ............................................................. 31
2.12 Computation of Interest and Fees ................................. 31
2.13 Termination or Reduction of Revolving Credit Commitments ......... 32
2.14 Inability to Determine Interest Rate ............................. 32
2.15 Pro Rata Treatment and Payments .................................. 33
2.16 Illegality ....................................................... 34
2.17 Requirements of Law .............................................. 34
2.18 Taxes ............................................................ 36
2.19 Indemnity ........................................................ 39
2.20 Change of Lending Office ......................................... 39
SECTION 3. LOCAL CURRENCY FACILITIES ....................................... 40
3.1 Terms of Local Currency Facilities ................................ 40
3.2 Currency Fluctuations, etc ........................................ 42
3.3 Refunding of Local Currency Loans ................................. 44
SECTION 4. REPRESENTATIONS AND WARRANTIES .................................. 46
4.1 Organization; Powers .............................................. 46
4.2 Authorization ..................................................... 46
4.3 Enforceability .................................................... 46
4.4 Governmental Approvals ............................................ 47
4.5 Financial Statements .............................................. 47
4.6 No Material Adverse Change ........................................ 47
4.7 No Material Litigation, etc ....................................... 47
4.8 Federal Reserve Regulations ....................................... 47
4.9 Investment Company Act, etc ....................................... 48
4.10 Tax Returns ...................................................... 48
4.11 No Material Misstatements ........................................ 48
<PAGE>
Page
----
4.12 ERISA .......................................................... 48
4.13 Use of Proceeds ................................................ 48
SECTION 5. CONDITIONS PRECEDENT ............................................ 48
5.1 Conditions to Initial US$ Loans ................................. 48
5.2 Conditions to Each US$ Loan ..................................... 50
SECTION 6. AFFIRMATIVE COVENANTS ........................................... 51
6.1 Existence; Business and Properties .............................. 51
6.2 Financial Statements, Reports, etc .............................. 52
6.3 Notices ......................................................... 53
SECTION 7. NEGATIVE COVENANTS .............................................. 53
7.1 Limitation on Secured Debt and Sale and Leaseback Transactions .. 53
7.2 Mergers, Consolidations and Sales of Assets ..................... 54
7.3 Margin Regulations .............................................. 54
7.4 Consolidated Net Interest Expense Ratio ......................... 55
SECTION 8. EVENTS OF DEFAULT ............................................... 55
SECTION 9. THE ADMINISTRATIVE AGENT ........................................ 57
9.1 Appointment ..................................................... 57
9.2 Delegation of Duties ............................................ 57
9.3 Exculpatory Provisions .......................................... 57
9.4 Reliance by Administrative Agent ................................ 58
9.5 Notice of Default ............................................... 58
9.6 Non-Reliance on Administrative Agent and Other Lenders .......... 58
9.7 Indemnification ................................................. 59
9.8 Administrative Agent in Its Individual Capacity ................. 59
9.9 Successor Administrative Agent .................................. 60
SECTION 10. GUARANTEE ...................................................... 60
10.1 Guarantee ...................................................... 60
10.2 No Subrogation, Contribution, Reimbursement or Indemnity ....... 61
10.3 Amendments, etc. with respect to the Subsidiary Borrower
Obligations ................................................. 61
10.4 Guarantee Absolute and Unconditional ........................... 62
10.5 Reinstatement .................................................. 63
10.6 Payments ....................................................... 63
10.7 Judgments Relating to Guarantee ................................ 63
10.8 Independent Obligations ........................................ 64
SECTION 11. MISCELLANEOUS .................................................. 64
11.1 Amendments and Waivers ......................................... 64
11.2 Notices ........................................................ 65
11.3 No Waiver; Cumulative Remedies ................................. 65
- ii -
<PAGE>
Page
----
11.4 Survival of Representations and Warranties ..................... 66
11.5 Payment of Expenses ............................................ 66
11.6 Participations ................................................. 67
11.7 Transfers of Competitive Loans ................................. 67
11.8 Assignments .................................................... 69
11.9 The Register; Disclosure; Pledges to Federal Reserve Banks ..... 69
11.10 Changing Designations of Swing Line Lenders and Competitive Loan
Lenders ..................................................... 70
11.11 Replacement of Lenders under Certain Circumstances ............ 71
11.12 Adjustments; Set-off .......................................... 71
11.13 Counterparts .................................................. 72
11.14 Severability .................................................. 72
11.15 Integration ................................................... 72
11.16 GOVERNING LAW ................................................. 72
11.17 Submission To Jurisdiction; Waivers ........................... 72
11.18 Judgments Relating to Subsidiary Borrowers .................... 73
11.19 Acknowledgements .............................................. 74
11.20 WAIVERS OF JURY TRIAL ......................................... 74
11.21 Confidentiality ............................................... 74
11.22 Binding Effect; Successors and Assigns ........................ 75
SCHEDULES
SCHEDULE 1.1A Revolving Credit Commitments and Swing Line Commitments
of Lenders
SCHEDULE 1.1B Existing Credit Agreements
SCHEDULE 6.2(c) Compliance Certificate
EXHIBITS
EXHIBIT A-1 Form of Competitive Loan Confirmation
EXHIBIT A-2 Form of Competitive Loan Offer
EXHIBIT A-3 Form of Competitive Loan Request
EXHIBIT B-1 Form of Subsidiary Borrower Notice and Designation
EXHIBIT B-2 Form of Subsidiary Borrower Request
EXHIBIT C Form of Closing Certificate
EXHIBIT D-1 Form of Opinion of Simpson Thacher & Bartlett
EXHIBIT D-2 Form of Opinion of Cravath, Swaine & Moore
EXHIBIT D-3 Form of Opinion of Associate General Counsel of IBM
EXHIBIT E Form of Assignment and Acceptance
EXHIBIT F Form of Local Currency Facility Addendum
EXHIBIT G-1 Form of Revolving Credit Loan Promissory Note
EXHIBIT G-2 Form of Competitive Loan Promissory Note
EXHIBIT H Form of Addendum
- iii -
<PAGE>
CREDIT AGREEMENT, dated as of December 22, 1993, among
INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation
("IBM"), each Subsidiary Borrower (as hereinafter defined), the several banks
and other financial institutions from time to time parties to this Agreement
(the "Lenders"), and CHEMICAL BANK, a New York banking corporation, as
administrative agent for the Lenders hereunder (in such capacity, the
"Administrative Agent").
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect
on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes
hereof: "Prime Rate" shall mean the rate of interest per annum publicly
announced from time.to time by Chemical Bank as its prime rate in effect at its
principal office in New York City (each change in the Prime Rate to be effective
on the date such change is publicly announced); "Base CD Rate" shall mean the
sum of (a) the product of (i) the Three- Month Secondary CD Rate and (ii) a
fraction, the numerator of which is one and the denominator of which is one
minus the CD Reserve Percentage and (b) the CD Assessment Rate; "Three-Month
Secondary CD Rate" shall mean, for any day, the secondary market rate for
three-month certificates of deposit reported as being in effect on such day (or,
if such day shall not be a Business Day, the next preceding Business Day) by the
Board through the public information telephone line of the Federal Reserve Bank
of New York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the week
following such day), or, if such rate shall not be so reported on such day or
such next preceding Business Day, the average of the secondary market quotations
for three- month certificates of deposit of major money center banks in New York
City received at approximately 10:00 A.M., New York City time, on such day (or,
if such day shall not be a Business Day, on the next preceding Business Day) by
the Administrative Agent from three New York City negotiable certificate of
deposit dealers of recognized standing selected by it; "CD Reserve Percentage"
shall mean, for any day, that percentage (expressed as a decimal) which is in
effect on such day, as prescribed by the Board, for determining the maximum
reserve requirement for a Depositary Institution (as defined in Regulation D of
the Board) in respect of new non-personal time deposits in Dollars having a
maturity of 30 days or more; and "CD Assessment Rate" shall mean, for any day,
the annual assessment rate in effect on such day which is payable by a member of
the Bank Insurance Fund classified as "well-capitalized" and within supervisory
subgroup "A" (or a comparable successor assessment risk classification) within
the meaning of 12 C.F.R. Sec. 327.3(e) (or any successor provision)
<PAGE>
2
to the Federal Deposit Insurance Corporation (or any successor) for such
Corporation's (or such successor's) insuring time deposits at offices of such
institution in the United States. If for any reason the Administrative Agent
shall have determined (which determination shall be conclusive absent manifest
error) that it is unable to ascertain the Base CD Rate or the Federal Funds
Effective Rate, or both, for any reason, including the inability or failure of
the Administrative Agent to obtain sufficient quotations in accordance with the
terms thereof, the ABR shall be determined without regard to clause (b) or (c),
or both, of the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in the
ABR due to a change in the Prime Rate, the Three-Month Secondary CD Rate, the CD
Reserve Percentage, the CD Assessment Rate or the Federal Funds Effective Rate
shall be effective on the effective day of such change in the Prime Rate, the
Three=Month Secondary CD Rate, the CD Reserve Percentage, the CD Assessment Rate
or the Federal Funds Effective Rate, respectively.
"ABR Loans": Revolving Credit Loans the rate of interest applicable to
which is based upon the ABR.
"Addendum" means an instrument, substantially in the form of Exhibit H,
by which a Lender becomes a party to this Agreement.
"Aggregate Outstanding Revolving Extensions of Credit": as to any Lender
at any time, the aggregate principal amount of all Revolving Credit Loans,
Swing Line Loans and Local Currency Loans (US$ Equivalent) made by such Lender
then outstanding.
"Aggregate Outstanding US$ Revolving Extensions of Credit": as to any
Lender at any time, the aggregate principal amount of all Revolving Credit Loans
and Swing Line Loans made by such Lender then outstanding.
"Agreement": this Credit Agreement, as amended supplemented or otherwise
modified from time to time.
"Applicable Eurodollar Margin": with respect to each Eurodollar Loan at
any date, the applicable percentage per annum set forth below based upon the
Status and Utilization on such date (provided that if the Revolving Credit
Commitments have been terminated on or prior to such date, the Utilization for
such date shall be deemed to be greater than 50%):
<TABLE><CAPTION>
Level I Level II Level III Level IV Level V
Status Status Status status status
<S> <C> <C> <C> <C>
If Utilization is less
than or equal to 50%: 0.2000% 0.2250% 0.3125% 0.4000% 0.5000%
If Utilization is greater
than 50%: 0.3250% 0.3500% 0.4375% 0.5250% 0.6250%
</TABLE>
<PAGE>
3
"Applicable Index Rate": in respect of any Index Rate Competitive Loan of
a specified maturity requested pursuant to an Index Rate Competitive Loan
Request, the rate of interest, determined on the basis of the rate for deposits
in Dollars with a maturity comparable to the maturity applicable to such Index
Rate Competitive Loan, appearing on Page 3750 of the Telerate screen as of 11:00
A.M., London time, two Business Days prior to the Borrowing Date in respect of
such Index Rate Competitive Loan. In the event that such rate does not appear on
Page 3750 of the Tolerate Service (or otherwise on such service), the
"Applicable Index Rate" shall be determined by reference to such other publicly
available service for displaying eurodollar rates as may be agreed upon by the
Administrative Agent and IBM or, in the absence of such agreement, the
"Applicable Index Rate" shall instead be the average (rounded upward, if
necessary, to the nearest 1/16 th of 1%) of the respective rates notified to the
Administrative Agent by each of the Reference Lenders as the rate at which such
Reference Lender is offered Dollar deposits at or about 10:00 A.M., New York
City time, two Business Days prior to the Borrowing Date in respect of such
Index Rate Competitive Loan, in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations in respect of its
Eurodollar Loans are then being conducted for delivery on such Borrowing Date
with a maturity comparable to the maturity applicable to such Index Rate
Competitive Loan and in an amount comparable to the amount of such Index Rate
Competitive Loan.
"Attributable Debt": as of any date of determination, the present value
(discounted semiannually at the Attributable Interest Rate) of the obligation of
a lessee for rental payments pursuant to any Sale and Leaseback Transaction
(reduced by the amount of the rental obligations of any sublessee of all or part
of the same property) during the remaining term of such Sale and Leaseback
Transaction (including any period for which the lease relating thereto has been
extended), such rental payments not to include amounts payable by the lessee for
maintenance and repairs, insurance, taxes, assessments and similar charges and
for contingent rents (such as those based on sales). In the case of any Sale and
Leaseback Transaction in which the lease is terminable by the lessee upon the
payment of a penalty, such rental payments shall be considered for purposes of
this definition to be the lesser of (a) the rental payments to be paid under
such Sale and Leaseback Transaction until the first date (after the date of such
determination) upon which it may be so terminated plus the then applicable
penalty upon such termination and (b) the rental payments required to be paid
during the remaining term of such Sale and Leaseback Transaction (assuming such
termination provision is not exercised).
"Attributable Interest Rate": as of the date of its determination, the
weighted average of the interest rates (or the effective rate in the case of
original issue discount securities or discount securities) of (a) all
Outstanding Securities (as such term is defined in the 1990 Indenture) of IBM
under the 1990 Indenture and all securities of IBM issued and outstanding (as
defined in the 1985 Indenture) under the 1985 Indenture to which Sections 6.05
and 6.06 of the 1985 Indenture apply (and whose application has not been
waived), or (b) at any time when no securities of IBM
<PAGE>
4
referred to in clause (a) of this sentence are outstanding, all outstanding
Loans and all other outstanding Funded Debt of IBM.
"Available Revolving Credit Commitment": as to any Lender, at any time of
determination, an amount equal to such Lender's Revolving Credit Commitment at
such time minus such Lender's Aggregate Outstanding Revolving Extensions of
Credit at such time.
"Banking Day": in respect of any city, any day on which commercial banks
are open for business (including dealings in foreign exchange and foreign
currency deposits) in that city.
"Board": the Board of Governors of the Federal Reserve System of the
United States (or any successor).
"Borrower": as applicable, IBM or the relevant Subsidiary Borrower.
"Borrower Obligations": any and all obligations of any Borrower for the
payment of money hereunder or in respect hereof, whether absolute or contingent
(including, in the case of IBM, its obligations pursuant to the guarantee,
contained in Section 10).
"Borrowing Date": any Business Day specified in a notice pursuant to
Section 2.2, 2.5 or 2.8 as a date on which the relevant Borrower requests US$
Loans to be made hereunder and, for the purposes of Section 3, any other date on
which the relevant Borrower requests Local Currency Loans to be made under a
Local Currency Facility.
"Business Day": a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to
close, except that, when used in connection with a Eurodollar Loan or an Index
Rate Competitive Loan with respect to which the Eurodollar Rate or the
Applicable Index Rate is determined based upon the Tolerate screen in accordance
with the definition of Eurodollar Rate or Applicable Index Rate, as the case may
be, "Business Day" shall mean any Business Day on which dealings in foreign
currencies and exchange between banks may be carried on in London, England and
New York, New York.
"Calculation Date": the last Business Day of each calendar week.
"Capital Lease": with respect to any Person, any obligation of such
Person to pay rent or other amounts under a lease with respect to any
property (whether real, personal or mixed) acquired or leased by such Person
that is required to be accounted for as a liability on a balance sheet of such
Person in accordance with GAAP.
"Code": the Internal Revenue Code of 1986, as amended from time to time.
<PAGE>
5
"Commitment Percentage": as to any Lender at any time, the percentage
which such Lender's Revolving Credit Commitment then constitutes of the
aggregate Revolving Credit Commitments (or, at any time after the Revolving
Credit Commitments shall have expired or terminated, the percentage which the
aggregate principal amount of such Lender's Loans then outstanding constitutes
of the aggregate principal amount of the Loans of all Lenders then outstanding).
"Commitments": the collective reference to the Revolving Credit
Commitments and any commitments to make Local Currency Loans under any
Local Currency Facility.
"Competitive Loan": each loan made pursuant to Section 2.7.
"Competitive Loan Assignee": as defined in Section 11.7(a).
"Competitive Loan Assignment": any assignment by a Competitive Loan
Lender to a Competitive Loan Assignee of a Competitive Loan; any such
Competitive Loan Assignment to be registered in the Register must set forth, in
respect of the Competitive Loan Assignee thereunder, the full name of such
Competitive Loan Assignee, its address for notices, its lending office address
(in each case with telephone and facsimile transmission numbers) and payment
instructions for all payments to such Competitive Loan Assignee, and must
contain an agreement by such Competitive Loan Assignee to comply with the
provisions of Sections 2.18, 2.20, 11.7 and 11.21.
"Competitive Loan Borrowing Period'': the period from and including the
Effective Date until the earlier of (a) the date which is 14 days prior to the
Termination Date and (b) the last day of the Revolving Credit Commitment Period.
"Competitive Loan Confirmation": each confirmation by the relevant
Borrower of its acceptance of Competitive Loan Offers, which Competitive
Loan Confirmation shall be substantially in the form of Exhibit A-1 and shall be
delivered to the Administrative Agent in writing or by facsimile transmission.
"Competitive Loan Lender": each Lender that has agreed to offer to make
Competitive Loans hereunder and each other Lender that shall hereafter be
designated as a Competitive Loan Lender in accordance with the provisions of
Section 11.8 and 11.10.
"Competitive Loan Maturity Date": as to any Competitive Loan, the date
specified by the relevant Borrower pursuant to Section 2.8(d)(ii) in its
acceptance of the related Competitive Loan Offer.
"Competitive Loan Offer": each offer by a Competitive Loan Lender to make
Competitive Loans pursuant to a Competitive Loan Request, which Competitive Loan
Offer shall contain the information specified in Exhibit A-2 and shall be
delivered to
<PAGE>
6
the Administrative Agent by telephone, immediately confirmed by facsimile
transmission.
"Competitive Loan Request": each request by the relevant Borrower for
Competitive Loan Lenders to submit bids to make Competitive Loans, which request
shall contain the information in respect of such requested Competitive
Loans specified in Exhibit A-3 and shall be delivered to the Administrative
Agent in writing or by facsimile transmission, or by telephone, immediately
confirmed by facsimile transmission.
"Consolidated Adjusted Cash Flow": for any period, earnings before income
taxes of IBM and its consolidated Subsidiaries for such period, excluding
gains or losses from the divestiture or sale of a business, plus, to the extent
deducted in arriving at earnings before income taxes of IBM and its consolidated
Subsidiaries for such period, the sum of (i) Consolidated Net Interest Expense,
(ii) depreciation expense, (iii) amortization expense and (iv) restructuring
charges made after the Effective Date minus the sum of (a) cash payments made
during such period in respect of restructuring charges made after the Effective
Date, (b) payments made during such period for plant, rental machines and other
property excluding acquisitions of businesses (net of proceeds received during
such period from dispositions of plant, rental machines and other property
excluding divestitures or sales of businesses) and (c) investment in software
for such period, all as determined on a consolidated basis in accordance with
GAAP and, where applicable, determined by reference to the consolidated
statement of earnings or (including in the case of clauses (b) and (c) above)
statement of cash flows of IBM and its consolidated Subsidiaries.
"Consolidated Net Interest Expense": for any period, (a) total interest
cost of IBM and the Subsidiaries for such period minus (b) interest income
of IBM and the Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP.
"Consolidated Net Interest Expense Ratio": for any period, the ratio of
Consolidated Adjusted Cash Flow for such period to Consolidated Net Interest
Expense for such period.
"Consolidated Net Tangible Assets": at any date, the total assets
appearing on the consolidated statement of financial position of IBM and
the Subsidiaries most recently delivered to the Administrative Agent pursuant to
Section 4.5, 6.2(a) or 6.2(b), as the case may be, less (a) all current
liabilities as shown on such statement and Co) intangible assets. As used
herein, "intangible assets" means the value (net of any applicable reserves) as
shown on or reflected in such statement, of: (i) all trade names, trademarks,
licenses, patents, copyrights and goodwill; (ii) organizational and development
costs; (iii) deferred charges (other than prepaid items such as insurance,
taxes, interest, commissions, rents and similar items and tangible assets being
amortized); and (iv) unamortized debt discount and expense, less unamortized
premium; but in no event shall the term "intangible assets" include program
products.
<PAGE>
7
"Controlled Person": any corporation, partnership or other entity of
which shares of stock or other ownership interests having ordinary voting
power (other than stock or such other ownership interests having such power only
by reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other entity are
at the time owned, or the management of which is otherwise controlled, directly
or indirectly through one or more intermediaries, or both, by IBM.
"Debt": with respect to any Person, without duplication, all indebtedness
representing money borrowed which is created, assumed, incurred or
guaranteed in any manner by such Person or for which such Person is otherwise
responsible or liable (whether by agreement to purchase indebtedness of, or to
supply funds to or invest in, others).
"Default": any of the events specified in Section 8, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Domestic Subsidiary Borrower": any Subsidiary Borrower which (a) is
organized under the laws of the United States of America, any state,
Territory or possession thereof or the District of Columbia or (b) conducts a
substantial portion of its business or maintains a substantial portion of its
property or assets in any one or more of the foregoing jurisdictions.
"Effective Date": as defined in Section 11.22(a).
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations promulgated thereunder, as from
time to time in effect.
"Eurodollar Loans": Revolving Credit Loans the rate of interest
applicable to which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, the rate of interest determined on the
basis of the rate for deposits in Dollars for a period equal to such Interest
Period commencing on the first day of such Interest Period appearing on Page
3750 of the Telerate screen as of 11:00 A.M., London time, two Business Days
prior to the beginning of such Interest Period. In the event that such rate does
not appear on Page 3750 of the Telerate Service (or otherwise on such service),
the "Eurodollar Rate" shall be determined by reference to such other publicly
available service for displaying eurodollar rates as may be agreed upon by the
Administrative Agent and IBM or, in the absence of such agreement, the
"Eurodollar Rate" shall instead be the rate per annum equal to the average
(rounded upward, if necessary, to the nearest 1/16th of 1%) of the respective
<PAGE>
8
rates notified to the Administrative Agent by each of the Reference Lenders
as the rate at which such Reference Lender is offered Dollar deposits at or
about 10:00 A.M., New York City time, two Business Days prior to the beginning
of such Interest Period, in the interbank eurodollar market where the eurodollar
and foreign currency and exchange operations in respect of its Eurodollar Loans
are then being conducted for delivery on the fast day of such Interest Period
for the number of days comprised therein and in an mount comparable to the
amount of its Eurodollar Loan to be outstanding during such Interest Period.
"Eurodollar Tranche": the collective reference to Eurodollar Loans the
then current Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such Eurodollar Loans
shall originally have been made on the same day).
"Event of Default": any of the events specified in Section 8, provided
that any requirement for the giving of notice, the lapse of time, or both,
or any other condition, has been satisfied.
"Exchange Rate": with respect to any Local Currency on a particular
date, the rate at which such Local Currency may be exchanged into
Dollars',. as set forth on such date on the relevant Reuters currency page. In
the event that such rate does not appear on any Reuters currency page, the
"Exchange Rate" with respect to such Local Currency shall be determined by
reference to such other publicly available service for displaying exchange rates
as may be agreed upon by the Administrative Agent and IBM or, in the absence of
such agreement, such "Exchange Rate" shall instead be the Administrative Agent's
spot rate of exchange in the interbank market where its foreign currency
exchange operations in respect of such Local Currency are then being conducted,
at or about 10:00 A.M., local time, at such date for the purchase of Dollars
with such Local Currency, for delivery two Banking Days later; provided, that if
at the time of any such determination, for any reason, no such spot rate is
being quoted, the Administrative Agent may use any reasonable method as it deems
applicable to determine such rate, and such determination shall be conclusive
absent manifest error.
"Existing Credit Agreements": the collective reference to the agreements
listed on Schedule 1.1B.
"Facility Fee Rate": for any day, the rate per annum set forth below
opposite the Status in effect on such day:
<PAGE>
9
Facility Fee
Status Rate
------ ------------
Level I Status 0.1000%
Level II Status 0.1250%
Level III Status 0.1500%
Level IV Status 0.2250%
Level V Status 0.3750%
"Federal Funds Effective Rate": for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for such day for such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.
"Fixed Rate Competitive Loan Request": any Competitive Loan Request
requesting the Competitive Loan Lenders to offer to make Fixed Rate Competitive
Loans.
"Fixed Rate Competitive Loans": Competitive Loans the rate of interest
applicable to which is equal to a fixed percentage rate per annum specified by
the Competitive Loan Lender making such Loan in its Competitive Loan Offer (as
opposed to a rate composed of the Applicable Index Rate plus or minus a margin).
"Foreign Subsidiary Borrower": any Subsidiary Borrower other than a
Domestic Subsidiary Borrower.
"Funded Debt": any Debt maturing by its terms more than one year from the
date of the issuance thereof, including any Debt renewable or extendible at
the option of the obligor to a date later than one year from the date of the
original issuance thereof.
"GAAP": generally accepted accounting principles in the United States of
America in effect from time to time, provided, that for the purposes of
Section 7.4 and the terms used therein, "GAAP" shall mean generally accepted
accounting principles used to prepare the financial statements of IBM for the
fiscal quarter ending September 30, 1993.
<PAGE>
10
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Indebtedness": with respect to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services other than indebtedness to trade creditors and
service providers incurred in the ordinary course of business, (b) obligations,
contingent or otherwise, of such Person in connection with (i) letter of credit
facilities or bankers' acceptance facilities and (ii) interest rate swap
agreements, interest rate cap agreements or similar arrangements used by a
Person to fix or cap a floating rate of interest to a negotiated maximum rate or
amount, or other similar facilities including currency swaps, (c) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all obligations of such Person to pay rent or
other amounts under a Capital Lease, (f) all indebtedness referred to in clause
(a), (b), (c), (d) or (e) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property owned by such Person, even though such Person has
not assumed or become liable for the payment of such indebtedness, and (g) all
Indebtedness of others guaranteed by such Person. For purposes of this
Agreement, the amount of any Indebtedness referred to in clause (b)(ii) of the
preceding sentence shall be the amounts, including any termination payments,
required to be paid to a counterparty rather than any notional amount with
regard to which payments may be calculated. For purposes of this Agreement,
Indebtedness shall not include any indebtedness or other obligations issued by
any Person (or by a trust or other entity established by such Person or any of
its affiliates) which are primarily serviced by the cash flows of a discrete
pool of receivables, leases or other financial assets which have been sold or
transferred by IBM or any Subsidiary in securitization transactions
("Securitization Transactions") which, in accordance with GAAP, are accounted
for as sales for financial reporting purposes. The definitions of Debt and
Indebtedness in this Section 1.1 shall be independent in construction,
interpretation and application.
"Index Rate Competitive Loan": Competitive Loans the rate of interest
applicable to which is equal to the Applicable Index Rate plus or minus a
margin.
"Index Rate Competitive Loan Request": any Competitive Loan Request
requesting the Competitive Loan Lenders to offer to make Index Rate Competitive
Loans.
"Interest Payment Date": (a) as to any ABR Loan (other than Swing Line
Loans which do not constitute Unrefunded Swing Line Loans), the last day of each
March, June, September and December to occur while such Loan is outstanding and
<PAGE>
11
the Termination Date, (b) as to any Swing Line Loan which does not constitute an
Unrefunded Swing Line Loan, the last day such Loan is outstanding, (c) as to any
Eurodollar Loan having an Interest Period of three months or less, the last
day of such Interest Period, (d) as to any Eurodollar Loan having an Interest
Period longer than three months, each day which is three months, or a whole
multiple thereof, after the first day of such Interest Period and the last day
of such Interest Period. (e) as to any Fixed Rate Competitive Loan, each
interest payment date specified by the relevant Borrower for such Loan in the
related Competitive Loan Request (including, in any event, the Competitive Loan
Maturity Date in respect of such Loan) and (f) as to any Index Rate Competitive
Loan, (i) the Competitive Loan Maturity Date in respect of such Loan and (ii)
each date (if any) occurring prior to such Competitive Loan Maturity Date which
is three months, or a whole multiple thereof, after the Borrowing Date in
respect of such Loan.
"Interest Period": with respect to any Eurodollar Loan:
(a) initially, the period commencing on the borrowing or conversion date,
as the case may be, with respect to such Eurodollar Loan and ending one,
two, three or six months thereafter, as selected by the relevant Borrower in its
notice of borrowing or notice of conversion, as the case may be, given with
respect thereto; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending
one, two, three or six months thereafter, as selected by the relevant Borrower
by irrevocable notice to the Administrative Agent not less than three Business
Days prior to the last day of the then current Interest Period with respect
thereto;
provided that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(1) if any Interest Period would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to carry such Interest
Period into another calendar month in which event such Interest Period shall end
on the immediately preceding Business Day;
(2) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date; and
(3) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on the
last Business Day of a calendar month.
"Level I Status": exists at any date if, at such date, IBM has a
long-term senior unsecured debt rating of AA- or better by S&P and Aa3 or
better by Moody's.
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12
"Level II Status": exists at any date if, at such date, Level I Status
does not exist and IBM has a long-term senior unsecured debt rating of A+
or better by S&P and A1 or better by Moody's.
"Level III Status": exists at any date if, at such date, neither Level I
Status nor Level II Status exists and IBM has a long-term senior unsecured
debt rating of A- or better by S&P and A3 or better by Moody's.
"Level IV Status": exists at any date if, at such date, neither Level I
Status, Level II Status nor Level III Status exists and IBM has a long-term
senior unsecured debt rating of BBB- or better by S&P and Baa3 or better by
Moody's.
"Level V Status": exists at any date if, at such date, none of Level I
Status, Level II Status, Level III Status or Level IV Status exists.
"Lien": with respect to any asset. any mortgage, pledge, security
interest, lien, charge or other encumbrance whatsoever.
"Loan": any. US$ Loan or Local Currency Loan.
"Local Currency": Dollars and any currency other than Dollars as to which
an Exchange Rate may be calculated.
"Local Currency Facility": any credit facility designated as a "Local
Currency Facility" pursuant to a Local Currency Facility Addendum and
providing for borrowings in a Local Currency.
"Local Currency Facility Addendum": a Local Currency Facility Addendum
received by the Administrative Agent substantially in the form of Exhibit F and
conforming to the requirements of Section 3.
"Local Currency Facility Maximum Borrowing Amount": as defined in Section
3.1(b).
"Local Currency Facility Stated Maximum Borrowing Amount": the stated
amount of any Local Currency Facility Maximum Borrowing Amount, without giving
effect to any reductions thereof effected pursuant to Section 3.2(c) or (d).
"Local Currency Lender": any Lender (or, if applicable, any affiliate,
branch or agency thereof) party to a Local Currency Facility.
"Local Currency Lender Maximum Borrowing Amount": as defined in Section
3.1(b).
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13
"Local Currency Lender Stated Maximum Borrowing Amount": the stated
amount of any Local Currency Lender Maximum Borrowing Amount, without giving
effect to any reductions thereof pursuant to Section 3.2(c) or (d).
"Local Currency Loan": any loan made pursuant to a Local Currency
Facility.
"Local Currency Loans (US$ Equivalent)": the US$ Equivalent of the
relevant Local Currency Loans.
"Margin Stock": as defined under Regulation U.
"Material Adverse Effect": a material adverse effect on (a) the financial
condition of IBM and the Subsidiaries taken as a whole or (b) the validity or
enforceability of this Agreement or the rights or remedies of the Administrative
Agent and the Lenders hereunder.
"Maximum Subsidiary Borrowing Amount": as defined in Section 5.2(d).
"Moody's": Moody's Investors Service, Inc. and its successors.
"1985 Indenture": the Indenture, dated as of July 15, 1985, between IBM
and The Bank of New York (successor to Morgan Guaranty Trust Company of New
York), as Trustee.
"1990 Indenture": the Indenture, dated as of March 1, 1990, between IBM
and The Bank of New York, as Trustee.
"Non-Excluded Taxes": as defined in Section 2.18(a).
"Participant": as defined in Section 11.6.
"Permitted Liens": (a) pledges or deposits made to secure obligations of
IBM or a Restricted Subsidiary under workmen's compensation laws or similar
legislation; (b) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's, vendors', repairmen's or other like Liens incurred in the
ordinary course of business; (c) governmental (Federal, state or municipal)
Liens arising out of contracts for the purchase of products of IBM or a
Restricted Subsidiary, and deposits or pledges to obtain the release of any of
the foregoing Liens; (d) Liens created by or resulting from any litigation or
legal proceeding that is currently being contested in good faith by appropriate
proceedings; (e) leases made or existing on Principal Property entered into in
the ordinary course of business by IBM or a Restricted Subsidiary; (f)
landlords' Liens under leases of Principal Property to which IBM or a Restricted
Subsidiary is a party; (g) zoning restrictions, easements, licenses or
restrictions on the use of Principal Property or minor irregularities in the
title thereto that in any such case do not interfere materially with the use of
such Principal Property by IBM or any Restricted Subsidiary; (h) deposits in
connection with bids, tenders or contracts (other than for
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14
the payment of money) to which IBM or any Restricted Subsidiary is a party; (i)
deposits to secure public or statutory obligations of IBM or any Restricted
Subsidiary; (j) deposits in connection with obtaining or maintaining
self-insurance or to obtain the benefits of any law, regulation or arrangement
pertaining to unemployment insurance, old age pensions, social security or
similar matters; (k) deposits of cash or obligations of the United States of
America to secure surety, appeal or customs bonds to which IBM or any Restricted
Subsidiary is a party; and (1) Liens for taxes or assessments or governmental
charges or levies not yet due or delinquent, or which can thereafter be paid
without penalty, or which are being contested in good faith by appropriate
proceedings.
"Person": an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Principal Property": any land, land improvements, buildings and
associated factory, laboratory and office equipment (excluding all products
marketed by IBM or any Subsidiary) constituting a manufacturing facility,
development facility, warehouse facility, service facility or office facility
(including any portion thereof), which facility (a) is owned by or leased to IBM
or any Restricted Subsidiary, (b) is located within the United States, and (c)
has an acquisition cost plus capitalized improvements in excess of 0.15% of
Consolidated Net Tangible Assets as of the date of such determination, other
than (i) any such facility, or portion thereof, which has been financed by
obligations issued by or on behalf of a state, a Territory or a possession of
the United States, or any political subdivision of any of the foregoing, or the
District of Columbia, the interest on which is, or at the time of issuance of
such obligations was determined by counsel to be, excludable from the gross
income of the holders thereof (other than a "substantial user" of such facility
or a "related person" as those terms were used in Section 147 of the Code)
pursuant to the provisions of Section 103 and related Sections of the Code (or
any similar provisions hereafter enacted) as in effect at the time of issuance
of such obligations, (ii) any such facility which the Board of Directors of IBM,
or a duly authorized committee thereof, may by resolution declare is not of
material importance to IBM and the Restricted Subsidiaries, taken as a whole
(provided that IBM has delivered written notice of such declaration to the
Administrative Agent), and (iii) any such facility, or portion thereof, owned or
leased jointly or in common with one or more Persons other than IBM and any
Subsidiary and in which the interest of IBM and all Subsidiaries does not exceed
50%.
"Purchasing Lender": as defined in Section 11.8(a).
"Reference Lenders": Chemical Bank Credit Suisse and Morgan Guaranty
Trust Company of New York.
"Register": as defined in Section 11.9(a).
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15
"Regulation G": Regulation G of the Board as from time to time in effect
and all official rulings and interpretations thereunder or thereof.
"Regulation T": Regulation T of the Board as from time to time in effect
and all official rulings and interpretations thereunder or thereof.
"Regulation U": Regulation U of the Board as from time to time in effect
and all official rulings and interpretations thereunder or thereof.
"Regulation X": Regulation X of the Board as from time to time in effect
and all official rulings and interpretations thereunder or thereof.
"Required Lenders": at any date, the holders of 51% of the aggregate
Revolving Credit Commitments, or, if the Revolving Credit Commitments have been
terminated or for the purposes of determining whether to accelerate the Loans
pursuant to Section 8, of the aggregate unpaid principal amount of the Loans.
"Requirement of Law": as to any Person, the Certificate of Incorporation
and By-Laws or other organizational or governing documents of such Person,
and any law, treaty, rule or regulation or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or assets or to which such Person or any
of its property or assets is subject.
"Reset Date": as defined in Section 3.2(a).
"Responsible Officer": the Chief Executive Officer, the Chief Financial
Officer, the Vice President and Treasurer, the Vice President and Controller,
any Assistant Controller and any Assistant Treasurer of IBM.
"Restricted Securities": any capital stock or Indebtedness of any
Restricted Subsidiary.
"Restricted Subsidiary": (a) any Subsidiary (i) which has substantially
all its property within the United States of America, (ii) which owns or is
a lessee of any property that would be a Principal Property but for clause (a)
of the definition of such term contained in this Section 1.1, and (iii) in which
the investment of IBM and all other Subsidiaries exceeds 0.15% of Consolidated
Net Tangible Assets as of the date of such determination; provided, however,
that the term "Restricted Subsidiary" shall not include (A) any Subsidiary (x)
primarily engaged in the business of purchasing, holding, collecting, servicing
or otherwise dealing in and with installment sales contracts, leases, trust
receipts, mortgages, commercial paper or other financing instruments, and any
collateral or agreements relating thereto, including in the business,
individually or through partnerships, of financing (whether through long- or
short-term borrowings, pledges, discounts or otherwise) the sales, leasing or
other operations of IBM and the Subsidiaries or any of them, or (y) engaged in
the business
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16
of financing the assets and operations of third parties, and (z) in any
case, not, except as incidental to such financing business, engaged in owning,
leasing or operating any property which but for this proviso would qualify as
Principal Property or (B) any Subsidiary acquired or organized after July 15,
1985, for the purpose of acquiring the stock or business or assets of any Person
other than IBM or any Restricted Subsidiary, whether by merger, consolidation,
acquisition of stock or assets or similar transaction analogous in purpose or
effect, so long as such Subsidiary shall not have, since such date, and does not
hereafter acquire by merger, consolidation, acquisition of stock or assets or
similar transaction analogous in purpose or effect all or any substantial part
of the business or assets of IBM or any Restricted Subsidiary; and (b) any other
Subsidiary which is hereafter designated by the Board of Directors of IBM, or a
duly authorized committee thereof, as a Restricted Subsidiary.
"Revolving Credit Borrowing Share": for any borrowing of Revolving Credit
Loans, with respect to any Lender, an amount equal to such Lender's Adjusted
Revolving Credit Commitment Percentage of the amount of such borrowing. As used
in this definition, "Adjusted Revolving Credit Commitment Percentage" means, as
to any Lender, at any time of determination, the percentage which such Lender's
Available Revolving Credit Commitment then constitutes of the aggregate
Available Revolving Credit Commitments of all Lenders at such time.
"Revolving Credit Commitment": as to any Lender, the obligation of such
Lender to make Revolving Credit Loans to the Borrowers hereunder in an aggregate
principal amount at any one time outstanding not to exceed the amount set forth
opposite such Lender's name on Schedule 1.1A, as such amount may be changed from
time to time in accordance with the provisions of this Agreement.
"Revolving Credit Commitment Period": the period from and including the
date hereof to but not including the Termination Date or such earlier date on
which the Revolving Credit Commitments shall terminate as provided herein.
"Revolving Credit Loans": as defined in Section 2.1.
"S&P": Standard & Poor's Corporation and its successors.
"Sale and Leaseback Transaction": any arrangement with any Person
providing for the leasing by IBM or any Restricted Subsidiary of any
Principal Property (whether such Principal Property is now owned or hereafter
acquired) that has been or is to be sold or transferred by IBM or such
Restricted Subsidiary to such Person, other than (a) temporary leases for a
term, including renewals at the option of the lessee, of not more than three
years; (b) leases between IBM and a Restricted Subsidiary or between Restricted
Subsidiaries; and (c) leases of Principal Property executed by the time of, or
within 180 days after the latest of, the acquisition, the completion of
construction or improvement (including any improvements on property which will
result in such property becoming Principal Property), or the commencement of
commercial operation of such Principal Property.
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17
"SEC': the Securities and Exchange Commission and any successor agency.
"Secured Debt": (a) Debt of IBM or a Restricted Subsidiary which is
secured by any Lien other than a Permitted Lien upon any Principal Property
or Restricted Securities and (b) Indebtedness of IBM or a Restricted Subsidiary
in respect of any conditional sale or other title retention agreement covering
Principal Property or Restricted Securities; but "Secured Debt" shall not
include any of the following:
(i) Debt of IBM and the Restricted Subsidiaries outstanding on July 15,
1985, secured by then existing Liens upon, or incurred in connection with
conditional sales agreements or other title retention agreements with respect
to, Principal Property or Restricted Securities;
(ii) Debt of IBM or a Restricted Subsidiary secured by (A) purchase
money Liens upon Principal Property or Restricted Securities acquired after
July 15, 1985, or (B) Liens placed on Principal Property after July 15, 1985,
during construction or improvement thereof (including any improvements on
property which resulted or will result in such property becoming Principal
Property) or placed thereon within 180 days after the later of acquisition,
completion of construction or improvement or the commencement of
commercial operation of such Principal Property or improvement, or placed on
Restricted Securities acquired after July 15, 1985, or (C) conditional sale
agreements or other title retention agreements with respect to any Principal
Property or Restricted Securities acquired after July 15, 1985, if (in each case
referred to in this subparagraph (ii)) (x) such Lien or agreement secures all or
any part of the Debt incurred for the purpose of financing all or any part of
the purchase price or cost of construction of such Principal Property or
improvement or Restricted Securities and (y) such Lien or agreement does not
extend to any Principal Property or Restricted Securities other than the
Principal Property or Restricted Securities so acquired or the Principal
Property, or portion thereof, on which the property so constructed, or such
improvement, is located; provided, however, that the amount by which the
aggregate principal amount of Debt secured by any such Lien or agreement
exceeds the cost to IBM or such Restricted Subsidiary of the related
acquisition, construction or improvement shall be considered to be "Secured
Debt";
(iii) Debt of IBM or a Restricted Subsidiary secured by Liens on
Principal Property or Restricted Securities, which Liens exist at the time of
acquisition (by any manner whatsoever) of such Principal Property or
Restricted Securities by IBM or a Restricted Subsidiary;
(iv) Debt of Restricted Subsidiaries owing to IBM or any other
Restricted Subsidiary or Debt of IBM owing to any Restricted Subsidiary;
(v) in the case of any corporation which becomes (by any manner
whatsoever), as the case may be, a Restricted Subsidiary after the date hereof,
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18
Debt secured by Liens upon, or conditional sale agreements or other title
retention agreements with respect to, its property which constitutes Principal
Property or Restricted Securities, which Liens shall have existed or exist, as
the case may be, at the time such corporation shall have become or becomes,
as the case may be, a Restricted Subsidiary;
(vi) guarantees by IBM of Secured Debt and Attributable Debt of any
Restricted Subsidiaries and guarantees by a Restricted Subsidiary of Secured
Debt and Attributable Debt of IBM and any other Restricted Subsidiaries;
(vii) Debt arising from any Sale and Leaseback Transaction;
(viii) Debt secured by Liens on property of IBM or a Restricted
Subsidiary in favor of the United States of America, any state, Territory or
possession thereof, or the District of Columbia, or any department, agency or
instrumentality or political subdivision of the United States of America or any
state, Territory or possession thereof, or the District of Columbia, or in favor
of any other country or any political subdivision thereof, if such Debt was
incurred for the purpose of financing all or any part of the purchase price or
the cost of construction of the property subject to such Liens; provided,
however, that the amount by which the aggregate principal amount of Debt
secured by any such Lien exceeds the cost to IBM or such Restricted
Subsidiary of the related acquisition or construction shall be considered to be
"Secured Debt"; and
(ix) the replacement, extension or renewal (or successive replacements,
extensions or renewals) of any Debt (in whole or in part) excluded from the
definition of "Secured Debt" by subparagraphs (i) through (viii) above;
provided, however, that no Lien securing, or conditional sale or title retention
agreement with respect to, such Debt shall extend to or cover any Principal
Property or any Restricted Securities, other than such property which secured
the Debt so replaced, extended or renewed (plus improvements on or to any
such Principal Property); provided, further, however, that to the extent that
such replacement, extension or renewal increased or increases the principal
amount of Debt secured by such Lien or was or is in a principal amount in excess
of the principal amount of Debt excluded from the definition of "Secured Debt"
by subparagraphs (i) through (viii) above, the amount of such increase or
excess shall be considered to be "Secured Debt".
In no event shall the foregoing provisions be interpreted to mean or their
operation to cause the same Debt to be included more than once in the
calculation of "Secured Debt" as that term is used herein.
"Securitization Transactions": as defined in the definition of
Indebtedness.
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19
"Significant Subsidiary": any Subsidiary that would be a "significant
subsidiary" within the meaning of Rule 1-02 of the SEC's Regulation S-X.
"Status": as to IBM, the existence of Level I Status, Level II Status,
Level III Status, Level IV Status or Level V Status, as the case may be.
"Subsidiary": (a) any corporation of which IBM owns or controls more than
50% of the outstanding Voting Stock or (b) any such corporation of which such
percentage of shares of outstanding Voting Stock shall at the time be owned or
controlled by IBM or one or more Subsidiaries as defined in clause (a) or by one
or more such Subsidiaries.
"Subsidiary Borrower": a Subsidiary or Controlled Person (a) which is
designated as a Subsidiary Borrower by IBM with the consent of the
Administrative Agent, (b) which has delivered to the Administrative Agent a
Subsidiary Borrower Request and (c) whose designation as a Subsidiary
Borrower has not been terminated pursuant to Section 5.2(d).
"Subsidiary Borrower Notice and Designation": a notice and designation,
substantially in the form of Exhibit B-1, which may be delivered by IBM, and
received and consented to by the Administrative Agent, and which shall identify
a Subsidiary Borrower and the Maximum Subsidiary Borrowing Amount with respect
to such Subsidiary Borrower, and shall be accompanied by a Subsidiary Borrower
Request.
"Subsidiary Borrower Obligations": with respect to each Subsidiary
Borrower, the unpaid principal of and interest on (including, without
limitation, interest accruing after the maturity of the Loans made to such
Borrower and interest accruing after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like proceeding,
relating to such Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the US$ Loans and Local
Currency Loans made to such Borrower and all other obligations and liabilities
of such Borrower to the Administrative Agent or to any Lender, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, this
Agreement, any Local Currency Facility or any other document made, delivered or
given in connection herewith or therewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all fees, charges and disbursements of counsel
(including the allocated costs of internal counsel) to the Administrative Agent
or to any Lender that are required to be paid by such Borrower pursuant to this
Agreement or any Local Currency Facility) or otherwise.
"Subsidiary Borrower Request": a request, substantially in the form of
Exhibit B-2, which is received by the Administrative Agent in connection
with a Subsidiary Borrower Notice and Designation.
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20
"Swing Line Borrower": IBM and, subject to the approval of the
Administrative Agent (which approval shall not be unreasonably withheld), any
Subsidiary Borrower designated as a "Swing Line Borrower" in the relevant
Subsidiary Borrower Notice and Designation.
"Swing Line Borrowing Share": for any borrowing of Swing Line Loans, with
respect to any Swing Line Lender, an amount equal to such Swing Line Lender's
Adjusted Swing Line Commitment Percentage of the amount of such borrowing.
As used in this definition:
"Adjusted Swing Line Commitment Percentage" means, as to any Swing
Line Lender, at any time of determination, the percentage which such
Swing Line Lender's Available Swing Line Commitment then constitutes
of the aggregate Available Swing Line Commitments of all Swing Line
Lenders at such time.
"Available Swing Line Commitment": as to any Swing Line Lender, at
any time of determination, an amount equal to the lesser of (a) such
Swing Line Lender's Swing Line Commitment at such time minus the
aggregate principal amount of all Swing Line Loans made by such Swing
Line Lender then outstanding and (b) such Swing Line Lender's
Revolving Credit Commitment at such time minus such Swing Line
Lender's Aggregate Outstanding Revolving Extensions of Credit at such
time.
"Swing Line Commitment": as to any Swing Line Lender, the obligation of
such Lender to make Swing Line Loans to the Swing Line Borrowers hereunder in an
aggregate principal amount at any one time outstanding not to exceed the
amount set forth opposite such Swing Line Lender's name on Schedule 1.1A, as
such amount may be changed from time to time in accordance with the provisions
of this Agreement.
"Swing Line Lender": each of the Lenders that have agreed to make Swing
Line Loans hereunder as indicated on Schedule 1.1A and each other Lender
that shall hereafter be designated as a Swing Line Lender in accordance with the
provisions of Sections 11.8 and 11.10.
"Swing Line Loan": as defined in Section 2.5(a).
"Termination Date": the fifth anniversary of the date hereof.
"Transactions": as defined in Section 4.2.
"Transferee": as defined in Section 11.9.
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21
"Type": (a) as to any Revolving Credit Loan, its nature as a ABR Loan or
a Eurodollar Loan and (b) as to any Competitive Loan, its nature as a Fixed Rate
Competitive Loan or an Index Rate Competitive Loan.
"Unrefunded Swing Line Loans": as defined in Section 2.5(c).
"US$ Equivalent": on any date of determination, with respect to any
amount in any Local Currency, the equivalent in Dollars of such amount,
determined by the Administrative Agent using the Exchange Rate with respect to
such Local Currency then in effect as determined pursuant to Section 3.
"US$ Facility Overage": an amount equal to the excess of (a) the
aggregate Revolving Credit Commitments over (b) the aggregate amount of all
Local Currency Facility Maximum Borrowing Amounts (determined, if applicable,
after giving effect to any reduction therein made pursuant to Section 3.2(c)).
"US$ Loan": any Revolving Credit Loan, Swing Line Loan or Competitive
Loan made pursuant to this Agreement.
"US$ Revolving Credit Overage": with respect to any Lender, an amount
equal to the excess, if any, of (a) such Lender's Revolving Credit
Commitment over (b) the aggregate Local Currency Lender Stated Maximum Borrowing
Amounts with respect to all Local Currency Facilities to which such Lender is a
party.
"Utilization": as of any date, the quotient (expressed as a percentage)
of (a) the aggregate principal amount of US$ Loans and Local Currency Loans
CUSS Equivalent) outstanding as of such date (after giving effect to any
borrowing or payment on such date) and (b) the aggregate Revolving Credit
Commitments of all Lenders as of such date (after giving effect to any reduction
of the Revolving Credit Commitments on such date).
"Voting Stock": with respect to any Person, outstanding capital stock of
such Person ordinarily (and apart from fights exercisable upon the
occurrence of any contingency) having the power to vote in the election of
directors of such Person.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined
meanings when used in any instrument, certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in any instrument, certificate or other
document made or delivered pursuant hereto, accounting terms relating to
IBM and the Subsidiaries not defined in Section 1.1 and accounting terms partly
defined in Section 1.1, to the extent not defined, shah have the respective
meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as
a whole and not to any
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22
particular provision of this Agreement, and Section, Schedule and Exhibit
references are to this Agreement unless otherwise specified. References herein
do not include references to any provision of any Local Currency Facility or
Loans outstanding thereunder unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF US$ FACILITIES
2.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to make revolving credit
loans in Dollars ("Revolving Credit Loans") to any of IBM or any Subsidiary
Borrower from time to time during the Revolving Credit Commitment Period. During
the Revolving Credit Commitment Period each Borrower may use the Revolving
Credit Commitments by borrowing, prepaying the Revolving Credit Loans in whole
or in part, and reborrowing, all in accordance with the terms and conditions
hereof. Notwithstanding anything to the contrary contained in this Agreement, in
no event may Revolving Credit Loans be borrowed under this Section 2 if, after
giving effect thereto, (i) the aggregate principal amount of the US$ Loans and
Local Currency Loans (US$ Equivalent) then outstanding would exceed the
aggregate Revolving Credit Commitments then in effect, (ii) the aggregate
principal amount of US$ Loans and Local Currency Loans CUSS Equivalent) made to
any Subsidiary Borrower then outstanding would exceed the Maximum Subsidiary
Borrowing Amount with respect to such Subsidiary Borrower set forth in the most
recent Subsidiary Borrower Notice and Designation delivered by IBM pursuant to
Section 5.2(d) or (iii) the aggregate principal amount of Revolving Credit
Loans, Swing Line Loans and Local Currency Loans CUSS Equivalent) made by any
Lender then outstanding would exceed such Lender's Revolving Credit Commitment.
(b) The Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as
determined by the relevant Borrower and notified to the Administrative Agent in
accordance with Sections 2.2 and 2.3, provided that no Revolving Credit Loan
shall be made as a Eurodollar Loan after the day that is one month prior to the
Termination Date.
2.2 Procedure for Revolving Credit Borrowing. Each Borrower may
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day; provided that such Borrower shall give
the Administrative Agent irrevocable notice (which notice must be received by
the Administrative Agent prior to (a) 11:00 A.M., New York City time, three
Business Days prior to the requested Borrowing Date, if all or any part of the
requested Revolving Credit Loans are to be initially Eurodollar Loans or (b)
11:00 A.M. New York City lime, one Business Day prior to the requested Borrowing
Date, otherwise), specifying (i) the amount to be borrowed, (ii) the requested
Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR
Loans or a combination thereof and (iv) if the borrowing is to be entirely or
partly of Eurodollar Loans, the respective amounts of each such Loan and the
respective lengths of the initial Interest Periods therefor.
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23
Each borrowing under the Revolving Credit Commitments shah be in a minimum
aggregate principal amount of the lesser of (i) $50,000,000 or an integral
multiple of $5,000,000 in excess thereof and (ii) the aggregate amount of the
then Available Revolving Credit Commitments. Upon receipt of any such notice
from any Borrower, the Administrative Agent shall promptly notify each Lender of
the aggregate amount of such borrowing and of the amount of such Lender's
Revolving Credit Borrowing Share (if any) thereof. Each Lender will make the
amount of its Revolving Credit Borrowing Share of each such borrowing available
to the Administrative Agent for the account of the relevant Borrower at the
office of the Administrative Agent specified in Section 11.2 prior to 2:00 P.M.,
New York City time, on the Borrowing Date requested by such Borrower in funds
immediately available to the Administrative Agent. Such borrowing will then be
made available to the relevant Borrower by the Administrative Agent crediting
the account of such Borrower on the books of such office with the aggregate of
the amounts made available to the Administrative Agent by the Lenders and in
like funds as received by the Administrative Agent; provided that if on the
Borrowing Date of any Revolving Credit Loans to be made to any Borrower, any
Swing Line Loans made to such Borrower shall be then outstanding, the proceeds
of such Revolving Credit Loans shall first be applied to pay in full such Swing
Line Loans, with any remaining proceeds to be made available to such Borrower as
provided above.
2.3 Conversion and Continuation Options for Revolving Credit
Loans. (a) Each Borrower may elect from time to time to convert Eurodollar
Loans to ABR Loans, by giving the Administrative Agent at least one Business
Day's prior irrevocable notice of such election; provided that if any such
conversion of Eurodollar Loans is made other than on the last day of an Interest
Period with respect thereto, such Borrower shall pay any amounts due to the
Lenders pursuant to Section 2.19 as a result of such conversion. Each Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of such election. Any such notice of conversion to Eurodollar Loans shall
specify the length of the initial Interest Period or Interest Periods therefor.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each Lender thereof. All or any part of outstanding Eurodollar Loans or ABR
Loans may be convened as provided herein; provided that (i) no Loan may be
convened into a Eurodollar Loan when any Default or Event of Default has
occurred and is continuing and the Administrative Agent or the Required Lenders
have determined in its or their sole discretion that such a conversion is not
appropriate, (ii) any such conversion may only be made if, after giving effect
thereto, Section 2.4 shall not have been contravened and (iii) no Loan may be
convened into a Eurodollar Loan alter the date that is one month prior to the
Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
relevant Borrower giving at least three Business Days' prior irrevocable notice
to the Administrative Agent, in accordance with the applicable provisions of the
term "Interest Period" set forth in Section 1.1, of the length of the next
Interest Period to be applicable to such Loans; provided that no Eurodollar Loan
may be continued as such (i) when any Default or Event of Default has occurred
and is continuing and the Administrative Agent or the Required Lenders have
determined in its or their sole discretion that such a continuation is not
appropriate, (ii) if, after giving effect thereto,
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24
Section 2.4 would be contravened or (iii) after the date that is one month
prior to the Termination Date and provided, further, that if such Borrower shall
fail to give any required notice as described above in this Section 2.3 or if
such continuation is not permitted pursuant to the preceding proviso such Loans
shall automatically be converted to ABR Loans on the last day of such then
expiring Interest Period.
2.4 Minimum Amounts and Maximum Number of Eurodollar Tranches.
All borrowings, optional prepayments, conversions and continuations of
Eurodollar Loans hereunder and all selections of Interest Periods hereunder
shall be in such amounts and be made pursuant to such elections so that, after
giving effect thereto, (a) the aggregate principal amount of the Eurodollar
Loans comprising each Eurodollar Tranche shall be equal to $50,000,000 or a
whole multiple of $5,000,000 in excess thereof and (b) there shall be no more
than twenty Eurodollar Tranches outstanding at any one time.
2.5 Swing Line Loans. (a) Subject to the terms and conditions
hereof, each Swing Line Lender severally agrees to make swing line loans in
Dollars (individually, a "Swing Line Loan"; collectively, the "Swing Line
Loans") to any Swing Line Borrower from time to time during the Revolving Credit
Commitment Period in accordance with the procedures set forth in this Section
2.5; provided, that (i) the aggregate principal amount of all Swing Line Loans
shall not exceed $1,000,000,000 at any one time outstanding, (ii) the principal
amount of any borrowing of Swing Line Loans may not exceed the aggregate amount
of the Available Revolving Credit Commitments of all Lenders immediately prior
to such borrowing, (iii) in no event may Swing Line Loans be borrowed hereunder
if, after giving effect thereto, (x) the aggregate principal amount of Swing
Line Loans, Revolving Credit Loans and Local Currency Loans (US$ Equivalent)
made by any Swing Line Lender then outstanding would exceed such Swing Line
Lender's Revolving Credit Commitment, (y) the aggregate principal amount of US$
Loans and Local Currency Loans (US$ Equivalent) made to any Subsidiary Borrower
then outstanding would exceed the Maximum Subsidiary Borrowing Amount with
respect to such Subsidiary Borrower set forth in the most recent Subsidiary
Borrower Notice and Designation delivered by IBM pursuant to Section 5.2(d) or
(z) the aggregate principal amount of Swing Line Loans made by any Swing Line
Lender then outstanding would exceed the Swing Line Commitment of such Swing
Line Lender and (iv) in no event may Swing Line Loans be borrowed hereunder if
(x) the Administrative Agent shall have received notice from the Required
Lenders specifying that a Default or Event of Default shall have occurred and be
continuing and (y) such Default or Event of Default shall not have been
subsequently cured or waived. Amounts borrowed by any Swing Line Borrower under
this Section 2.5 may be repaid and, up to but excluding the Termination Date,
reborrowed. All Swing Line Loans shall at all times be ABR Loans. The relevant
Swing Line Borrower shall give the Administrative Agent irrevocable notice of
any Swing Line Loans requested hereunder (which notice must be received by the
Administrative Agent prior to 11:00 A.M., New York City time, on the requested
Borrowing Date) specifying (A) the amount to be borrowed, and (B) the requested
Borrowing Date. Upon receipt of such notice, the Administrative Agent shall
promptly notify each Swing Line Lender of the aggregate amount of such borrowing
and of the amount of such Swing Line Lender's Swing Line Borrowing Share (if
any) thereof. Not later than 2:00 P.M., New York City time, on the Borrowing
Date specified in such notice each Swing Line Lender shall make its Swing Line
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25
Borrowing Share of such Swing Line Loans available to the Administrative
Agent for the account of the relevant Swing Line Borrower at the office of the
Administrative Agent set forth in Section 11.2 in funds immediately available to
the Administrative Agent. The proceeds of such borrowing will then be made
available to the relevant Swing Line Borrower by the Administrative Agent
crediting the account of such Swing Line Borrower on the books of such office
with the aggregate of the amounts made available to the Administrative Agent by
the Swing Line Lenders and in like funds as received by the Administrative
Agent. Each borrowing pursuant to this Section 2.5 shall be in a minimum
aggregate principal amount of the lesser of (i) $20,000,000 or an integral
multiple of $5,000,000 in excess thereof and (ii) the aggregate amount of the
then Available Swing Line Commitments.
(b) Notwithstanding the occurrence of any Default or Event of
Default or noncompliance with the conditions precedent set forth in Section
5 or the minimum borrowing amounts specified in Section 2.2, if any Swing Line
Loans shall remain outstanding at 10:00 A.M., New York City time, on the seventh
Business Day following the Borrowing Date thereof and if by such time on such
seventh Business Day the Administrative Agent shall have received neither (i) a
notice of borrowing delivered by the relevant Swing Line Borrower pursuant to
Section 2.2 requesting that Revolving Credit Loans be made pursuant to Section
2.1 on the immediately succeeding Business Day in an amount at least equal to
the aggregate principal amount of such Swing Line Loans, nor (ii) any other
notice satisfactory to the Administrative Agent indicating such Swing Line
Borrower's intent to repay all such Swing Line Loans on the immediately
succeeding Business Day with funds obtained from other sources, the
Administrative Agent shall be deemed to have received a notice from such Swing
Line Borrower pursuant to Section 2.2 requesting that ABR Loans be made pursuant
to Section 2.1 on such immediately succeeding Business Day in an amount equal to
the aggregate amount of such Swing Line Loans, and the procedures set forth in
Section 2.2 shall be followed in making such ABR Loans, provided, that for the
purposes of determining each Lender's Revolving Credit Borrowing Share with
respect to such borrowing, the outstanding principal amount of Swing Line Loans
shall be deemed to be zero. The proceeds of such ABR Loans shall be applied to
repay such Swing Line Loans.
(c) If, for any reason, ABR Loans may not be, or are not, made
pursuant to paragraph (b) of this Section 2.5 to repay Swing Line Loans as
required by such paragraph, effective on the date such ABR Loans would otherwise
have been made, each Lender severally, unconditionally and irrevocably agrees
that it shall, without regard to the occurrence of any Default or Event of
Default, purchase a participating interest in such Swing Line Loans ("Unrefunded
Swing Line Loans") in an amount equal to the amount of ABR Loans which would
otherwise have been made by such Lender pursuant to paragraph (b) of this
Section 2.5. Each Lender will immediately transfer to the Administrative Agent,
in immediately available funds, the amount of its participation, and the
proceeds of such participation shall be distributed by the Administrative Agent
to each Swing Line Lender in such amount as will reduce the amount of the
participating interest retained by such Swing Line Lender in its Swing Line
Loans to the amount of the ABR Loans which were to have been made by it pursuant
to paragraph (b) of this Section 2.5. All payments in respect of Unrefunded
Swing Line Loans and participations therein shall be made in accordance with
Section 2.15.
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26
2.6 Optional Prepayments of Revolving Credit Loans and Swing Line
Loans. Each Borrower may at any time and from time to time prepay the
Revolving Credit Loans and the Swing Line Loans (subject, in the case of
Eurodollar Loans, to compliance with the terms of Sections 2.4 and 2.19), in
whole or in part, without premium or penalty, upon at least one Business Day's
irrevocable notice to the Administrative Agent, specifying the date and amount
of prepayment and whether the prepayment is of Eurodollar Loans (including the
Eurodollar Tranche(s) to which such prepayment is to be applied), ABR Loans or a
combination thereof, and, if of a combination thereof, the amount allocable to
each, provided, that notice of any prepayment of Swing Line Loans may be
delivered to the Administrative Agent as late as, but no later than, 12:00 Noon,
New York City time, on the date of such prepayment. Upon receipt of any such
notice the Administrative Agent shall promptly notify each relevant Lender
thereof. If any such notice is given, the amount specified in such notice shall
be due and payable on the date specified therein, together with (except in the
case of ABR Loans) accrued interest to such date on the amount prepaid. Partial
prepayments of Revolving Credit Loans shall be in an aggregate principal amount
of $50,000,000 or a whole multiple of $5,000,000 in excess thereof (or, if less,
the remaining outstanding principal amount thereof). Partial prepayments of
Swing Line Loans shall be in an aggregate principal amount of $20,000,000 or a
whole multiple of $5,000,000 in excess thereof (or, if less, the remaining
outstanding principal amount thereof).
2.7 The Competitive Loans. Subject to the terms and conditions of
this Agreement, each Borrower may borrow Competitive Loans in Dollars from
time to time during the Competitive Loan Borrowing Period on any Business Day,
provided, that in no event may Competitive Loans be borrowed hereunder if, after
giving effect thereto (a) the aggregate principal amount of US$ Loans and Local
Currency Loans (US$ Equivalent) then outstanding would exceed the aggregate
amount of the Revolving Credit Commitments at such time or (b) the aggregate
principal amount of US$ Loans and Local Currency Loans (US$ Equivalent) made to
any Subsidiary Borrower then outstanding would exceed the Maximum Subsidiary
Borrowing Amount with respect to such Subsidiary Borrower set forth in the most
recent Subsidiary Borrower Notice and Designation delivered by IBM pursuant to
Section 5.2(d). Within the limits and on the conditions hereinafter set forth
with respect to Competitive Loans, each Borrower from time to time may borrow,
repay and reborrow Competitive Loans.
2.8 Procedure for Competitive Loan Borrowing. (a) The relevant
Borrower shall request Competitive Loans by delivering a Competitive Loan
Request to the Administrative Agent, not later than 12:00 Noon (New York City
time) four Business Days prior to the proposed Borrowing Date (in the case of an
Index Rate Competitive Loan Request), and not later than 10:00 A.M. (New York
City time) one Business Day prior to the proposed Borrowing Date (in the case of
a Fixed Rate Competitive Loan Request). Each Competitive Loan Request may
solicit bids for Competitive Loans in an aggregate principal amount of
$20,000,000 or an integral multiple of $5,000,000 in excess thereof and having
not more than three alternative maturity dates. The maturity date for each Fixed
Rate Competitive Loan shall be not less than 14 days nor more than 180 days
after the Borrowing Date therefor and the maturity date for each Index Rate
Competitive Loan shall be not less than one month nor more than six months after
the Borrowing Date therefor, and in any event
<PAGE>
27
shall be not later than the Termination Date. The Administrative Agent
shall notify each Competitive Loan Lender promptly by facsimile transmission of
the contents of each Competitive Loan Request received by the Administrative
Agent.
(b) In the case of an Index Rate Competitive Loan Request, upon
receipt of notice from the Administrative Agent of the contents of such
Competitive Loan Request, each Competitive Loan Lender may elect, in its sole
discretion, to offer irrevocably, subject to Section 5, to make one or more
Competitive Loans at the Applicable Index Rate plus or minus a margin determined
by such Competitive Loan Lender in its sole discretion for each such Competitive
Loan. Any such irrevocable offer shall be made by delivering a Competitive Loan
Offer to the Administrative Agent, before 10:30 A.M. (New York City time) on the
day that is three Business Days before the proposed Borrowing Date, setting
forth:
(i) the maximum amount of Competitive Loans for each maturity
date and the aggregate maximum amount of Competitive Loans for all maturity
dates which such Competitive Loan Lender would be willing to make (which amounts
may, subject to Section 2.7, exceed such Competitive Loan Lender's Revolving
Credit Commitment); and
(ii) the margin above or below the Applicable Index Rate at which
such Competitive Loan Lender is willing to make each such Competitive Loan.
The Administrative Agent shall advise the relevant Borrower before 11:00
A.M. (New York City time) on the date which is three Business Days before the
proposed Borrowing Date of the contents of each such Competitive Loan Offer
received by it. If the Administrative Agent, in its capacity as a Competitive
Loan Lender, shall elect, in its sole discretion, to make any such Competitive
Loan Offer, it shall advise the relevant Borrower of the contents of its
Competitive Loan Offer before 10:15 A.M. (New York City time) on the date which
is three Business Days before the proposed Borrowing Date.
(c) In the case of a Fixed Rate Competitive Loan Request, upon
receipt of notice from the Administrative Agent of the contents of such
Competitive Loan Request, each Competitive Loan Lender may elect, in its sole
discretion, to offer irrevocably, subject to Section 5, to make one or more
Competitive Loans at a rate of interest determined by such Competitive Loan
Lender in its sole discretion for each such Competitive Loan. Any such
irrevocable offer shall be made by delivering a Competitive Loan Offer to the
Administrative Agent before 9:30 A.M. (New York City time) on the proposed
Borrowing Date, setting forth:
(i) the maximum amount of Competitive Loans for each maturity
date, and the aggregate maximum amount for all maturity dates, which such
Competitive Loan Lender would be willing to make (which amounts may, subject to
Section 2.7, exceed such Competitive Loan Lender's Revolving Credit Commitment);
and
(ii) the rate of interest at which such Competitive Loan Lender
is willing to make each such Competitive Loan.
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The Administrative Agent shall advise the relevant Borrower before 10:00
A.M. (New York City time) on the proposed Borrowing Date of the contents of each
such Competitive Loan Offer received by it. If the Administrative Agent, in its
capacity as a Competitive Loan Lender, shall elect, in its sole discretion, to
make any such Competitive Loan Offer, it shall advise the relevant Borrower of
the contents of its Competitive Loan Offer before 9:15 A.M. (New York City time)
on the proposed Borrowing Date.
(d) Before 11:30 A.M. (New York City time) three Business Days
before the proposed Borrowing Date (in the case of Index Rate Competitive
Loans) and before 10:30 A.M. (New York City time) on the proposed Borrowing Date
(in the case of Fixed Rate Competitive Loans), the relevant Borrower, in its
absolute discretion, shall:
(i) cancel such Competitive Loan Request by giving the
Administrative Agent telephone notice to that effect, or
(ii) by giving telephone notice to the Administrative Agent
(immediately confirmed by delivery to the Administrative Agent of a
Competitive Loan Confirmation in writing or by facsimile transmission) (1)
subject to the provisions of Section 2.8(e), accept one or more of the
offers made by any Competitive Loan Lender or Competitive Loan Lenders
pursuant to Section 2.8(b) or Section 2.8(c), as the case may be, of the
amount of Competitive Loans for each relevant maturity date and (2) reject
any remaining offers made by Competitive Loan Lenders pursuant to Section
2.8(b) or Section 2.8(c), as the case may be.
(e) Each Borrower's acceptance of Competitive Loans in response
to any Competitive Loan Request shall be subject to the following
limitations:
(i) The amount of Competitive Loans accepted for each maturity
date specified by any Competitive Loan Lender in its Competitive Loan Offer
shall not exceed the maximum amount for such maturity date specified in
such Competitive Loan Offer;
(ii) the aggregate amount of Competitive Loans accepted for all
maturity dates specified by any Competitive Loan Lender in its Competitive
Loan Offer shall not exceed the aggregate maximum amount specified in such
Competitive Loan Offer for all such maturity dates;
(iii) a Borrower may not accept offers for Competitive Loans for
any maturity date in an aggregate principal amount in excess of the maximum
principal amount requested in the related Competitive Loan Request; and
(iv) if a Borrower accepts any of such offers, (1) it must accept
such offers based solely upon pricing for such relevant maturity date
(including any amounts which shall be payable to the relevant Competitive
Loan Lender in respect of the relevant Competitive Loans pursuant to
Section 2.17) and upon no other criteria whatsoever and (2) if (x) two or
more Competitive Loan Lenders submit offers for any
<PAGE>
29
maturity date at identical pricing and such Borrower accepts any of such
offers but does not wish to (or by reason of the limitations set forth in
Section 2.7 or in this Section 2.8, cannot) borrow the total amount offered
by such Competitive Loan Lenders with such identical pricing, such Borrower
shall accept offers from all of such Competitive Loan Lenders in amounts
allocated among them pro rata according to the amounts offered by such
Competitive Loan Lenders (or as nearly pro rata as shall be practicable
after giving effect to the requirement that Competitive Loans made by a
Competitive Loan Lender on a Borrowing Date for each relevant maturity date
shall be in a principal amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof) or (y) a Competitive Loan Lender submits
offers for multiple maturity dates specifying a maximum aggregate principal
amount for all maturity dates, and the relevant Borrower accepts offers
from such Competitive Loan Lender for more than one maturity date, then
such Borrower shall instruct the Administrative Agent how to apportion such
Borrower's acceptances among such offers for different maturity dates to
the extent, if any, necessary to provide for acceptance of offers from such
Competitive Loan Lender equal to but not exceeding such specified maximum
aggregate amount.
(f) If the relevant Borrower notifies the Administrative Agent
that a Competitive Loan Request is cancelled pursuant to Section 2.8(d)(i), the
Administrative Agent shall give prompt telephone notice thereof to the
Competitive Loan Lenders.
(g) If the relevant Borrower accepts pursuant to Section 2.8(d)
(ii) one or more of the offers made by any one or more Competitive Loan
Lenders, the Administrative Agent promptly shall notify each Competitive Loan
Lender which has made such a Competitive Loan Offer of (i) the aggregate amount
of such Competitive Loans to be made on such Borrowing Date for each maturity
date, (ii) the acceptance or rejection of any offers to make such Competitive
Loans made by such Competitive Loan Lender and (iii) in the case of Index Rate
Competitive Loans, the Applicable Index Rate in respect thereof. Before 12:00
Noon (New York City time) on the Borrowing Date specified in the applicable
Competitive Loan Request, each Competitive Loan Lender whose Competitive Loan
Offer has been accepted shall make available to the Administrative Agent at its
office set forth in Section 11.2 the amount of Competitive Loans to be made by
such Competitive Loan Lender, in immediately available funds. The Administrative
Agent will make such funds available to the relevant Borrower as soon as
practicable on such date at the Administrative Agent's aforesaid address. As
soon as practicable after each Borrowing Date, the Administrative Agent shall
notify each Competitive Loan Lender of the aggregate amount of Competitive Loans
advanced on such Borrowing Date, the respective maturity dates thereof and the
respective interest rates applicable thereto.
(h) Nothing in Section 2.7 or this Section 2.8 shall be construed
as a right of first offer in favor of the Lenders or to otherwise limit the
ability of any Borrower to request and accept credit facilities from any
Person (including any of the Lenders).
2.9 Repayment of US$ Loans; Evidence of Debt. (a) Each Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of the relevant
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30
Lenders (i) on the Termination Date (or such earlier date as the US$ Loans
become due and payable pursuant to Section 2.6 or Section 8), the unpaid
principal amount of each US$ Loan (including, without limitation, each Swing
Line Loan) made to it by each such Lender and (ii) on the Competitive Loan
Maturity Date in respect thereof, the unpaid principal amount of each
Competitive Loan made to it by each such Lender. No Borrower shall have the
right to prepay any principal amount of any Competitive Loan. Each Borrower
hereby further agrees to pay interest in immediately available funds at the
office of the Administrative Agent on the unpaid principal amount of the US$
Loans from time to time from the date hereof until payment in full thereof at
the rates per annum, and on the dates, set forth in Section 2.10.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of each
Borrower to the appropriate lending office of such Lender resulting from each
US$ Loan made by such lending office of such Lender from time to time, including
the amounts of principal and interest payable and paid to such lending office of
such Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant
to Section 11.9(a), and a subaccount for each Lender, in which Register and
subaccounts (taken together) shall be recorded (i) the amount of each US$ Loan
made hereunder, whether such US$ Loan is a Revolving Credit Loan, a Swing Line
Loan or a Competitive Loan, the Type of each US$ Loan made and the Interest
Period or maturity date (if any) applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from each
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder from each Borrower and each Lender's share
thereof.
(d) The entries made in the Register and accounts maintained
pursuant to paragraphs (b) and (c) of this Section 2.9 shall, to the extent
permitted by applicable law, be prima facie evidence of the existence and
amounts of the obligations of each Borrower therein recorded; provided, however,
that the failure of any Lender or the Administrative Agent to maintain such
account, such Register or such subaccount, as applicable, or any error therein,
shall not in any manner affect the obligation of any Borrower to repay (with
applicable interest) the US$ Loans made to such Borrower by such Lender in
accordance with the terms of this Agreement.
2.10 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such
Interest Period plus the Applicable Eurodollar Margin. Interest in respect of
Eurodollar Loans shall accrue from and including the first day of an Interest
Period to but excluding the last day of such Interest Period.
(b) Each ABR Loan shall bear interest at a rate per annum equal
to the ABR.
(c) Each Competitive Loan shall bear interest for each day from
the applicable Borrowing Date to (but excluding) the applicable Competitive
Loan Maturity Date at the rate of interest specified in the Competitive Loan
Offer accepted by the relevant Borrower in connection with such Competitive
Loan.
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31
(d) If all or a portion of (i) the principal amount of any Loan,
(ii) any interest payable thereon or (iii) any facility fee or other amount
payable hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a rate
per annum which is (x) in the case of overdue principal (except as otherwise
provided in clause (y) below), the rate that would otherwise be applicable
thereto pursuant to the foregoing provisions of this Section 2.10 plus 2% or (y)
in the case of principal of any Competitive Loan which remains overdue past the
stated maturity date thereof, or any overdue interest, facility fee or other
amount, the rate described in Section 2.10(b) plus 2%, in each case from the
date of such non-payment to (but excluding) the date on which such amount is
paid in full (as well after as before judgment).
(e) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to Section 2.10(d) shall be
payable from time to time on demand.
2.11 Fees. (a) IBM agrees to pay to the Administrative Agent, for
the account of each Lender, a facility fee for each day during the
Revolving Credit Commitment Period. Such fee shall be payable quarterly in
arrears on the last day of each March, June, September and December and on the
Termination Date and shall be computed for each day during such period at a rate
per annum equal to the Facility Fee Rate in effect on such day on the aggregate
amount of the Revolving Credit Commitments in effect on such day (or, if the
Revolving Credit Commitments shall have been terminated, on the average
aggregate outstanding principal amount of the Loans on such day).
(b) IBM shall pay to the Administrative Agent, for its own
account, and, to the extent mutually agreed upon by the Administrative
Agent and the Lenders, for the account of the Lenders, the fees in the amounts
and on the dates previously agreed to in writing by IBM.
2.12 Computation of Interest and Fees. (a) Facility fees and
interest (other than interest calculated on the basis of the Prime Rate)
shall be calculated on the basis of a 360-day year for the actual days elapsed.
Interest calculated on the basis of the Prime Rate shall be calculated on the
basis of a 365- (or 366-, as the case may be) day year for the actual days
elapsed. The Administrative Agent shall as soon as practicable notify the
relevant Borrower and the Lenders of each determination of a Eurodollar Rate.
Any change in the interest rate on a US$ Loan resulting from a change in the ABR
shall become effective as of the opening of business on the day on which such
change becomes effective. The Administrative Agent shall as soon as practicable
notify the relevant Borrower and the Lenders of the effective date and the
amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrowers and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the relevant Borrower, deliver to
such Borrower a statement showing the quotations furnished by the Reference
Lenders (if any) used by the Administrative Agent in determining any interest
rate with respect to a Eurodollar Loan or an Index Rate Competitive Loan.
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32
(c) If any Reference Lender shall for any reason no longer have a
Revolving Credit Commitment, such Reference Lender shall thereupon cease to
be a Reference Lender, and if, as a result, there shall only be one Reference
Lender remaining, the Administrative Agent (with the consent of IBM) shall, by
notice to the Borrowers and the Lenders, designate another Lender as a Reference
Lender so that there shall at all times be at least two Reference Lenders.
(d) Each Reference Lender shall use its best efforts to furnish
quotations of rates to the Administrative Agent on a timely basis as
contemplated hereby. If any of the Reference Lenders shall be unable or shall
otherwise fail to supply such rates to the Administrative Agent upon its
request, the rate of interest shall, subject to the provisions of Section 2.14,
be determined on the basis of the quotations of the remaining Reference Lenders
or Reference Lender.
2. 13 Termination or Reduction of Revolving Credit Commitments.
IBM shall have the right, upon not less than three Business Days' notice to
the Administrative Agent, to terminate the Revolving Credit Commitments or, from
time to time, to reduce the amount of the Revolving Credit Commitments; provided
that no such termination or reduction of Revolving Credit Commitments shall be
permitted if, after giving effect thereto and to any repayments of the Loans
made on the effective date thereof, (a) the aggregate principal amount of the
US$ Loans and Local Currency Loans (US$ Equivalent) then outstanding would
exceed the aggregate Revolving Credit Commitments then in effect or (b) the
aggregate principal amount of Revolving Credit Loans, Swing Line Loans and Local
Currency Loans (US$ Equivalent) made by any Lender then outstanding would exceed
such Lender's Revolving Credit Commitment. Any such reduction shall be in an
amount equal to $50,000,000 or a whole multiple of $5,000,000 in excess thereof
and shall reduce permanently the Revolving Credit Commitments then in effect.
2.14 Inability to Determine Interest Rate. If prior to the first
day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrowers) that, by
reason of circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such Interest
Period, or
(b) the Administrative Agent shall have received notice from the
Required Lenders that the Eurodollar Rate determined or to be determined
for such Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof
to the Borrowers and the Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans requested to be made on the first day
of such Interest Period shall be made as ABR Loans and (y) any US$ Loans that,
on the first day of such Interest Period, were to have been
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33
converted to or continued as Eurodollar Loans shall be continued as or
converted to ABR Loans. Until such notice has been withdrawn by the
Administrative Agent, no further Eurodollar Loans shall be made or continued as
such, nor shall any Borrower have the right to convert ABR Loans to Eurodollar
Loans.
2.15 Pro Rata Treatment and Payments. (a) Each reduction of the
Revolving Credit Commitments of the Lenders shall be made pro rata
according to the Lenders' respective Commitment Percentages. Each payment
(including each prepayment other than any prepayment made pursuant to Section
3.2(f)) by a Borrower on account of principal of and interest on Revolving
Credit Loans which are ABR Loans shall be made pro rata according to the
respective outstanding principal amounts of such ABR Loans then held by the
Lenders. Each payment (including each prepayment other than any prepayment made
pursuant to Section 3.2(f)) by a Borrower on account of principal of and
interest on Eurodollar Loans designated by a Borrower to be applied to a
particular Eurodollar Tranche shall be made pro rata according to the respective
outstanding principal amounts of such Eurodollar Loans then held by the Lenders.
Each payment (including each prepayment other than any prepayment made pursuant
to Section 3.2(f)) by any Swing Line Borrower on account of principal of and
interest on Swing Line Loans shall be made pro rata according to the respective
outstanding principal amounts of the Swing Line Loans or participating
interests therein, as the case may be, then held by the relevant Lenders. All
payments (including prepayments) to be made by a Borrower hereunder, whether on
account of principal, interest, fees or otherwise, shall be made without setoff
or counterclaim and shall be made prior to 12:00 Noon, New York City time, on
the due date thereof to the Administrative Agent, for the account of the
Lenders, at the Administrative Agent's office specified in Section 11.2, in
Dollars and in immediately available funds. The Administrative Agent shall
distribute such payments to the Lenders promptly upon receipt in like funds as
received. If any payment hereunder (other than payments on Eurodollar Loans or
Index Rate Competitive Loans) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day, and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension. If any payment on a
Eurodollar Loan or an Index Rate Competitive Loan becomes due and payable on a
day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day (and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension) unless the result of such extension would be to extend such payment
into another calendar month, in which event such payment shall be made on the
immediately preceding Business Day.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make
the amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the relevant
Borrower a corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender
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34
makes such amount immediately available to the Administrative Agent. A
certificate of the Administrative Agent submitted to any Lender with respect to
any amounts owing under this Section 2.15(b) shall be conclusive in the absence
of manifest error. If such Lender's share of such borrowing is not made
available to the Administrative Agent by such Lender within three Business Days
of such Borrowing Date, the Administrative Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
ABR Loans hereunder, on demand, from the relevant Borrower.
2.16 Illegality. Notwithstanding any other provision herein, if
the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans or Index Rate Competitive Loans as
contemplated by this Agreement, (a) the commitment of such Lender hereunder to
make Eurodollar Loans, continue Eurodollar Loans as such and convert ABR Loans
to Eurodollar Loans shall forthwith be cancelled, (b) such Lender's Revolving
Credit Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to ABR Loans on the respective last days of the then current
Interest Periods with respect to such Loans or within such earlier period as
required by law and (c) the relevant Borrower shall, with respect to any Index
Rate Competitive Loan of such Lender, take such action as such Lender may
reasonably request.
2.17 Requirements of Law. (a) If the adoption of or any change in
any Requirement of Law applicable to any Lender or in the interpretation or
application thereof or compliance by any Lender with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority made subsequent to the date hereof (or, in the case of
Index Rate Competitive Loans, made subsequent to acceptance by a Borrower of
such Loan):
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to this Agreement or any Eurodollar Loan or Index Rate Competitive
Loan made by it, or change the basis of taxation of payments to such Lender in
respect thereof (except for taxes covered by Section 2.18 and net income taxes
and franchise taxes imposed in lieu of income taxes);
(ii) shall impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by, deposits or
other liabilities in or for the account of, advances, loans or other extensions
of credit by, or any other acquisition of funds by, any office of such Lender
which is not otherwise included pursuant to Section 2.17(c) in the determination
of the Eurodollar Rate or the Applicable Index Rate, as the case may be; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such
Lender, by an amount which such Lender deems to be material, of making,
converting into, continuing or maintaining Eurodollar Loans or Index Rate
Competitive Loans, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the relevant Borrower shall
<PAGE>
35
promptly pay such Lender, upon its demand, any additional amounts necessary
to compensate such Lender for such increased cost or reduced amount receivable.
If any Lender becomes entitled to claim any additional amounts pursuant to this
Section 2.17(a), it shall promptly notify the relevant Borrower, through the
Administrative Agent, of the event by reason of which it has become so entitled.
Notwithstanding the foregoing, no Lender shall be entitled to request
compensation under this Section 2.17(a) with respect to any Index Rate
Competitive Loan if it shall have obtained actual knowledge of the change giving
rise to such request at the time of submission of such Lender's Competitive Loan
Offer pursuant to which such Competitive Loan shall have been made, unless
notice of such Lender's entitlement to such compensation shall have been
furnished to the relevant Borrower at or prior to such time.
(b) If any Lender shall have determined that any change in any
Requirement of Law regarding capital adequacy or in the interpretation or
application thereof or compliance by such Lender or any corporation controlling
such Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) from any Governmental Authority, in each case made
subsequent to the date hereof, does or shall have the effect of reducing the
rate of return on such Lender's or such corporation's capital as a consequence
of its obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such application or compliance (taking
into consideration such Lender's or such corporation's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time, after submission by such Lender to the relevant Borrower (with a
copy to the Administrative Agent) of a written request therefor, such Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender for such reduction.
(c) Each Borrower agrees to pay to each Lender which requests
compensation under this Section 2.17(c) (by notice to such Borrower), on
the last day of each Interest Period with respect to any Eurodollar Loan made by
such Lender or on the Competitive Loan Maturity Date with respect to any Index
Rate Competitive Loan made by such Lender, as the case may be, so long as such
Lender shall be required to maintain reserves against "Eurocurrency liabilities"
under Regulation D of the Board (or, so long as such Lender may be required by
the Board or by any other Governmental Authority to maintain reserves against
any other category of liabilities which includes deposits by reference to which
the interest rate on Eurodollar Loans or Index Rate Competitive Loans is
determined as provided in this Agreement or against any category of extensions
of credit or other assets of such Lender which includes any Eurodollar Loans or
Index Rate Competitive Loans), an additional amount (determined by such Lender
and notified to the relevant Borrower) representing such Lender's calculation
or, if an accurate calculation is impracticable, reasonable estimate (using such
reasonable means of allocation as such Lender shall determine) of the actual
costs, if any, incurred by such Lender during such Interest Period or during the
period such Index Rate Competitive Loan was outstanding (a "Competitive Loan
Period"), as the case may be, as a result of the applicability of the foregoing
reserves to such Eurodollar Loans or Index Rate Competitive Loans, which amount
in any event shall not exceed the product of the following for each day of such
Interest Period or Competitive Loan Period:
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36
(i) the principal amount of the Eurodollar Loans or Index Rate
Competitive Loans, as the case may be, made by such Lender to which
such Interest Period or Competitive Loan Period relates and outstanding
on such day; and
(ii) the difference between (x) a fraction the numerator of which
is the Eurodollar Rate or the Applicable Index Rate, as the case may be
(expressed as a decimal) applicable to such Eurodollar Loan or Index
Rate Competitive Loan, and the denominator of which is one minus the
maximum rate (expressed as a decimal) at which such reserve
requirements are imposed by the Board or other Governmental
Authority on such date minus (y) such numerator; and
(iii) a fraction the numerator of which is one and the
denominator of which is 360.
Any Lender which gives notice under this Section 2.17(c) shall promptly
withdraw such notice (by written notice of withdrawal given to the
Administrative Agent and the relevant Borrowers) in the event such Lender is no
longer required to maintain such reserves or the circumstances giving rise to
such notice shall otherwise cease to exist. Notwithstanding the foregoing, no
Lender shall be entitled to request compensation under this Section 2.17(c) with
respect to any Index Rate Competitive Loan if it shall have obtained actual
knowledge of the change giving rise to such request at the time of submission of
such Lender's Competitive Loan Offer pursuant to which such Competitive Loan
shall have been made, unless notice of such Lender's entitlement to such
compensation shall have been furnished to the relevant Borrower at or prior to
such time.
(d) A certificate as to any additional amounts payable pursuant
to this Section 2.17 submitted by any Lender, through the Administrative
Agent, to the relevant Borrower shall specify in reasonable detail the basis for
the request for compensation of such additional amounts and the method of
computation thereof and shall be conclusive in the absence of manifest error.
Subject to the provisions of the next succeeding sentence, the relevant Borrower
shall (except as otherwise provided in Section 2.17(c)) pay each Lender the
amount shown as due on any such certificate delivered by it within 30 days after
receipt thereof. Notwithstanding any other provision of this Section 2.17, each
Lender shall be entitled to compensation under this Section 2.17 for only such
costs as are incurred or reductions as are suffered as to which a certificate
has been delivered in accordance with the terms of this paragraph (d) within 180
days after such Lender obtained actual knowledge of such costs or reductions.
Each Lender agrees to use its best efforts to notify the relevant Borrower as
promptly as practicable after obtaining knowledge of any such costs or
reductions. The obligations of the Borrowers pursuant to this Section 2.17 shall
survive the termination of this Agreement and the payment of the US$ Loans and
all other amounts payable hereunder.
2.18 Taxes. (a) Unless otherwise required by applicable law, all
payments made by the Borrowers under this Agreement shall be made free and
clear of, and without deduction or withholding for or on account of, any present
or future income, stamp or other
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37
taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Administrative Agent, any Lender or
any Transferee as a result of a present or former connection between the
Administrative Agent or such Lender (or Transferee) and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely from
the Administrative Agent or such Lender (or Transferee) having executed,
delivered or performed its obligations or received a payment under, or enforced,
this Agreement). If any such non- excluded taxes, levies, imposts, duties,
charges, fees, deductions or withholdings ("Non- Excluded Taxes") are required
to be withheld from any amounts payable to the Administrative Agent or any
Lender (or Transferee) hereunder, the amounts so payable to the Administrative
Agent or such Lender (or Transferee) shall be increased to the extent necessary
to yield to the Administrative Agent or such Lender (or Transferee) (after
payment of all Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement;
provided, however, that no Borrower shall be required to increase any such
amounts payable to any Lender (or Transferee) that is not organized under the
laws of the United States of America or a state thereof if such Lender (or
Transferee) fails to comply with the requirements of Section 2.18(b); and
provided further, however, that no Transferee shall be entitled to receive
any greater payment under this paragraph, (a) than the transferor would have
been entitled to receive with respect to the right assigned, participated or
otherwise transferred. Whenever any Non-Excluded Taxes are payable by any
Borrower, as promptly as possible thereafter such Borrower shall send to the
Administrative Agent for its own account or for the account of such Lender
(or Transferee), as the case may be, a certified copy of an original official
receipt received by such Borrower showing payment thereof. If any Borrower
fails to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required receipts
or other required documentary evidence, such Borrower shall indemnify the
Administrative Agent and the Lenders (or Transferees) for any incremental
taxes, interest or penalties that may become payable by the Administrative
Agent or any Lender (or Transferee) as a result of any such failure.
The obligations contained in this Section 2.18 shall survive the
termination of this Agreement and the payment of all other amounts
payable hereunder.
(b) Each Lender (or Transferee) that is not incorporated under
the laws of the United States of America or a state thereof shall:
(i) on the date it becomes a Lender or Transferee, deliver to IBM
and the Administrative Agent (A) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, or successor applicable form,
as the case may be, and shall certify that it is entitled to receive
payments under this Agreement without deduction or withholding (or at a
reduced rate of deduction or withholding) of any United States Federal
income taxes and (B) an Internal Revenue Service Form W-8 or W-9, or
successor applicable form, as the case may be and shall certify that it is
entitled to an exemption from United States backup withholding tax;
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38
(ii) deliver to IBM and the Administrative Agent two further
copies of any such form or certification on or before the date that any
such form or certification described above expires or becomes obsolete and
after the occurrence of any event requiring a change in the most recent
form previously delivered by it to IBM; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by IBM or the
Administrative Agent;
except that the forms and certificates described in clauses (ii) and (iii)
above shall not be required if any change in Requirement of Law has occurred
prior to the date on which any such delivery would otherwise be required which
renders all such forms inapplicable or which would prevent such Lender (or
Transferee) from duly completing and delivering any such form with respect to it
and such Lender (or Transferee) so advises IBM and the Administrative Agent. If
the form provided by a Lender at the time such Lender first becomes a party to
this Agreement indicates a United States federal withholding tax rate on any
payments under this Agreement in excess of zero, then withholding tax at such
rate or any subsequent lower rate shall not be treated as a "Non-Excluded Tax"
as defined in Section 2.18(a) at such time or any time thereafter with respect
to such Lender or any Transferee of such Lender and the relevant Borrower or the
Administrative Agent shall withhold such tax from payments to such Lender or
Transferee, as the case may be, at the applicable rate.
(c) Each Person that shall become a Participant pursuant to
Section 11.6, a Competitive Loan Assignee pursuant to Section 11.7, or a
Lender pursuant to Section 11.8, including for this purpose a Lender that
arranges a US$ Loan through or transfers a US$ Loan to a different branch of
such Lender, shall, upon the effectiveness of the related designation or
transfer, be required to provide all of the forms and statements required
pursuant to this Section 2.18, provided that in the case of a Participant such
Participant shall furnish all such required forms and statements to the Lender
from which the related participation shall have been purchased.
(d) If any Lender (or Transferee) or the Administrative Agent
shall become aware that it is entitled to receive a refund or credit (such
credit to include any increase in any foreign tax credit) as a result of
Non-Excluded Taxes (including any penalties or interest with respect thereto) as
to which it has been indemnified by any Borrower pursuant to this Section 2.18,
it shall promptly notify such Borrower of the availability of such refund or
credit and shall, within 30 days after receipt of a request by such Borrower,
apply for such refund or credit at such Borrower's expense, and in the case of
any application for such refund or credit by such Borrower, shall, if legally
able to do so, deliver to such Borrower such certificates, forms or other
documentation as may be reasonably necessary to assist such Borrower in such
application. If any Lender (or Transferee) or the Administrative Agent receives
a refund or credit (such credit to include any increase in any foreign tax
credit) in respect to any Non-Excluded Taxes as to which it has been indemnified
by any Borrower pursuant to this Section 2.18, it shall promptly notify such
Borrower of such refund or credit and shall, within 30 days after receipt of
such refund or the benefit of such credit (such benefit to include any reduction
of the taxes for which any Lender (or Transferee) or the Administrative Agent
would otherwise be liable due to any increase in any foreign tax credit
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39
available to such Lender (or Transferee) or the Administrative Agent),
repay the amount of such refund or benefit of such credit (with respect to the
credit, as determined by the Lender, Transferee or Administrative Agent in its
sole, reasonable judgment) to such Borrower (to the extent of amounts that have
been paid by such Borrower under this Section 2.18 with respect to Non-Excluded
Taxes giving rise to such refund or credit), plus any interest received with
respect thereto, net of all reasonable out-of-pocket expenses of such Lender (or
Transferee) or the Administrative Agent and without interest (other than
interest actually received from the relevant taxing authority or other
Governmental Authority with respect to such refund or credit); provided,
however, that such Borrower, upon the request of such Lender (or Transferee) or
the Administrative Agent, agrees to return the amount of such refund or benefit
of such credit (plus interest) to such Lender (or Transferee) or the
Administrative Agent in the event such Lender (or Transferee) or the
Administrative Agent is required to repay the amount of such refund or benefit
of such credit to the relevant taxing authority or other Governmental Authority.
2.19 Indemnity. Each Borrower agrees to indemnify each Lender and
to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by such Borrower in making a
borrowing of Eurodollar Loans or Competitive Loans, or in the conversion into or
continuation of Eurodollar Loans, after such Borrower has given a notice
requesting or accepting the same in accordance with the provisions of this
Agreement, (b) default by such Borrower in making any prepayment after such
Borrower has given a notice thereof in accordance with the provisions of this
Agreement, or (c) the making of a prepayment of Eurodollar Loans or Competitive
Loans on a day which is not the last day of an Interest Period or the applicable
Competitive Loan Maturity Date, as the case may be, with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
the relevant Interest Period (or proposed Interest Period) or, in the case of
Competitive Loans, the applicable Competitive Loan Maturity Date (or proposed
Competitive Loan Maturity Date), in each case at the applicable rate of interest
for such Loans provided for herein (excluding, however, the Applicable Margin or
any positive margin applicable to Index Rate Competitive Loans included therein,
if any) over (ii) the amount of interest (as reasonably determined by such
Lender) which would have accrued to such Lender on such amount by placing such
amount on deposit for a comparable period with leading banks in the interbank
eurodollar market. The obligations contained in this Section 2.19 shall survive
the termination of this Agreement and the payment of all other amounts payable
hereunder.
2.20 Change of Lending Office. Each Lender (or Transferee) agrees
that, upon the occurrence of any event giving rise to the operation of
Section 2.16, 2.17 or 2.18 with respect to such Lender (or Transferee), it will,
if requested by IBM, use reasonable efforts (subject to overall policy
considerations of such Lender (or Transferee)) to designate another lending
office for any Loans affected by such event with the object of avoiding the
consequences of such event; provided, that such designation is made on terms
that, in the sole judgment of such Lender, cause such Lender and its lending
office(s) to suffer no material economic, legal or regulatory disadvantage, and
provided, further, that nothing in this Section
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40
2.20 shall affect or postpone any of the obligations of any Borrower or the
fights of any Lender (or Transferee) pursuant to Section 2.16, 2.17 and 2.18.
SECTION 3. LOCAL CURRENCY FACILITIES
3.1 Terms of Local Currency Facilities. (a) Subject to the
provisions of this Section 3, each Lender hereby agrees that IBM may in its
discretion from time to time designate any credit facility to which any one or
more Borrowers and any one or more Lenders is a party as a "Local Currency
Facility", with the consent of each such Lender in its sole discretion, by
delivering a Local Currency Facility Addendum to the Administrative Agent and
the Lenders (through the Administrative Agent) executed by IBM, each such
Borrower and each such Lender, provided, that on the effective date of such
designation (i) an Exchange Rate with respect to each Local Currency covered by
such Local Currency Facility shall be determinable by reference to the Reuters
currency pages (or comparable publicly available screen) and (ii) no Event of
Default shall have occurred and be continuing. Concurrently with the delivery of
a Local Currency Facility Addendum, IBM or the relevant Borrower shall furnish
to the Administrative Agent or its counsel copies of all documentation executed
and delivered by any Borrower in connection therewith, together with, if
applicable, an English translation thereof (provided, that IBM may instead
furnish an English translation of a summary term sheet in respect thereof
describing all material terms thereof so long as an English translation of all
such documentation is furnished to the Administrative Agent or its counsel
within 90 days after the date of delivery of such Local Currency Facility
Addendum). Except as otherwise provided in this Section 3, the terms and
conditions of each Local Currency Facility shall be determined by mutual
agreement of the relevant Borrower(s) and Local Currency Lender(s). The
documentation governing each Local Currency Facility shall contain an express
acknowledgment that such Local Currency Facility shall be subject to the
provisions of this Section 3. Each of IBM and, by agreeing to any Local Currency
Facility designation as contemplated hereby, each relevant Local Currency Lender
(if any) which is an affiliate, branch or agency of a Lender, acknowledges and
agrees that each reference in this Agreement to any Lender shall, to the extent
applicable, be deemed to be a reference to such Local Currency Lender. In the
event of any inconsistency between the terms of this Agreement and the terms of
any Local Currency Facility, the terms of this Agreement shall prevail.
(b) The documentation governing each Local Currency Facility
shall set forth (i) the maximum amount (expressed in Dollars) available to
be borrowed from all Local Currency Lenders under such Local Currency Facility
(as the same may be reduced from time to time pursuant to Section 3.2(e) or (d),
a "Local Currency Facility Maximum Borrowing Amount") and (ii) with respect to
each Local Currency Lender party to such Local Currency Facility, the maximum
amount (expressed in Dollars) available to be borrowed from such Local Currency
Lender thereunder (as the same may be reduced from time to time pursuant to
Section 3.2(c) or (d), a "Local Currency Lender Maximum Borrowing Amount"). In
no event shall (i) the aggregate of all Local Currency Facility Stated Maximum
Borrowing Amounts at any time exceed $4,000,000,000 or (ii) the aggregate of all
Local Currency Lender Stated Maximum Borrowing Amounts in respect of any Local
Currency Lender at any time exceed
.
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41
such Lender's Revolving Credit Commitment. The making of Local Currency
Loans by a Local Currency Lender under a Local Currency Facility shall under no
circumstances reduce the amount available to be borrowed from such Lender under
any other Local Currency Facility to which such Lender is a party.
(c) Except as otherwise required by applicable law, in no event
shall the Local Currency Lenders party to a Local Currency Facility have
the right to accelerate the Local Currency Loans outstanding thereunder, or to
terminate their Commitments (if any) to make such Loans prior to the stated
termination date in respect thereof, except, in each case, in connection with an
acceleration of the Loans or a termination of the Commitments pursuant to
Section 8 of this Agreement, provided, that nothing in this paragraph (c) shall
be deemed to require any Local Currency Lender to make a Local Currency Loan if
the applicable conditions precedent to the making of such Local Currency Loan
set forth in the relevant Local Currency Facility have not been satisfied. No
Local Currency Loan may be made under a Local Currency Facility if (i) an Event
of Default shall have occurred and be continuing or would result therefrom or
(ii) after giving effect thereto, (x) the aggregate principal amount of the US$
Loans and Local Currency Loans (US$ Equivalent) then outstanding would exceed
the aggregate Revolving Credit Commitments then in effect, (y) the aggregate
principal amount of US$ Loans and Local Currency Loans (US$ Equivalent) made to
any Subsidiary Borrower then outstanding would exceed the Maximum Subsidiary
Borrowing Amount with respect to such Subsidiary Borrower set forth in the most
recent Subsidiary Borrower Notice and Designation delivered by IBM pursuant to
Section 5.2(d) or (z) the aggregate principal amount of Revolving Credit Loans,
Swing Line Loans and Local Currency Loans (US$ Equivalent) made by any Lender
then outstanding would exceed such Lender's Revolving Credit Commitment.
(d) The relevant Local Currency Lenders, or, if so specified in
the relevant Local Currency Facility, an agent acting on their behalf,
shall finish to the Administrative Agent, immediately upon its request, a
statement setting forth the outstanding Local Currency Loans made under such
Local Currency Facility and the amount and terms of any pending prepayment
notices or borrowing requests received by such Lenders or agent through the date
of the Administrative Agent's request.
(e) The relevant Borrower shall furnish to the Administrative
Agent or its counsel copies of any amendment, supplement or other
modification (including any change in commitment amounts or in the Lenders
participating in any Local Currency Facility) to the terms of any Local Currency
Facility promptly after the effectiveness thereof (together with, if applicable,
an English translation thereof). If any such amendment, supplement or other
modification to a local Currency Facility shall (i) add a Lender as a Local
Currency Lender thereunder or (ii) change the Local Currency Facility Stated
Maximum Borrowing Amount or any Local Currency Lender Stated Maximum Borrowing
Amount with respect thereto, IBM shall promptly furnish an appropriately revised
Local Currency Facility Addendum, executed by IBM, the relevant Borrower and the
affected Local Currency Lenders (or any agent acting on their behalf), to the
Administrative Agent and the Lenders (through the Administrative Agent).
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42
(f) IBM may terminate its designation of a facility as a Local
Currency Facility, with the consent of each Local Currency Lender party
thereto in its sole discretion, by written notice to the Administrative Agent,
which notice shall be executed by IBM, the relevant Borrower and each Lender
party to such Local Currency Facility (or any agent acting on their behalf).
Once notice of such termination is received by the Administrative Agent, such
Local Currency Facility and the loans and other obligations outstanding
thereunder shall immediately cease to be subject to the terms of this
Agreement (including the guarantee of IBM contained in Section 10).
Notwithstanding anything to the contrary in this Agreement, any loans made under
a Local Currency Facility at any time when an exchange rate with respect to the
relevant Local Currency cannot be calculated by the Administrative Agent in
accordance with the definition of "Exchange Rate" contained in Section 1.1 shall
be deemed not to constitute "Local Currency Loans" for the purposes of this
Agreement unless and until an exchange rate with respect to such loans may be so
calculated.
(g) Nothing in this Section 3 shall be deemed to limit the
ability of IBM or any of the Subsidiaries or Controlled Persons to enter
into credit facilities which do not constitute Local Currency Facilities.
3.2 Currency Fluctuations, etc. (a) No later than 2:00 P.M., New
York City time, on each Calculation Date, the Administrative Agent shall
(i) determine the Exchange Rate as of such Calculation Date with respect to each
Local Currency covered by a Local Currency Facility and (ii) give notice thereof
to the Lenders, IBM and the relevant Borrowers. Except as otherwise provided in
Section 3.3, the Exchange Rates so determined shall become effective on the
first Business Day immediately following the relevant Calculation Date (a
"Reset Date") and shall remain effective until the next succeeding Reset Date.
(b) No later than 2:00 P.M. New York City time, on each Reset
Date and each Borrowing Date, the Administrative Agent shall (i) determine
the US$ Equivalent of the Local Currency Loans then outstanding under each Local
Currency Facility (after giving effect to any Local Currency Loans to be made or
repaid on such date) and (ii) notify the Lenders, IBM and the relevant Borrowers
of the results of such determination.
(c) If, on any Reset Date or any Borrowing Date (after giving
effect to (i) any Loans to be made or repaid on such date and (ii) any
amendment, supplement or other modification to any Local Currency Facility
effective on such date of which the Administrative Agent has received notice),
the Aggregate Outstanding US$ Revolving Extensions of Credit of any Lender
exceed the US$ Revolving Credit Overage of such Lender (the amount of such
excess, the "US$ Revolving Credit Excess"), then the Local Currency Lender
Maximum Borrowing Amount under each Local Currency Facility to which such Lender
is a party shall be reduced on such date by an amount equal to the product of
such US$ Revolving Credit Excess times a fraction the numerator of which shall
equal the Local Currency Lender Stated Maximum Borrowing Amount under such Local
Currency Facility and the denominator of which shall equal the aggregate of the
Local Currency Lender Stated Maximum Borrowing Amounts under all Local Currency
Facilities to which such Lender is a party. After giving effect to any such
reduction in Local Currency Lender Maximum Borrowing Amounts, the Local Currency
Facility Maximum Borrowing Amount with respect
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43
to each Local Currency Facility shall in turn be reduced to an amount equal
to the aggregate of the Local Currency Lender Maximum Borrowing Amounts of all
Local Currency Lenders party to such Local Currency Facility. Reductions in
Local Currency Lender Maximum Borrowing Amounts and Local Currency Facility
Maximum Borrowing Amounts pursuant to this paragraph (c) shall be effective
until the amount thereof shall be recalculated by the Administrative Agent on
the next succeeding Reset Date or Borrowing Date, and shall not be deemed to
reduce the stated amount of any Commitment of any Local Currency Lender in
respect of any Local Currency Facility.
(d) If, on any Reset Date or Borrowing Date (after giving effect
to (i) any Loans to be made or repaid on such date, (ii) any amendment,
supplement or other modification to any Local Currency Facility effective on
such date of which the Administrative Agent has received notice and (iii) any
changes in any Local Currency Lender Maximum Borrowing Amounts effected pursuant
to Section 3.2(c) on such date), the aggregate outstanding principal amount of
the US$ Loans exceeds the US$ Facility Overage (the amount of such excess, the
"US$ Facility Excess"), then the Local Currency Facility Maximum Borrowing
Amount under each Local Currency Facility shall be reduced on such date by an
amount equal to the product of such US$ Facility Excess times a fraction the
numerator of which shall equal the Local Currency Facility Stated Maximum
Borrowing Amount under such Local Currency Facility and the denominator of which
shall equal the aggregate of the Local Currency Facility Stated Maximum
Borrowing Amounts with respect to all Local Currency Facilities. Each such
reduction in the Local Currency Facility Maximum Borrowing Amount under a Local
Currency Facility shall in turn reduce the respective Local Currency Lender
Maximum Borrowing Amounts of each Local Currency Lender party to such Local
Currency Facility, pro rata on the basis of the respective Local Currency Lender
Stated Maximum Borrowing Amounts of such Lenders. Reductions in Local Currency
Facility Maximum Borrowing Amounts and Local Currency Lender Maximum Borrowing
Amounts pursuant to this paragraph (d) shall be effective until the amount
thereof shall be recalculated by the Administrative Agent on the next succeeding
Reset Date or Borrowing Date, and shall not be deemed to reduce the stated
amount of any Commitment of any Local Currency Lender in respect of any Local
Currency Facility.
(e) If, on any Reset Date, the US$ Equivalent of the Local
Currency Loans outstanding under a Local Currency Facility exceeds an
amount equal to 105% of the Local Currency Facility Maximum Borrowing Amount
with respect thereto (after giving effect to any reductions therein effected
pursuant to Section 3.2(c) or (d) on such date), then the relevant Borrower
shall, within three Business Days after notice thereof from the Administrative
Agent, (i) increase the Local Currency Facility Stated Maximum Borrowing Amount
with respect to such Local Currency Facility in accordance with Section 3.1(e)
and/or (ii) prepay such Local Currency Loans in accordance with the terms of the
relevant Local Currency Facilities in an aggregate amount such that, after
giving effect thereto, (x) the US$ Equivalent of all such Local Currency Loans
shall be equal to or less than such Local Currency Facility Maximum Borrowing
Amount and (y) the US$ Equivalent of the Local Currency Loans of each relevant
Local Currency Lender shall be equal to or less than such Local Currency
Lender's Local Currency Lender Maximum Borrowing Amount with respect to such
Local Currency Facility.
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44
(f) If, on any Reset Date, the Aggregate Outstanding Revolving
Extensions of Credit of any Lender exceed an amount equal to 105% of such
Lender's Revolving Credit Commitment, then, within three Business Days after
notice thereof from the Administrative Agent, IBM shall prepay and/or cause the
Subsidiary Borrowers to prepay the Loans in accordance with this Agreement or
the relevant Local Currency Facilities, as the case may be, in an aggregate
mount such that, after giving effect thereto, the Aggregate Outstanding
Revolving Extensions of Credit of such Lender shall be equal to or less than
such Lender's Revolving Credit Commitment.
(g) The Administrative Agent shall promptly notify the relevant
Lenders of the amount of any reductions in Local Currency Facility Maximum
Borrowing Amounts or Local Currency Lender Maximum Borrowing Amounts, and the
amount of any prepayments, required pursuant to paragraph (c), (d), (e) or (f)
of this Section 3.2.
3.3 Refunding of Local Currency Loans. (a) Notwithstanding
noncompliance with the conditions precedent set forth in Section 5, if any
Local Currency Loans are outstanding on (i) any date on which an Event of
Default pursuant to Section 8(f) or (g) shall have occurred with respect to IBM,
(ii) any date (the "Acceleration Date") on which the Commitments shall have been
terminated and/or the Loans shall have been declared immediately due and payable
pursuant to Section 8 or (iii) any date on which an Event of Default pursuant to
Section 8(a)(ii) shall have occurred and be continuing for three or more
Business Days and, in the ease of clause (iii) above, any Local Currency Lender
party to the affected Local Currency Facility shall have given notice thereof to
the Administrative Agent requesting that the Local Currency Loans ("Affected
Local Currency Loans") outstanding thereunder be refunded pursuant to this
Section 3.3, then, at 10:00 A.M., New York City time, on the second Business Day
immediately succeeding (x) the date on which such Event of Default occurs (in
the case of clause (i) above), (y) such Acceleration Date (in the case of clause
(ii) above) or (z) the date on which such notice is received by the
Administrative Agent (in the case of clause (iii) above), the Administrative
Agent shall be deemed to have received a notice from IBM (or any one or more
Subsidiary Borrowers designated by the Administrative Agent after consultation
with IBM, provided, that any Subsidiary Borrower so designated shall in each
case be the relevant Subsidiary Borrower party to the relevant Local Currency
Facility unless otherwise agreed by the requisite Local Currency Lenders party
to such Local Currency Facility) pursuant to Section 2.2 requesting that ABR
Loans be made pursuant to Section 2.1 on such second Business Day in an
aggregate amount equal to the US$ Equivalent of the aggregate amount of all
Local Currency Loans (in the case of clause (i) or (ii) above) or the Affected
Local Currency Loans (in the case of clause (iii) above) (calculated on the
basis of Exchange Rates determined by the Administrative Agent on the Business
Day immediately preceding such second Business Day), and the procedures set
forth in Section 2.2 shall be followed in making such ABR Loans, provided, that
(x) for the purposes of determining each Lender's Revolving Credit Borrowing
Share of such borrowing, the outstanding principal amount of Local Currency
Loans or Affected Local Currency Loans, as the case may be, shall be deemed to
be zero and (y) each Lender's Revolving Credit Borrowing Share of such borrowing
shall be reduced to the extent (if any) necessary to prevent the Aggregate
Outstanding Revolving Extensions of Credit of such Lender from exceeding its
Revolving Credit Commitment after giving effect to such borrowing. The
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45
proceeds of such ABR Loans shall be applied to repay such Local Currency
Loans; it being understood, however, that IBM (or such designated Borrower or
Borrowers) shall have the right to make payment through the original Borrower or
Borrowers of such Local Currency Loans and become a creditor of such original
Borrower or Borrowers to the extent of such proceeds.
(b) If, for any reason, ABR Loans may not be made pursuant to
paragraph (a) of this Section 3.3 to repay Local Currency Loans as required
by such paragraph, effective on the date such ABR Loans would otherwise have
been made, (i) the principal amount of each relevant Local Currency Loan shall
be convened into Dollars (calculated on the basis of Exchange Rates determined
by the Administrative Agent as of the immediately preceding Business Day)
("Converted Local Currency Loans") and (ii) each Lender severally,
unconditionally and irrevocably agrees that it shall purchase in Dollars a
participating interest in such Convened Local Currency Loans in an amount equal
to the amount of ABR Loans which would otherwise have been made by such Lender
pursuant to paragraph (a) of this Section 3.3. Each Lender will immediately
transfer to the Administrative Agent, in immediately available funds, the amount
of its participation, and the proceeds of such participation shall be
distributed by the Administrative Agent to each relevant Local Currency Lender
in such mount as will reduce the amount of the participating interest retained
by such Local Currency Lender in the Converted Local Currency Loans to the
amount of the ABR Loans which were to have been made by it pursuant to
paragraph (a) of this Section 3.3. All Converted Local Currency Loans shall
bear interest at the rate which would otherwise be applicable to ABR Loans.
Each Lender shall share on a pro rata basis (calculated by reference to its
participating interest in such Converted Local Currency Loans) in any interest
which accrues thereon and in all repayments thereof.
(c) If, for any reason, ABR Loans may not be made pursuant to
paragraph (a) of this Section 3.3 to repay Local Currency Loans as required
by such paragraph and the principal amount of any Local Currency Loans may not
be converted into Dollars in the manner contemplated by paragraph (b) of this
Section 3.3, (i) the Administrative Agent shall determine the US$ Equivalent of
such Local Currency Loans (calculated on the basis of Exchange Rates determined
by the Administrative Agent as of the Business Day immediately preceding the
date on which ABR Loans would otherwise have been made pursuant to said
paragraph (a)) and (ii) effective on the date on which ABR Loans would otherwise
have been made pursuant to said paragraph (a), each Lender severally,
unconditionally and irrevocably agrees that it shall purchase in Dollars a
participating interest in such Local Currency Loans in an amount equal to the
amount of ABR Loans which would otherwise have been made by such Lender pursuant
to paragraph (a) of this Section 3.3. Each Lender will immediately transfer to
the Administrative Agent, in immediately available funds, the amount of its
participation, and the proceeds of such participation shall be distributed by
the Administrative Agent to each relevant Local Currency Lender in such amount
as will reduce the US$ Equivalent as of such date of the amount of the
participating interest retained by such Local Currency Lender in such Local
Currency Loans to the amount of the ABR Loans which were to have been made by it
pursuant to paragraph (a) of this Section 3.3. Each Lender shall share on a pro
rata basis (calculated by reference to its participating interest in such Local
Currency Loans) in any interest which accrues thereon, in all repayments of
principal thereof
.
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46
and in the benefits of any collateral furnished in respect thereof and the
proceeds of such collateral.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into
this Agreement and to make the Loans, IBM hereby represents and warrants,
and each Subsidiary Borrower by its execution and delivery of a Subsidiary
Borrower Request represents and warrants (to the extent specifically applicable
to such Subsidiary Borrower), to the Administrative Agent and each Lender that:
4.1 Organizational Powers. Each of IBM, each Significant
Subsidiary and each Subsidiary Borrower (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite power and authority to own its property and
assets and to carry on its business in all material respects as now conducted
and as proposed to be conducted, (c) is qualified to do business in every
jurisdiction where such qualification is required, except where the failure so
to qualify would not, individually or in the aggregate, result in a Material
Adverse Effect, and (d) in the case of each Borrower, has the power and
authority to execute, deliver and perform its obligations under this Agreement
and each other agreement or instrument contemplated hereby to which it is or
will be a party and to borrow hereunder.
4.2 Authorization. The execution, delivery and performance by
each Borrower of this Agreement and the borrowings and other transactions
contemplated hereby (collectively, the "Transactions") (a) have been duly
authorized by all requisite corporate or other organizational action and, if
required, stockholder action and (b) will not (i) violate (A) any provision of
law, statute, material role or material regulation, or of the certificate or
articles of incorporation or other constitutive documents or by-laws of IBM, any
Significant Subsidiary or any Subsidiary Borrower, (B) any material order of any
Governmental Authority or (C) any provision of any material indenture, material
agreement or other material instrument to which IBM, any Significant Subsidiary
or any Subsidiary Borrower is a party or by which any of them or any of their
property is or may be bound, (ii) be in conflict with, result in a breach of or
constitute (alone or with notice or lapse of time or both) a default under any
such indenture, agreement or other instrument or (iii) except as contemplated
hereby, result in the creation or imposition of any Lien upon or with respect to
any property or assets now owned or hereafter acquired by IBM, any Significant
Subsidiary or any Subsidiary Borrower.
4.3 Enforceability. This Agreement has been duly executed and
delivered by each Borrower and constitutes a legal, valid and binding
obligation of each Borrower enforceable against each such Borrower in accordance
with its terms, except as enforceability may be limited by (a) any applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, or
similar laws relating to or affecting creditors' rights generally and (b)
general principles of equity.
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47
4.4 Governmental Approvals. No action, consent or approval of,
registration or filing with, or any other action by, any Governmental
Authority is or will be required in connection with the Transactions, except (a)
such as have been made or obtained and are in full force and effect or as to
which the failure to be made or obtained or to be in full force and effect would
not result, individually or in the aggregate, in a Material Adverse Effect and
(b) such periodic and current reports, if any, as (i) are required to disclose
the Transactions and (ii) will be filed with the SEC on a timely basis.
4.5 Financial Statements. IBM has heretofore furnished to the
Lenders its consolidated statement of financial position and related
consolidated statements of earnings, cash flows and stockholders' equity as of
and for the fiscal year ended December 31, 1992, audited by and accompanied by
the opinion of Price Waterhouse, independent accountants. Such financial
statements present fairly the financial position, results of operations, cash
flows and changes in stockholders' equity of IBM and the Subsidiaries in
accordance with GAAP.
4.6 No Material Adverse Change. Except as publicly disclosed in
filings by IBM with the SEC prior to the date hereof, between September 30,
1993 and the Effective Date, there has been no development or event which has
had a Material Adverse Effect.
4.7 No Material Litigation, etc. (a) Except as set forth in the
Form 10-K of IBM for its fiscal year ended December 31, 1992 or the Form
10-Q of IBM for the fiscal quarter ended September 30, 1993, no litigation,
investigation or proceeding of or before any arbitrator or Governmental
Authority is pending or, to the knowledge of IBM, threatened by or against IBM
or any of the Subsidiaries or against any of its or their respective properties,
assets or revenues as of the Effective Date (a) with respect to this Agreement
or any of the Transactions, or (b) which involves a probable risk of an adverse
decision which would materially restrict the ability of IBM to comply with its
obligations under this Agreement.
(b) None of IBM or the Significant Subsidiaries is in violation
of any law, rule or regulation, or in default with respect to any order,
judgment, writ, injunction or decree of any Governmental Authority, where such
violation or default has resulted or could reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect.
4.8 Federal Reserve Regulations. (a) No Borrower is engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether
directly or indirectly, for any purpose which entails a violation of, or
which is inconsistent with, the provisions of Regulation G, T, U or X.
(c) After giving effect to the application of the proceeds of
each Loan, not more than 25% of the value of the assets of IBM and the
Subsidiaries (as determined in good faith by IBM) subject to the provisions of
Section 7.1 will consist of or be represented by Margin Stock. In the event any
portion of the Loans made to any Borrower constitutes a "purpose credit" within
the meaning of Regulation G or U and the Loans are directly or
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48
indirectly secured by any Margin Stock pursuant to the operation of Section
7.1, then, at the time of any borrowing which increases the outstanding amount
of Loans, the aggregate "maximum loan value" (within the meaning of Regulation
G or U) of all Margin Stock and all collateral other than Margin Stock which
directly or indirectly secures the Loans will be greater than the aggregate
principal amount of Loans and other extensions of credit to all Borrowers
(whether made by the Lenders or other Persons) which are subject to Regulation
G, T, U or X and which are directly or indirectly secured by such Margin Stock
or other collateral.
4.9 Investment Company Act, etc. No Borrower is (a) an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (b) a "holding company" as defined in the
Public Utility Holding Company Act of 1935 or subject to regulation under such
Act or the Federal Power Act or (except as contemplated by Section 4.8) any
foreign, federal, state or local statute or regulation limiting such Borrower's
ability to incur Borrower Obligations.
4.10 Tax Returns. Each of IBM and the Significant Subsidiaries
has filed or caused to be filed all Federal, state and local tax returns
required to have been filed by it and has paid or caused to be paid all taxes
shown to be due and payable on such returns or on any assessments received by it
except taxes, assessments, fees, liabilities, .penalties or charges that are
being contested in good faith by appropriate proceedings and for which IBM or
Significant Subsidiary shall have set aside on its books reserves in accordance
with GAAP.
4.11 No Material Misstatements. No written information, report,
financial statement, exhibit or schedule furnished by or on behalf of any
Borrower to the Administrative Agent or any Lender in connection with this
Agreement or the Transactions or included herein or delivered pursuant hereto
contained, contains or will contain any material misstatement of fact or
omitted, omits or will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were,
are or will be made, not misleading.
4.12 ERISA. Each Borrower is in compliance with all material
provisions of ERISA, except to the extent that all failures to be in
compliance could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
4.13 Use of Proceeds. The proceeds of all US$ Loans will be used
by the Borrowers for general corporate purposes.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial US$ Loans. The agreement of each Lender
to make the initial US$ Loan requested to be made by it is subject to the
satisfaction, on or prior to the date of such US$ Loan, of the following
conditions precedent:
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49
(a) Effective Date. The Effective Date shall have occurred in accordance
with Section 11.22.
(b) Closing Certificate. The Administrative Agent shall have received a
certificate of IBM, dated the Effective Date, substantially in the form of
Exhibit C, with appropriate insertions, satisfactory in form and substance to
the Administrative Agent, executed by the President or any Vice President and
the Secretary or any Assistant Secretary of IBM, and attaching the documents
referred to in Section 5.1(c) and (d).
(c) Corporate Proceedings of IBM. The Administrative Agent shall have
received, with a copy for each Lender, a copy of the resolutions, in form
and substance satisfactory to the Administrative Agent, of the Board of
Directors of IBM (or a duly authorized committee thereof) authorizing (i) the
execution, delivery and performance of this Agreement and (ii) the borrowings
contemplated hereunder.
(d) Corporate Documents. The Administrative Agent shall have received,
with a copy for each Lender, true and complete copies of the certificate of
incorporation and by-laws of IBM.
(e) Fees. The Administrative Agent shall have received the fees to be
received on or prior to the Effective Date referred to in Section 2.11(b).
(f) Legal Opinions. The Administrative Agent shall have received the
following executed legal opinions, with a copy for each Lender.
(i) the executed legal opinion of Simpson Thacher & Bartlett, counsel
to the Administrative Agent, substantially in the form of Exhibit D- 1;
(ii) the executed legal opinion of Cravath, Swaine & Moore, counsel to
IBM, substantially in the form of Exhibit D-2; and
(iii) the executed legal opinion of Robert S. Stone, Esq., Associate
General Counsel of IBM, substantially in the form of Exhibit D-3.
(g) Existing Credit Agreements. The Administrative Agent shall have
received satisfactory evidence that each of the Existing Credit Agreements
shall have been terminated pursuant to an irrevocable notice of termination of
commitments and that any amounts owing thereunder by IBM or IBM Credit
Corporation, as the case may be, shall have been (or shall upon the occurrence
of the Effective Date be) paid in full. Without affecting any terms of any
Existing Credit Agreement which expressly survive the termination of such
Existing Credit Agreement, each Lender party to any one or more of the Existing
Credit Agreements hereby waives any requirement of advance notice of such
termination contained in any Existing Credit Agreement and hereby agrees that
such Existing Credit Agreements and the commitments thereunder (subject to
receipt of any other required consents of any other Person) shall terminate
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50
simultaneously with the satisfaction by IBM of the conditions to borrowing set
forth in this Section 5.1.
5.2 Conditions to Each US$ Loan. The agreement of each Lender to
make any US$ Loan requested to be made by it on any date (including,
without limitation, its initial US$ Loan) is subject to the satisfaction of the
following conditions precedent:
(a) Notice. The Administrative Agent shall have received notice
of such borrowing in conformity with the applicable requirements of this
Agreement
(b) Representations and Warranties. Each of the representations
and warranties made by any Borrower in or pursuant to this Agreement shall
be true and correct in all material respects on and as of such date as if
made on and as of such date, except to the extent such representations
and warranties expressly relate to an earlier date.
(c) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or shall occur after giving effect
to the borrowing of the US$ Loans requested to be made on such date.
(d) Subsidiary Borrower Notice and Designation; Subsidiary
Borrower Request. If the relevant Borrower is a Subsidiary Borrower, IBM
shall have delivered to the Administrative Agent a Subsidiary Borrower
Notice and Designation for such Subsidiary Borrower specifying the maximum
amount (the "Maximum Subsidiary Borrowing Amount") which may be borrowed by
such Subsidiary Borrower, and such Subsidiary Borrower shall have furnished
to the Administrative Agent a Subsidiary Borrower Request. IBM may from
time to time deliver a subsequent Subsidiary Borrower Notice and
Designation with respect to such Subsidiary Borrower, countersigned by such
Subsidiary Borrower, for the purpose of changing the Maximum Subsidiary
Borrowing Amount specified therein or terminating such Subsidiary
Borrower's designation as such, so long as (i) in the case of any reduction
of any Maximum Subsidiary Borrowing Amount, on the effective date of such
reduction, the aggregate principal amount of US$ Loans and Local Currency
Loans (US$ Equivalent) made to such Subsidiary Borrower shall not exceed
the Maximum Subsidiary Borrowing Amount as so reduced and (ii) in the case
of any termination of such designation, on the effective date of such
termination, all Subsidiary Borrower Obligations in respect of such
Subsidiary Borrower shall have been paid in full. In addition, if on any
date a Subsidiary Borrower shall cease to be a Subsidiary or Controlled
Person, all Subsidiary Borrower Obligations in respect of such Subsidiary
Borrower shall automatically become due and payable on such date and no
further Loans may be borrowed by such Subsidiary Borrower hereunder or
under any Local Currency Facility.
(e) Closing Certificate of Subsidiary Borrower. If the relevant
Borrower is a Subsidiary Borrower, the Administrative Agent shall have
received, as promptly as reasonably practicable after the effective date of
the relevant Subsidiary Borrower
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51
Notice and Designation and prior to the date of such US$ Loan, a
certificate of such Subsidiary Borrower, substantially in the form of
Exhibit C, with appropriate insertions and attachments, satisfactory in
form and substance to the Administrative Agent, executed by the President,
any Vice President, the Treasurer or any other senior officer and the
Secretary or any Assistant Secretary (or, in either case, comparable
officers) of such Subsidiary Borrower.
(f) Opinions of Counsel to Subsidiary Borrower. If the relevant
Borrower is a Subsidiary Borrower, the Administrative Agent shall have
received, with a copy for each Lender, as promptly as reasonably
practicable after the effective date of the relevant Subsidiary Borrower
Notice and Designation and prior to the date of such US$ Loan, executed
legal opinions with respect to such Subsidiary Borrower, in form and
substance reasonably satisfactory to the Administrative Agent and
including, to the extent applicable, the opinions set forth in Exhibits D-2
and D-3.
Each borrowing of a US$ Loan by a Borrower shall constitute a representation
and warranty by such Borrower (and, in the case of a Subsidiary Borrower, IBM)
as of the date of such US$ Loan that the conditions contained in paragraphs
(b) and (c) of this Section 5.2 have been satisfied.
SECTION 6.AFFIRMATIVE COVENANTS
IBM and each Subsidiary Borrower by its execution and delivery of
a Subsidiary Borrower Request agrees that, so long as the Commitments
remain in effect, any Loan remains outstanding and unpaid or any other amount is
owing to any Lender or the Administrative Agent hereunder, it shall and (in the
case of IBM) shall cause each of the Significant Subsidiaries to:
6.1 Existence; Business and Properties. (a) Do or cause to be
done all things necessary to preserve, renew and keep in full force and
effect its legal existence, except as would not cause or result in a Default or
Event of Default under this Agreement.
(b) Do or cause to be done all things reasonably necessary to
preserve and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; except in each case where the failure
to do so would not result in a Material Adverse Effect; and at all times
maintain and preserve all property material to the conduct of its business and
keep such property in good repair, working order and condition and from time to
time make, or cause to be made, all needful and proper repairs, renewals,
additions, improvements and replacements thereto necessary in order that the
business carried on in connection therewith may be properly conducted at all
times; provided, however, that nothing in this Section 6.1(b) shall prevent IBM,
any Subsidiary or any Subsidiary Borrower from (x) discontinuing any of its
businesses no longer deemed advantageous to it or discontinuing the operation
and maintenance of any of its properties no longer deemed useful in the conduct
of its business or
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52
(y) selling or disposing of any assets, Subsidiaries or capital stock thereof,
in a transaction not prohibited by Section 7.2.
6.2 Financial Statements, Reports, etc. In the case of IBM,
furnish to the Administrative Agent for distribution to the Lenders:
(a) as soon as available and in any event within 105 days after
the end of each fiscal year, copies of the report filed by IBM with the SEC
on Form 10-K in respect of such fiscal year, each accompanied by IBM's
annual report in respect of such fiscal year or, if IBM is not required to
file such a report in respect of such fiscal year, the consolidated
statements of financial position and related consolidated statements of
earnings, cash flows and stockholders' equity of IBM and the Subsidiaries,
as of the close of such fiscal year, all audited by Price Waterhouse or
other independent accountants of recognized national standing and
accompanied by an opinion of such accountants to the effect that such
consolidated financial statements fairly present the financial position,
results of operations, cash flows and changes in stockholders' equity of
IBM and the Subsidiaries, in accordance with GAAP;
(b) as soon as available and in any event within 60 days after
the end of each of the first three quarterly periods of each fiscal year,
copies of the unaudited quarterly reports filed by IBM with the SEC on Form
10-Q in respect of such quarterly period, or if IBM is not required to file
such a report in respect of such quarterly period, the unaudited
consolidated statements of financial position and related unaudited
consolidated statements of earnings, cash flows and stockholders' equity of
IBM and the Subsidiaries, as of the close of such fiscal quarter, certified
by a Responsible Officer of IBM as fairly presenting the financial
position, results of operations, cash flows and changes in stockholders'
equity of IBM and the Subsidiaries, in accordance with GAAP, subject to
normal year-end audit adjustments which are not expected to be material in
amount;
(c) concurrently with any delivery of financial statements by IBM
described in paragraph (a) or (b) above (whether contained in a report
filed with the SEC or otherwise), a certificate of a Responsible Officer of
IBM substantially in the form of Schedule 6.2(c);
(d) promptly after the same become publicly available, copies of
(i) all financial statements, notices, reports and proxy materials
distributed to stockholders of IBM and (ii) all reports on Form 10-K, 10-Q
and 8-K (or their equivalents) filed by IBM with the SEC (or with any
Governmental Authority succeeding to any or all of the functions of the
SEC) pursuant to the periodic reporting requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder;
(e) promptly, from time to time, such other publicly available
documents and information regarding the operations, business affairs and
financial condition of IBM, any Significant Subsidiary or any Subsidiary
Borrower, or compliance with the terms
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53
of this Agreement, as the Administrative Agent or any Lender (through the
Administrative Agent) may reasonably request; and
(f) within ten Business Days after the occurrence thereof,
written notice of any change in Status; provided that the failure to
provide such notice shall not delay or other, vise affect any change in the
Applicable Eurodollar Margin or other amount payable hereunder which is to
occur upon a change in Status pursuant to the terms of this Agreement.
With respect to the documents referred to in paragraphs (a) through (e)
above, IBM shall furnish such number of copies as the Administrative Agent or
the Lenders shall reasonably require for distribution to their personnel in
connection with this Agreement.
6.3 Notices. Promptly give notice to the Administrative Agent and
each Lender of the occurrence of any Default or Event of Default, accompanied
by a statement of a Responsible Officer of IBM setting forth details of the
occurrence referred to therein and stating what action the relevant Borrower
proposes to take with respect thereto.
SECTION 7. NEGATIVE COVENANTS
IBM and, in the case of Sections 7.2 and 7.3, each Subsidiary Borrower by
its execution and delivery of a Subsidiary Borrower Request agrees that, so long
as the Commitments remain in effect, any Loan remains outstanding and unpaid or
any other amount is owing to any Lender or the Administrative Agent hereunder.
7.1 Limitation on Secured Debt and Sale and Leaseback
Transactions. (a) IBM will not create, assume, incur or guarantee, and will
not permit any Restricted Subsidiary to create, assume, incur or guarantee, any
Secured Debt without making provision whereby all Borrower Obligations shall be
secured equally and ratably with (or prior to) such Secured Debt (together with,
if IBM shall so determine, any other Debt of IBM or such Restricted Subsidiary
then existing or thereafter created which is not by its terms subordinate to the
Borrower Obligations) so long as such Secured Debt shall be outstanding unless
such Secured Debt, when added to (a) the aggregate amount of all Secured Debt
then outstanding (not including in this computation Secured Debt if the Borrower
Obligations are secured equally and ratably with (or prior to) such Secured Debt
and further not including in this computation any Secured Debt which is
concurrently being retired) and (b) the aggregate amount of all Attributable
Debt then outstanding pursuant to Sale and Leaseback Transactions entered into
by IBM after July 15, 1985, or entered into by a Restricted Subsidiary after
July 15, 1985, or, if later, the date on which it became a Restricted Subsidiary
(not including in this computation any Attributable Debt which is concurrently
being retired), would not exceed 5% of Consolidated Net Tangible Assets.
(b) IBM will not, and will not permit any Restricted Subsidiary
to. enter into any Sale and Leaseback Transaction unless (a) the sum of (i)
the Attributable Debt to be outstanding pursuant to such Sale and Leaseback
Transaction, (ii) all Attributable Debt then
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54
outstanding pursuant to all other Sale and Leaseback Transactions entered
into by IBM after July 15, 1985, or entered into by a Restricted Subsidiary
after July 15, 1985, or, if later, the date on which it became a Restricted
Subsidiary, and (iii) the aggregate of all Secured Debt then outstanding (not
including in this computation Secured Debt if the Borrower Obligations are
secured equally and ratably with (or prior to) such Secured Debt) would not
exceed 5% of Consolidated Net Tangible Assets or (b) an amount equal to the
greater of (i) the net proceeds to IBM or the Restricted Subsidiary of the sale
of the Principal Property sold and leased back pursuant to such Sale and
Leaseback Transaction and (ii) the amount of Attributable Debt to be outstanding
pursuant to such Sale and Leaseback Transaction, is applied to the retirement of
Funded Debt of IBM or any Restricted Subsidiaries (other than Funded Debt which
is subordinated to the Loans or which is owing to IBM or any Restricted
Subsidiaries) within 180 days after the consummation of such Sale and Leaseback
Transaction.
7.2 Mergers, Consolidations and Sales of Assets. No Borrower will
consolidate with or merge with or into any other Person or sell, convey or
otherwise transfer all or substantially all of its properties or assets to any
Person, except that, so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom, IBM may merge with any
other U.S. corporation and each Subsidiary Borrower may merge with any other
Person, provided that (a) in the case of any such merger involving IBM, IBM is
the surviving corporation, (b) in the case of any such merger involving a
subsidiary Borrower, the surviving corporation assumes all of such Borrower's
obligations under this Agreement and remains a "Subsidiary Borrower" and (c) on
the date of consummation of any merger involving IBM, IBM shall deliver to the
Administrative Agent a certificate of a Responsible Officer of IBM demonstrating
that, on a pro forma basis determined as if such merger had been consummated on
the date occurring twelve months prior to the last day of the most recently
ended fiscal quarter, IBM would have been in compliance with Section 7.4 as of
the last day of such fiscal quarter. For the purposes of this Section 7.2, the
consummation of a Securitization Transaction by any Subsidiary Borrower in the
ordinary course of its business shall not be deemed to constitute a sale,
conveyance or transfer of properties or assets.
7.3 Margin Regulations. (a) No Borrower will permit any part of
the proceeds of any Loan to be used in any manner that would result in a
violation of, or be inconsistent with, the provisions of Regulation G, T, U or
X. No Borrower will take, or permit the Subsidiaries to take, any action at any
time that would (A) result in a violation of the substitution and withdrawal
requirements of Regulation G, T or U, in the event the same should become
applicable to any Loans or this Agreement or (B) cause the representations and
warranties contained in Section 4.8 at any time to be other than true and
correct.
(b) Whenever required to ensure compliance with Regulations G, T,
U and X or requested by the Administrative Agent or one or more Lenders,
each Borrower will furnish to the Administrative Agent and each Lender a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U, and any other notice or form required under
Regulation G or U, the statements made and information contained in which shall
be sufficient, in the good faith opinion of each Lender, to permit the
extensions of Loans hereunder in compliance with Regulations G and U.
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55
7.4 Consolidated Net Interest Expense Ratio. IBM will not permit
the Consolidated Net Interest Expense Ratio, for any period of four
consecutive fiscal quarters taken as a single accounting period ending during
any period set forth below (commencing with the period of four consecutive
fiscal quarters ending June 30, 1994), to be less than the ratio set forth
opposite such period:
Period Ratio
- ------ -----
June 30, 1994 to and including December 31, 1994 1.8 to 1.0
January 1, 1995 to and including December 31, 1995 2.0 to 1.0
January 1, 1996 and thereafter 2.2 to 1.0
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) (i) Any Borrower shall (x) fail to pay any principal of any
US$ Loan when due in accordance with the applicable terms of this Agreement
or (y) fail to pay any interest on any US$ Loan, or any fee or other
amount payable hereunder or under any Local Currency Facility (other than
as provided in clause (ii) below), within five Business Days after any such
interest, fee or other amount becomes due in accordance with the terms
hereof or thereof; or (ii) any Borrower shall fail to pay any principal of
or interest on any Local Currency Loan when due in accordance with the
applicable terms of the relevant Local Currency Facility and such default
shall continue unremedied for a period of three Business Days (in the case
of principal) or five Business Days (in the case of interest) after written
notice thereof shall have been given to IBM by the Administrative Agent or
any affected Local Currency Lender (with a copy to the Administrative
Agent); or
(b) Any representation or warranty made or deemed made by any
Borrower herein or in any Local Currency Facility or which is contained in
any certificate, document or financial or other statement furnished by it
at any time pursuant to this Agreement or any Local Currency Facility shall
prove to have been incorrect in any material respect on or as of the date
made or deemed made; or
(c) IBM shall default in the observance or performance of the
agreement contained in Section 7.4; or
(d) Any Borrower shall default in the observance or performance
of any other agreement contained in this Agreement or in any Local Currency
Facility or any other event or condition constituting a default under any
Local Currency Facility shall occur (in each case other than as provided in
paragraphs (a) through (c) of this Section 8), and such default shall
continue unremedied for a period of 30 days after written notice thereof
shall have been given to IBM by the Administrative Agent or the Required
Lenders; or
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56
(e) IBM or any Significant Subsidiary shall default in the
payment of any principal or interest, regardless of amount, due in respect
of any Indebtedness in an aggregate principal amount of $100,000,000 or
more. when and as the same shall become due and payable (after the
expiration of any applicable grace period); or
(f) An involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction
seeking (i) relief in respect of IBM or any Significant Subsidiary, or of a
substantial part of the property or assets of IBM or any Significant
Subsidiary, under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other Federal, state or foreign bankruptcy,
insolvency, receivership or similar law, (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official
for IBM or any Significant Subsidiary or for a substantial part of the
property or assets of IBM or any Significant Subsidiary or (iii) the
winding-up or liquidation of IBM or any Significant Subsidiary; and such
proceeding or petition shah continue undismissed for 90 days or an order or
decree approving or ordering any of the foregoing shall be entered; or
(g) IBM or any Significant Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title 11
of the United States Code, as now constituted or hereafter amended, or any
other Federal, state or foreign bankruptcy, insolvency, receivership or
similar law, (ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or the filing of any petition
described in paragraph (f) of this Section 8, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for IBM or any Significant Subsidiary or
for a substantial part of the property or assets of IBM or any Significant
Subsidiary, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, or (vi) take any action for the
purpose of effecting any of the foregoing; or
(h) One or more judgments for the payment of money in an
aggregate amount of $100,000,000 or more shall be rendered by a court of
competent jurisdiction against IBM, any Significant Subsidiary or any
combination of IBM and Significant Subsidiaries and the same shall remain
undischarged for a period of 30 days during which execution shall not be
effectively stayed, or any action shall be legally taken by a judgment
creditor to levy upon assets or properties of IBM or any Significant
Subsidiary to enforce any such judgment; or
(i) The guarantee contained in Section 10 shall cease, for any
reason, to be in full force and effect or IBM shall so assert;
then, and in any such event, (A) if such event is an Event of Default
specified in paragraph (f) or (g) above with respect to IBM, automatically the
Commitments shall immediately terminate and the Loans (with accrued interest
thereon) and all fees and other amounts owing under this Agreement and the Local
Currency Facilities shall immediately become due and payable, and (B) if such
event is any other Event of Default, either or both of the following
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57
actions may be taken: (i) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to IBM declare the Commitments to be
terminated forthwith, whereupon such Commitments shall immediately terminate;
and {ii) with the consent of the Required Lenders, the Administrative Agent may,
or upon the request of the Required Lenders, the Administrative Agent shall, by
notice to IBM, declare the Loans {with accrued interest thereon) and all fees
and other amounts owing under this Agreement and the Local Currency Facilities
to be due and payable forthwith, whereupon the same shall immediately become due
and payable. Except as expressly provided above in this Section 8, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 9. THE ADMINISTRATIVE AGENT
9.1 Appointment. Each Lender hereby irrevocably designates and
appoints Chemical Bank as the Administrative Agent of such Lender under
this Agreement, and each such Lender irrevocably authorizes Chemical Bank, as
the Administrative Agent for such Lender, to take such action on its behalf
under the provisions of this Agreement and to exercise such powers and perform
such duties as are expressly delegated to the Administrative Agent by the terms
of this Agreement, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any Local Currency Facility or otherwise exist against the
Administrative Agent.
9.2 Delegation of Duties. The Administrative Agent may execute
any of its duties under this Agreement by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys in-fact
selected by it with reasonable care.
9.3 Exculpatory Provisions. Neither the Administrative Agent nor
any of its officers, directors. employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement (except
for its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any Borrower or any officer thereof
contained in this Agreement or any Local Currency Facility or in any
certificate, report, statement or other document referred to or provided for in.
or received by the Administrative Agent under or in connection with, this
Agreement or any Local Currency Facility or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any Local Currency Facility or for any failure of any Borrower to perform its
obligations hereunder or thereunder. The Administrative Agent shall not be under
any obligation to any Lender to ascertain or to require as to the observance or
performance of any of the agreements
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58
contained in, or conditions of, this Agreement or any Local Currency
Facility, or to inspect the properties, books or records of any Borrower.
9.4 Reliance by Administrative .Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to any Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the Lender specified in the Register
with respect to any amount owing hereunder as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Administrative Agent. The Administrative Agent shall be
fully justified in failing or refusing to take any action under this Agreement
unless it shall first receive such advice or concurrence of the Required Lenders
or all Lenders, as the case may be, as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement in accordance with
a request of the Required Lenders, or all Lenders, as the case may be, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all future holders of the obligations owing by any
Borrower hereunder.
9.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or
Event of Default hereunder unless the Administrative Agent has received notice
from a Lender or a Borrower referring to this Agreement, describing such Default
or Event of Default and stating that such notice is a "notice of default". In
the event that the Administrative Agent receives such a notice, the
Administrative Agent shall promptly give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders;
provided that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders.
9.6 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates
has made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
any Borrower, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrowers and made its
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59
own decision to make its Loans and enter into this Agreement and any Local
Currency Facilities. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement or any Local Currency Facility, and to
make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrowers. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of any Borrower which may come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
9.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed
by the Borrowers and without limiting the obligation of the Borrowers to do so),
ratably according to their respective Commitment Percentages in effect on the
date on which indemnification is sought under this Section 9.7 (or, if
indemnification is sought after the date upon which the Revolving Credit
Commitments shall have terminated and the US$ Loans shall have been paid in
full, ratably in accordance with their Commitment Percentages immediately prior
to such date), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including, without limitation, at
any time following the payment of the amounts owing hereunder) be imposed on,
incurred by or asserted against the Administrative Agent in any way relating to
or arising out of this Agreement or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by the Administrative Agent under or in connection with
any of the foregoing; provided that (a) no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the gross negligence or willful misconduct of the Administrative Agent and
(b) in the event that the Administrative Agent is reimbursed by any Borrower for
any amount paid to it by the Lenders pursuant to this Section 9.7, the amount of
such reimbursement shall in turn be paid over to the Lenders on a ratable basis.
The agreements in this Section 9.7 shall survive the payment of the Loans and
all other amounts payable hereunder.
9.8 Administrative Agent in Its Individual Capacity. Each of the
Administrative Agent and its affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the Borrowers as though
the Administrative Agent were not the Administrative Agent hereunder. With
respect to its Loans made or renewed by it, the Administrative Agent shall have
the same rights and powers under this Agreement as any Lender and may exercise
the same as though it were not the Administrative Agent, and the terms "Lender"
and "Lenders" shall include the Administrative Agent in its individual capacity.
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9.9 Successor Administrative Agent. Subject to the appointment
and acceptance of a successor Administrative Agent as provided below, the
Administrative Agent may resign as Administrative Agent at any time by giving
notice to the Lenders and IBM. If the Administrative Agent shall resign as
Administrative Agent under this Agreement, then the Required Lenders shall
appoint from among the Lenders a successor administrative agent for the Lenders,
which successor administrative agent shall be subject to the approval of IBM
(which approval shall not be unreasonably withheld). If no successor shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent shall have
given notice of its resignation, then the retiring Administrative Agent may, on
behalf of the Lenders, appoint a successor Administrative Agent from among the
Lenders, which successor administrative agent shall be subject to the approval
of IBM (which approval shall not be unreasonably withheld). Upon the acceptance
of any appointment as Administrative Agent hereunder by a permitted successor,
such successor administrative agent shall succeed to the fights, powers and
duties of the Administrative Agent, and the term "Administrative Agent" shall
mean such successor administrative agent effective upon such appointment and
approval, and the former Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the pan of such former Administrative Agent or any of the parties to
this Agreement or any holders of the obligations owing hereunder. After any
retiring Administrative Agent's resignation as Administrative Agent, the
provisions of this Section 9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under
this Agreement.
SECTION 10. GUARANTEE
10.1 Guarantee. In order to induce the Administrative Agent and
the Lenders to execute and deliver this Agreement and to make or maintain
the Loans, and in consideration thereof, IBM hereby unconditionally and
irrevocably guarantees, as primary obligor and not merely as surety, to the
Administrative Agent, for the ratable benefit of the Lenders, the prompt and
complete payment and performance by each Subsidiary Borrower when due (whether
at stated maturity, by acceleration or otherwise) of the Subsidiary Borrower
Obligations, and IBM further agrees to pay any and all expenses (including,
without limitation, all reasonable fees, charges and disbursements of counsel
(including allocated costs of internal counsel)) which may be paid or incurred
by the Administrative Agent or by the Lenders in enforcing, or obtaining advice
of counsel in respect of, any of their rights under the guarantee contained in
this Section 10. The guarantee contained in this Section 10, subject to Section
10.5, shall remain in full force and effect until the Subsidiary Borrower
Obligations are paid in full and the Commitments are terminated, notwithstanding
that from time to time prior thereto any Subsidiary Borrower may be free from
any Subsidiary Borrower Obligations.
IBM agrees that whenever, at any time, or from time to time, it
shall make any payment to the Administrative Agent or any Lender on account
of its liability under this Section 10, it will notify the Administrative Agent
and such Lender in writing that such payment is made under the guarantee
contained in this Section 10 for such purpose. No
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61
payment or payments made by any Subsidiary Borrower or any other Person or
received or collected by the Administrative Agent or any Lender from any
Subsidiary Borrower or any other Person by virtue of any action or proceeding or
any setoff or appropriation or application, at any time or from time to time, in
reduction of or in payment of the Subsidiary Borrower Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of IBM under
this Section 10 which, notwithstanding any such payment or payments, shall
remain liable for the unpaid and outstanding Subsidiary Borrower Obligations
until, subject to Section 10.5, the Subsidiary Borrower Obligations are paid in
full and the Commitments are terminated.
10.2 No Subrogation, Contribution, Reimbursement or Indemnity.
Notwithstanding anything to the contrary in this Section 10, IBM hereby
irrevocably waives (a) all rights which may have arisen in connection with the
guarantee contained in this Section 10 to be subrogated to any of the rights
(whether contractual, under the Bankruptcy Code, including Section 509 thereof,
under common law or otherwise) of the Administrative Agent or any Lender against
any Subsidiary Borrower or against the Administrative Agent or any Lender for
the payment of the Subsidiary Borrower Obligations of any Domestic Subsidiary
Borrower and (b) all contractual, common law, statutory and other rights of
reimbursement, contribution, exoneration or indemnity (or any similar right)
from or against any Subsidiary Borrower or any other Person which may have
arisen in connection with the guarantee of the Subsidiary Borrower Obligations
of any Domestic Subsidiary Borrower contained in this Section 10. In addition,
notwithstanding anything to the contrary in this Section 10, IBM hereby
irrevocably waives (a) all rights which may have arisen in connection with the
guarantee contained in this Section 10 to be subrogated to any of the rights
(whether contractual, under the Bankruptcy Code, including Section 509 thereof,
under common law or otherwise) of the Administrative Agent or any Lender against
any Subsidiary Borrower or against the Administrative Agent or any Lender for
the payment of the Subsidiary Borrower Obligations of any Foreign Subsidiary
Borrower and (b) irrevocably waives all contractual, common law, statutory and
other rights of reimbursement, contribution, exoneration or indemnity (or any
similar right) from or against any Subsidiary Borrower or any other Person which
may have arisen in connection with the guarantee of the Subsidiary Borrower
Obligations of any Foreign Subsidiary Borrower contained in this Section 10, in
each case until all Subsidiary Borrower Obligations of the Foreign Subsidiary
Borrowers are paid in full. So long as the Subsidiary Borrower Obligations
remain outstanding, if any amount shall be paid by or on behalf of any
Subsidiary Borrower or any other Person to IBM on account of any of the rights
waived in this Section 10.2, such amount shall be held by IBM in trust,
segregated from other funds of IBM, and shall, forthwith upon receipt by IBM, be
turned over to the Administrative Agent in the exact form received by IBM (duly
indorsed by IBM to the Administrative Agent, if required), to be applied against
the Subsidiary Borrower Obligations, whether matured or unmatured, in such order
as the Administrative Agent may determine. The provisions of this Section 10.2
shall survive the term of the guarantee contained in this Section 10 and the
payment in full of the Subsidiary Borrower Obligations and the termination of
the Commitments.
10.3 Amendments, etc. with respect to the Subsidiary Borrower
Obligations. IBM shall remain obligated under this Section 10
notwithstanding that, without any
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reservation of rights against IBM, and without notice to or further assent
by IBM, any demand for payment of or reduction in the principal amount of any of
the Subsidiary Borrower Obligations made by the Administrative Agent or any
Lender may be rescinded by the Administrative Agent or such Lender, and any of
the Subsidiary Borrower Obligations continued, and the Subsidiary Borrower
Obligations, or the liability of any other party upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered or released by
the Administrative Agent or any Lender, and this Agreement and any other
documents executed and delivered in connection herewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Lenders (or
the Required Lenders, as the case my be) may deem advisable from time to time,
and any collateral security, guarantee or right of offset at any time held by
the Administrative Agent or any Lender for the payment of the Subsidiary
Borrower Obligations may be sold, exchanged, waived, surrendered or released.
Neither the Administrative Agent nor any Lender shall have any obligation to
protect, secure, perfect or insure any lien at any time held by it as security
for the Subsidiary Borrower Obligations or for the guarantee contained in this
Section 10 or any property subject thereto.
10.4 Guarantee Absolute and Unconditional. IBM waives any and
all notice of the creation, renewal, extension or accrual of any of the
Subsidiary Borrower Obligations and notice of or proof of reliance by the
Administrative Agent or any Lender upon the guarantee contained in this Section
10 or acceptance of the guarantee contained in this Section 10; the Subsidiary
Borrower Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon the guarantee contained in this Section 10; and all dealings
between IBM or the Subsidiary Borrowers, on the one hand, and the Administrative
Agent and the Lenders, on the other, shall likewise be conclusively presumed to
have been had or consummated in reliance upon the guarantee contained in this
Section 10. IBM waives diligence, presentment, protest, demand for payment and
notice of default or nonpayment to or upon IBM or any Subsidiary Borrower with
respect to the Subsidiary Borrower Obligations. The guarantee contained in this
Section 10 shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity or enforceability of
this Agreement, any Local Currency Facility, any of the Subsidiary Borrower
Obligations or any collateral security therefor or guarantee or right of offset
with respect thereto at any time or from time to time held by the Administrative
Agent or any Lender. (b) the legality under applicable Requirements of Law of
repayment by the relevant Subsidiary Borrower of any Subsidiary Borrower
Obligations or the adoption of any Requirement of Law purporting to render any
Subsidiary Borrower Obligations null and void, (c) any defense, setoff or
counterclaim (other than a defense of payment or performance by the applicable
Subsidiary Borrower) which may at any time be available to or be asserted by IBM
against the Administrative Agent or any Lender, or (d) any other circumstance
whatsoever (with or without notice to or knowledge of IBM or any Subsidiary
Borrower) which constitutes, or might be construed to constitute, an equitable
or legal discharge of any Subsidiary Borrower for any Subsidiary Borrower
Obligations, or of IBM under the guarantee contained in this Section 10, in
bankruptcy or in any other instance. When the Administrative Agent or any Lender
is pursuing its rights and remedies under this Section 10 against IBM, the
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63
Administrative Agent or any Lender may, but shall be under no obligation
to, pursue such rights and remedies as it may have against any Subsidiary
Borrower or any other Person or against any collateral security or guarantee for
the Subsidiary Borrower Obligations or any right of offset with respect thereto,
and any failure by the Administrative Agent or any Lender to pursue such other
rights or remedies or to collect any payments from any Subsidiary Borrower or
any such other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset, or any release of any
Subsidiary Borrower or any such other Person or of any such collateral security,
guarantee or right of offset, shall not relieve IBM of any liability under this
Section 10, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the Administrative Agent
and the Lenders against IBM.
10.5 Reinstatement. The guarantee contained in this Section 10
shall continue to be effective, or be reinstated, as the case may be, if at
any time payment, or any part thereof, of any of the Subsidiary Borrower
Obligations is rescinded or must otherwise be restored or returned by the
Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of any Subsidiary Borrower or upon or as a result
of the appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, any Subsidiary Borrower or any substantial part of its
property, or otherwise, all as though such payments had not been made.
10.6 Payments. IBM hereby agrees that any payments in respect of
the Subsidiary Borrower Obligations pursuant to this Section 10 will be
paid to the Administrative Agent without setoff or counterclaim in Dollars (in
the case of Subsidiary Borrower Obligations arising under this Agreement) or, at
the option of the relevant Local Currency Lender(s), in Dollars or in the
relevant Local Currency (in the case of Subsidiary Borrower Obligations arising
under any Local Currency Facility), at (a) the office of the Administrative
Agent specified in Section 11.2 (in the case of Subsidiary Borrower Obligations
arising under this Agreement) or (b) at the office specified for payments under
the relevant Local Currency Facility or such other office as shall have been
specified by the relevant Local Currency Lender(s) in each case to the extent
permitted by applicable law (in the case of Subsidiary Borrower Obligations
arising under any Local Currency Facility).
10.7 Judgments Relating to Guarantee. (a) If, for the purpose of
obtaining judgment in any court, it is necessary to convert a sum due under
the guarantee contained in this Section 10 in one currency into another
currency, IBM agrees, to the fullest extent that it may effectively do so, that
the rate of exchange used shall be that at which in accordance with normal
banking procedures in the relevant jurisdiction the relevant Lender (or agent
acting on its behalf) could purchase the first currency with such other currency
for the first currency on the Banking Day immediately preceding the day on which
final judgment is given.
(b) The obligations of IBM in respect of any sum due under the
guarantee contained in this Section 10 shall, notwithstanding any judgment
in a currency (the "Judgment Currency") other than that in which such sum is
denominated in accordance with this Section 10 (the "Agreement Currency."), be
discharged only to the extent that, on the Banking Day
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64
following receipt by any Lender (or agent acting on its behalf) (the
"Applicable Creditor") of any sum adjudged to be so due in the Judgment
Currency, the Applicable Creditor may in accordance with normal banking
procedures in the relevant jurisdiction purchase the Agreement Currency with the
Judgment Currency; if the amount of the Agreement Currency so purchased is less
than the sum originally due to the Applicable Creditor in the Agreement
Currency, IBM agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify the Applicable Creditor against such loss, provided that
if the amount of the Agreement Currency so purchased exceeds the sum originally
due to the Applicable Creditor, the Applicable Creditor agrees to remit such
excess to IBM. The obligations of IBM contained in this Section 10.7 shall
survive the termination of the guarantee contained in this Section 10 and the
payment of all amounts owing hereunder.
10.8 Independent Obligations. The obligations of IBM under the
guarantee contained in this Section 10 are independent of the obligations
of each Subsidiary Borrower, and a separate action or actions may be brought and
prosecuted against IBM whether or not the relevant Subsidiary Borrower be joined
in any such action or actions. IBM waives, to the full extent permitted by law,
the benefit of any statute of limitations affecting its liability hereunder or
the enforcement thereof. Any payment by the relevant Subsidiary Borrower or
other circumstance which operates to toll any statute of limitations as to such
Subsidiary Borrower shall operate to toll the statute of limitations as to IBM.
SECTION 11. MISCELLANEOUS
11.1 Amendments and Waivers. Neither this Agreement nor any
terms hereof may be amended, supplemented or modified except in accordance
with the provisions of this Section 11.1. The Required Lenders may, or, upon
receipt of written consent of the Required Lenders to all terms thereof, the
Administrative Agent may, from time to time, (a) enter into with the Borrowers
written amendments, supplements or modifications hereto for the purpose of
adding any provisions to this Agreement or changing in any manner the rights of
the Lenders or of the Borrowers hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the Administrative Agent, as the
case may be, may specify in such instrument, any of the requirements of this
Agreement or any Default or Event of Default and its consequences; provided,
.however, that no such waiver and no such amendment, supplement or modification
shall (i) reduce the amount or extend the scheduled date of maturity of any US$
Loan, or reduce the stated rate of any interest or fee payable hereunder or
extend the scheduled date of any payment thereof or increase the amount or
extend the expiration date of any Lender's Revolving Credit Commitment or Swing
Line Commitment, in each case without the consent of each Lender directly
affected thereby, or (ii) reduce any amounts payable to any Lender pursuant to
Section 2.5(b), 2.5(c), 3.3 or 10 (including, without limitation, pursuant to
any release of the guarantee contained in Section 10), or increase any amounts
payable by any Lender pursuant to Section 2.5(b), 2.5(c) or 3.3, in each case
without the consent of each Lender materially and adversely affected thereby, or
(iii) amend, modify or waive any provision of this Section 11.1 or reduce the
percentage specified in the definition of Required Lenders, or consent to the
assignment or transfer by any Borrower of any of its rights and obligations
under this Agreement, in each case without
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65
the written consent of all the Lenders, or (iv) amend, modify or waive any
provision of Section 9 without the written consent of the then Administrative
Agent. Any such waiver and any such amendment, supplement or modification shall
apply equally to each of the Lenders and shall be binding upon the Borrowers,
the Lenders, the Administrative Agent and all future holders of the obligations
owing hereunder. In the case of any waiver, the Borrowers, the Lenders and the
Administrative Agent shall be restored to their former position and rights
hereunder, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; but no such waiver shall extend to any subsequent or
other Default or Event of Default, or impair any right consequent thereon.
11.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three Business Days
after being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, addressed as follows in the case of IBM and the
Administrative Agent, as set forth in the relevant Subsidiary Borrower Notice
and Designation in the case of the Subsidiary Borrowers and as set forth on its
Addendum in the case of the Lenders, or to such other address as may be
hereafter notified by the respective parties hereto and any future holders of
the obligations owing hereunder:
IBM: INTERNATIONAL BUSINESS MACHINES
CORPORATION
Old Orchard Road
Armonk, New York 10504
Attention: Mike Foss
Telecopy: 914-765-7605
The Administrative Agent: CHEMICAL BANK
270 Park Avenue
New York, New York 10017
Attention: Kevin Comwell
Telecopy: 212-949-1459
with a copy to: CHEMICAL BANK AGENCY SERVICES
CORPORATION
140 East 45th Street
New York, New York 10017
Attention: Terri Reilly
Telecopy: 212-622-0854
provided that any notice, request or demand to or upon the Administrative
Agent or the Lenders pursuant to Section 2.2, 2.3, 2.5, 2.6, 2.8 or 2.13 shall
not be effective until received.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Administrative Agent or any
Lender, any right, remedy, power or privilege hereunder shall operate as a
waiver thereof; nor shall any single or partial
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66
exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other fight, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
11.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
US$ Loans hereunder.
11.5 Payment of Expenses. Each of IBM and, as applicable, each
Subsidiary Borrower agrees (a) to pay or reimburse the Administrative Agent
for all its reasonable out-of-pocket costs and expenses incurred in connection
with the development, preparation and execution of, and any amendment,
supplement or modification to, this Agreement and any other documents prepared
in connection herewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent, (b) to
pay or reimburse each Lender and the Administrative Agent for all its reasonable
costs and expenses incurred in connection with the enforcement or preservation
of any rights. under this Agreement and any such other documents, including,
without limitation, the reasonable fees and disbursements of separate counsel
(including the allocated costs of internal counsel) to the Administrative Agent
and to each Lender, and (c) to pay, indemnify, and hold each Lender and the
Administrative Agent harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other similar taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement and any such other documents, and (d) to pay,
indemnify, and hold each Lender and the Administrative Agent harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements, including
reasonable fees and disbursements of counsel (including the allocated costs of
internal counsel), incurred by or asserted against such Lender or the
Administrative Agent which arise out of or in connection with any claim,
litigation or proceeding relating to this Agreement, any Loan, any such other
documents, any actual or proposed use of proceeds of any Loan or any of the
Transactions, or any failure by any Borrower to repay any Local Currency Loans
or other obligations owing under any Local Currency Facility when due in
accordance with the terms of such Local Currency Facility (all the foregoing in
this clause (d), collectively, the "indemnified liabilities"), provided, that no
Borrower shall have any obligation hereunder to the Administrative Agent or any
Lender with respect to indemnified liabilities arising from the gross negligence
or willful misconduct of the Administrative Agent or any such Lender and
provided further, that nothing contained in this Section 11.5 (other than
Section 11.5(c)) shall require IBM or any Subsidiary Borrower to pay any taxes
of the Administrative Agent, any Lender or any Transferee or any indemnity with
respect thereto. The agreements in this Section 11.5 shall survive repayment of
the Loans and the payment of all other amounts payable hereunder.
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11.6 Participations. Any Lender may, in the ordinary course of
its business and in accordance with applicable law, at any time sell to one
or more banks or other entities (each, a "Participant") participating interests
in any US$ Loan owing to such Lender, any Revolving Credit Commitment of such
Lender or any other interest of such Lender hereunder. In the event of any such
sale by a Lender of a participating interest to a Participant, such Lender's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such obligation
owing to it hereunder for all purposes under this Agreement, and the Borrowers
and the Administrative Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement. In no event shall any Participant under any such participation have
any right to approve any amendment or waiver of any provision of this Agreement,
or any consent to any departure by any Borrower therefrom, except to the extent
that such amendment, waiver or consent would reduce the principal of, or
interest on, the US$ Loans or any fees payable hereunder, postpone the date of
the final maturity of the US$ Loans, or release the guarantee contained in
Section 10, in each case to the extent subject to such participation. Each
Borrower agrees that, while an Event of Default shall have occurred and be
continuing, if amounts outstanding under this Agreement are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement, provided that, in
purchasing such participating interest, such Participant shall be deemed to have
agreed to share with the Lenders the proceeds thereof as provided in Section I
1.12 as fully as if it were a Lender hereunder. Each Borrower also agrees that
each Participant shall be entitled to the benefits of Sections 2.16, 2.17, 2.18
and 2.19 with respect to its participation in the Revolving Credit Commitments
and the US$ Loans outstanding from time to time as if it was a Lender; provided
that, in the case of Section 2.18, such Participant shall have complied with the
requirements of said Section and provided, further, that no Participant shall be
entitled to receive any greater amount pursuant to any such Section than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such Participant
had no such transfer occurred.
11.7 Transfers of Competitive Loans. (a) Any Competitive Loan
Lender, in the ordinary course of its business and in accordance with
applicable law, at any time may assign to one or more banks or other entities
(each, a "Competitive Loan Assignee") any Competitive Loan owing to such
Competitive Loan Lender, pursuant to a Competitive Loan Assignment executed by
the assignor Competitive Loan Lender and the Competitive Loan Assignee.
(b) Upon such execution, from and after the date of such Competitive Loan
Assignment, the Competitive Loan Assignee shall be deemed, to the extent of
the assignment provided for in such Competitive Loan Assignment, and subject to
the provisions of Sections 11.7(c) and 11.7(d), to have the same rights and
benefits of payment and enforcement with respect to such Competitive Loan
(including, without limitation, the applicable rights set forth
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in Sections 2.16, 2.17, 2.18 and 2.19) and the same rights of setoff and
obligation to share pursuant to Section 11.12 as it would have had if it were a
Competitive Loan Lender hereunder.
(c) Unless such Competitive Loan Assignment shall otherwise specify and a
copy of such Competitive Loan Assignment shall have been delivered to the
Administrative Agent for its acceptance and recording in the Register in
accordance with Section 11.9(a), the assignor under the Competitive Loan
Assignment shall act as collection agent for the Competitive Loan Assignee
thereunder, and the Administrative Agent shall pay all amounts received from the
relevant Borrower which are allocable to the assigned Competitive Loan directly
to such assignor without any liability to such Competitive Loan Assignee.
(d) A Competitive Loan Assignee under a Competitive Loan Assignment
shall not, by virtue of such Competitive Loan Assignment, become a party to
this Agreement or a "Competitive Loan Lender", or have any fights to consent to
or refrain from consenting to any amendment, waiver or other modification of any
provision of this Agreement or any related document; provided that (i) the
assignor under such Competitive Loan Assignment and such Competitive Loan
Assignee may, in their discretion, agree between themselves upon the manner in
which such assignor will exercise its fights under this Agreement and any
related document, and (ii) if a copy of such Competitive Loan Assignment shall
have been delivered to the Administrative Agent for its acceptance and recording
in the Register in accordance with Section 11.9(a), no such amendment, waiver or
modification may reduce or postpone any payment of principal or interest in
respect of any Competitive Loan assigned to such Competitive Loan Assignee
without the written consent of such Competitive Loan Assignee.
(e) If a Competitive Loan Assignee has caused a Competitive Loan
Assignment to be recorded in the Register in accordance with Section
11.9(a), such Competitive Loan Assignee may thereafter, in the ordinary course
of its business and in accordance with applicable law, assign the relevant
Competitive Loans to any Competitive Loan Lender, to any affiliate or subsidiary
of such Competitive Loan Assignee or to any other financial institution that has
total assets in excess of $1,000,000,000 and that in the ordinary course of its
business extends credit of the same type as the Competitive Loans, and the
foregoing provisions of this Section 11.7 shall apply, mutatis mutandis, to any
such assignment, by a Competitive Loan Assignee. Except in accordance with the
preceding sentence, Competitive Loans may not be further assigned by a
Competitive Loan Assignee, subject to any legal or regulatory requirement that
the Competitive Loan Assignee's assets must remain under its control.
(f) Upon its receipt of a Competitive Loan Assignment executed by an
assignor Competitive Loan Lender and a Competitive Loan Assignee, together
with payment to the Administrative Agent of a registration and processing fee of
$2,500 (which shall not be payable by any Borrower), the Administrative Agent
promptly shall (i) accept such Competitive Loan Assignment, (ii) record the
information contained therein in the Register and (iii) give notice of such
acceptance and recordation to the assignor Competitive Loan Lender, the
Competitive Loan Assignee and the relevant Borrower.
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11.8 Assignments. (a) Subject to clause (ii) of the second
sentence of Section 3.1 (b), any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time and from time to
time assign to any affiliate of such Lender or, with the consent of IBM and the
Administrative Agent (which consent in each case shall not be unreasonably
withheld), to any other Lender or to an additional bank, financial institution
or other entity (each, a "Purchasing Lender") all or any part of its rights and
obligations under this Agreement pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit E, executed by such Purchasing Lender and
such assigning Lender (and, in the case of a Purchasing Lender that is not an
affiliate of the relevant assigning Lender, by IBM and the Administrative Agent)
and delivered to the Administrative Agent for its acceptance and recording in
the Register, provided, that except in the case of an assignment of all of a
Lender's rights and obligations under this Agreement, the amount of the
Revolving Credit Commitment of the assigning Lender being assigned pursuant to
each such assignment (determined as of the date of the Assignment and Acceptance
with respect to such assignment) shall in no event be less than $10,000,000 or
such lesser amount as may be consented to by IBM and the Administrative Agent
and provided, further, that a Swing Line Lender may so assign all or a portion
of such rights and obligations to a Person that shall become a Swing Line Lender
hereunder only if notice of the designation of such new Swing Line Lender shall
have been delivered to the Administrative Agent prior to such assignment. Upon
such execution, delivery, acceptance and recording, from and after the effective
date determined pursuant to such Assignment and Acceptance, (x) the Purchasing
Lender thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
with a Revolving Credit Commitment (and, if applicable, a Swing Line Commitment)
as set forth therein, and (y) the assigning Lender thereunder shall, to the
extent provided in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such assigning Lender shall cease to be a
party hereto).
(b) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and a Purchasing Lender (and, in the case of a Purchasing
Lender that is not an affiliate of the relevant assigning Lender, by IBM and the
Administrative Agent) together with payment to the Administrative Agent of a
registration and processing fee of $2,500 (which shall not be payable by any
Borrower), the Administrative Agent shall (i) promptly accept such Assignment
and Acceptance and (ii) on the effective date determined pursuant thereto record
the information contained therein in the Register and give notice of such
acceptance and recordation to the Lenders and IBM.
11.9 The Register; Disclosure; Pledges to Federal Reserve Banks.
(a) The Administrative Agent shall maintain at its address referred to in
Section 11.2 a copy of each Competitive Loan Assignment and Assignment and
Acceptance delivered to it and a register (the "Register") for the recordation
of (i) the names and addresses of the Lenders, the Revolving Credit Commitments
and Swing Line Commitments of the Lenders, and the principal amount of the US$
Loans owing to each Lender from time to time and (ii) with respect to each
Competitive Loan Assignment delivered to the Administrative Agent, the name and
address of the Competitive Loan Assignee and the principal amount of each
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Competitive Loan owing to such Competitive Loan Assignee. The entries in the
Register shall be conclusive, in the absence of clearly demonstrable error,
and the Borrowers, the Administrative Agent and the Lenders may treat each
Person whose name is recorded in the Register as the owner of the US$ Loan
recorded therein for all purposes of this Agreement. The Register shall be
available for inspection by the Borrowers or any Lender or Competitive Loan
Assignee at any reasonable time and from time to time upon reasonable prior
notice.
(b) Each Borrower authorizes each Lender to disclose to any Participant,
Competitive Loan Assignee or Purchasing Lender (each, a "Transferee") and
any prospective Transferee, subject to the provisions of Section 11.21 (whether
or not, in the case of any Person that is a prospective Transferee, such Person
in fact becomes a Transferee), any and all financial information in such
Lender's possession concerning the Borrowers and their respective affiliates
which has been delivered to such Lender by or on behalf of any Borrower pursuant
to this Agreement or which has been delivered to such Lender by or on behalf of
any Borrower in connection with such Lender's credit evaluation of the Borrowers
and their respective affiliates prior to becoming a party to this Agreement.
(c) Nothing herein shall prohibit any Lender from pledging or assigning
all or any portion of its Loans to any Federal Reserve Bank in accordance
with applicable law. In order to facilitate such pledge or assignment, each
Borrower hereby agrees that, upon request of any Lender at any time and from
time to time after such Borrower has made its initial borrowing hereunder, such
Borrower shall provide to such Lender, at such Borrower's own expense, a
promissory note, substantially in the form of Exhibit G-1 or G-2, as the case
may be, evidencing the Revolving Credit Loans, Swing Line Loans or Competitive
Loans, as the case may be, owing to such Lender.
11.10 Changing Designations of Swing Line Lenders and Competitive
Loan Lenders. (a) IBM shall have the right to change the designation of a
Lender or Swing Line Lender to (i) cause a Lender to become a Swing Line Lender,
(ii) change the Swing Line Commitment of a Swing Line Lender (so long as, after
giving effect thereto, (x) such Swing Line Commitment does not exceed such
Lender's Revolving Credit Commitment and (y) the aggregate amount of the Swing
Line Commitments shall not exceed $1,000,000,000) or (iii) cause a Swing Line
Lender to cease to be a Swing Line Lender, provided that no such change shall
become effective unless (x) the Lender affected thereby shall in its sole
discretion have agreed in writing to such change and (y) prior written
notification thereof shall have been delivered to the Administrative Agent and,
in the case of clause (i) above, the Administrative Agent shall have approved of
such designation (which approval shall not be unreasonably withheld).
(b) IBM shall have the right to change the designation of a
Lender or Competitive Loan Lender to (i) cause a Lender to become a
Competitive Loan Lender or (ii) cause a Competitive Loan Lender to cease to be a
Competitive Loan Lender, provided that no such change shall become effective
unless (x) the Lender affected thereby shall in its sole discretion have agreed
in writing to such change and (y) prior written notification thereof shall have
been delivered to the Administrative Agent and, in the case of clause (i) above,
the
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71
Administrative Agent shall have approved of such designation (which approval
shall not be unreasonably withheld).
11.11 Replacement of Lenders under Certain Circumstances. IBM
shall be permitted to replace any Lender which (a) requests reimbursement
for amounts owing pursuant to Section 2.17 or 2.18 (other than with respect to
Index Rate Competitive Loans), (b) is affected in the manner described in
Section 2.16 (other than with respect to Index Rate Competitive Loans) and as a
result thereof any of the actions described in said Section is required to be
taken or (c) defaults in its obligation to make Revolving Credit Loans or Swing
Line Loans hereunder, with a replacement bank or other financial institution;
provided that (i) such replacement does not conflict with any Requirement of
Law, (ii) no Event of Default shall have occurred and be continuing at the time
of such replacement, (iii) IBM shall repay (or the replacement bank or
institution shall purchase, at par) all Loans and other amounts owing to such
replaced Lender prior to the date of replacement, (iv) IBM shall be liable to
such replaced Lender under Section 2.19 if any Eurodollar Loan owing to such
replaced Lender shall be prepaid (or purchased) other than on the last day of
the Interest Period relating thereto or any Competitive Loan owing to such
replaced Lender shah be paid other than on the relevant Competitive Loan
Maturity Date, (v) the replacement bank or institution, if not already a Lender,
and the terms and conditions of such replacement, shall be reasonably
satisfactory to the Administrative Agent, (vi) the replaced Lender shall be
obligated to make such replacement in accordance with the provisions of Section
11.8 (provided that IBM shall be obligated to pay the registration and
processing fee referred to therein), (vii) until such time as such replacement
shall be consummated, IBM shall pay all additional amounts (if any) required
pursuant to Section 2.17 or 2.18, as the case may be, and (viii) any such
replacement shall not be deemed to be a waiver of any rights which IBM, the
Administrative Agent or any other Lender shall have against the replaced Lender.
11.12 Adjustments; Set-off. (a) If any Lender (a "benefited
Lender") shall at any time receive any payment of all or part of its US$
Loans, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 8(f) or (g), or otherwise), in
a greater proportion than any such payment to or collateral received by any
other Lender, if any, in respect of such other Lender's US$ Loans that are then
due and payable, or interest thereon, such benefitted Lender shall purchase at
par for cash from the other Lenders a participating interest in such portion of
each such other Lender's US$ Loan, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, however, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to any
Borrower, any such notice being expressly waived by each Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by any
Borrower hereunder (whether at the stated
<PAGE>
72
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or any branch or agency thereof to or for the credit or the
account of the relevant Borrower. Each Lender agrees promptly to notify IBM and
the Administrative Agent after any such set-off and application made by such
Lender, provided that the failure to give such notice shall not affect the
validity of such set-off and application.
11.13 Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with IBM and the
Administrative Agent.
11.14 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
11.15 Integration. This Agreement represents the agreement of the
Borrowers, the Administrative Agent and the Lenders with respect to the
subject matter hereof, and there are no promises, undertakings, representations
or warranties by the Administrative Agent or any Lender relative to subject
matter hereof not expressly set forth or referred to herein.
11.16 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.17 Submission To Jurisdiction; Waivers. Each Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition and enforcement
of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the State of New York, the courts of the
United States of America for the Southern District of New York, and
appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
<PAGE>
73
(c) in the case of each Subsidiary Borrower, designates and
directs IBM at its offices at Old Orchard Road, Armonk, New York, as its
agent to receive service of any and all process and documents on its behalf
in any legal action or proceeding referred to in paragraph (a) of this
Section 11.17 in the State of New York and agrees that service upon such
agent shall constitute valid and effective service upon such Subsidiary
Borrower and that failure of IBM to give any notice of such service to any
such party shall not affect or impair in any way the validity of such
service or of any judgment rendered in any action or proceeding based
thereon;
(d) in the case of each Subsidiary Borrower, to the extent that
such Subsidiary Borrower has or hereafter may acquire any immunity
(sovereign or otherwise) from any legal action, suit or proceeding, from
jurisdiction of any court or from set-off or any legal process (whether
service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise) with respect to
itself or any of its property or assets, waives and agrees not to plead or
claim such immunity in respect of its obligations under this Agreement (it
being understood that the waivers contained in this paragraph (d) shall
have the fullest extent permitted under the Foreign Sovereign Immunities
Act of 1976, as amended, and are intended to be irrevocable and not subject
to withdrawal for the purposes of such Act);
(e) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Borrower at its address referred to in Section 11.2 or at
such other address of which the Administrative Agent shall have been
notified pursuant thereto;
(f) agrees that nothing herein shall affect the fight to effect
service of process in any other manner permitted by law or shall limit the
fight to sue in any other jurisdiction; and
(g) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section any special, exemplary, punitive or
consequential damages.
11.18 Judgments Relating to Subsidiary Borrowers. (a) If, for
the purpose of obtaining judgment in any court, it is necessary to convert
a sum owing hereunder by any Subsidiary Borrower to any party hereto or any
holder of the obligations of such Subsidiary Borrower hereunder into another
currency, such Subsidiary Borrower agrees, to the fullest extent that it may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures in the relevant jurisdiction such
party or holder could purchase Dollars with such other currency for Dollars on
the Banking Day immediately preceding the day on which final judgment is given.
(b) The obligations of each Subsidiary Borrower in respect of any
sum due to any party hereto or any holder of the obligations owing
hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a
currency (the "Judgment Currency."') other than
<PAGE>
74
Dollars, be discharged only to the extent that, on the Banking Day
following receipt by the Applicable Creditor of any sum adjudged to be so due in
the Judgment Currency, the Applicable Creditor may in accordance with normal
banking procedures in the relevant jurisdiction purchase Dollars with the
Judgment Currency; if the amount of Dollars so purchased is less than the sum
originally due to the Applicable Creditor in Dollars, such Subsidiary Borrower
agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify the Applicable Creditor against such loss, provided, that if the
amount of Dollars so purchased exceeds the sum originally due to the Applicable
Creditor, the Applicable Creditor agrees to remit such excess to such Subsidiary
Borrower. The obligations of the Subsidiary Borrowers contained in this Section
11.1 8 shall survive the termination of this Agreement and the payment of all
other amounts owing hereunder.
11.19 Acknowledgements. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to any Borrower arising out of or in
connection with this Agreement, and the relationship between Administrative
Agent and Lenders, on one hand, and the Borrowers, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or otherwise exists by
virtue of the transactions contemplated hereby among the Lenders or among
the Borrowers and the Lenders.
11.20 WAIVERS OF JURY TRIAL. EACH OF THE BORROWERS, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND FOR ANY COUNTERCLAIM
THEREIN.
11.21 Confidentiality. Each Lender agrees to keep confidential any
written or oral information (a) provided to it by or on behalf of any
Borrower or any of the Subsidiaries pursuant to or in connection with this
Agreement or (b) obtained by such Lender based on a review of the books and
records of any Borrower or any of the Subsidiaries; provided that nothing herein
shall prevent any Lender from disclosing any such information (i) to the
Administrative Agent or any other Lender, (ii) to any Transferee or prospective
Transferee so long as delivery of such information is made subject to the
requirement that such information be kept confidential in the manner
contemplated by this Section 11.21, (iii) to its employees involved in the
administration of this Agreement or any Local Currency Facility, directors,
agents, attorneys, accountants and other professional advisors (each of which
shall be instructed to hold the same in confidence), (iv) upon the request or
demand of any Governmental Authority having jurisdiction over such Lender, (v)
in response to any order of
<PAGE>
75
any court or other Governmental Authority or as may otherwise be required
pursuant to any Requirement of Law, (vi) which has been publicly disclosed other
than in breach of this Agreement, or (vii) in connection with the exercise of
any remedy hereunder or under any Local Currency Facility.
11.22 Binding Effect; Successors and Assigns. (a) This Agreement
shall become effective on the date (the "Effective Date") on which (i) it
shall have been executed and delivered by a duly authorized officer of each of
IBM and the Administrative Agent and (ii) the Administrative Agent shall have
received an executed Addendum (or a copy thereof by facsimile transmission) from
each Person listed on Schedule 1.1A, provided, that, notwithstanding the
foregoing, in the event that an Addendum has not been duly executed and
delivered by each Person listed on Schedule 1.1A on the date (which shall be no
earlier than the date hereof) on which this Agreement shall have been executed
and delivered by each of IBM and the Administrative Agent, this Agreement shall
nevertheless become effective on such date with respect to those Persons which
have executed and delivered an Addendum on or before such date if IBM shall
(after consultation with the Administrative Agent) have designated one or more
Persons (the "Designated Lenders") to assume, in the aggregate, all of the
Revolving Credit Commitments which would have been held by the Persons listed on
Schedule I. 1A (the 'Non-Executing Persons") which have not so executed an
Addendum (subject to each such Designated Lender's prior written consent in its
sole discretion). Schedule I. 1A shall automatically be deemed to be amended to
reflect the respective Revolving Credit Commitments of the Designated Lenders
and the omission of the Non- Executing Persons as Lenders hereunder. The
Administrative Agent shall notify the Lenders of the Effective Date promptly
after the occurrence thereof, which notice shall be accompanied, if applicable,
with a copy of Schedule 1.1A revised to give effect to any deemed amendments
thereto made pursuant to this Section 11.22(a).
(b) This Agreement shall be binding upon and inure to the benefit
of the Borrowers, the Lenders, the Administrative Agent, all future
permitted holders of the obligations hereunder and their respective successors
and permitted assigns, except that no Borrower may assign or transfer any of its
fights or obligations under this Agreement without
<PAGE>
76
the prior written consent of each Lender. Each reference herein to any Lender
shall, to the extent applicable, be deemed to be a reference to any
affiliate, branch or agency of any Lender which is a Local Currency Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
INTERNATIONAL BUSINESS MACHINES
CORPORATION
By:
-----------------------------------
Title:
CHEMICAL BANK, as Administrative Agent
By:
-----------------------------------
Title:
<PAGE>
SCHEDULE 1.1
<TABLE><CAPTION>
Revolving
Credit Swing Line
Lender Commitment Commitment
----- ---------- ----------
<S> <C> <C>
Chemical Bank $ 300,000,000 50,000,000
The Fuji Bank, Limited 260,000,000 50,000,000
ABN AMRO Bank NV 235,000,000 50,000,000
Bank of America National
Trust and Savings
Association 235,000,000 50,000,000
Bank of Montreal 235,000,000 50,000,000
The Bank of Nova Scotia 235,000,000 50,000,000
The Bank of Tokyo Trust
Company 235,000,000
Banque Nationale de Paris 235,000,000 50,000,000
Canadian Imperial Bank
of Commerce 235,000,000 50,000,000
The Chase Manhattan Bank, N.A. 235,000,000 50,000,000
Credit Suisse 235,000,000 50,000,000
Industrial Bank of Japan 235,000,000
Istituto Bancario San Paolo
di Torino S.P.A. 235,000,000 50,000,000
J.P. Morgan 235,000,000 50,000,000
The Long-Term Credit Bank of
Japan, Limited 235,000,000
PNC Bank, N.A. 235,000,000
Sakura Bank 235,000,000
The Sanwa Bank Limited 235,000,000 50,000,000
Societe Generale 235,000,000 50,000,000
The Sumitomo Bank, Limited 235,000,000 50,000,000
Bank of Boston 195,000,000
Bayerische Landesbank
Girozentrale 195,000,000 50,000,000
Cassa di Risparmio della
Provincie Lambarde (CARIPLO) 195,000,000
Compagnie Financiere de CIC
et de l'Union Europeene 195,000,000
The Mitsubishi Trust and
Banking Corporation 195,000,000
The Nippon Credit Bank, Ltd. 195,000,000 50,000,000
The Toronto Dominion Bank 195,000,000 50,000,000
Wachovia Bank, N.A. 195,000,000 50,000,000
Deutsche Bank AG 150,000,000
DG BANK Deutsche
Genossenschaftsbank 150,000,000
Shawmut Bank, N.A. 150,000,000
Banca di Roma SpA 100,000,000
Banco Central HispanoAmericano 100,000,000
Banco Exterior 100,000,000
Banco Santander 100,000,000
Comerica Bank 100,000,000
The Dai-ichi Kangyo Bank, Ltd. 100,000,000
Daiwa Bank Trust Company 100,000,000
Hypo Bank 100,000,000
ING Bank 100,000,000
The Mitsubishi Bank, Ltd. 100,000,000
</TABLE>
<PAGE>
2
<TABLE><CAPTION>
Revolving
Credit Swing Line
Lender Commitment Commitment
------ ---------- ----------
<S> <C> <C>
The Yasuda Trust and Banking
Company, Limited 100,000,000 50,000,000
Banque Paribas 100,000,000
Banca Commerciale Italiana 100,000,000
Banca Nazionale del Lavoro 100,000,000
Bayerische Vereinsbank AG 100,000,000
Commerzbank AG 100,000,000
Credit Lyonnais Cayman
Island Branch 100,000,000
Credito Italiano 100,000,000
Mellon Bank, N.A. 100,000,000
Monte Dei Paschi di Siena 100,000,000
Norinchukin Bank 100,000,000
The Tokai Bank, Limited 100,000,000
Westdeutsche Landesbank 100,000,000
Banca Nazionale dell'
Agricoltura 60,000,000
Arab Bank Plc 50,000,000
Banca Popolare di Milano 50,000,000
Banco Bilbao Vizcaya 50,000,000
Continental Bank, N.A. 50,000,000
Kredietbank N.V. 50,000,000
Landesbank Rheinland-Pfalz
Girozentrale 50,000,000
Mitsui Trust and Banking
Company, Limited 50,000,000
Sudwestdeutche Landesbank 50,000,000
Svenska Handelsbanken 50,000,000
Swiss Bank Corporation 50,000,000
First Bank, N.A. 30,000,000
Bank of Hawaii 25,000,000
Bank of Taiwan 25,000,000
Banque Worms 25,000,000
Banque Francaise du
Commerce Exterieur 25,000,000
The First National Bank
Chicago 25,000,000
ado Takughoku Bank, Ltd. 25,000,000
The Northern Trust Company 25,000,000
Republic National Bank of
New York 25,000,000
Royal Bank of Scotland 25,000,000
Toyo Trust & Banking 25,000,000
Via Bank 25,000,000
Chiba Bank 10,000,000
Joyo Bank 10,000,000
77 Bank 10,000,000
Abu Dhabi International
Bank 5,000,000
--------------- --------------
Total $10,000,000,000 $1,000,000,000
</TABLE>
<PAGE>
Schedule 1.1B
Existing Credit Agreements
- --------------------------
1. The $300,000,000 Revolving Credit Facility Agreement dated as of May 26,
1993 among IBM Credit Corporation, the lenders party thereto (the "Banks"),
Credit Suisse, as agent and administrative agent for the Banks, Bank of America
National Trust and Savings Association, The Chase Manhattan Bank, N.A., Chemical
Bank, Societe Generale, Union Bank of Switzerland, as co-agents for the Banks,
and Credit Suisse First Boston Limited, as arranger.
2. The $1,300,000,000 Revolving Credit Facility Agreement dated as of May 26,
1993 among IBM Credit Corporation, the lenders party thereto (the "Banks"),
Credit Suisse, as agent and administrative agent for the Banks, Bank of America
National Trust and Savings Association, The Chase Manhattan Bank, N.A., Chemical
Bank, Societe Generale, Union Bank of Switzerland, as co-agents for the Banks,
and Credit Suisse First Boston Limited, as arranger.
3. The $500,000,000 Revolving Credit Facility Agreement dated as of May 26,
1993 among International Business Machines Corporation, the lenders party
thereto (the "Banks"), Credit Suisse, as agent and administrative agent for the
Banks, Bank of America National Trust and Savings Association, The Chase
Manhattan Bank, N.A., Chemical Bank, Societe Generale, Union Bank of
Switzerland, as co-agents for the Banks, and Credit Suisse First Boston Limited,
as arranger.
4. The $2,500,000,000 Revolving Credit Facility Agreement dated as of May 26,
1993 among International Business Machines Corporation, the lenders party
thereto (the "Banks"), Credit Suisse, as agent and administrative agent for the
Banks, Bank of America National Trust and Savings Association, The Chase
Manhattan Bank, N.A., Chemical Bank, Societe Generale, Union Bank of
Switzerland, as co-agents for the Banks, and Credit Suisse First Boston Limited,
as arranger.
<PAGE>
SCHEDULE 6.2(c)
[FORM OF COMPLIANCE CERTIFICATE]
COMPLIANCE CERTIFICATE
[For the Fiscal Quarter ending __]
[For the Fiscal Year ending __]
Pursuant to Section 6.2(c) of the Credit Agreement, dated as of
December 22, 1993 (as amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"; terms defined therein being used herein as
therein defined unless otherwise defined herein), among International Business
Machines Corporation ("IBM"), each Subsidiary Borrower party thereto, the
Lenders named therein, and Chemical Bank, as Administrative Agent for the
Lenders (in such capacity, the "Administrative Agent"), the undersigned, the
duly elected, qualified and acting Responsible Officer of IBM, hereby certifies
that:
(a) During the period of four consecutive fiscal quarters ended
on , 199 , such Responsible Officer has obtained no knowledge of any
Default or Event of Default except as follows:
[The financial statements referred to in Section 6.2(b) of the
Credit Agreement which are delivered concurrently with the delivery of this
Compliance Certificate fairly present the financial position, results of
operations, cash flows and changes in stockholders' equity of IBM and the
Subsidiaries, in accordance with GAAP, subject to normal year-end audit
adjustments which are not expected to be material in amount.] */
[(b) The covenant calculation set forth below is based on IBM's
[unaudited] [audited] balance sheet and statements of earnings, cash flows and
stockholders' equity for the fiscal [quarter] [year] ended
, 199 , a copy of which is attached hereto.]**/
- ------------------
*/ Insert only in Compliance Certificates accompanying financial statements
delivered pursuant to Section 6.2(b) of the Credit Agreement.
**/ Insert only in Compliance Certificates delivered in respect of fiscal
periods ending on or after June 30, 1994.
<PAGE>
<TABLE><CAPTION>
1. Consolidated Net Interest Expense Ratio (Section 7.4)
The ratio of
<S> <C> <C>
(i) the difference between
A. the sum of
(1) earnings before income taxes of IBM and its
consolidated Subsidiaries for the period of four
consecutive fiscal quarters ended on the date
referred to in paragraph (b) above, excluding
gains or losses from the divestiture or sale of a
business
(2) Consolidated Net Interest Expense (to the extent
deducted in arriving at earnings before income
taxes) $_________
(3) depreciation expense (to the extent deducted in
arriving at earnings before income taxes) $_________
(4) amortization expense (to the extent deducted in
arriving at earnings before income taxes) $_________
(5) restructuring charges made after the Effective
Date (to the extent deducted in arriving at
earnings before income taxes) $_________
Total of (1), (2), (3), (4) and (5) above $_________
and
B. the sum of
(1) cash payments made during such period in respect
of restructuring charges made after the Effective
Date $_________
(2) payments made during such period for plant,
rental machines and other property excluding
acquisitions of businesses (net of proceeds
received during such period from dispositions of
plant, rental machines and other property
investment excluding divestitures or sales of
businesses)
(3) Investment in software for such period $_________
Total of (1), (2) and (3) above $_________
equals
C. Consolidated Adjusted Cash Flow
(A. minus B.) $_________
</TABLE>
<PAGE>
to
(ii) the difference between
A. total interest cost of IBM and the Subsidiaries
for such period $_______
and
B. interest income of IBM and the Subsidiaries for such
period equals $_______
C. Consolidated Net Interest Expense $_______
equals
(iii) the Consolidated Net Interest Expense Ratio $_______
(Ratio of Consolidated Adjusted Cash Flow (i)(C.) to
Consolidated Net Interest Expense (ii)(C.))
IN WITNESS WHEREOF, the undersigned has hereto set his name.
Dated:
---------------------------
Title: [Responsible Officer
of IBM]
<PAGE>
EXHIBIT A-1 TO
CREDIT AGREEMENT
[FORM OF COMPETITIVE LOAN CONFIRMATION]
, 199_
Chemical Bank, as Administrative Agent
270 Park Avenue
New York, New York 10017
Reference is made to the Credit Agreement, dated as of December 22, 1993,
among International Business Machines Corporation, each Subsidiary Borrower
party thereto, the Lenders named therein, and Chemical Bank, as Administrative
Agent (as the same may be amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"). Terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
In accordance with Section 2.8(d) of the Credit Agreement, the
undersigned accepts and confirms the offers by Competitive Loan Lender(s)
to make Competitive Loans to the undersigned on , 199_ [Competitive Loan
Borrowing Date] under Section 2.8(b) [index rate] or 2.8(c) [fixed rate] in the
(respective) amount(s) set forth on the attached list of Competitive Loans
offered.
Very truly yours,
[Name of Borrower]
By
---------------------------------
Title:
[Borrower must attach Competitive Loan offer list prepared by Administrative
Agent with accepted amount entered by the Borrower to right of each
Competitive Loan offer].
<PAGE>
EXHIBIT A-2 TO
CREDIT AGREEMENT
[FORM OF COMPETITIVE LOAN OFFER]
Chemical Bank, as Administrative Agent , 199_
270 Park Avenue
New York, New York 10017
Reference is made to the Credit Agreement, dated as of December 22, 1993,
among International Business Machines Corporation, each Subsidiary Borrower
party thereto, the Lenders named therein, and Chemical Bank, as Administrative
Agent (as the same may be amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"). Terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement. In
accordance with Section 2.8(b) [index rate] or 2.8(c) [fixed rate] of the Credit
Agreement, the undersigned Competitive Loan Lender offers to make Competitive
Loans thereunder in the following amounts with the following maturity dates:
Competitive Aggregate Maximum Amount: $_________
Loan Date: ,199
--------- ---
Maturity Date 1: Maximum Amount: $
---------
,199 $ offered at *
------------ --------- --------
$ offered at *
------------ --------- --------
Maturity Date 2: Maximum Amount: $
----------
, 199 $ offered at *
------------ --------- --------
$ offered at *
------------ --------- --------
Maturity Date 3: Maximum Amount: $
, 199 $ offered at *
------------ --------- --------
$ offered at *
------------ --------- --------
Very truly yours,
[NAME OF COMPETITIVE LOAN LENDER]
By _____________________________________
Name____________________________________
Title___________________________________
Telephone No.___________________________
Fax No._________________________________
- ----------------------
* Insert the interest rate offered for the specified loan amount. In the
case of Index Rate Competitive Loans, insert a margin bid. In the case of
Fixed Rate Competitive Loans. insert a fixed rate bid.
<PAGE>
EXHIBIT A-3 TO
CREDIT AGREEMENT
[FORM OF COMPETITIVE LOAN REQUEST]
,199
--------- --
Chemical Bank, as Administrative Agent
270 Park Avenue
New York, New York 10017
Reference is made to the Credit Agreement, dated as of December 22, 1993,
among International Business Machines Corporation, the undersigned, each
Subsidiary Borrower party thereto, the Lenders named therein, and Chemical
Bank, as Administrative Agent (as the same may be amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"). Terms defined in
the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
This is [an Index Rate] [a Fixed Rate] Competitive Loan Request pursuant to
Section 2.8(a) of the Credit Agreement requesting quotes for the following
Competitive Loan:
<TABLE><CAPTION>
Loan 1 Loan 2 Loan 3
<S> <C> <C> <C>
Aggregate Principal Amount $ $ $
Borrowing Date
Interest Period2
Maturity Date3
Interest Payment Dates4
Very truly yours,
[Name of Borrower]
By:
-------------------
Title:
</TABLE>
- --------------------
1. Pursuant to the Credit Agreement, a Competitive Loan Request may be
transmitted in writing or by facsimile transmission, or by telephone,
immediately confirmed by facsimile transmission. In any case, a Competitive
Loan Request shall contain the information specified in the second paragraph
of this form.
2. Insert only in an Index Rate Competitive Loan Request.
3. In an Index Rate Competitive Loan Request, insert last day of Interest
Period.
4. Insert only in a Fixed Rate Competitive Loan Request.
<PAGE>
EXECUTION COPY
FIRST AMENDMENT, dated as of March 1, 1995, to the Credit Agreement dated as
of December 22, 1993 (the "Credit Agreement") among International Business
Machines Corporation ("IBM"), each Subsidiary Borrower party thereto, the banks
and other financial institutions parties thereto (the "Lenders") and Chemical
Bank, as administrative agent (in such capacity, the "Administrative Agent") for
the Lenders.
W I T N E S S E T H:
WHEREAS, IBM has requested the Lenders to amend the Credit Agreement in
order to (i) change the Applicable Eurodollar Margin and the Facility Fee Rate,
(ii) increase the maximum permitted aggregate of all Local Currency Facility
Stated Maximum Borrowing Amounts from $4,000,000,000 to $5,000,000,000 and (iii)
modify the requirement that the Lenders party to any Local Currency Facility
execute the related Local Currency Facility Addendum; and
WHEREAS, in connection with the foregoing, IBM has requested the
Administrative Agent, on behalf of the Lenders, to enter into this First
Amendment, and the Administrative Agent is willing to so consent subject to the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged the parties hereto hereby agree as follows:
I. AMENDMENTS
1. SECTION 1.1--APPLICABLE EURODOLLAR MARGIN. Section 1.1 of the Credit
Agreement is hereby amended by amending and restating the definition of
"Applicable Eurodollar Margin" in its entirety as follows:
"Applicable Eurodollar Margin": with respect to each Eurodollar Loan at
any date, the applicable percentage per annum set forth below based upon the
Status and Utilization on such date (provided that if the Revolving Credit
Commitments have been terminated on or prior to such date, the Utilization
for such date shall be deemed to be greater than 50%):
<TABLE>
<CAPTION>
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
STATUS STATUS STATUS STATUS STATUS
------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
If Utilization is less than or equal to
50%...................................... 0.1700% 0.1750% 0.2000% 0.4000% 0.5000%
If Utilization is greater than 50%....... 0.2950% 0.3000% 0.3250% 0.5250% 0.6250%
</TABLE>
2. SECTION 1.1--FACILITY FEE RATE. Section 1.1 of the Credit Agreement is
hereby amended by amending and restating the definition of "Facility Fee Rate"
in its entirety as follows:
"Facility Fee Rate": for any day, the rate per annum set forth below
opposite the Status in effect on such day:
FACILITY FEE
STATUS RATE
- ------------------------------------------ ------------
Level I Status............................ 0.0800%
Level II Status........................... 0.0900%
Level III Status.......................... 0.1000%
Level IV Status........................... 0.2000%
Level V Status............................ 0.3750%
3. Section 3.1(a). Section 3.1(a) of the Credit Agreement is hereby amended
by deleting the words "executed by IBM, each such Borrower and each such Lender"
and substituting, in lieu thereof,
<PAGE>
the words "executed by IBM and each such Borrower and executed or acknowledged
in writing by each such Lender".
4. Section 3.1(b). Section 3.1(b) of the Credit Agreement is hereby amended
by deleting the amount "$4,000,000,000" contained therein and substituting, in
lieu thereof, the amount "$5,000,000,000".
II. MISCELLANEOUS
1. DEFINED TERMS. Terms defined in the Credit Agreement shall be used in
this First Amendment with their defined meanings unless otherwise defined
herein.
2. CONDITIONS TO EFFECTIVENESS. This First Amendment shall become effective
on the date (the "Amendment Effective Date") on which (a) the Administrative
Agent shall have received from each Lender an executed consent (or a facsimile
transmission thereof) to the execution of this First Amendment by the
Administrative Agent on behalf of such Lender and (b) the Administrative Agent
shall have received a counterpart hereof (or a facsimile transmission thereof)
executed by IBM and each Subsidiary Borrower.
3. REPRESENTATIONS AND WARRANTIES: No Default or Event of Default. (a) Each
of IBM and each Subsidiary Borrower hereby represents and warrants as of the
date hereof and as of the Amendment Effective Date that each of the
representations and warranties made by it in the Credit Agreement is true and
correct in all material respects on and as of each such date as if made on and
as of each such date; (b) IBM hereby represents and warrants as of the date
hereof and as of the Amendment Effective Date that no Default or Event of
Default (other than those relating to any Local Currency Facility) has occurred
and is continuing as of each such date; and (c) each Subsidiary Borrower hereby
represents and warrants as of the date hereof and as of the Amendment Effective
Date that no Default or Event of Default relating to any Local Currency Facility
to which it is a party has occurred and is continuing as of each such date.
4. NO CHANGE. Except as expressly provided herein, this Amendment shall not
modify or amend any term or provision of the Credit Agreement, and each term and
provision of the Credit Agreement shall remain in full force and effect.
5. COUNTERPARTS. This First Amendment may be executed by the parties hereto
in any number of separate counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
6. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
INTERNATIONAL BUSINESS MACHINES
CORPORATION
By
...................................
Title:
CHEMICAL BANK, as Administrative Agent
By
...................................
Title:
2
<PAGE>
IBM INTERNATIONAL MAINTENANCE PARTS
LOGISTICS B.V.
By
...................................
Title:
IBM NEDERLAND FINANCIERINGEN B.V.
By
...................................
Title:
IBM NEDERLAND N.V.
By
...................................
Title:
IBM INTERNATIONAL FINANCE N.V.
By
...................................
Title: Director
IBM DE MEXICO, S.A.
By
...................................
Title:
IBM DEL PERU S.A.
By
...................................
Title:
<PAGE>
IBM IRELAND LIMITED
By
...................................
Title:
IBM CANADA LTD.
By
...................................
Title:
IBM VENEZUELA S.A.
By
...................................
Title:
INTERNATIONAL BUSINESS MACHINES, S.A.
By
...................................
Title:
IBM BRASIL INDUSTRIA, MAQUINAS E
SERVICOS, LTD.
By
...................................
Title:
IBM BRASIL LEASING ARRENDAMENTO
MERCANTIL S.A.
By
...................................
Title:
<PAGE>
IBM URUGUAY, S.A.
By
...................................
Title:
IBM SEMEA S.P.A
By
..................................
Title:
IBM ARGENTINA, S.A.
By
...................................
Title:
IBM AUSTRALIA LIMITED
By
...................................
Title:
IBM UNITED KINGDOM HOLDINGS LIMITED
By
...................................
Title:
IBM UNITED KINGDOM LIMITED
By
...................................
Title:
IBM CREDIT CORPORATION
By
...................................
Title:
EXHIBIT (c)(1)
EXECUTION COPY
============================================================
AGREEMENT AND PLAN OF MERGER
Among
INTERNATIONAL BUSINESS MACHINES CORPORATION,
TOPAZ ACQUISITION CORP.
and
TIVOLI SYSTEMS INC.
Dated as of January 30, 1996
============================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
The Offer
---------
SECTION 1.01. The Offer . . . . . . . . . . . . . . . 2
SECTION 1.02. Company Actions . . . . . . . . . . . . 4
ARTICLE II
The Merger
----------
SECTION 2.01. The Merger . . . . . . . . . . . . . . 6
SECTION 2.02. Closing . . . . . . . . . . . . . . . . 6
SECTION 2.03. Effective Time . . . . . . . . . . . . 6
SECTION 2.04. Effects of the Merger . . . . . . . . . 7
SECTION 2.05. Certificate of Incorporation and
By-laws . . . . . . . . . . . . . . . 7
SECTION 2.06. Directors . . . . . . . . . . . . . . . 7
SECTION 2.07. Officers . . . . . . . . . . . . . . . 7
ARTICLE III
Effect of the Merger on the Capital Stock of the
------------------------------------------------
Constituent Corporations; Exchange of Certificates
--------------------------------------------------
SECTION 3.01. Effect on Capital Stock . . . . . . . . 7
(a) Capital Stock of Sub . . . . . . . 8
(b) Cancelation of Treasury Stock and
Parent Owned Stock . . . . . . . 8
(c) Conversion of Company Common Stock 8
(d) Shares of Dissenting Stockholders 8
SECTION 3.02. Exchange of Certificates . . . . . . . 9
(a) Paying Agent . . . . . . . . . . . 9
(b) Exchange Procedure . . . . . . . . 9
(c) No Further Ownership Rights in
Company Common Stock . . . . . . 10
(d) No Liability . . . . . . . . . . . 10
<PAGE>
Contents, p. 2
Page
----
ARTICLE IV
Representations and Warranties of the Company
---------------------------------------------
SECTION 4.01. Organization . . . . . . . . . . . . . 11
SECTION 4.02. Subsidiaries . . . . . . . . . . . . . 11
SECTION 4.03. Capitalization . . . . . . . . . . . . 12
SECTION 4.04. Authority . . . . . . . . . . . . . . . 13
SECTION 4.05. Consents and Approvals; No Violations . 13
SECTION 4.06. SEC Reports and Financial Statements . 14
SECTION 4.07. Absence of Certain Changes or Events . 15
SECTION 4.08. No Undisclosed Liabilities . . . . . . 17
SECTION 4.09. Information Supplied . . . . . . . . . 17
SECTION 4.10. Benefit Plans . . . . . . . . . . . . . 18
SECTION 4.11. Other Compensation Arrangements. . . . . 18
SECTION 4.12. Litigation . . . . . . . . . . . . . . . 19
SECTION 4.13. Compliance with Applicable Law . . . . 19
SECTION 4.14. Tax Matters . . . . . . . . . . . . . . 20
SECTION 4.15. State Takeover Statutes . . . . . . . . 21
SECTION 4.16. Brokers; Fees and Expenses . . . . . . 22
SECTION 4.17. Opinion of Financial Advisor . . . . . 22
SECTION 4.18. Intellectual Property . . . . . . . . . 22
SECTION 4.19. Distribution Agreements . . . . . . . . 25
SECTION 4.20. Indebtedness . . . . . . . . . . . . . 25
ARTICLE V
Representations and Warranties
------------------------------
of Parent and Sub
-----------------
SECTION 5.01. Organization . . . . . . . . . . . . . 25
SECTION 5.02. Authority . . . . . . . . . . . . . . . 25
SECTION 5.03. Consents and Approvals; No Violations . 26
SECTION 5.04. Information Supplied . . . . . . . . . 27
SECTION 5.05. Interim Operations of Sub . . . . . . . 27
SECTION 5.06. Brokers . . . . . . . . . . . . . . . . 27
SECTION 5.07. Financing . . . . . . . . . . . . . . . 27
<PAGE>
Contents, p. 3
Page
----
ARTICLE VI
Covenants
---------
SECTION 6.01. Covenants of the Company . . . . . . . 28
(a) Ordinary Course . . . . . . . . . 28
(b) Dividends; Changes in Stock . . . 28
(c) Issuance of Securities . . . . . . 28
(d) Governing Documents . . . . . . . 29
(e) No Acquisitions . . . . . . . . . 29
(f) No Dispositions . . . . . . . . . 29
(g) Indebtedness . . . . . . . . . . . 29
(h) Advice of Changes; Filings . . . . 30
(i) Tax Matters . . . . . . . . . . . 30
(j) Capital Expenditures . . . . . . . 30
(k) Discharge of Liabilities . . . . . 30
(l) Material Contracts . . . . . . . . 31
(m) Compensation of Company Employees 31
(n) General . . . . . . . . . . . . . 31
SECTION 6.02. No Solicitation . . . . . . . . . . . . 31
SECTION 6.03. Other Actions . . . . . . . . . . . . . 34
ARTICLE VII
Additional Agreements
---------------------
SECTION 7.01. Stockholder Approval; Preparation of
Proxy Statement . . . . . . . . . . . 35
SECTION 7.02. Access to Information . . . . . . . . . 36
SECTION 7.03. Reasonable Efforts . . . . . . . . . . 36
SECTION 7.04. Company Stock Options; Shares Subject
to Repurchase Right . . . . . . . . . . 37
SECTION 7.05. Directors . . . . . . . . . . . . . . . 39
SECTION 7.06. Fees and Expenses . . . . . . . . . . . 40
SECTION 7.07. Indemnification; Insurance . . . . . . 41
SECTION 7.08. Certain Litigation . . . . . . . . . . 41
SECTION 7.09. Benefits . . . . . . . . . . . . . . . 42
<PAGE>
Contents, p. 4
Page
----
ARTICLE VIII
Conditions
----------
SECTION 8.01. Conditions to Each Party's Obligation To
Effect the Merger . . . . . . . . . . 42
(a) Company Stockholder Approval . . . 42
(b) No Injunctions or Restraints . . . 42
(c) Purchase of Shares . . . . . . . . 43
ARTICLE IX
Termination and Amendment
-------------------------
SECTION 9.01. Termination . . . . . . . . . . . . . . 43
SECTION 9.02. Effect of Termination . . . . . . . . . 44
SECTION 9.03. Amendment . . . . . . . . . . . . . . . 44
SECTION 9.04. Extension; Waiver . . . . . . . . . . . 45
ARTICLE X
Miscellaneous
-------------
SECTION 10.01. Nonsurvival of Representations,
Warranties and Agreements . . . . . . 45
SECTION 10.02. Notices . . . . . . . . . . . . . . . . 45
SECTION 10.03. Interpretation . . . . . . . . . . . . 47
SECTION 10.04. Counterparts . . . . . . . . . . . . . 47
SECTION 10.05. Entire Agreement; Third Party
Beneficiaries . . . . . . . . . . . . 47
SECTION 10.06. Governing Law . . . . . . . . . . . . . 48
SECTION 10.07. Publicity . . . . . . . . . . . . . . . 48
SECTION 10.08. Assignment . . . . . . . . . . . . . . 48
SECTION 10.09. Enforcement . . . . . . . . . . . . . . 48
Exhibits
- --------
Exhibit A Conditions of the Offer
<PAGE>
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER dated as of
January 30, 1996, among INTERNATIONAL
BUSINESS MACHINES CORPORATION, a New York
corporation ("Parent"), TOPAZ ACQUISITION
CORP., a Delaware corporation and a wholly
owned subsidiary of Parent ("Sub"), and
TIVOLI SYSTEMS INC., a Delaware corporation
(the "Company").
WHEREAS the respective Boards of Directors of
Parent, Sub and the Company have approved the acquisition of
the Company by Parent on the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition,
Parent proposes to cause Sub to make a tender offer (as it
may be amended from time to time as permitted under this
Agreement, the "Offer") to purchase all the outstanding
shares of Common Stock, par value $0.01 per share, of the
Company (the "Company Common Stock"; all the outstanding
shares of Company Common Stock being hereinafter
collectively referred to as the "Shares") at a purchase
price of $47.50 per share (the "Offer Price"), net to the
seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in this Agreement; and
the Board of Directors of the Company has adopted
resolutions approving the Offer and the Merger (as defined
below), recommending that the Company's stockholders accept
the Offer and approving the acquisition of Shares by Sub
pursuant to the Offer and the Stockholder Agreement (as
defined below);
WHEREAS the respective Boards of Directors of
Parent, Sub and the Company have each approved the merger of
Sub into the Company (the "Merger"), upon the terms and
subject to the conditions set forth in this Agreement,
whereby each share of Company Common Stock, other than
shares of Company Common Stock owned directly or indirectly
by Parent or the Company and Dissenting Shares (as defined
in Section 3.01(d)), will be converted into the right to
receive the price per share paid in the Offer;
WHEREAS, concurrently with the execution of this
Agreement and as an inducement to Parent to enter into this
Agreement, Parent, Sub and certain stockholders of the
Company are entering into a Stockholder Agreement (the
"Stockholder Agreement") pursuant to which such stockholders
have, among other things, agreed to sell all such
<PAGE>
2
stockholders' Shares to the Purchaser at a cash price per
Share of the Offer Price, or such higher price per Share as
may be offered by Sub in the Offer, upon the terms and
subject to the conditions set forth in the Stockholder
Agreement;
WHEREAS, concurrently with the execution of this
Agreement and as an inducement to Parent to enter into this
Agreement, Parent and certain stockholders of the Company
who are employed by the Company are entering into a
Noncompetition Agreement (the "Noncompetition Agreement")
pursuant to which such stockholders have, among other
things, agreed to not have any Relationship (as defined in
the Noncompetition Agreement) with certain third parties
during the Noncompetition Period (as defined in the
Noncompetition Agreement); and
WHEREAS Parent, Sub and the Company desire to make
certain representations, warranties, covenants and
agreements in connection with the Offer and the Merger and
also to prescribe various conditions to the Offer and the
Merger.
NOW, THEREFORE, in consideration of the foregoing
and the mutual covenants and agreements herein contained,
and intending to be legally bound hereby, Parent, Sub and
the Company hereby agree as follows:
ARTICLE I
The Offer
---------
SECTION 1.01. The Offer. (a) Subject to the
----------
provisions of this Agreement, as promptly as practicable but
in no event later than five business days after the date of
the public announcement by Parent and the Company of this
Agreement, Sub shall, and Parent shall cause Sub to,
commence the Offer. The obligation of Sub to, and of Parent
to cause Sub to, commence the Offer and accept for payment,
and pay for, any Shares tendered pursuant to the Offer shall
be subject to the conditions set forth in Exhibit A (the
"Offer Conditions") (any of which may be waived in whole or
in part by Sub in its sole discretion, provided that,
without the consent of the Company, Sub shall not waive the
Minimum Condition (as defined in Exhibit A)) and to the
terms and conditions of this Agreement. Sub expressly
reserves the right to modify the terms of the Offer, except
<PAGE>
3
that, without the consent of the Company, Sub shall not
(i) reduce the number of Shares subject to the Offer,
(ii) reduce the Offer Price, (iii) add to the Offer
Conditions, (iv) except as provided in the next sentence,
extend the Offer, (v) change the form of consideration
payable in the Offer or (vi) amend any other term of the
Offer in any manner adverse to the holders of the Shares.
Notwithstanding the foregoing, Sub may, without the consent
of the Company, (A) extend the Offer, if at the scheduled or
extended expiration date of the Offer any of the Offer
Conditions shall not be satisfied or waived, until such time
as such conditions are satisfied or waived, (B) extend the
Offer for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange
Commission (the "SEC") or the staff thereof applicable to
the Offer and (C) extend the Offer for any reason on one or
more occasions for an aggregate period of not more than
25 business days beyond the latest expiration date that
would otherwise be permitted under clause (A) or (B) of this
sentence. Subject to the terms and conditions of the Offer
and this Agreement, Sub shall, and Parent shall cause Sub
to, accept for payment, and pay for, all Shares validly
tendered and not withdrawn pursuant to the Offer that Sub
becomes obligated to accept for payment, and pay for,
pursuant to the Offer as soon as practicable after the
expiration of the Offer.
(b) On the date of commencement of the Offer,
Parent and Sub shall file with the SEC a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1") with
respect to the Offer, which shall contain an offer to
purchase and a related letter of transmittal and summary
advertisement (such Schedule 14D-1 and the documents
included therein pursuant to which the Offer will be made,
together with any supplements or amendments thereto, the
"Offer Documents"). Parent and Sub agree that the Offer
Documents shall comply as to form in all material respects
with the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated
thereunder and the Offer Documents, on the date first
published, sent or given to the Company's stockholders,
shall not 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 were
made, not misleading, except that no representation or
warranty is made by Parent or Sub with respect to
information supplied by the Company or any of its
stockholders specifically for inclusion or incorporation by
<PAGE>
4
reference in the Offer Documents. Parent, Sub and the
Company each agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the
extent that such information shall have become false or
misleading in any material respect, and Parent and Sub
further agree to take all steps necessary to cause the
Schedule 14D-1 as so corrected to be filed with the SEC and
the other Offer Documents as so corrected to be disseminated
to holders of Shares, in each case as and to the extent
required by applicable Federal securities laws. The Company
and its counsel shall be given reasonable opportunity to
review and comment upon the Offer Documents prior to their
filing with the SEC or dissemination to the stockholders of
the Company. Parent and Sub agree to provide the Company
and its counsel any comments Parent, Sub or their counsel
may receive from the SEC or its staff with respect to the
Offer Documents promptly after the receipt of such comments.
(c) Parent shall provide or cause to be provided
to Sub on a timely basis the funds necessary to accept for
payment, and pay for, any Shares that Sub becomes obligated
to accept for payment, and pay for, pursuant to the Offer.
SECTION 1.02. Company Actions. (a) The Company
----------------
hereby approves of and consents to the Offer and represents
that the Board of Directors of the Company, at a meeting
duly called and held, duly and unanimously adopted
resolutions approving this Agreement, the Offer and the
Merger, determining that the terms of the Offer and the
Merger are fair to, and in the best interests of, the
Company's stockholders and recommending that the Company's
stockholders accept the Offer, tender their shares pursuant
to the Offer and approve and adopt this Agreement. The
Company represents that its Board of Directors has received
the opinion of Goldman, Sachs & Co. that the proposed
consideration to be received by the holders of Shares
pursuant to the Offer and the Merger is fair to such
holders, and a complete and correct signed copy of such
opinion has been delivered by the Company to Parent.
(b) On the date the Offer Documents are filed
with the SEC, or promptly thereafter, the Company shall file
with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such
Schedule 14D-9, as amended from time to time, the
"Schedule 14D-9") containing the recommendation described in
paragraph (a) and shall mail the Schedule 14D-9 to the
stockholders of the Company. The Schedule 14D-9 shall
comply as to form in all material respects with the
<PAGE>
5
requirements of the Exchange Act and the rules and
regulations promulgated thereunder and, on the date filed
with the SEC and on the date first published, sent or given
to the Company's stockholders, shall not 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 were made, not misleading, except that no
representation or warranty is made by the Company with
respect to information supplied by Parent or Sub
specifically for inclusion in the Schedule 14D-9. Each of
the Company, Parent and Sub agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if
and to the extent that such information shall have become
false or misleading in any material respect, and the Company
further agrees to take all steps necessary to amend or
supplement the Schedule 14D-9 and to cause the
Schedule 14D-9 as so amended or supplemented to be filed
with the SEC and disseminated to the Company's stockholders,
in each case as and to the extent required by applicable
Federal securities laws. Parent and its counsel shall be
given reasonable opportunity to review and comment upon the
Schedule 14D-9 prior to its filing with the SEC or
dissemination to stockholders of the Company. The Company
agrees to provide Parent and its counsel any comments the
Company or its counsel may receive from the SEC or its staff
with respect to the Schedule 14D-9 promptly after the
receipt of such comments.
(c) In connection with the Offer and the Merger,
the Company shall cause its transfer agent to furnish Sub
promptly with mailing labels containing the names and
addresses of the record holders of Shares as of a recent
date and of those persons becoming record holders subsequent
to such date, together with copies of all lists of
stockholders, security position listings and computer files
and all other information in the Company's possession or
control regarding the beneficial owners of Shares, and shall
furnish to Sub such information and assistance (including
updated lists of stockholders, security position listings
and computer files) as Parent may reasonably request in
communicating the Offer to the Company's stockholders.
Subject to the requirements of applicable law, and except
for such steps as are necessary to disseminate the Offer
Documents and any other documents necessary to consummate
the Merger, Parent and Sub and their agents shall hold in
confidence the information contained in any such labels,
listings and files, will use such information only in
connection with the Offer and the Merger and, if this
<PAGE>
6
Agreement shall be terminated, will, upon request, deliver,
and will use their best efforts to cause their agents to
deliver, to the Company all copies of such information then
in their possession or control.
ARTICLE II
The Merger
----------
SECTION 2.01. The Merger. Upon the terms and
-----------
subject to the conditions set forth in this Agreement, and
in accordance with the Delaware General Corporation Law (the
"DGCL"), Sub shall be merged with and into the Company at
the Effective Time (as defined in Section 2.03). Following
the Effective Time, the separate corporate existence of Sub
shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed
to and assume all the rights and obligations of Sub in
accordance with the DGCL. At the election of Parent, any
direct or indirect wholly owned subsidiary (as defined in
Section 10.03) of Parent may be substituted for Sub as a
constituent corporation in the Merger. In such event, the
parties agree to execute an appropriate amendment to this
Agreement in order to reflect the foregoing. In addition,
after the Effective Time, Parent intends to merge the
Surviving Corporation with and into Parent.
SECTION 2.02. Closing. The closing of the Merger
--------
will take place at 10:00 a.m. (New York City time) on a date
to be specified by Parent or Sub, which shall be no later
than the second business day after satisfaction or waiver of
the conditions set forth in Article VIII (the "Closing
Date"), at the offices of Cravath, Swaine & Moore, Worldwide
Plaza, 825 Eighth Avenue, New York, New York 10019, unless
another date, time or place is agreed to in writing by the
parties hereto.
SECTION 2.03. Effective Time. Subject to the
---------------
provisions of this Agreement, as soon as practicable on or
after the Closing Date, the parties shall file a certificate
of merger or other appropriate documents (in any such case,
the "Certificate of Merger") executed in accordance with the
relevant provisions of the DGCL and shall make all other
filings or recordings required under the DGCL. The Merger
shall become effective at such time as the Certificate of
Merger is duly filed with the Delaware Secretary of State,
or at such other time as Sub and the Company shall agree
should be specified in the Certificate of Merger (the time
<PAGE>
7
the Merger becomes effective being hereinafter referred to
as the "Effective Time").
SECTION 2.04. Effects of the Merger. The Merger
----------------------
shall have the effects set forth in Section 259 of the DGCL.
SECTION 2.05. Certificate of Incorporation and
--------------------------------
By-laws. (a) The Amended and Restated Certificate of
- --------
Incorporation of the Company, as in effect immediately prior
to the Effective Time, shall be amended as of the Effective
Time so that ARTICLE FOUR of such certificate of
incorporation reads in its entirety as follows: "The total
number of shares of all classes of stock which the
Corporation shall have authority to issue is 40,000,000
shares of Common Stock, par value $.01 per share." and, as
so amended, such certificate of incorporation shall be the
certificate of incorporation of the Surviving Corporation
until thereafter changed or amended as provided therein or
by applicable law.
(b) The by-laws of the Company as in effect
immediately prior to the Effective Time shall be the by-laws
of the Surviving Corporation, until thereafter changed or
amended as provided therein or by applicable law.
SECTION 2.06. Directors. The directors of Sub
----------
immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective
successors are duly elected and qualified, as the case may
be.
SECTION 2.07. Officers. The officers of the
---------
Company immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective
successors are duly elected and qualified, as the case may
be.
ARTICLE III
Effect of the Merger on the Capital Stock of the
-------------------------------------------------
Constituent Corporations; Exchange of Certificates
--------------------------------------------------
SECTION 3.01. Effect on Capital Stock. As of the
------------------------
Effective Time, by virtue of the Merger and without any
action on the part of the holder of any Shares or any shares
of capital stock of Sub:
<PAGE>
8
(a) Capital Stock of Sub. Each issued and
---------------------
outstanding share of capital stock of Sub shall be
converted into and become 160,000 fully paid and
nonassessable shares of Common Stock, par value $.01
per share, of the Surviving Corporation.
(b) Cancelation of Treasury Stock and Parent
----------------------------------------
Owned Stock. Each share of Company Common Stock that
------------
is owned by the Company or by any subsidiary of the
Company and each Share that is owned by Parent, Sub or
any other subsidiary of Parent shall automatically be
canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject
-----------------------------------
to Section 3.01(d), each Share issued and outstanding
(other than Shares to be canceled in accordance with
Section 3.01(b)) shall be converted into the right to
receive from the Surviving Corporation in cash, without
interest, the price paid in the Offer (the "Merger
Consideration"). As of the Effective Time, all such
Shares shall no longer be outstanding and shall
automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing
any such Shares shall cease to have any rights with
respect thereto, except the right to receive the Merger
Consideration, without interest.
(d) Shares of Dissenting Stockholders.
----------------------------------
Notwithstanding anything in this Agreement to the
contrary, any issued and outstanding Shares held by a
person (a "Dissenting Stockholder") who objects to the
Merger and complies with all the provisions of Delaware
law concerning the right of holders of Company Common
Stock to dissent from the Merger and require appraisal
of their Shares ("Dissenting Shares") shall not be
converted as described in Section 3.01(c) but shall
become the right to receive such consideration as may
be determined to be due to such Dissenting Stockholder
pursuant to the laws of the State of Delaware. If,
after the Effective Time, such Dissenting Stockholder
withdraws his demand for appraisal or fails to perfect
or otherwise loses his right of appraisal, in any case
pursuant to the DGCL, his Shares shall be deemed to be
converted as of the Effective Time into the right to
receive the Merger Consideration. The Company shall
give Parent (i) prompt notice of any demands for
appraisal of Shares received by the Company and
(ii) the opportunity to participate in and direct all
<PAGE>
9
negotiations and proceedings with respect to any such
demands. The Company shall not, without the prior
written consent of Parent, make any payment with
respect to, or settle, offer to settle or otherwise
negotiate, any such demands.
SECTION 3.02. Exchange of Certificates.
-------------------------
(a) Paying Agent. Prior to the Effective Time, Parent shall
-------------
designate a bank or trust company to act as paying agent in
the Merger (the "Paying Agent"), and, from time to time on,
prior to or after the Effective Time, Parent shall make
available, or cause the Surviving Corporation to make
available, to the Paying Agent funds in amounts and at the
times necessary for the payment of the Merger Consideration
upon surrender of certificates representing Shares as part
of the Merger pursuant to Section 3.01 (it being understood
that any and all interest earned on funds made available to
the Paying Agent pursuant to this Agreement shall be turned
over to Parent).
(b) Exchange Procedure. As soon as reasonably
-------------------
practicable after the Effective Time, the Paying Agent shall
mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time
represented Shares (the "Certificates"), (i) a letter of
transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the
Paying Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancelation to the Paying
Agent or to such other agent or agents as may be appointed
by Parent, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the amount
of cash into which the Shares theretofore represented by
such Certificate shall have been converted pursuant to
Section 3.01, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of
ownership of Shares that is not registered in the transfer
records of the Company, payment may be made to a person
other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be
properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay
any transfer or other taxes required by reason of the
<PAGE>
10
payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered as contemplated by this
Section 3.02, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to
receive upon such surrender the amount of cash, without
interest, into which the Shares theretofore represented by
such Certificate shall have been converted pursuant to
Section 3.01. No interest will be paid or will accrue on
the cash payable upon the surrender of any Certificate.
(c) No Further Ownership Rights in Company Common
---------------------------------------------
Stock. All cash paid upon the surrender of Certificates in
- ------
accordance with the terms of this Article III shall be
deemed to have been paid in full satisfaction of all rights
pertaining to the Shares theretofore represented by such
Certificates. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no
further registration of transfers on the stock transfer
books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the
Surviving Corporation or the Paying Agent for any reason,
they shall be canceled and exchanged as provided in this
Article III.
(d) No Liability. None of Parent, Sub, the
-------------
Company or the Paying Agent shall be liable to any person in
respect of any cash delivered to a public official pursuant
to any applicable abandoned property, escheat or similar
law. If any Certificates shall not have been surrendered
prior to seven years after the Effective Time (or
immediately prior to such earlier date on which any payment
pursuant to this Article III would otherwise escheat to or
become the property of any Governmental Entity (as defined
in Section 4.05)), the cash payment in respect of such
Certificate shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free
and clear of all claims or interests of any person
previously entitled thereto.
<PAGE>
11
ARTICLE IV
Representations and Warranties of the Company
---------------------------------------------
The Company represents and warrants to Parent and
Sub as follows:
SECTION 4.01. Organization. The Company and each
-------------
of its United States subsidiaries is a corporation duly
organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its
business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have
such power and authority would not have a material adverse
effect (as defined in Section 10.03) on the Company. The
Company and each of its United States subsidiaries is duly
qualified or licensed to do business and in good standing in
each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in
such jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a material
adverse effect on the Company or prevent or materially delay
the consummation of the Offer and/or the Merger. The
Company has made available to Parent complete and correct
copies of its Amended and Restated Certificate of
Incorporation and By-laws and the certificates of
incorporation and by-laws (or similar organizational
documents) of its subsidiaries.
SECTION 4.02. Subsidiaries. The only
-------------
subsidiaries of the Company are Tivoli Systems Subsidiary
Inc., a Texas corporation, Tivoli Systems Software SA, a
Swiss corporation, Tivoli Systems KK, a Japanese subsidiary,
and Tivoli Systems UK Ltd, a United Kingdom subsidiary. All
the outstanding shares of capital stock of each such
subsidiary, other than director qualifying shares of foreign
subsidiaries, are owned by the Company, by another wholly
owned subsidiary of the Company or by the Company and
another wholly owned subsidiary of the Company, free and
clear of all pledges, claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever
(collectively, "Liens"), except for immaterial Liens on
outstanding shares of capital stock of foreign subsidiaries
of the Company, and are duly authorized, validly issued,
fully paid and nonassessable. Except for the capital stock
of its subsidiaries and capital stock of net.Genesis, Inc.
and DBMX, Ltd., the Company does not own, directly or
<PAGE>
12
indirectly, any capital stock or other ownership interest in
any corporation, partnership, joint venture or other entity.
SECTION 4.03. Capitalization. The authorized
---------------
capital stock of the Company consists of 40,000,000 shares
of Company Common Stock and 3,000,000 shares of preferred
stock, par value $0.01 per share ("Company Preferred
Stock"). At the close of business on December 31, 1995,
(i) 14,943,580 shares of Company Common Stock were issued
and outstanding, (ii) a number of shares of Company Common
Stock were held by the Company in its treasury,
(iii) 2,072,415 shares of Company Common Stock were reserved
for issuance upon exercise of outstanding Company Stock
Options (as defined in Section 7.04), (iv) a maximum of
100,000 shares of Company Common Stock were issuable upon
the exercise of outstanding warrants and (v) no shares of
Company Preferred Stock were issued and outstanding. Except
as set forth above, and except for 70,775 shares of Company
Common Stock reserved for issuance upon the exercise of
Company Stock Options granted since December 31, 1995, and
except for Shares issued upon the exercise of Company Stock
Options since December 31, 1995, as of the date of this
Agreement, no shares of capital stock or other voting
securities of the Company were issued, reserved for issuance
or outstanding. All outstanding shares of capital stock of
the Company are, and all shares which may be issued will be,
when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There
are no bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on
any matters on which stockholders of the Company may vote.
Except as set forth above, and except for obligations to
grant options, subject to the approval of the Board of
Directors of the Company, for up to 50,000 shares of the
Company Common Stock pursuant to job offer letters
outstanding on the date of this Agreement, as of the date of
this Agreement, there are not any securities, options,
warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the
Company or any of its subsidiaries is a party or by which
any of them is bound obligating the Company or any of its
subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital
stock or other voting securities of the Company or of any of
its subsidiaries or obligating the Company or any of its
subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. As of the date of
<PAGE>
13
this Agreement, there are not any outstanding contractual
obligations (i) of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or (ii) of the Company to vote
or to dispose of any shares of the capital stock of any of
its subsidiaries.
SECTION 4.04. Authority. The Company has the
----------
requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby (other than, with respect to the Merger,
the approval and adoption of the terms of this Agreement by
the holders of a majority of the Shares (the "Company
Stockholder Approval")). The execution, delivery and
performance of this Agreement and the consummation by the
Company of the Merger and of the other transactions
contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the
transactions so contemplated (in each case, other than, with
respect to the Merger, the Company Stockholder Approval).
This Agreement has been duly executed and delivered by the
Company and, assuming this Agreement constitutes a valid and
binding obligation of Parent and Sub, constitutes a valid
and binding obligation of the Company enforceable against
the Company in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or
other equitable remedies.
SECTION 4.05. Consents and Approvals; No
--------------------------
Violations. Except for filings, permits, authorizations,
- -----------
consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act (including the
filing with the SEC of the Schedule 14D-9 and a proxy
statement relating to any required approval by the Company's
stockholders of this Agreement (the "Proxy Statement")), the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the DGCL, the laws of other states
in which the Company is qualified to do or is doing
business, state takeover laws and foreign laws, neither the
execution, delivery or performance of this Agreement by the
Company nor the consummation by the Company of the
transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the Amended and
<PAGE>
14
Restated Certificate of Incorporation or By-laws of the
Company or of the similar organizational documents of any of
its United States subsidiaries, (ii) require any filing
with, or permit, authorization, consent or approval of, any
Federal, state or local government or any court, tribunal,
administrative agency or commission or other governmental or
other regulatory authority or agency, domestic, foreign or
supranational (a "Governmental Entity") (except where the
failure to obtain such permits, authorizations, consents or
approvals or to make such filings would not have a material
adverse effect on the Company or prevent or materially delay
the consummation of the Offer and/or the Merger),
(iii) except as set forth on Schedule 4.05, result in a
violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancelation or
acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or
obligation to which the Company or any of its subsidiaries
is a party or by which any of them or any of their
properties or assets may be bound, provided, however, that
-------- -------
certain contracts and agreements, the material ones of which
have been identified to Parent by the Company, (A) provide
for their termination upon a change of control of the
Company or (B) contain provisions restricting their
assignment, or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the
Company, any of its subsidiaries or any of their properties
or assets, except in the case of clauses (iii) or (iv) for
violations, breaches or defaults that would not have a
material adverse effect on the Company or prevent or
materially delay the consummation of the Offer and/or the
Merger.
SECTION 4.06. SEC Reports and Financial
-------------------------
Statements. The Company has filed with the SEC, and has
- -----------
heretofore made available to Parent true and complete copies
of, all forms, reports, schedules, statements and other
documents required to be filed by it since December 31,
1994, under the Exchange Act or the Securities Act of 1933
(the "Securities Act") (such forms, reports, schedules,
statements and other documents, including any financial
statements or schedules included therein, are referred to as
the "Company SEC Documents"). The Company SEC Documents, at
the time filed, (a) did not contain any untrue statement of
a material fact or omit 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
<PAGE>
15
which they were made, not misleading and (b) complied in all
material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder.
Except to the extent revised or superseded by a subsequently
filed Company Filed SEC Document (as defined in
Section 4.07) (a copy of which has been made available to
Parent prior to the date hereof) or by the Company's annual
earnings press release dated January 25, 1996, the Company
SEC Documents and such press release, considered as a whole,
do not contain an untrue statement of a material fact or
omit to state a material fact required to be stated or
incorporated by reference therein or necessary in order to
make the statements therein, in light of the circumstances
under which they were made, not misleading (it being
understood that the foregoing does not cover future events
resulting from public announcement of the Offer and the
Merger). The financial statements of the Company included
in the Company SEC Documents comply as to form in all
material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with
generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may
be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC)
and fairly present (subject, in the case of the unaudited
statements, to normal, recurring audit adjustments) the
consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for
the periods then ended.
SECTION 4.07. Absence of Certain Changes or
-----------------------------
Events. Except as disclosed in the Company SEC Documents
- -------
filed and publicly available prior to the date of this
Agreement (the "Company Filed SEC Documents"), and except as
disclosed in the Company's financial statements dated as of
December 31, 1995 (the "Company 1995 Financial Statements")
(a copy of which has been delivered to Parent by the
Company), and except as contemplated by Section 7.04, since
December 31, 1995, the Company and its subsidiaries have
conducted their respective businesses only in the ordinary
course, and there has not been any material adverse change
(as defined in Section 10.03) with respect to the Company.
Except as set forth in a letter from the Company to Parent
dated January 29, 1996, and except as disclosed in the
Company Filed SEC Documents or the Company 1995 Financial
Statements, since December 31, 1995, there has not been
<PAGE>
16
(i) any declaration, setting aside or payment of any
dividend or other distribution with respect to its capital
stock or any redemption, purchase or other acquisition of
any of its capital stock (except for the repurchase of
Shares from employees and other providers at cost in the
ordinary course of business consistent with past practice),
(ii) any split, combination or reclassification of any of
its capital stock or any issuance or the authorization of
any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock,
(iii) (w) any granting by the Company or any of its
subsidiaries to any officer of the Company or any of its
subsidiaries of any increase in compensation, except in the
ordinary course of business (including in connection with
promotions) consistent with past practice or as was required
under employment agreements in effect as of March 10, 1995,
(x) any granting by the Company or any of its subsidiaries
to any such officer of any increase in severance or
termination pay, except as part of a standard employment
package to any person promoted or hired (but not including
the five most senior officers), or as was required under
employment, severance or termination agreements in effect as
of March 10, 1995, (y) except employment arrangements in the
ordinary course of business consistent with past practice
with employees other than any executive officer of the
Company, any entry by the Company or any of its subsidiaries
into any employment, severance or termination agreement with
any such employee or executive officer or (z) except as
contemplated by Section 7.04, any increase in or
establishment of any bonus, insurance, deferred
compensation, pension, retirement, profit-sharing, stock
option (including the granting of stock options, stock
appreciation rights, performance awards or restricted stock
awards or the amendment of any existing stock options, stock
appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan or
agreement or arrangement, except in the ordinary course of
business consistent with past practice, (iv) any damage,
destruction or loss, whether or not covered by insurance,
that has or reasonably could be expected to have a material
adverse effect on the Company, (v) any revaluation by the
Company of any of its material assets, (vi) any material
change in accounting methods, principles or practices by the
Company or (vii) (A) any licensing or other agreement with
regard to the acquisition or disposition of any material
Intellectual Property (as defined in Section 4.18) or rights
thereto other than licenses or other agreements in the
ordinary course of business consistent with past practice or
(B) any amendment or consent with respect to any licensing
<PAGE>
17
agreement filed, or required to be filed, by the Company
with the SEC.
SECTION 4.08. No Undisclosed Liabilities. Except
---------------------------
as and to the extent set forth in the Company 1995 Financial
Statements, as of December 31, 1995, neither the Company nor
any of its subsidiaries had any liabilities or obligations
of any nature, whether or not accrued, contingent or
otherwise, that would be required by generally accepted
accounting principles to be reflected on a consolidated
balance sheet of the Company and its subsidiaries (including
the notes thereto). Since December 31, 1995, except as and
to the extent set forth in the Company Filed SEC Documents
or the Company 1995 Financial Statements, neither the
Company nor any of its subsidiaries has incurred any
liabilities of any nature, whether or not accrued,
contingent or otherwise, that would be reasonably expected
to have a material adverse effect on the Company.
SECTION 4.09. Information Supplied. None of the
---------------------
information supplied or to be supplied by the Company
specifically for inclusion or incorporation by reference in
(i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
information to be filed by the Company in connection with
the Offer pursuant to Rule 14f-1 promulgated under the
Exchange Act (the "Information Statement") or (iv) the Proxy
Statement, will, in the case of the Offer Documents, the
Schedule 14D-9 and the Information Statement, at the
respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first
published, sent or given to the Company's stockholders, or,
in the case of the Proxy Statement, at the time the Proxy
Statement is first mailed to the Company's stockholders or
at the time of the Stockholders Meeting (as defined in
Section 7.01), 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 Schedule 14D-9, the Information
Statement and the Proxy Statement will comply as to form in
all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder, except that no
representation or warranty is made by the Company with
respect to statements made or incorporated by reference
therein based on information supplied by Parent or Sub
specifically for inclusion or incorporation by reference
therein.
<PAGE>
18
SECTION 4.10. Benefit Plans. (a) Each "employee
--------------
pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (a "Pension Plan"), "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA) (a "Welfare
Plan") and each other plan, arrangement or policy (written
or oral) relating to stock options, stock purchases,
compensation, deferred compensation, bonuses, severance,
fringe benefits or other employee benefits, in each case
maintained or contributed to, or required to be maintained
or contributed to, by the Company or its subsidiaries for
the benefit of any present or former employee, officer or
director (each of the foregoing, a "Benefit Plan") has been
administered in all material respects in accordance with its
terms. The Company and its subsidiaries and all the Benefit
Plans are in compliance in all material respects with the
applicable provisions of ERISA, the Internal Revenue Code of
1986, as amended (the "Code"), all other applicable laws and
all applicable collective bargaining agreements.
(b) None of the Pension Plans is subject to
Title IV of ERISA and none of the Company or any other
person or entity that, together with the Company, is treated
as a single employer under Section 414 of the Code (each,
including the Company, a "Commonly Controlled Entity") has
incurred any liability to a Pension Plan, or to an employee
pension benefit plan that is no longer maintained,
contributed to or required to be contributed to by a
Commonly Controlled Entity under Title IV of ERISA (other
than for contributions not yet due) or to the Pension
Benefit Guaranty Corporation (other than for payment of
premiums not yet due), which liability has not been fully
paid.
(c) No Commonly Controlled Entity is required to
contribute to any "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) or has withdrawn from any
multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (within the
meaning of Section 4201 of ERISA) that has not been fully
paid.
(d) Each Benefit Plan that is a Welfare Plan may
be amended or terminated at any time after the Effective
Time without material liability to the Company or its
subsidiaries.
SECTION 4.11. Other Compensation Arrangements.
--------------------------------
Except as disclosed in the Company Filed SEC Documents, and
<PAGE>
19
except as provided in this Agreement, as of the date of this
Agreement, neither the Company nor any of its subsidiaries
is a party to any oral or written (i) consulting agreement
not terminable on not more than 60 calendar days notice
(except for third party agreements for the development of,
and assignment to, the Company of Intellectual Property in
the ordinary course of business) and involving the payment
of more than $200,000 per annum or union or collective
bargaining agreement, (ii) agreement with any executive
officer or other key employee of the Company or any of its
subsidiaries (x) the benefits of which are contingent, or
the terms of which are materially altered, upon the
occurrence of a transaction involving the Company of the
nature contemplated by this Agreement or (y) providing any
term of employment or compensation guarantee extending for a
period longer than two years or the payment of more than
$100,000 per year (except for employment agreements with
employees of the Swiss subsidiary) or (iii) agreement or
plan, including any stock option plan, stock appreciation
right plan, restricted stock plan or stock purchase plan,
any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions
contemplated by this Agreement.
SECTION 4.12. Litigation. Except as disclosed in
-----------
the Company Filed SEC Documents, there is no suit, claim,
action, proceeding or investigation pending before any
Governmental Entity or, to the best knowledge of the
Company, threatened against the Company or any of its
subsidiaries that could reasonably be expected to have a
material adverse effect on the Company. Except as disclosed
in the Company Filed SEC Documents, neither the Company nor
any of its subsidiaries is subject to any outstanding order,
writ, injunction or decree that could reasonably be expected
to have a material adverse effect on the Company.
SECTION 4.13. Compliance with Applicable Law.
-------------------------------
The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits"), except
for failures to hold such permits, licenses, variances,
exemptions, orders and approvals that would not have a
material adverse effect on the Company. The Company and its
subsidiaries are in compliance with the terms of the Company
Permits, except where the failure so to comply would not
<PAGE>
20
have a material adverse effect on the Company. Except as
disclosed in the Company Filed SEC Documents, to the best
knowledge of the Company, the businesses of the Company and
its subsidiaries are not being conducted in violation of any
law, ordinance or regulation of any Governmental Entity,
except for possible violations that would not have a
material adverse effect on the Company or prevent or
materially delay the consummation of the Offer and/or the
Merger. As of the date of this Agreement, no investigation
or review by any Governmental Entity with respect to the
Company or any of its subsidiaries is pending or, to the
best knowledge of the Company, threatened, nor has any
Governmental Entity indicated an intention to conduct any
such investigation or review, other than, in each case,
those the outcome of which would not be reasonably expected
to have a material adverse effect on the Company or prevent
or materially delay the consummation of the Offer and/or the
Merger.
SECTION 4.14. Tax Matters. (a) The Company and
------------
each of its subsidiaries has filed all Federal income tax
returns and all other material tax returns and reports
required to be filed by it. All such returns are complete
and correct in all material respects (except to the extent a
reserve has been established on the financial statements
contained in the Company Filed SEC Documents or the Company
1995 Financial Statements). Each of the Company and each of
its subsidiaries has paid (or the Company has paid on its
subsidiaries' behalf) all taxes required to be paid by it
(without regard to whether a tax return is required), except
taxes for which an adequate reserve has been established on
the financial statements contained in the Company Filed SEC
Documents or the Company 1995 Financial Statements. The
most recent financial statements contained in the Company
Filed SEC Documents reflect an adequate reserve for all
taxes payable by the Company and its subsidiaries for all
taxable periods and portions thereof through the date of
such financial statements.
(b) No material tax return of the Company or any
of its subsidiaries is under audit or examination by any
taxing authority, and no written or unwritten notice of such
an audit or examination has been received by the Company or
any of its subsidiaries. Each material deficiency resulting
from any audit or examination relating to taxes by any
taxing authority has been paid, except for deficiencies
being contested in good faith. No material issues relating
to taxes were raised in writing by the relevant taxing
authority during any presently pending audit or examination,
<PAGE>
21
and no material issues relating to taxes were raised in
writing by the relevant taxing authority in any completed
audit or examination that can reasonably be expected to
recur in a later taxable period. The Federal income tax
returns of the Company and each of its subsidiaries
consolidated in such returns have not been examined by and
settled with the Internal Revenue Service.
(c) There is no agreement or other document
extending, or having the effect of extending, the period of
assessment or collection of any taxes and no power of
attorney with respect to any taxes has been executed or
filed with any taxing authority.
(d) No material liens for taxes exist with
respect to any assets or properties of the Company or any of
its subsidiaries, except for liens for taxes not yet due.
(e) None of the Company or any of its
subsidiaries is a party to or is bound by any tax sharing
agreement, tax indemnity obligation or similar agreement,
arrangement or practice with respect to taxes (including any
advance pricing agreement, closing agreement or other
agreement relating to taxes with any taxing authority).
(f) None of the Company or any of its
subsidiaries shall be required to include in a taxable
period ending after the Effective Time taxable income
attributable to income that accrued in a prior taxable
period but was not recognized in any prior taxable period as
a result of the installment method of accounting, the
completed contract method of accounting, the long-term
contract method of accounting, the cash method of accounting
or Section 481 of the Code or comparable provisions of
state, local or foreign tax law.
(g) As used in this Agreement, "taxes" shall
include all Federal, state, local and foreign income,
property, sales, excise, withholding and other taxes,
tariffs or governmental charges of any nature whatsoever.
SECTION 4.15. State Takeover Statutes. The Board
------------------------
of Directors of the Company has approved the Offer, the
Merger, this Agreement and the acquisition of Shares by Sub
pursuant to the Offer and the Stockholder Agreement and such
approval is sufficient to render inapplicable to the Offer,
the Merger, this Agreement and the Stockholder Agreement and
the transactions contemplated by this Agreement and the
Stockholder Agreement the provisions of Section 203 of the
<PAGE>
22
DGCL. To the best knowledge of the Company, no other state
takeover statute or similar statute or regulation applies or
purports to apply to the Offer, the Merger, this Agreement,
the Stockholder Agreement or any of the transactions
contemplated by this Agreement or the Stockholder Agreement.
SECTION 4.16. Brokers; Fees and Expenses. No
---------------------------
broker, investment banker, financial advisor or other
person, other than Goldman, Sachs & Co., the fees and
expenses of which will be paid by the Company, is entitled
to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The
estimated fees and expenses incurred and to be incurred by
the Company in connection with this Agreement and the
transactions contemplated by this Agreement (including the
fees of the Company's legal counsel and the legal counsel
for its financial advisor) are set forth in a letter dated
January 29, 1996, from the Company to Parent.
SECTION 4.17. Opinion of Financial Advisor. The
-----------------------------
Company has received the opinion of Goldman, Sachs & Co.,
dated the date of this Agreement, to the effect that, as of
the date of this Agreement, the consideration to be received
in the Offer and the Merger by the Company's stockholders is
fair, and a complete and correct signed copy of such opinion
has been, or promptly upon receipt thereof will be,
delivered to Parent.
SECTION 4.18. Intellectual Property. (a) Except
----------------------
as listed on Schedule 4.18, the Company has made available
to Parent true and correct copies of all license agreements
relating to Intellectual Property to which the Company is a
party.
(b) Except to the extent that the inaccuracy of
any of the following (or the circumstances giving rise to
such inaccuracy) would not have a material adverse effect on
the Company:
(1) the Company and each of its subsidiaries owns,
or is licensed or otherwise has the right to use (in
each case, clear of any liens or encumbrances of any
kind), all Intellectual Property used in or necessary
for the conduct of its business as currently conducted;
(2) no claims are pending or, to the best
knowledge of the Company, threatened that the Company
<PAGE>
23
or any of its subsidiaries is infringing on or
otherwise violating the rights of any person with
regard to any Intellectual Property owned by and/or
licensed to the Company or its subsidiaries;
(3) to the best knowledge of the Company, no
person is infringing on or otherwise violating any
right of the Company or any of its subsidiaries with
respect to any Intellectual Property owned by and/or
licensed to the Company or its subsidiaries;
(4) none of the former or current members of
management or key personnel of the Company or any of
its subsidiaries, including all former and current
employees, agents, consultants and contractors who have
contributed to or participated in the conception and
development of computer software or other Intellectual
Property of the Company or any of its subsidiaries have
any valid claim against the Company or any of its
subsidiaries in connection with the involvement of such
persons in the conception and development of any
computer software or other Intellectual Property of the
Company or any of its subsidiaries, and no such claim
has been asserted or threatened;
(5) except as set forth in Schedule 4.18, the
execution and delivery of this Agreement, compliance
with its terms and the consummation of the transactions
contemplated hereby do not and will not conflict with
or result in any violation or default (with or without
notice or lapse of time or both) or give rise to any
right, license or encumbrance relating to Intellectual
Property owned by the Company or with respect to which
the Company now has or has had any agreement with any
third party, or right of termination, cancelation or
acceleration of any material Intellectual Property
right or obligation set forth in any agreement to which
the Company is a party, or the loss or encumbrance of
any Intellectual Property or material benefit related
thereto, or result in or require the creation,
imposition or extension of any lien or encumbrance upon
any Intellectual Property or right, other than certain
contracts and agreements, the material ones of which
have been identified to Parent by the Company, that
(A) provide for their termination upon a change of
control of the Company or (B) contain provisions
restricting their assignment;
<PAGE>
24
(6) except as set forth in Schedule 4.18, and
except in the ordinary course of business consistent
with past practice, no licenses or rights have been
granted to distribute the source code of, or to use
source code to create Derivative Works (as hereinafter
defined) of, Tivoli Management Environment or any
product currently marketed by, commercially available
from or under development by the Company or any of its
subsidiaries for which the Company possesses the source
code; and
(7) the Company and each of its subsidiaries has
taken reasonable and necessary steps to protect their
Intellectual Property and their rights thereunder, and
to the best knowledge of the Company no such rights to
Intellectual Property have been lost or are in jeopardy
of being lost through failure to act by the Company or
any of its subsidiaries.
As used herein, "Derivative Work" shall mean a
work that is based upon one or more preexisting works, such
as a revision, enhancement, modification, abridgement,
condensation, expansion or any other form in which such
preexisting works may be recast, transformed or adapted, and
which, if prepared without authorization of the owner of the
copyright in such preexisting work, would constitute a
copyright infringement. For purposes hereof, a Derivative
Work shall also include any compilation that incorporates
such a preexisting work as well as translations from one
human language to another and from one type of code to
another.
(c) For purposes of this Agreement, "Intellectual
Property" shall mean trademarks (registered or
unregistered), service marks, brand names, certification
marks, trade dress, assumed names, trade names 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 patented, patentable or not in any
jurisdiction; trade secrets and confidential information and
rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works, whether
copyrighted, copyrightable or not in any jurisdiction;
registration or applications for registration of copyrights
in any jurisdiction, and any renewals or extensions thereof;
any similar intellectual property or proprietary rights and
<PAGE>
25
computer programs and software (including source code,
object code and data); licenses, immunities, covenants not
to sue and the like relating to the foregoing; and any
claims or causes of action arising out of or related to any
infringement or misappropriation of any of the foregoing.
SECTION 4.19. Distribution Agreements. The
------------------------
Company has made available to Parent and its representatives
true and correct copies of all contracts, agreements,
arrangements or understandings to which the Company or any
of its subsidiaries is a party, except those that are
immaterial in any one country or jurisdiction, relating to
the distribution of its products or products licensed by the
Company or its subsidiaries in any foreign country or
jurisdiction.
SECTION 4.20. Indebtedness. As of the date
-------------
hereof, the Company and its subsidiaries do not have
consolidated indebtedness for borrowed money in excess of
the amount disclosed in the Company 1995 Financial
Statements.
ARTICLE V
Representations and Warranties
------------------------------
of Parent and Sub
-----------------
Parent and Sub represent and warrant to the
Company as follows:
SECTION 5.01. Organization. Each of Parent and
-------------
Sub is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and
authority to carry on its business as now being conducted,
except where the failure to be so organized, existing and in
good standing or to have such power and authority would not
be reasonably expected to prevent or materially delay the
consummation of the Offer and/or the Merger.
SECTION 5.02. Authority. Parent and Sub have
----------
requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and
Sub and no other corporate proceedings on the part of Parent
<PAGE>
26
and Sub are necessary to authorize this Agreement or to
consummate such transactions. No vote of Parent
shareholders is required to approve this Agreement or the
transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and Sub, as the case
may be, and, assuming this Agreement constitutes a valid and
binding obligation of the Company, constitutes a valid and
binding obligation of each of Parent and Sub enforceable
against them in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or
other equitable remedies.
SECTION 5.03. Consents and Approvals; No
--------------------------
Violations. Except for filings, permits, authorizations,
- -----------
consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act (including the
filing with the SEC of the Offer Documents), the HSR Act,
the DGCL, the laws of other states in which Parent is
qualified to do or is doing business, state takeover laws
and foreign laws, neither the execution, delivery or
performance of this Agreement by Parent and Sub nor the
consummation by Parent and Sub of the transactions
contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective certificate of
incorporation or by-laws of Parent and Sub, (ii) require any
filing with, or permit, authorization, consent or approval
of, any Governmental Entity (except where the failure to
obtain such permits, authorizations, consents or approvals
or to make such filings would not be reasonably expected to
prevent or materially delay the consummation of the Offer
and/or the Merger), (iii) result in a violation or breach
of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of
termination, amendment, cancelation or acceleration) under,
any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, lease, contract,
agreement or other instrument or obligation to which Parent
or any of its subsidiaries is a party or by which any of
them or any of their properties or assets may be bound or
(iv) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Parent, any of its
subsidiaries or any of their properties or assets, except in
the case of clauses (iii) and (iv) for violations, breaches
or defaults which would not, individually or in the
<PAGE>
27
aggregate, be reasonably expected to prevent or materially
delay the consummation of the Offer and/or the Merger.
SECTION 5.04. Information Supplied. None of the
---------------------
information supplied or to be supplied by Parent or Sub
specifically for inclusion or incorporation by reference in
(i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
Information Statement or (iv) the Proxy Statement will, in
the case of the Offer Documents, the Schedule 14D-9 and the
Information Statement, at the respective times the Offer
Documents, the Schedule 14D-9 and the Information Statement
are filed with the SEC or first published, sent or given to
the Company's stockholders, or, in the case of the Proxy
Statement, at the time the Proxy Statement is first mailed
to the Company's stockholders or at the time of the
Stockholders Meeting, 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 Offer Documents
will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation or
warranty is made by Parent or Sub with respect to statements
made or incorporated by reference therein based on
information supplied by the Company specifically for
inclusion or incorporation by reference therein.
SECTION 5.05. Interim Operations of Sub. Sub was
--------------------------
formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as
contemplated hereby.
SECTION 5.06. Brokers. No broker, investment
--------
banker, financial advisor or other person, other than Morgan
Stanley & Co. Incorporated, the fees and expenses of which
will be paid by Parent, is entitled to any broker's,
finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on
behalf of Parent or Sub.
SECTION 5.07. Financing. Parent has sufficient
----------
funds readily available to purchase, or to cause Sub to
purchase, all the Shares pursuant to the Offer and the
Merger and to pay all fees and expenses related to the
transactions contemplated by this Agreement.
<PAGE>
28
ARTICLE VI
Covenants
---------
SECTION 6.01. Covenants of the Company. Until
-------------------------
such time as Parent's designees shall constitute a majority
of the members of the Board of Directors of the Company, the
Company agrees as to itself and its subsidiaries that
(except as expressly contemplated or permitted by this
Agreement, or to the extent that Parent shall otherwise
consent in writing):
(a) Ordinary Course. The Company shall, and
----------------
shall cause its subsidiaries to, carry on their respective
businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted (it
being understood that the foregoing does not cover future
events resulting from public announcement of the Offer and
the Merger) and shall use all reasonable efforts to preserve
intact their present business organizations, keep available
the services of their present officers and employees and
preserve their relationships with customers, suppliers and
others having business dealings with the Company and its
subsidiaries.
(b) Dividends; Changes in Stock. The Company
----------------------------
shall not, and shall not permit any of its subsidiaries to,
(i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, except
for dividends by a direct or indirect wholly owned
subsidiary of the Company to its parent, (ii) split, combine
or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital
stock or (iii) repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or its subsidiaries
or any other securities thereof except pursuant to contracts
existing on the date of this Agreement.
(c) Issuance of Securities. The Company shall
-----------------------
not, and shall not permit any of its subsidiaries to, issue,
deliver, sell, pledge or encumber, or authorize or propose
the issuance, delivery, sale, pledge or encumbrance of, any
shares of its capital stock of any class or any securities
convertible into, or any rights, warrants, calls,
subscriptions or options to acquire, any such shares or
convertible securities, or any other ownership interest
(including stock appreciation rights or phantom stock) other
than (i) the issuance of shares of Company Common Stock upon
<PAGE>
29
the exercise of Company Stock Options outstanding on the
date of this Agreement and in accordance with the terms of
such Company Stock Options and (ii) the issuance of shares
of Company Common Stock upon the exercise of warrants
outstanding on the date of this Agreement and in accordance
with the terms of such warrants as of the date of this
Agreement.
(d) Governing Documents. The Company shall not,
--------------------
and shall not permit any of its subsidiaries to, amend or
propose to amend its certificate of incorporation or by-laws
(or similar organizational documents).
(e) No Acquisitions. The Company shall not, and
----------------
shall not permit any of its subsidiaries to, acquire or
agree to acquire (i) by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial
portion of the assets of, or by any other manner, any
business or any corporation, partnership, joint venture,
association or other business organization or division
thereof or (ii) any assets that are material, individually
or in the aggregate, to the Company and its subsidiaries
taken as a whole, except purchases of inventory in the
ordinary course of business consistent with past practice.
(f) No Dispositions. Other than sales or
----------------
licenses of its products to customers in the ordinary course
of business consistent with past practice, the Company shall
not, and shall not permit any of its subsidiaries to, sell,
lease, license, encumber or otherwise dispose of, or agree
to sell, lease, license, encumber or otherwise dispose of,
any of its assets, except for the disposition of equipment
in the ordinary course of business consistent with past
practice.
(g) Indebtedness. The Company shall not, and
-------------
shall not permit any of its subsidiaries to, (i) incur
(which shall not be deemed to include entering into credit
agreements, lines of credit or similar agreements until
borrowings are made under such agreements) any indebtedness
for borrowed money or guarantee any such indebtedness or
issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of others, enter
into any "keep-well" or other agreement to maintain any
financial statement condition of another person or enter
into any arrangement having the economic effect of any of
the foregoing, except for working capital borrowings
incurred in the ordinary course of business consistent with
<PAGE>
30
past practice, or (ii) make any loans, advances or capital
contributions to, or investments in, any other person, other
than, with respect to both clause (i) and (ii) above, (A) to
the Company or any direct or indirect wholly owned
subsidiary of the Company or (B) any advances to employees
in accordance with past practice.
(h) Advice of Changes; Filings. The Company
---------------------------
shall confer with Parent on a regular and frequent basis as
reasonably requested by Parent, report on operational
matters and promptly advise Parent orally and, if requested
by Parent, in writing of any material adverse change with
respect to the Company. The Company shall promptly provide
to Parent (or its counsel) copies of all filings made by the
Company with any Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
(i) Tax Matters. The Company shall not make any
------------
tax election that would have a material effect on the tax
liability of the Company or any of its subsidiaries or
settle or compromise any material income tax liability of
the Company or any of its subsidiaries. The Company shall,
before filing or causing to be filed any material tax return
of the Company or any of its subsidiaries, consult with
Parent and its advisors as to the positions and elections
that may be taken or made with respect to such return, and
shall take such positions or make such elections as the
Company and Parent shall jointly agree.
(j) Capital Expenditures. Neither the Company
---------------------
nor any of its subsidiaries shall make or agree to make any
new capital expenditure or expenditures other than in
accordance with the Company's 1996 Operating Plan, which
plan has been made available to Parent.
(k) Discharge of Liabilities. The Company shall
-------------------------
not, and shall not permit any of its subsidiaries to, pay,
discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge,
settlement or satisfaction, in the ordinary course of
business consistent with past practice or in accordance with
their terms, of (i) liabilities recognized or disclosed in
the Company 1995 Financial Statements, (ii) liabilities not
required by generally accepted accounting principles to be
recognized or disclosed therein, or (iii) liabilities
incurred since the date of such financial statements in the
ordinary course of business consistent with past practice.
The Company shall not, and shall not permit any of its
<PAGE>
31
subsidiaries to, waive the benefits of, or agree to modify
in any manner, any confidentiality, standstill or similar
agreement to which the Company or any of its subsidiaries is
a party.
(l) Material Contracts. Except in the ordinary
-------------------
course of business, neither the Company nor any of its
subsidiaries shall (i) modify, amend or terminate any
material contract or agreement to which the Company or such
subsidiary is a party, (ii) waive, release or assign any
material rights or claims or (iii) grant any rights to
Intellectual Property except for licenses in the ordinary
course of business consistent with past practice.
(m) Compensation of Company Employees. Except as
----------------------------------
set forth in a letter from the Company to Parent dated
January 29, 1996, and except as provided in Section 7.04,
the Company and its subsidiaries will not, without the prior
written consent of Parent, except as may be required by law,
(i) enter into, adopt, amend or terminate any Company
Benefit Plan or other employee benefit plan or any
agreement, arrangement, plan or policy for the benefit of
any director, officer or current or former employee,
(ii) except for normal increases or bonuses in the ordinary
course of business consistent with past practice that, in
the aggregate, do not result in a material increase in
benefits or compensation expense to the Company, increase in
any manner the compensation or fringe benefits of, or pay
any bonus to, any director, officer or employee or (iii) pay
any benefit not required by any plan or arrangement as in
effect as of the date hereof (including the granting of,
acceleration of exercisability of or vesting of stock
options, stock appreciation rights or restricted stock).
(n) General. The Company shall not, and shall
--------
not permit any of its subsidiaries to, authorize any of, or
commit or agree to take any of, the foregoing actions
described in this Section 6.01.
SECTION 6.02. No Solicitation. (a) The Company
----------------
and its officers, directors, employees, representatives and
agents shall immediately cease any discussions or
negotiations with any parties that may be ongoing with
respect to a Takeover Proposal (as hereinafter defined).
The Company shall not, nor shall it permit any of its
subsidiaries to, authorize or permit any of its officers,
directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative
retained by it or any of its subsidiaries to, directly or
<PAGE>
32
indirectly, (i) solicit, initiate or encourage (including by
way of furnishing information), or take any other action to
facilitate, any inquiries or the making of any proposal
which constitutes, or may reasonably be expected to lead to,
any Takeover Proposal or (ii) participate in any discussions
or negotiations regarding any Takeover Proposal; provided,
--------
however, that if, at any time prior to the acceptance for
- -------
payment of Shares pursuant to the Offer, the Board of
Directors of the Company determines in good faith, after
consultation with outside counsel, that it is necessary to
do so in order to comply with its fiduciary duties to the
Company's stockholders under applicable law, the Company
may, in response to an unsolicited Takeover Proposal, and
subject to compliance with Section 6.02(c), (x) furnish
information with respect to the Company to any person
pursuant to a confidentiality agreement in a form approved
by the Company and Parent (such approval not to be
unreasonably withheld) and (y) participate in negotiations
regarding such Takeover Proposal. Without limiting the
foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any
director or executive officer of the Company or any of its
subsidiaries or any investment banker, financial advisor,
attorney, accountant or other representative of the Company
or any of its subsidiaries, whether or not such person is
purporting to act on behalf of the Company or any of its
subsidiaries or otherwise, shall be deemed to be a breach of
this Section 6.02(a) by the Company. For purposes of this
Agreement, "Takeover Proposal" means any inquiry, proposal
or offer from any person relating to any direct or indirect
acquisition or purchase of 20% or more of the assets of the
Company and its subsidiaries or 20% or more of any class of
equity securities of the Company or any of its subsidiaries,
any tender offer or exchange offer that if consummated would
result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any of its
subsidiaries, any merger, consolidation, business
combination, sale of substantially all the assets,
recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its
subsidiaries, other than the transactions contemplated by
this Agreement, or any other transaction the consummation of
which could reasonably be expected to impede, interfere
with, prevent or materially delay the Offer and/or the
Merger or which would reasonably be expected to dilute
materially the benefits to Parent of the transactions
contemplated hereby.
<PAGE>
33
(b) Except as set forth in this Section 6.02,
neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw or modify, or propose
to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by such Board of Directors or
such committee of the Offer, this Agreement or the Merger,
(ii) approve or recommend, or propose to approve or
recommend, any Takeover Proposal or (iii) cause the Company
to enter into any agreement with respect to any Takeover
Proposal. Notwithstanding the foregoing, in the event that
prior to the acceptance for payment of Shares pursuant to
the Offer the Board of Directors of the Company determines
in good faith, after consultation with outside counsel, that
it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders under
applicable law, the Board of Directors of the Company may
(subject to the other provisions of Section 6.02) withdraw
or modify its approval or recommendation of the Offer, this
Agreement and the Merger, approve or recommend a Superior
Proposal (as defined below), cause the Company to enter into
an agreement with respect to a Superior Proposal or
terminate this Agreement, but in each case only at a time
that is after the second business day following Parent's
receipt of written notice (a "Notice of Superior Proposal")
advising Parent that the Board of Directors of the Company
has received a Superior Proposal, specifying the material
terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal. In
the event that a Notice of Superior Proposal is delivered
and any material term or condition of the Superior Proposal
described therein is subsequently changed, the Company shall
deliver a supplemental Notice of Superior Proposal
describing such change and may withdraw or modify its
approval or recommendation of the Offer, this Agreement and
the Merger, approve or recommend the modified Superior
Proposal or cause the Company to enter into an agreement
with respect to the modified Superior Proposal only at a
time that is after the second business day following
Parent's receipt of the supplemental Notice of Superior
Proposal. In addition, if the Company proposes to enter
into an agreement with respect to any Takeover Proposal, it
shall concurrently with entering into such agreement pay, or
cause to be paid, to Parent the Initial Termination Fee (as
such term is defined in Section 7.06(b)). For purposes of
this Agreement, a "Superior Proposal" means any bona fide
proposal made by a third party to acquire, directly or
indirectly, for consideration consisting of cash and/or
securities, more than 50% of the shares of Company Common
Stock then outstanding or all or substantially all the
<PAGE>
34
assets of the Company and otherwise on terms which the Board
of Directors of the Company determines in its good faith
judgment (based on the advice of a financial advisor of
nationally recognized reputation) to be more favorable to
the Company's stockholders than the Offer and the Merger.
(c) In addition to the obligations of the Company
set forth in paragraphs (a) and (b) of this Section 6.02,
the Company shall immediately advise Parent orally and in
writing of any request for information or of any Takeover
Proposal, the material terms and conditions of such request
or Takeover Proposal and the identity of the person making
such request or Takeover Proposal. The Company will keep
Parent fully informed of the status and details (including
amendments or proposed amendments) of any such request or
Takeover Proposal.
(d) Nothing contained in this Section 6.02 shall
prohibit the Company from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders if, in the good
faith judgment of the Board of Directors of the Company,
after consultation with outside counsel, failure so to
disclose would be inconsistent with its fiduciary duties to
the Company's stockholders under applicable law; provided,
--------
however, neither the Company nor its Board of Directors nor
- -------
any committee thereof shall, except as permitted by
Section 6.02(b), withdraw or modify, or propose to withdraw
or modify, its position with respect to the Offer, this
Agreement or the Merger or approve or recommend, or propose
to approve or recommend, a Takeover Proposal.
SECTION 6.03. Other Actions. The Company shall
--------------
not, and shall not permit any of its subsidiaries to, take
any action that would, or that could reasonably be expected
to, result in (i) any of the representations and warranties
of the Company set forth in this Agreement that are
qualified as to materiality becoming untrue, (ii) any of
such representations and warranties that are not so
qualified becoming untrue in any material respect or
(iii) any of the Offer Conditions not being satisfied
(subject to the Company's right to take actions specifically
permitted by Section 6.02).
<PAGE>
35
ARTICLE VII
Additional Agreements
---------------------
SECTION 7.01. Stockholder Approval; Preparation
---------------------------------
of Proxy Statement. (a) If the Company Stockholder
- -------------------
Approval is required by law, the Company will, at Parent's
request, as soon as practicable following the expiration of
the Offer, duly call, give notice of, convene and hold a
meeting of its stockholders (the "Stockholders Meeting") for
the purpose of obtaining the Company Stockholder Approval.
The Company will, through its Board of Directors, recommend
to its stockholders that the Company Stockholder Approval be
given. Notwithstanding the foregoing, if Sub or any other
subsidiary of Parent shall acquire at least 90% of the
outstanding Shares, the parties shall, at the request of
Parent, take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after
the expiration of the Offer without a Stockholders Meeting
in accordance with Section 253 of the DGCL. Without
limiting the generality of the foregoing, the Company agrees
that its obligations pursuant to the first sentence of this
Section 7.01(a) shall not be affected by (i) the
commencement, public proposal, public disclosure or
communication to the Company of any Takeover Proposal or
(ii) the withdrawal or modification by the Board of
Directors of the Company of its approval or recommendation
of the Offer, this Agreement or the Merger.
(b) If the Company Stockholder Approval is
required by law, the Company will, at Parent's request, as
soon as practicable following the expiration of the Offer,
prepare and file a preliminary Proxy Statement with the SEC
and will use its best efforts to respond to any comments of
the SEC or its staff and to cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as
practicable after responding to all such comments to the
satisfaction of the staff. The Company will notify Parent
promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for
additional information and will supply Parent with copies of
all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff,
on the other hand, with respect to the Proxy Statement or
the Merger. If at any time prior to the Stockholders
Meeting there shall occur any event that should be set forth
in an amendment or supplement to the Proxy Statement, the
Company will promptly prepare and mail to its stockholders
<PAGE>
36
such an amendment or supplement. The Company will not mail
any Proxy Statement, or any amendment or supplement thereto,
to which Parent reasonably objects.
(c) Parent agrees to cause all Shares purchased
pursuant to the Offer and all other Shares owned by Parent
or any subsidiary of Parent to be voted in favor of the
Company Stockholder Approval.
SECTION 7.02. Access to Information. Upon
----------------------
reasonable notice and subject to restrictions contained in
confidentiality agreements to which the Company is subject
(from which it shall use reasonable efforts to be released),
the Company shall, and shall cause each of its subsidiaries
to, afford to Parent and to the officers, employees,
accountants, counsel and other representatives of Parent
access, during normal business hours during the period prior
to the Effective Time, to all their respective properties,
books, contracts, commitments and records and, during such
period, the Company shall (and shall cause each of its
subsidiaries to) furnish promptly to Parent (a) a copy of
each report, schedule, registration statement and other
document filed or received by it during such period pursuant
to the requirements of the Federal or state securities laws
or the Federal tax laws and (b) all other information
concerning its business, properties and personnel as Parent
may reasonably request (including the Company's outside
accountants' work papers). Except as otherwise agreed to by
the Company, unless and until Parent and Sub shall have
purchased a majority of the outstanding Shares pursuant to
the Offer or otherwise, and notwithstanding termination of
this Agreement, the terms of Confidential Disclosure
Agreement #RAL-R95632-00, dated August 16, 1995, shall apply
to all information about the Company which has been
furnished under this Agreement by the Company to Parent or
Sub.
SECTION 7.03. Reasonable Efforts. Each of the
-------------------
Company, Parent and Sub agree to use its reasonable efforts
to take, or cause to be taken, all actions necessary to
comply promptly with all legal requirements which may be
imposed on itself with respect to the Offer and the Merger
(which actions shall include furnishing all information
required under the HSR Act and in connection with approvals
of or filings with any other Governmental Entity) and will
promptly cooperate with and furnish information to each
other in connection with any such requirements imposed upon
any of them or any of their subsidiaries in connection with
the Offer and the Merger. Each of the Company, Parent and
<PAGE>
37
Sub will, and will cause its subsidiaries to, use its
reasonable efforts to take all reasonable actions necessary
to obtain (and will cooperate with each other in obtaining)
any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or
private third party required to be obtained or made by
Parent, Sub, the Company or any of their subsidiaries in
connection with the Offer and the Merger or the taking of
any action contemplated thereby or by this Agreement, except
that no party need waive any substantial rights or agree to
any substantial limitation on its operations or to dispose
of any assets.
SECTION 7.04. Company Stock Options; Shares
-----------------------------
Subject to Repurchase Right. (a) The Company shall amend,
- ----------------------------
if necessary, each of the Company's stock option plans (the
"Company Stock Option Plans") to provide that each
outstanding option to purchase Company Common Stock (a
"Company Stock Option") issued pursuant to a Company Stock
Option Plan, whether vested or unvested, shall remain
outstanding after the Effective Time and shall be assumed by
Parent. Parent shall assume such Company Stock Options in
such manner that Parent (i) is a corporation "assuming a
stock option in a transaction to which Section 424(a)
applied" within the meaning of Section 424 of the Code, or
(ii) to the extent that Section 424 of the Code does not
apply to any such Company Stock Options, would be such a
corporation were Section 424 applicable to such option.
Each Company Stock Option assumed by Parent shall be
exercisable upon the same terms and conditions as under the
applicable Company Stock Option Plan and the applicable
option agreement issued thereunder, except that (i) such
option shall be exercisable for that number of shares of
common stock of Parent equal to the product of (x) the
number of shares of Company Common Stock for which such
option was exercisable and (y) the Merger Consideration
divided by the average closing price of common stock of
Parent on the NYSE Composite Transactions Tape for the 30
consecutive trading days immediately preceding the date of
the Effective Time (the "Conversion Number"), and (ii) the
per share exercise price of such option shall be equal to
the per share exercise price of such option as of the date
hereof divided by the Conversion Number.
The Company represents that none of the Offer, the
Merger, the execution of this Agreement, the execution of
the Stockholder Agreement or the assumption of the Company
Stock Options by Parent shall accelerate the exercisability
of any Company Stock Option. However, except as set forth
<PAGE>
38
in a letter from the Company to Parent dated January 29,
1996, the Company intends to accelerate the exercisability
of up to 50% of the unexercisable Company Stock Options
outstanding as of the date of this Agreement in the manner
set forth on Schedule 7.04 and this Agreement shall not
prohibit the Company from doing so. In addition, with
respect to any Shares held by employees or other eligible
individuals that are subject to the Company's repurchase
right (the "Repurchase Right"), the Company hereby assigns,
as of the Effective Time, such Repurchase Right with respect
to all such Shares to Parent. However, prior to the
Effective Time, the Company intends to terminate such
Repurchase Right for up to 50% of the Shares subject to the
Repurchase Right as of the date of this Agreement in the
manner set forth on Schedule 7.04 and this Agreement shall
not prohibit the Company from doing so.
(b) As soon as practicable after the Effective
Time, Parent shall deliver to the holders of the Company
Stock Options appropriate notices setting forth such
holders' rights pursuant to the Company Stock Option Plans
and the agreements evidencing the grants of such Company
Stock Options shall continue in effect on the same terms and
conditions (subject to the adjustments required by this
Section 7.04 after giving effect to the Merger).
Parent shall comply with the terms of the Company
Stock Option Plans and ensure, to the extent required by,
and subject to the provisions of, such Company Stock Option
Plans, that the Company Stock Options which qualified as
qualified stock options prior to the Effective Time continue
to qualify as qualified stock options after the Effective
Time. Parent shall use all reasonable efforts to register
under the Securities Act all shares subject to options that
were formerly Company Stock Options as of the Effective
Time.
(c) Notwithstanding anything to the contrary
herein, if it is determined that compliance with any of the
foregoing would cause any individual subject to Section 16
of the Exchange Act to become subject to the profit recovery
provisions thereof, any Company Stock Options held by such
individual will be canceled or purchased, as the case may
be, at the Effective Time or at such later time as may be
necessary to avoid application of such profit recovery
provisions and such individual will be entitled to receive
from the Company or the Surviving Corporation an amount
equal to the excess, if any, of the Merger Consideration
over the per Share exercise price of such Company Stock
<PAGE>
39
Option multiplied by the number of Shares subject thereto,
and the parties hereto will cooperate so as to achieve the
intent of the foregoing without giving rise to such profit
recovery.
SECTION 7.05. Directors. Promptly upon the
----------
acceptance for payment of, and payment for, any Shares by
Sub pursuant to the Offer, Sub shall be entitled to
designate such number of directors on the Board of Directors
of the Company as will give Sub, subject to compliance with
Section 14(f) of the Exchange Act, a majority of such
directors, and the Company shall, at such time, cause Sub's
designees to be so elected by its existing Board of
Directors; provided, however, that in the event that Sub's
-------- -------
designees are elected to the Board of Directors of the
Company, until the Effective Time such Board of Directors
shall have at least two directors who are directors on the
date of this Agreement and who are not officers of the
Company (the "Independent Directors"); and provided further
-------- -------
that, in such event, if the number of Independent Directors
shall be reduced below two for any reason whatsoever, the
remaining Independent Director shall designate a person to
fill such vacancy who shall be deemed to be an Independent
Director for purposes of this Agreement or, if no
Independent Directors then remain, the other directors shall
designate two persons to fill such vacancies who shall not
be officers or affiliates of the Company or any of its
subsidiaries, or officers or affiliates of Parent or any of
its subsidiaries, and such persons shall be deemed to be
Independent Directors for purposes of this Agreement.
Subject to applicable law, the Company shall take all action
requested by Parent necessary to effect any such election,
including mailing to its stockholders the Information
Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and the Company agrees to make such mailing with
the mailing of the Schedule 14D-9 (provided that Sub shall
have provided to the Company on a timely basis all
information required to be included in the Information
Statement with respect to Sub's designees). In connection
with the foregoing, the Company will promptly, at the option
of Parent, either increase the size of the Company's Board
of Directors and/or obtain the resignation of such number of
its current directors as is necessary to enable Sub's
designees to be elected or appointed to, and to constitute a
majority of, the Company's Board of Directors as provided
above.
<PAGE>
40
SECTION 7.06. Fees and Expenses. (a) Except as
------------------
provided below in this Section 7.06, all fees and expenses
incurred in connection with the Offer, the Merger, this
Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Offer or the Merger is
consummated.
(b) The Company shall pay, or cause to be paid,
in same day funds to Parent $5,000,000 (the "Initial
Termination Fee") upon demand if (i) Parent or Sub
terminates this Agreement under Section 9.01(d); (ii) the
Company terminates this Agreement pursuant to
Section 9.01(e) or (iii) prior to any termination of this
Agreement (other than by the Company pursuant to
Section 9.01(f)), a Takeover Proposal shall have been made
and within 12 months of such termination, a transaction
constituting a Takeover Proposal is consummated or the
Company enters into an agreement with respect to, approves
or recommends or takes any action to facilitate such
Takeover Proposal. In addition, if the Company becomes
obligated to pay the Initial Termination Fee and a
transaction constituting a Takeover Proposal is consummated
within 12 months of the termination of this Agreement, the
Company shall pay, or cause to be paid, in same day funds to
Parent upon consummation of such transaction the sum of (x)
the Expenses (as hereinafter defined) in an amount up to but
not to exceed $2,000,000 and (y) $15,000,000. "Expenses"
shall mean documented out-of-pocket fees and expenses
incurred or paid by or on behalf of Parent in connection
with the Offer, the Merger or the consummation of any of the
transactions contemplated by this Agreement, including all
fees and expenses of law firms, commercial banks, investment
banking firms, accountants, experts and consultants to
Parent.
(c) If (i) the waiting period under the HSR Act
applicable to the purchase of the Shares shall not have
expired or terminated or (ii) there shall be any threatened,
instituted or pending antitrust litigation by the United
States government (or any agency or commission thereof)
challenging on antitrust grounds the acquisition by Parent
or Sub of any Shares (or any related transaction) and, in
the case of each of clauses (i) and (ii) above, if Parent by
reason of the foregoing terminates this Agreement, then
Parent shall pay $5,000,000 in same day funds to the Company
upon demand.
<PAGE>
41
SECTION 7.07. Indemnification; Insurance.
---------------------------
(a) Parent and Sub agree that all rights to indemnification
for acts or omissions occurring prior to the Effective Time
now existing in favor of the current or former directors or
officers (the "Indemnified Parties") of the Company and its
subsidiaries as provided in their respective certificates of
incorporation or by-laws (or similar organizational
documents) or existing indemnification contracts as filed
with the Company Filed SEC Documents shall survive the
Merger and shall continue in full force and effect in
accordance with their terms.
(b) For six years from the Effective Time, Parent
shall, unless Parent agrees in writing to guarantee the
indemnification obligations set forth in Section 7.07(a),
maintain in effect the Company's current directors' and
officers' liability insurance covering those persons who are
currently covered by the Company's directors' and officers'
liability insurance policy (a copy of which has been
heretofore delivered to Parent); provided, however, that in
-------- -------
no event shall Parent be required to expend in any one year
an amount in excess of 200% of the annual premiums currently
paid by the Company for such insurance which the Company
represents is not more than $250,000; and, provided,
--------
further, that if the annual premiums of such insurance
- -------
coverage exceed such amount, Parent shall be obligated to
obtain a policy with the greatest coverage available for a
cost not exceeding such amount.
(c) This Section 7.07 shall survive the
consummation of the Merger at the Effective Time, is
intended to benefit the Company, Parent, the Surviving
Corporation and the Indemnified Parties, and shall be
binding on all successors and assigns of Parent and the
Surviving Corporation.
SECTION 7.08. Certain Litigation. The Company
-------------------
agrees that it will not settle any litigation commenced
after the date hereof against the Company or any of its
directors by any stockholder of the Company relating to the
Offer, the Merger or this Agreement, without the prior
written consent of Parent. In addition, the Company will
not voluntarily cooperate with any third party which may
hereafter seek to restrain or prohibit or otherwise oppose
the Offer or the Merger and will cooperate with Parent and
Sub to resist any such effort to restrain or prohibit or
otherwise oppose the Offer or the Merger, unless the Board
of Directors of the Company determines in good faith, after
consultation with outside counsel, that failing so to
<PAGE>
42
cooperate with such third party or cooperating with Parent
or Sub, as the case may be, would constitute a breach of the
Board's fiduciary duties under applicable law.
SECTION 7.09. Benefits. (a) Parent and Sub shall
---------
take such reasonable actions as are necessary to allow
eligible employees of the Company to participate in benefit
programs of Parent including severance and alternative
benefit programs substantially comparable to those
applicable to comparable employees of Parent on similar
terms as soon as practicable after the Effective Time. To
the extent reasonably possible, eligible employees of the
Company shall receive service credit under Parent's vacation
and severance programs, but not under Parent's pension plans
and post-retirement welfare benefit plans, for the duration
of their service with the Company. In addition, Parent has
transmitted to the Company a letter dated January 29, 1996,
regarding certain incentive benefits matters.
ARTICLE VIII
Conditions
----------
SECTION 8.01. Conditions to Each Party's
--------------------------
Obligation To Effect the Merger. The respective obligation
- --------------------------------
of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following
conditions:
(a) Company Stockholder Approval. If required by
-----------------------------
applicable law, the Company Stockholder Approval shall
have been obtained.
(b) No Injunctions or Restraints. No statute,
-----------------------------
rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction
or other order issued by any court of competent
jurisdiction or other Governmental Entity or other
legal restraint or prohibition preventing the
consummation of the Merger shall be in effect;
provided, however, that each of the parties shall have
-------- -------
used reasonable efforts to prevent the entry of any
such injunction or other order and to appeal as
promptly as possible any injunction or other order that
may be entered.
<PAGE>
43
(c) Purchase of Shares. Sub shall have
-------------------
previously accepted for payment and paid for Shares
pursuant to the Offer.
ARTICLE IX
Termination and Amendment
-------------------------
SECTION 9.01. Termination. This Agreement may be
------------
terminated at any time prior to the Effective Time, whether
before or after approval of the terms of this Agreement by
the stockholders of the Company:
(a) by mutual written consent of Parent and the
Company;
(b) by either Parent or the Company:
(i) if (x) as a result of the failure of any
of the Offer Conditions the Offer shall have
terminated or expired in accordance with its terms
without Sub having accepted for payment any Shares
pursuant to the Offer or (y) Sub shall not have
accepted for payment any Shares pursuant to the
Offer prior to May 31, 1996; provided, however,
-------- -------
that the right to terminate this Agreement
pursuant to this Section 9.01(b)(i) shall not be
available to any party whose failure to perform
any of its obligations under this Agreement
results in the failure of any such condition or if
the failure of such condition results from facts
or circumstances that constitute a breach of
representation or warranty under this Agreement by
such party; or
(ii) if any Governmental Entity shall have
issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or
otherwise prohibiting the acceptance for payment
of, or payment for, shares of Company Common Stock
pursuant to the Offer or the Merger and such
order, decree or ruling or other action shall have
become final and nonappealable;
(c) by Parent or Sub prior to the purchase of
Shares pursuant to the Offer in the event of a breach
by the Company of any representation, warranty,
covenant or other agreement contained in this Agreement
<PAGE>
44
which (i) would give rise to the failure of a condition
set forth in paragraph (e) or (f) of Exhibit A and (ii)
cannot be or has not been cured within 20 days after
the giving of written notice to the Company;
(d) by Parent or Sub if either Parent or Sub is
entitled to terminate the Offer as a result of the
occurrence of any event set forth in paragraph (d) of
Exhibit A to this Agreement;
(e) by the Company in connection with entering
into a definitive agreement in accordance with
Section 6.02(b), provided it has complied with all
provisions thereof, including the notice provisions
therein, and that it makes simultaneous payment of the
Initial Termination Fee; or
(f) by the Company, if Sub or Parent shall have
breached in any material respect any of their
respective representations, warranties, covenants or
other agreements contained in this Agreement, which
breach or failure to perform is incapable of being
cured or has not been cured within 20 days after the
giving of written notice to Parent or Sub, as
applicable, except, in any case, such breaches and
failures which are not reasonably likely to affect
adversely Parent's or Sub's ability to complete the
Offer or the Merger.
SECTION 9.02. Effect of Termination. In the
----------------------
event of a termination of this Agreement by either the
Company or Parent as provided in Section 9.01, this
Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Parent, Sub or the
Company or their respective officers or directors, except
with respect to the last sentence of Section 1.02(c),
Section 4.16, Section 5.06, the last sentence of
Section 7.02, Section 7.06, this Section 9.02 and Article X;
provided, however, that nothing herein shall relieve any
- -------- -------
party for liability for any breach hereof.
SECTION 9.03. Amendment. This Agreement may be
----------
amended by the parties hereto, by action taken or authorized
by their respective Boards of Directors, at any time before
or after obtaining the Company Stockholder Approval (if
required by law), but, after any such approval, no amendment
shall be made which by law requires further approval by such
shareholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in
<PAGE>
45
writing signed on behalf of each of the parties hereto.
Following the election or appointment of the Sub's designees
pursuant to Section 7.05 and prior to the Effective Time,
the affirmative vote of a majority of the Independent
Directors then in office shall be required by the Company to
(i) amend or terminate this Agreement by the Company, (ii)
exercise or waive any of the Company's rights or remedies
under this Agreement or (iii) extend the time for
performance of Parent and Sub's respective obligations under
this Agreement.
SECTION 9.04. Extension; Waiver. At any time
------------------
prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors,
may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto or (iii) subject to the
proviso of Section 9.03, waive compliance with any of the
agreements or conditions contained herein. Any agreement on
the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument
signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of
those rights.
ARTICLE X
Miscellaneous
-------------
SECTION 10.01. Nonsurvival of Representations,
-------------------------------
Warranties and Agreements. None of the representations and
- --------------------------
warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time
or, in the case of the Company, shall survive the acceptance
for payment of, and payment for, Shares by Sub pursuant to
the Offer. This Section 10.01 shall not limit any covenant
or agreement of the parties which by its terms contemplates
performance after the Effective Time of the Merger.
SECTION 10.02. Notices. All notices and other
--------
communications hereunder shall be in writing and shall be
deemed given if delivered personally, telecopied (which is
confirmed), sent by overnight courier (providing proof of
delivery) or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses
<PAGE>
46
(or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or Sub, to
International Business Machines Corporation
Old Orchard Road
Armonk, NY 10504
Attention: Mr. Lee A. Dayton
Telecopy No.: (914) 765-7803
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Melvin L. Bedrick, Esq.
Telecopy No.: (212) 474-3700
and
(b) if to the Company, to
Tivoli Systems Inc.
9442 Capital of Texas Highway North
Arboretum Plaza One, Suite 500
Austin, TX 78759
Attention: Mr. Franklin H. Moss
Telecopy No.: (512) 794-0623
with a copy to:
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP
600 Hansen Way
2nd Floor
Palo Alto, CA 94304
Attention: Robert V. Gunderson, Jr., Esq.
Telecopy No.: (415) 843-0314
<PAGE>
47
SECTION 10.03. Interpretation. When a reference
---------------
is made in this Agreement to an Article or a Section, such
reference shall be to an Article or a Section of this
Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words
"without limitation". The phrase "made available" in this
Agreement shall mean that the information referred to has
been made available if requested by the party to whom such
information is to be made available. As used in this
Agreement, the term "subsidiary" of any person means another
person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of
which) is owned directly or indirectly by such first person.
As used in this Agreement, "material adverse change" or
"material adverse effect" means, when used in connection
with the Company, any change or effect (or any development
that, insofar as can reasonably be foreseen, is likely to
result in any change or effect) that, individually or in the
aggregate with any such other changes or effects, is
materially adverse to the business, financial condition or
results of operations of the Company and its subsidiaries
taken as a whole. Notwithstanding the foregoing, a material
adverse change or material adverse effect shall not include
any material adverse change or material adverse effect
caused by any change resulting from the announcement of the
Offer or the Merger.
SECTION 10.04. Counterparts. This Agreement may
-------------
be executed in two or more counterparts, all of which shall
be considered one and the same agreement and shall become
effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it
being understood that all parties need not sign the same
counterpart.
SECTION 10.05. Entire Agreement; Third Party
-----------------------------
Beneficiaries. This Agreement (including the documents and
- --------------
the instruments referred to herein) (a) constitute the
entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (b) except as
provided in Section 7.07 and Section 7.09, are not intended
<PAGE>
48
to confer upon any person other than the parties hereto any
rights or remedies hereunder.
SECTION 10.06. Governing Law. This Agreement
--------------
shall be governed and construed in accordance with the laws
of the State of New York without regard to any applicable
conflicts of law, except to the extent the DGCL shall be
held to govern the terms of the Merger.
SECTION 10.07. Publicity. Except as otherwise
----------
required by law or the rules of the NYSE or the Nasdaq
National Market, for so long as this Agreement is in effect,
neither the Company nor Parent shall, or shall permit any of
its subsidiaries to, issue or cause the publication of any
press release or other public announcement with respect to
the transactions contemplated by this Agreement without the
consent of the other party, which consent shall not be
unreasonably withheld.
SECTION 10.08. Assignment. Neither this
-----------
Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may
assign, in its sole discretion, any or all of its rights,
interests and obligations hereunder to Parent or to any
direct or indirect wholly owned subsidiary of Parent.
Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
SECTION 10.09. Enforcement. The parties agree
------------
that irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the
terms and provisions of this Agreement in any court of the
United States located in the State of Delaware or in a
Delaware state court, this being in addition to any other
remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit
such party to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court
in the event any dispute arises out of this Agreement or any
of the transactions contemplated hereby, (ii) agrees that
such party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any
<PAGE>
49
such court, (iii) agrees that such party will not bring any
action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a Federal court
sitting in the state of Delaware or a Delaware state court
and (iv) waives any right to trial by jury with respect to
any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby.
IN WITNESS WHEREOF, Parent, Sub and the Company
have caused this Agreement to be signed by their respective
<PAGE>
officers thereunto duly authorized as of the date first
written above.
INTERNATIONAL BUSINESS
MACHINES CORPORATION,
by /s/ John E. Hickey
-----------------------------
Name:
Title:
TOPAZ ACQUISITION CORP.,
by /s/ Lee A. Dayton
--------------------------
Name:
Title:
TIVOLI SYSTEMS INC.,
by /s/ Franklin H. Moss
--------------------------
Name:
Title:
<PAGE>
EXHIBIT A
Conditions of the Offer
-----------------------
Notwithstanding any other term of the Offer or this Agreement,
Sub shall not be required to accept for payment or, subject to
applicable rules and regulations of the SEC, including Rule 14e-1(c)
under the Exchange Act (relating to Sub's obligation to pay
for or return tendered Shares after the termination or withdrawal
of the Offer), to pay for any Shares tendered pursuant to the
Offer unless (i) there shall have been validly tendered and not
withdrawn prior to the expiration of the Offer such number of
Shares that would constitute a majority of the outstanding Shares
(determined on a fully diluted basis for all outstanding stock
options and any other rights to acquire Shares) (the "Minimum
Condition") and (ii) any waiting period under the HSR Act
applicable to the purchase of Shares pursuant to the Offer shall
have expired or been terminated. Furthermore, notwithstanding
any other term of the Offer or this Agreement, Sub shall not be
required to accept for payment or, subject as aforesaid, to pay
for any Shares not theretofore accepted for payment or paid for,
and may terminate the Offer if, at any time on or after the date
of this Agreement and before the acceptance of such Shares for
payment or the payment therefor, any of the following conditions
exists (other than as a result of any action or inaction of
Parent or any of its subsidiaries that constitutes a breach of
this Agreement):
(a) there shall be threatened, instituted or pending by any
person or Governmental Entity any suit, action or proceeding (i)
challenging the acquisition by Parent or Sub of any Shares under
the Offer or pursuant to the Stockholder Agreement, seeking to
restrain or prohibit the making or consummation of the Offer or
the Merger or the performance of any of the other transactions
contemplated by this Agreement or the Stockholder Agreement
(including the voting provision thereunder), or seeking to obtain
from the Company, Parent or Sub any damages that are material in
relation to the Company and its subsidiaries taken as a whole,
(ii) seeking to prohibit or materially limit the ownership or
operation by the Company, Parent or any of their respective
subsidiaries of a material portion of the software business or
assets of the Company and its subsidiaries, taken as a whole, or
Parent and its subsidiaries, taken as a whole, or to compel the
Company or Parent to dispose of or hold separate any material
portion of the software business or assets of the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries,
taken as a whole, as a result of the Offer or any of the other
<PAGE>
transactions contemplated by this Agreement or the Stockholder
Agreement, (iii) seeking to impose material limitations on the
ability of Parent or Sub to acquire or hold, or exercise full
rights of ownership of, any Shares to be accepted for payment
pursuant to the Offer or purchased under the Stockholder
Agreement including, without limitation, the right to vote such
Shares on all matters properly presented to the stockholders of
the Company or (iv) seeking to prohibit Parent or any of its
subsidiaries from effectively controlling in any material respect
any material portion of the software business or operations of
the Company and its subsidiaries, taken as a whole;
(b) there shall be any statute, rule, regulation, judgment, order
or injunction enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, or any other action
shall be taken by any Governmental Entity or court, other
than the application to the Offer or the Merger of applicable
waiting periods under the HSR Act, that is reasonably likely to
result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (iv) of paragraph (a) above;
(c) there shall have occurred any material adverse change with
respect to the Company other than a change resulting from the
announcement of the Offer or the Merger;
(d) (i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to
Parent or Sub its approval or recommendation of the Offer, the
Merger or this Agreement, or approved or recommended any Takeover
Proposal, (ii) the Company shall have entered into any agreement
with respect to any Superior Proposal in accordance with Section
6.02(b) of this Agreement or (iii) the Board of Directors of the
Company or any committee thereof shall have resolved to take any
of the foregoing actions;
(e) any of the representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall
not be true and correct or any such representations and
warranties that are not so qualified shall not be true and
correct in any material respect, in each case at the date of this
Agreement and at the scheduled or extended expiration of the
Offer;
<PAGE>
(f) the Company shall have failed to perform in any material
respect any material obligation or to comply in any material
respect with any material agreement or covenant of the Company to
be performed or complied with by it under this Agreement; or
(g) this Agreement shall have been terminated in accordance with
its terms.
The foregoing conditions are for the sole benefit of Sub and
Parent and may, subject to the terms of this Agreement, be waived
by Sub and Parent in whole or in part at any time and from time
to time in their sole discretion. The failure by Parent or Sub
at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, the waiver of any such right
with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts and circumstances
and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
EXHIBIT (c)(2)
EXECUTION COPY
STOCKHOLDER AGREEMENT dated as of
January 30, 1996, among INTERNATIONAL
BUSINESS MACHINES CORPORATION, a New York
corporation ("Parent"), TOPAZ ACQUISITION
CORP., a Delaware corporation and a wholly
owned subsidiary of Parent ("Sub"), and the
other parties signatory hereto (each, a
"Stockholder").
WHEREAS each Stockholder desires that Tivoli
Systems Inc., a Delaware corporation (the "Company"), Parent
and Sub enter into an Agreement and Plan of Merger dated as
of the date hereof (as the same may be amended or
supplemented, the "Merger Agreement") with respect to the
merger of Sub with and into the Company (the "Merger"); and
WHEREAS each Stockholder is executing this
Agreement as an inducement to Parent to enter into and
execute, and to cause Sub to enter into and execute, the
Merger Agreement.
NOW, THEREFORE, in consideration of the execution
and delivery by Parent and Sub of the Merger Agreement and
the mutual covenants, conditions and agreements contained
herein and therein, the parties agree as follows:
SECTION 1. Representations and Warranties. Each
------------------------------
Stockholder severally, and not jointly, represents and
warrants to Parent and Sub as follows:
(a) Such Stockholder is the record and beneficial
owner of the number of shares of Common Stock, par
value $0.01 per share, of the Company (the "Company
Common Stock") set forth opposite such Stockholder's
name in Schedule A hereto (as may be adjusted from time
to time pursuant to Section 5, such Stockholder's
"Shares"). Except for such Stockholder's Shares and
any other shares of Company Common Stock subject
hereto, such Stockholder is not the record or
beneficial owner of any shares of Company Common Stock.
<PAGE>
2
(b) This Agreement has been duly authorized,
executed and delivered by such Stockholder and
constitutes the legal, valid and binding obligation of
such Stockholder, enforceable against such Stockholder
in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application
affecting enforcement of creditors' rights generally
and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief
or other equitable remedies. Neither the execution and
delivery of this Agreement nor the consummation by such
Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or
conflict with, any contract, trust, commitment,
agreement, understanding, arrangement or restriction of
any kind to which such Stockholder is a party or bound
or to which such Stockholder's Shares are subject. To
the best of such Stockholder's knowledge, consummation
by such Stockholder of the transactions contemplated
hereby will not violate, or require any consent,
approval, or notice under, any provision of any
judgment, order, decree, statute, law, rule or
regulation applicable to such Stockholder or such
Stockholder's Shares, except for any necessary filing
under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, or state takeover laws.
(c) Such Stockholder's Shares and the
certificates representing such Shares are now and at
all times during the term hereof will be held by such
Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all
liens, claims, security interests, proxies, voting
trusts or agreements, understandings or arrangements or
any other encumbrances whatsoever, except for any such
encumbrances or proxies arising hereunder.
(d) No broker, investment banker, financial
adviser or other person is entitled to any broker's,
finder's, financial adviser's or other similar fee or
commission from Parent, Sub or the Company in
connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of such
Stockholder.
<PAGE>
3
(e) Such Stockholder understands and acknowledges
that Parent is entering into, and causing Sub to enter
into, the Merger Agreement in reliance upon such
Stockholder's execution and delivery of this Agreement.
Such Stockholder acknowledges that the irrevocable
proxy set forth in Section 4 is granted in
consideration for the execution and delivery of the
Merger Agreement by Parent and Sub.
SECTION 2. Purchase and Sale of Shares.
---------------------------
(a) Each Stockholder hereby severally agrees that it shall
tender its Shares into the Offer and that it shall not
withdraw any Shares so tendered (it being understood that
the obligation contained in this sentence is
unconditional). In addition, each Stockholder hereby
severally agrees to sell to Sub, and Sub hereby agrees to
purchase, all such Stockholder's Shares at a price per Share
equal to $47.50, or such higher price per Share as may be
offered by Sub in the Offer, provided that (i) such
obligation to purchase is subject to Sub having accepted
Shares for payment under the Offer and the Minimum Condition
(as defined in Exhibit A to the Merger Agreement) having
been satisfied, which conditions may be waived by Sub in its
sole discretion, and (ii) such obligation to sell is subject
to the Minimum Condition having been satisfied or a Takeover
Proposal having been made.
(b) Subject to the satisfaction or waiver of the
requirements of the second sentence in paragraph (a) above,
(i) if a Takeover Proposal shall have been made and the
Minimum Condition shall not have been satisfied, Shares
shall be purchased within three business days of the
delivery by Sub to the Stockholder of notice of Sub's
intention to so purchase such Stockholder's Shares, or
(ii) if Sub shall have accepted Shares for payment under the
Offer and the Minimum Condition shall have been satisfied,
Shares shall be purchased under the Offer.
SECTION 3. Covenants. Each Stockholder
---------
severally, and not jointly, agrees with, and covenants to,
Parent and Sub as follows:
(a) Such Stockholder shall not, except as contem-
plated by the terms of this Agreement, (i) transfer
(which term shall include, without limitation, for the
<PAGE>
4
purposes of this Agreement, any sale, gift, pledge or
other disposition), or consent to any transfer of, any
or all of such Stockholder's Shares or any interest
therein, (ii) enter into any contract, option or other
agreement or understanding with respect to any transfer
of any or all of such Shares or any interest therein,
(iii) grant any proxy, power-of-attorney or other
authorization or consent in or with respect to such
Shares, (iv) deposit such Shares into a voting trust or
enter into a voting agreement or arrangement with
respect to such Shares or (v) take any other action
that would in any way restrict, limit or interfere with
the performance of its obligations hereunder or the
transactions contemplated hereby.
(b) Subject to Section 8, such Stockholder shall
not, nor shall it permit any investment banker,
attorney or other adviser or representative of such
Stockholder to, directly or indirectly, (i) solicit,
initiate or encourage the submission of, any Takeover
Proposal or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any
information with respect to, or take any other action
to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be
expected to lead to, any Takeover Proposal. Without
limiting the foregoing, it is understood that any
violation of the restrictions set forth in the
preceding sentence by an investment banker, attorney or
other adviser or representative of such Stockholder,
whether or not such person is purporting to act on
behalf of such Stockholder or otherwise, shall be
deemed to be a violation of this Section 3(b) by such
Stockholder.
SECTION 4. Grant of Irrevocable Proxy; Appoint-
------------------------------------
ment of Proxy. (a) Each Stockholder hereby irrevocably
- -------------
grants to, and appoints, Parent and Lee A. Dayton, Donald D.
Westfall and Archie W. Colburn, and any other individual who
shall hereafter be designated by Parent, such Stockholder's
proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such
<PAGE>
5
Stockholder, to vote such Stockholder's Shares, or grant a
consent or approval in respect of such Shares, at any
meeting of stockholders of the Company or at any adjournment
thereof or in any other circumstances upon which their vote,
consent or other approval is sought, against (i) any merger
agreement or merger (other than the Merger Agreement and the
Merger), consolidation, combination, sale of substantial
assets, reorganization, joint venture, recapitalization,
dissolution, liquidation or winding up of or by the Company
and (ii) any amendment of the Company's Amended and Restated
Certificate of Incorporation or By-laws or other proposal or
transaction (including any consent solicitation to remove or
elect any directors of the Company) involving the Company or
any of its subsidiaries which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent
or nullify, or result in a breach of any covenant,
representation or warranty or any other obligation or
agreement of the Company under or with respect to, the
Offer, the Merger, the Merger Agreement or any of the other
transactions contemplated by the Merger Agreement (each of
the foregoing in clause (i) or (ii) above, a "Competing
Transaction").
(b) Such Stockholder represents that any proxies
heretofore given in respect of such Stockholder's Shares are
not irrevocable, and that any such proxies are hereby
revoked.
(c) Such Stockholder hereby affirms that the
irrevocable proxy set forth in this Section 4 is given in
connection with the execution of the Merger Agreement, and
that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this
Agreement. Such Stockholder hereby further affirms that the
irrevocable proxy is coupled with an interest and may under
no circumstances be revoked. Such Stockholder hereby
ratifies and confirms all that such irrevocable proxy may
lawfully do or cause to be done by virtue hereof. Such
irrevocable proxy is executed and intended to be irrevocable
in accordance with the provisions of Section 212(e) of the
Delaware General Corporation Law (the "DGCL").
<PAGE>
6
SECTION 5. Certain Events. Each Stockholder
--------------
agrees that this Agreement and the obligations hereunder
shall attach to such Stockholder's Shares and shall be
binding upon any person or entity to which legal or
beneficial ownership of such Shares shall pass, whether by
operation of law or otherwise, including without limitation
such Stockholder's heirs, guardians, administrators or
successors. In the event of any stock split, stock
dividend, merger, reorganization, recapitalization or other
change in the capital structure of the Company affecting the
Company Common Stock, or the acquisition of additional
shares of Company Common Stock or other securities or rights
of the Company by any Stockholder, the number of Shares
listed on Schedule A beside the name of such Stockholder
shall be adjusted appropriately and this Agreement and the
obligations hereunder shall attach to any additional shares
of Company Common Stock or other securities or rights of the
Company issued to or acquired by such Stockholder.
SECTION 6. Stop Transfer; Legend. The Company
----------------------
agrees with, and covenants to, Parent that the Company shall
not register the transfer of any certificate representing
any Stockholder's Shares, unless such transfer is made to
Parent or Sub or otherwise in compliance with this
Agreement. Each Stockholder agrees that such Stockholder
will tender to the Company, within five business days after
the date hereof, any and all certificates representing such
Stockholder's Shares and the Company will inscribe upon such
certificates the following legend: "The shares of Common
Stock, par value $0.01 per share, of Tivoli Systems Inc.
represented by this certificate are subject to a Stockholder
Agreement dated as of January 30, 1996, and may not be sold
or otherwise transferred, except in accordance therewith.
Copies of such Agreement may be obtained at the principal
executive offices of Tivoli Systems Inc."
SECTION 7. Voidability. If prior to the
-----------
execution hereof, the Board of Directors of the Company
shall not have duly and validly authorized and approved by
all necessary corporate action the acquisition of Company
Common Stock by Parent and Sub and the other transactions
contemplated by this Agreement and the Merger Agreement, so
that by the execution and delivery hereof Parent or Sub
<PAGE>
7
would become, or could reasonably be expected to become, an
"interested stockholder" with whom the Company would be
prevented for any period pursuant to Section 203 of the DGCL
from engaging in any "business combination" (as such terms
are defined in Section 203 of the DGCL), then this Agreement
shall be void and unenforceable until such time as such
authorization and approval shall have been duly and validly
obtained.
SECTION 8. Stockholder Capacity. No person
--------------------
executing this Agreement who is or becomes during the term
hereof a director or officer of the Company makes any
agreement or understanding herein in his or her capacity as
such director or officer. Each Stockholder signs solely in
his or her capacity as the record holder and beneficial
owner of such Stockholder's Shares and nothing herein shall
limit or affect any actions taken by a Stockholder in its
capacity as an officer or director of the Company to the
extent specifically permitted by the Merger Agreement.
SECTION 9. Further Assurances. Each Stockholder
------------------
shall, upon request of Parent or Sub, execute and deliver
any additional documents and take such further actions as
may reasonably be deemed by Parent or Sub to be necessary or
desirable to carry out the provisions hereof and to vest the
power to vote such Stockholder's Shares as contemplated by
Section 4 in Parent and the other irrevocable proxies
described therein.
SECTION 10. Termination. This Agreement, and all
-----------
rights and obligations of the parties hereunder, shall
terminate upon the earlier of (a) the date upon which the
Merger Agreement is terminated in accordance with its terms
either (i) by Parent or Sub or (ii) by mutual written
consent of Parent, Sub and the Company or (b) the date that
Parent or Sub shall have purchased and paid for the Shares
of each Stockholder pursuant to Section 2.
SECTION 11. Public Announcements. Each
---------------------
Stockholder will consult with Parent before issuing, and
provide Parent with the opportunity to review and comment
upon, any press release or other public statements with
respect to the transactions contemplated by this Agreement
and the Merger Agreement, and shall not issue any such press
release or make any such public statement prior to such
consultation, except as may be required by applicable law,
court process or by obligations pursuant to any listing
agreement with any national securities exchange.
<PAGE>
8
SECTION 12. Miscellaneous. (a) Capitalized
-------------
terms used and not otherwise defined in this Agreement shall
have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices, requests, claims, demands and
other communications under this Agreement shall be in
writing and shall be deemed given if delivered personally or
sent by overnight courier (providing proof of delivery) to
the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) if to Parent or Sub, to the address set forth in
Section 10.02 of the Merger Agreement; and (ii) if to a
Stockholder, to the address set forth on Schedule A hereto,
or such other address as may be specified in writing by such
Stockholder.
(c) The headings contained in this Agreement are
for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
(d) This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the
same agreement, and shall become effective (even without the
signature of any other Stockholder) as to any Stockholder
when one or more counterparts have been signed by each of
Parent, Sub and such Stockholder and delivered to Parent,
Sub and such Stockholder.
(e) This Agreement (including the documents and
instruments referred to herein) constitutes the entire
agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties
with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of
Delaware, regardless of the laws that might otherwise govern
under applicable principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be
assigned, in whole or in part, by operation of law or
otherwise, by any of the parties without the prior written
consent of the other parties, except by laws of descent.
Any assignment in violation of the foregoing shall be void.
(h) If any term, provision, covenant or
restriction herein, or the application thereof to any
<PAGE>
9
circumstance, shall, to any event, be held by a court of
competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and
restrictions herein and the application thereof to any other
circumstances, shall remain in full force and effect, shall
not in any way be affected, impaired or invalidated, and
shall be enforced to the fullest extent permitted by law.
(i) Each Stockholder agrees that irreparable
damage would occur and that Parent and Sub would not have
any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise
breached. It is accordingly agreed that Parent and Sub
shall be entitled to an injunction or injunctions to prevent
breaches by any Stockholder of this Agreement and to enforce
specifically the terms and provisions of this Agreement in
any court of the United States located in the State of
Delaware or in Delaware state court, this being in addition
to any other remedy to which Parent and Sub are entitled at
law or in equity. In addition, each of the parties hereto
(i) consents to submit such party to the personal
jurisdiction of any Federal court located in the State of
Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the
transactions contemplated hereby, (ii) agrees that such
party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any
such court, (iii) agrees that such party will not bring any
action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a Federal court
located in the State of Delaware or a Delaware state court
and (iv) waives any right to trial by jury with respect to
any claim or proceeding related to or arising out of this
<PAGE>
10
Agreement, or any transaction or conduct in connection
herewith.
(j) No amendment, modification or waiver in
respect of this Agreement shall be effective against any
party unless it shall be in writing and signed by such
party.
IN WITNESS WHEREOF, Parent, Sub and the Stock-
holders have caused this Agreement to be duly executed and
delivered as of the date first written above.
INTERNATIONAL BUSINESS
MACHINES CORPORATION,
by /s/ John E. Hickey
--------------------------
Name: John E. Hickey
Title:
TOPAZ ACQUISITION CORP.,
by /s/ Lee A. Dayton
--------------------------
Name: Lee A. Dayton
Title:
<PAGE>
11
/s/ Eric L. Jones
------------------------------
Eric L. Jones
/s/ Bernard J. Lacroute
------------------------------
Bernard J. Lacroute
/s/ Timothy A. Barrows
------------------------------
Timothy A. Barrows
/s/ William P. Wood
------------------------------
William P. Wood
/s/ Promod Haque
------------------------------
Promod Haque
/s/ Franklin H. Moss
------------------------------
Franklin H. Moss
/s/ William G. Bock
------------------------------
William G. Bock
/s/ James R. Offerdahl
------------------------------
James R. Offerdahl
<PAGE>
12
/s/ Alexander S. Kuli
------------------------------
Alexander S. Kuli
/s/ Chris A. Grafft
------------------------------
Chris A. Grafft
ACKNOWLEDGED AND AGREED
TO AS TO SECTION 6:
TIVOLI SYSTEMS INC.,
by /s/ Franklin H. Moss
_________________________
Name: Franklin H. Moss
Title:
<PAGE>
Schedule A
Number of
---------
Shares
------
Stockholder (including address) Owned
------------------------------- -----
Eric L. Jones 87,041
Tivoli Systems Inc.
9442 Capital of Texas Hwy. North
Arboretum Plaza One, Suite 500
Austin, TX 78759
Bernard J. LaCroute 0
Kleiner Perkins Caulfield & Byers
2750 Sand Hill Road
Menlo Park, CA 94025
Timothy A. Barrows(1) 25,644
Matrix Partners
One International Place, Suite 3250
Boston, MA 02110
William P. Wood (1) 65,507
Austin Ventures
114 West 7th St., Suite 1300
Austin, TX 78701
Promod Haque 0
Norwest Ventures
222 S. Ninth Street
Minneapolis, MN 55402
Franklin H. Moss 93,900
Tivoli Systems Inc.
9442 Capital of Texas Hwy. North
Arboretum Plaza One, Suite 500
Austin, TX 78759
William G. Bock 14,500
Tivoli Systems Inc.
9442 Capital of Texas Hwy. North
Arboretum Plaza One, Suite 500
Austin, TX 78759
James R. Offerdahl 71,500
Tivoli Systems Inc.
9442 Capital of Texas Hwy. North
Arboretum Plaza One, Suite 500
Austin, TX 78759
- --------------------
(1) Mr. Barrows and Mr. Wood may donate after acquired Shares to
charitable organizations.
<PAGE>
14
Number of
---------
Shares
------
Stockholder (including address) Owned
------------------------------- -----
Alexander S. Kuli 157,349
Tivoli Systems Inc.
9442 Capital of Texas Hwy. North
Arboretum Plaza One, Suite 500
Austin, TX 78759
Chris A. Grafft 15,000
Tivoli Systems Inc.
9442 Capital of Texas Hwy. North
Arboretum Plaza One, Suite 500
Austin, TX 78759
