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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
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LOTUS DEVELOPMENT CORPORATION
(Name of Subject Company)
WHITE ACQUISITION CORP.
(Bidder)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(Title of Class of Securities)
545700106
(CUSIP Number of Class of Securities)
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LAWRENCE R. RICCIARDI, ESQ.
INTERNATIONAL BUSINESS MACHINES CORPORATION
OLD ORCHARD ROAD
ARMONK, NY 10504
(914) 765-1900
(Name, Address and Telephone Number of Persons Authorized to
Receive Notices and Communications on Behalf of Bidder)
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COPY TO:
ALLEN FINKELSON, ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NY 10019
(212) 474-1000
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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$3,312,018,660 $662,403.73
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* Based on the offer to purchase all outstanding shares of Common Stock of the
Subject Company together with the associated preferred share purchase rights
at $60.00 cash per share, the number of shares of Common Stock reported as
outstanding in the Quarterly Report on Form 10-Q of the Subject Company for
the quarter ended April 1, 1995 (47,594,311), and the number of shares of
Common Stock under option reported in the 1994 Annual Report to Shareholders
of the Subject Company (7,606,000).
** 1/50 of 1% of Transaction Valuation.
[ ] 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>
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Lotus Development Corporation, a
Delaware corporation (the "Company"), and the address of its principal executive
offices is 55 Cambridge Parkway, Cambridge, MA 02142.
(b) The class of securities to which this statement relates is the Common
Stock, par value $.01 per share (the "Common Stock"), of the Company, including
the associated preferred share purchase rights (the "Rights") issued pursuant to
the Rights Agreement dated as of November 7, 1988, as amended, between the
Company and The First National Bank of Boston, as Rights Agent (the Common Stock
and Rights are referred to collectively herein as the "Shares"). The information
set forth in the Introductory Section and Section 1 of the Offer to Purchase
(the "Offer to Purchase") annexed hereto as Exhibit 1 is incorporated herein by
reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d); (g) The information set forth in Section 9 of the Offer to Purchase
is incorporated herein by reference. The name, business address, present
principal occupation or employment, the material occupations, positions, offices
or employments for the past five years and citizenship of each director and
executive officer of White Acquisition Corp., a New York corporation (the
"Purchaser"), and International Business Machines Corporation, a New York
corporation ("IBM"), and the name, principal business and address of any
corporation or other organization in which such occupations, positions, offices
and employments are or were carried on are set forth in Schedule I of the Offer
to Purchase and incorporated herein by reference.
(e)-(f) During the last five years, none of the Purchaser or IBM or, to the
best of the Purchaser's knowledge, any of the directors or executive officers of
the Purchaser or IBM has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction as a result of
which any such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violation of such law.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction and Section 11 of the
Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 10 of the Offer to Purchase is
incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the Introduction and Sections 7 and 12
of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in Section 11 of the Offer to Purchase is
incorporated herein by reference.
<PAGE>
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction and Section 11 of the Offer to
Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16 of the Offer to Purchase is
incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(c) The information set forth in Section 15 of the Offer to Purchase is
incorporated herein by reference.
(d) The information set forth in Section 7 of the Offer to Purchase is
incorporated herein by reference.
(e) The information set forth under Section 15 of the Offer to Purchase is
incorporated herein by reference. See Exhibit (g).
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, to the extent not otherwise incorporated herein by reference, is
incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated June 6, 1995.
(2) Letter of Transmittal with respect to the Shares and Rights.
(3) Letter, dated June 6, 1995, from CS First Boston Corporation to
brokers, dealers, banks, trust companies and nominees.
(4) Letter to be sent by brokers, dealers, banks, trust companies and
nominees to their clients.
(5) Notice of Guaranteed Delivery.
(6) IRS Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(7) Press Release, dated June 5, 1995.
(8) Other material made available on IBM's WorldWideWeb (Internet) home
page (URL=http://www.ibm.com) on June 5, 1995, including a "Dear Colleague"
letter to IBM colleagues and the transcript of an audio tape.
(9) Form of summary advertisement, dated June 6, 1995.
(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) None.
(d) None.
(e) Not applicable.
(f) None.
(g) Complaint in International Business Machines Corporation and White
Acquisition Corp. v. Lotus Development Corporation and Jim P. Manzi, filed in
the United States District Court for the District of Delaware on June 5, 1995.
<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: June 6, 1995
WHITE ACQUISITION CORP.
By: /s/ LEE A. DAYTON
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Name: Lee A. Dayton
Title: President
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
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<S> <C> <C> <C>
(a) (1) Offer to Purchase, dated June 6, 1995. ................................
(2)
Letter of Transmittal with respect to the Shares and Rights. ..........
(3)
Letter, dated June 6, 1995, from CS First Boston Corporation to
brokers, dealers, banks, trust companies and nominees. ..............
(4)
Letter to be sent by brokers, dealers, banks, trust companies and
nominees to their clients. ..........................................
(5)
Notice of Guaranteed Delivery. ........................................
(6)
IRS Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9. ..................................................
(7)
Press Release, dated June 5, 1995. ....................................
(8)
Other material made available on IBM's WorldWideWeb (Internet) home
page (URL=http://www.ibm.com) on June 5, 1995, including a "Dear
Colleague" letter to IBM colleagues and the transcript of an audio
tape. ...............................................................
(9)
Form of summary advertisement, dated June 6, 1995. ....................
(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) None. .................................................................
(d) None. .................................................................
(e) Not Applicable. .......................................................
(f) None. .................................................................
(g) Complaint in International Business Machines Corporation and White
Acquisition Corp. v. Lotus Development Corporation and Jim P. Manzi,
filed in the United States District Court for the District of
Delaware on June 5, 1995. ...........................................
</TABLE>
Exhibit (a)(1)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
LOTUS DEVELOPMENT CORPORATION
at
$60 NET PER SHARE
by
WHITE 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 MONDAY, JULY 3, 1995,
UNLESS THE OFFER IS EXTENDED.
--------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES
THAT WOULD REPRESENT A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED
BASIS ON THE DATE OF PURCHASE, (ii) THE COMPANY'S PREFERRED SHARE PURCHASE
RIGHTS (THE "RIGHTS") HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS OF
THE COMPANY OR THE PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION,
THAT THE RIGHTS HAVE BEEN INVALIDATED OR ARE OTHERWISE INAPPLICABLE TO
THE OFFER AND THE PROPOSED MERGER (AS DEFINED HEREIN), (iii) THE
ACQUISITION OF SHARES PURSUANT TO THE OFFER AND THE PROPOSED
MERGER HAVING BEEN APPROVED PURSUANT TO SECTION 203 OF THE
DELAWARE GENERAL CORPORATION LAW ("SECTION 203") OR THE PURCHASER
BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE PROVISIONS OF
SECTION 203 ARE OTHERWISE INAPPLICABLE TO THE ACQUISITION OF
SHARES PURSUANT TO THE OFFER AND THE PROPOSED MERGER AND
(iv) THE AMENDMENT OF THE COMPANY'S BY-LAWS TO ELIMINATE
THE CONTROL SHARE BY-LAW (AS DEFINED HEREIN) OR THE
PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION,
THAT THE MASSACHUSETTS CONTROL SHARE ACQUISITION
STATUTE (AS DEFINED HEREIN) IS INVALID OR OTHERWISE
INAPPLICABLE TO THE PURCHASER OR IBM OR ANY OF
THEIR ASSOCIATES OR THE ACQUISITION OF SHARES BY
ANY OF THEM. SEE THE INTRODUCTION AND SECTIONS
1 AND 14.
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IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (and the associated Rights) should either (i) complete and sign the
Letter of Transmittal (or a facsimile 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 and, if
separate, the certificate(s) representing the associated Rights to the
Depositary along with the Letter of Transmittal (or facsimile) or deliver such
Shares (and Rights, if applicable) pursuant to the procedure for book-entry
transfer set forth in Section 2 or (ii) request such stockholder's broker,
dealer, bank, trust company or other nominee to effect the transaction for such
stockholder. A stockholder having Shares and, if applicable, Rights 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 and, if applicable, Rights. Unless the
Rights Condition (as defined herein) is satisfied, stockholders will be required
to tender one Right for each Share tendered in order to effect a valid tender of
Shares.
If a stockholder desires to tender Shares and Rights and such stockholder's
certificates for Shares (or Rights, if applicable) 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 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:
CS First Boston
June 6, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
Introduction............................................................................ 1
The Tender Offer........................................................................ 5
1. Terms of the Offer.............................................................. 5
2. Procedure for Tendering Shares and Rights....................................... 6
3. Withdrawal Rights............................................................... 10
4. Acceptance for Payment and Payment.............................................. 11
5. Certain Federal Income Tax Consequences......................................... 12
6. Price Range of the Shares; Dividends on the Shares.............................. 13
7. Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act
Registration; Margin Regulations.............................................. 14
8. Certain Information Concerning the Company...................................... 15
9. Certain Information Concerning the Purchaser and IBM............................ 19
10. Source and Amount of Funds....................................................... 20
11. Contacts and Transactions with the Company; Background of the Offer.............. 21
12. Purpose of the Offer; Plans for the Company...................................... 25
13. Dividends and Distributions...................................................... 28
14. Certain Conditions of the Offer.................................................. 28
15. Certain Legal Matters............................................................ 32
16. Fees and Expenses................................................................ 38
17. Miscellaneous.................................................................... 38
Schedule I--Directors and Executive Officers of IBM and the Purchaser................... S-1
</TABLE>
<PAGE>
To the Holders of Common Stock (including
the Associated Preferred Share Purchase Rights)
of Lotus Development Corporation:
INTRODUCTION
White Acquisition Corp., a New York 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 $.01 per share (the "Shares"), of Lotus Development
Corporation, a Delaware corporation (the "Company"), together with (unless and
until the Purchaser declares that the Rights Condition (as defined below) is
satisfied) the associated preferred share purchase rights (the "Rights") issued
pursuant to the Rights Agreement dated as of November 7, 1988, as amended (the
"Rights Agreement"), between the Company and The First National Bank of Boston,
as Rights Agent (the "Rights Agent"), at a price of $60 per Share (and
associated Right), 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"). All references herein to Rights shall include all benefits that may
inure to holders of the Rights pursuant to the Rights Agreement and, unless the
context otherwise requires, all references herein to Shares shall include the
Rights.
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 CS First Boston Corporation ("CS
First Boston"), 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 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. IBM currently intends, as soon as practicable following consummation of
the Offer, to propose and seek to have the Company consummate a merger or
similar business combination with the Purchaser or another direct or indirect
wholly owned subsidiary of IBM (the "Proposed Merger"). The purpose of the
Proposed Merger is to acquire all Shares not tendered and purchased pursuant to
the Offer or otherwise. Pursuant to the Proposed Merger, each then outstanding
Share (other than Shares owned by the Purchaser, IBM or any of their
subsidiaries, Shares held in the treasury of the Company and Shares owned by
stockholders who perfect any available appraisal rights under the Delaware
General Corporation Law (the "DGCL")) would be converted into the right to
receive an amount in cash equal to the price per Share paid pursuant to the
Offer.
IBM intends to seek to negotiate with the Company with respect to the
acquisition of the Company by IBM. If such negotiations result in a definitive
merger agreement between the Company and IBM, the consideration to be received
by holders of Shares could include or consist of securities, cash or any
combination thereof. Accordingly, such negotiations could result in, among other
things, termination of the Offer (see Section 14) and submission of a different
acquisition proposal to the Company's stockholders for their approval.
The Purchaser has filed preliminary consent solicitation materials with the
Securities and Exchange Commission (the "Commission") for use in connection with
the solicitation of written consents from stockholders of the Company (the
"Consent Solicitation") for the following purposes: (i) to remove all six of the
present members of the Board of Directors of the Company, (ii) to amend the
By-laws of the Company (the "Company By-laws") to fix the number of directors of
the Company at three, (iii) to elect Mark G. Ewald, David S. Hershberg and John
E. Sexton (the "Nominees") to serve as the directors of the Company, (iv) to
amend the Company By-laws to eliminate the provision
1
<PAGE>
contained therein (the "Control Share By-law") that purports to make Chapter
110E of the Massachusetts General Laws (the "Massachusetts Control Share
Acquisition Statute") applicable to certain acquisitions of Shares and (v) to
repeal each provision of the Company By-laws or amendment thereto adopted
subsequent to July 27, 1994 and prior to the effectiveness of the proposals made
pursuant to the Consent Solicitation. The Nominees intend to (a) redeem the
Rights (or amend the Rights Agreement to make the Rights inapplicable to the
Offer and the Proposed Merger) and approve the Offer and the Proposed Merger
under Section 203 of the DGCL ("Section 203"), which would satisfy the Rights
Condition and the Business Combination Condition (each as hereinafter defined),
and take such other actions as may be required to expedite the prompt
consummation of the Offer and the Proposed Merger or (b) if any other
transaction offering more value to the Company's stockholders is proposed, take
actions to facilitate such a transaction, subject in all cases to fulfillment of
the fiduciary duties that they would have as directors of the Company. The
elimination of the Control Share By-law pursuant to the proposed By-law
amendment described in clause (iv) above would satisfy the Control Share
Condition (as hereinafter defined). Accordingly, adoption of the proposals made
pursuant to the Consent Solicitation would expedite the prompt consummation of
the Offer and the Proposed Merger.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF CONSENTS FROM THE COMPANY'S
STOCKHOLDERS. ANY SUCH SOLICITATION (INCLUDING THE CONSENT SOLICITATION) WILL BE
MADE ONLY PURSUANT TO SEPARATE CONSENT SOLICITATION MATERIALS COMPLYING WITH THE
REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
(THE "EXCHANGE ACT").
Certain Federal income tax consequences of the sale of Shares pursuant to
the Offer are described in Section 5.
The Offer is subject to the fulfillment of a number of conditions including,
without limitation, the following:
Minimum Tender Condition. THE OFFER IS CONDITIONED UPON 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 REPRESENT A
MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF
PURCHASE, WITHOUT GIVING EFFECT TO ANY DILUTION THAT MIGHT ARISE FROM EXERCISE
OF THE RIGHTS (THE "MINIMUM TENDER CONDITION"). THE PURCHASER RESERVES THE RIGHT
(SUBJECT TO THE APPLICABLE RULES AND REGULATIONS OF THE COMMISSION), WHICH IT
PRESENTLY HAS NO INTENTION OF EXERCISING, TO WAIVE OR REDUCE THE MINIMUM TENDER
CONDITION AND TO ELECT TO PURCHASE, PURSUANT TO THE OFFER, FEWER THAN THE
MINIMUM NUMBER OF SHARES. SEE SECTIONS 1 AND 14.
According to the Company's Quarterly Report on Form 10-Q for the quarter
ended April 1, 1995 (the "Company 1995 10-Q"), as of April 29, 1995, there were
47,594,311 Shares issued and outstanding. According to the Company's 1994 Annual
Report to Shareholders (the "Company 1994 Annual Report"), as of December 31,
1994, there were 7,606,000 Shares under option. Based on the foregoing and
assuming that no options were granted after December 31, 1994, and no options
were exercised or expired from January 1, 1995 through April 29, 1995, there
would be 55,200,311 Shares outstanding on a fully diluted basis and the Minimum
Number of Shares would be 27,600,156. However, the actual Minimum Number of
Shares will depend on the facts as they exist on the date of purchase.
Rights Condition. THE OFFER IS CONDITIONED UPON THE RIGHTS HAVING BEEN
REDEEMED BY THE BOARD OF DIRECTORS OF THE COMPANY OR THE PURCHASER BEING
SATISFIED, IN ITS SOLE DISCRETION, THAT THE RIGHTS HAVE BEEN INVALIDATED OR ARE
OTHERWISE INAPPLICABLE TO THE OFFER AND THE PROPOSED MERGER (THE "RIGHTS
CONDITION"). THE RIGHTS ARE DESCRIBED IN THE COMPANY'S REGISTRATION STATEMENT ON
FORM 8-A DATED NOVEMBER 9, 1988 (THE "COMPANY 8-A"), AND A SUMMARY OF THAT
DESCRIPTION IS PROVIDED BELOW AND IN SECTION 8.
The Rights Agreement provides that, until the close of business on the
Distribution Date (as defined in Section 8), the Rights will be evidenced by the
certificates for Shares. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Shares will also constitute the surrender for transfer of the Rights associated
with the Shares
2
<PAGE>
represented by such certificates. The Rights Agreement further provides that, as
soon as practicable following the Distribution Date, separate certificates
representing the Rights are to be mailed by the Company or the Rights Agent to
holders of record of Shares as of the close of business on the Distribution
Date.
The Rights Agreement provides that, at any time prior to the close of
business on the earlier of (a) the tenth day following a public announcement
that a person has become an Acquiring Person (as defined in Section 8) (or such
later date as may be determined by the Board of Directors of the Company with
the concurrence of a majority of the Unaffiliated Directors (as defined in
Section 8)) and (b) the Final Expiration Date (as defined in Section 8), the
Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (except as provided in the Rights Agreement).
Based on publicly available information, the Purchaser believes that, as of
June 6, 1995, the Rights were not exercisable, certificates for Rights had not
been issued and the Rights were evidenced by the certificates for Shares. The
Purchaser believes that, as a result of IBM's announcement on June 5, 1995 of
the intention to commence the Offer, the Distribution Date may occur as early as
June 19, 1995, unless prior to such date the Company's Board of Directors
redeems the Rights, amends the Rights Agreement to make the Rights inapplicable
to the Offer or delays the Distribution Date.
UNLESS THE RIGHTS CONDITION IS SATISFIED, STOCKHOLDERS WILL BE REQUIRED TO
TENDER ONE RIGHT FOR EACH SHARE TENDERED IN ORDER TO EFFECT A VALID TENDER OF
SHARES IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN SECTION 2. UNLESS THE
DISTRIBUTION DATE OCCURS, A TENDER OF SHARES WILL ALSO CONSTITUTE A TENDER OF
THE ASSOCIATED RIGHTS.
The Purchaser believes that under the circumstances of the Offer, and under
applicable law, the Board of Directors of the Company has a fiduciary obligation
to redeem the Rights (or amend the Rights Agreement to make the Rights
inapplicable to the Offer and the Proposed Merger), and the Purchaser is hereby
requesting that the Company's Board of Directors do so. However, there can be no
assurance that the Board of Directors of the Company will redeem the Rights (or
amend the Rights Agreement). The Purchaser has commenced litigation against the
Company and Jim P. Manzi, its Chairman of the Board, President and Chief
Executive Officer, in the United States District Court for the District of
Delaware seeking, among other things, an order compelling the Board of Directors
of the Company to redeem the Rights or to amend the Rights Agreement to make the
Rights inapplicable to the Offer and the Proposed Merger on the grounds that
failure to do so would constitute a breach of fiduciary duty to the Company's
stockholders.
Pursuant to the Consent Solicitation, the Purchaser expects to seek to
remove the members of the current Board of Directors of the Company and to
replace them with the Nominees, who intend to redeem the Rights (or amend the
Rights Agreement to make the Rights inapplicable to the Offer and the Proposed
Merger), subject to the fulfillment of the fiduciary duties that they would have
as directors of the Company. Redemption of the Rights (or such an amendment of
the Rights Agreement) would satisfy the Rights Condition.
Business Combination Condition. THE OFFER IS CONDITIONED UPON THE
ACQUISITION OF SHARES PURSUANT TO THE OFFER AND THE PROPOSED MERGER HAVING BEEN
APPROVED PURSUANT TO SECTION 203 OR THE PURCHASER BEING SATISFIED, IN ITS SOLE
DISCRETION, THAT THE PROVISIONS OF SECTION 203 ARE OTHERWISE INAPPLICABLE TO THE
ACQUISITION OF SHARES PURSUANT TO THE OFFER AND THE PROPOSED MERGER (THE
"BUSINESS COMBINATION CONDITION"). THE PROVISIONS OF SECTION 203 ARE DESCRIBED
MORE FULLY IN SECTION 15.
Section 203, in general, prohibits a Delaware corporation such as the
Company from engaging in a Business Combination (as defined in Section 15) with
an Interested Stockholder (as defined in Section 15) for a period of three years
following the date that such person became an Interested Stockholder unless (a)
prior to the date that 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,
(b) upon consummation of the transaction that
3
<PAGE>
resulted in the stockholder becoming an Interested Stockholder, the Interested
Stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding stock held by
directors who are also officers of the corporation and employee stock plans that
do not provide employees with the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer,
or (c) on or subsequent to the date such person became an Interested
Stockholder, the Business Combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders, and not by written
consent, by the affirmative vote of the holders of at least 66 2/3% of the
outstanding voting stock of the corporation not owned by the Interested
Stockholder. See Section 15.
The Purchaser is hereby requesting that the Company's Board of Directors
adopt a resolution approving the Offer and the Proposed Merger for purposes of
Section 203. However, there can be no assurance that the Board of Directors of
the Company will do so.
The Purchaser has commenced litigation against the Company and Mr. Manzi in
the United States District Court for the District of Delaware seeking, among
other things, an order compelling the Board of Directors of the Company to
approve the Offer and the Proposed Merger for purposes of Section 203 on the
grounds that failure to do so would constitute a breach of fiduciary duty to the
Company's stockholders.
Pursuant to the Consent Solicitation, the Purchaser expects to seek to
remove the members of the current Board of Directors of the Company and to
replace them with the Nominees, who intend to approve the Offer and the Proposed
Merger under Section 203, subject to the fulfillment of the fiduciary duties
that they would have as directors of the Company. Approval of the Offer and the
Proposed Merger under Section 203 would satisfy the Business Combination
Condition.
Control Share Condition. THE OFFER IS CONDITIONED UPON THE AMENDMENT OF THE
COMPANY BY-LAWS TO ELIMINATE THE CONTROL SHARE BY-LAW OR THE PURCHASER BEING
SATISFIED, IN ITS SOLE DISCRETION, THAT THE MASSACHUSETTS CONTROL SHARE
ACQUISITION STATUTE IS INVALID OR OTHERWISE INAPPLICABLE TO THE PURCHASER OR IBM
OR ANY OF THEIR ASSOCIATES OR THE ACQUISITION OF SHARES BY ANY OF THEM (THE
"CONTROL SHARE CONDITION"). THE PROVISIONS OF THE MASSACHUSETTS CONTROL SHARE
ACQUISITION STATUTE ARE DESCRIBED MORE FULLY IN SECTION 15.
The Massachusetts Control Share Acquisition Statute provides, in general,
that shares of an Issuing Public Corporation (as defined in Section 15) acquired
in a Control Share Acquisition (as defined in Section 15) will not have voting
rights if the Issuing Public Corporation's charter or by-laws provides, at the
time of the Control Share Acquisition, that the Massachusetts Control Share
Acquisition Statute will apply to Control Share Acquisitions of shares of such
Issuing Public Corporation, unless voting rights for such shares are authorized
at an annual or special meeting of stockholders of the Issuing Public
Corporation by the affirmative vote of the holders of a majority of all the
shares entitled to vote generally in the election of directors, excluding
Interested Shares (as defined in Section 15).
Unless the Massachusetts Control Share Acquisition Statute is rendered
inapplicable to the Offer by elimination of the Control Share By-law or
judicially invalidated or the Purchaser obtains approval of voting rights for
the Shares from stockholders of the Company at an annual or special meeting of
stockholders, the Shares acquired pursuant to the Offer would not have voting
rights. The Purchaser does not presently intend to seek approval of voting
rights for the Shares from stockholders of the Company pursuant to the
provisions of the Massachusetts Control Share Acquisition Statute.
The Purchaser has commenced litigation against the Company and Mr. Manzi in
the United States District Court for the District of Delaware seeking, among
other things, an order enjoining enforcement of the Massachusetts Control Share
Acquisition Statute on the grounds that such statute is unconstitutional.
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Pursuant to the Consent Solicitation, the Purchaser expects to seek to amend
the Company By-laws to eliminate the Control Share By-law. Elimination of the
Control Share By-law would satisfy the Control Share Condition.
Certain other conditions to the Offer are described in Section 14. The
Purchaser reserves the right (but shall not be obligated) to waive any or all
such conditions. See Sections 1, 8, 14 and 15.
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 Monday, July
3, 1995, unless and until the Purchaser, in its sole discretion, 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.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM TENDER CONDITION,
THE RIGHTS CONDITION, THE BUSINESS COMBINATION CONDITION AND THE CONTROL SHARE
CONDITION, THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED BY THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER (THE "HSR ACT") AND THE SATISFACTION OF THE OTHER
CONDITIONS SET FORTH IN SECTION 14.
Subject to the applicable rules and regulations of the Commission, the
Purchaser reserves the right, in its sole discretion, 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, to (a) 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) 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 Monday, July 3, 1995 (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 applicable rules and regulations of
the Commission, to (a) terminate the Offer and not accept for payment or pay for
any Shares and return all tendered Shares to tendering stockholders, (b) 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)
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) amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, 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 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 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. As used in this Offer to
Purchase, "business day" has the meaning set forth in Rule 14d-1 under the
Exchange Act.
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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,
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 and investor response.
Requests are being made to the Company pursuant to Rule 14d-5 of the
Exchange Act and Section 220 of the DGCL for the use of 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 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, by the Purchaser following receipt
of such lists or listings from the Company, or by the Company if it so elects.
2. PROCEDURE FOR TENDERING SHARES AND RIGHTS
Valid Tender. For a stockholder validly to tender Shares and Rights pursuant
to the Offer, either (a) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), 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 and Rights must be received by the Depositary at one of such addresses or
such Shares and Rights 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.
UNLESS THE RIGHTS CONDITION IS SATISFIED, STOCKHOLDERS WILL BE REQUIRED TO
TENDER ONE RIGHT FOR EACH SHARE TENDERED IN ORDER TO EFFECT A VALID TENDER OF
SHARES. ACCORDINGLY, STOCKHOLDERS WHO SELL THEIR RIGHTS SEPARATELY FROM THEIR
SHARES AND DO NOT OTHERWISE ACQUIRE RIGHTS MAY NOT BE ABLE TO SATISFY THE
REQUIREMENTS OF THE OFFER FOR A VALID TENDER OF SHARES. As further described in
Section 8, the Rights Agreement provides that until the close of business on the
Distribution Date, the Rights will be evidenced by the certificates for the
Shares and may be transferred with and only with the Shares. The Rights
Agreement further provides that, as soon as practicable following the
Distribution Date, separate certificates representing the Rights are to be
mailed by the Company or the Rights Agent to holders of record of Shares as of
the close of business on the Distribution Date. The Purchaser believes that, as
a result of IBM's announcement on June 5, 1995 of the intention to commence the
Offer, the Distribution Date may occur as early as June 19, 1995, unless prior
to such date the Company's Board
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of Directors redeems the Rights, amends the Rights Agreement to make the Rights
inapplicable to the Offer or delays the Distribution Date. UNLESS THE
DISTRIBUTION DATE OCCURS, A TENDER OF SHARES WILL ALSO CONSTITUTE A TENDER OF
THE ASSOCIATED RIGHTS.
If the Distribution Date occurs and separate certificates representing the
Rights are distributed by the Company or the Rights Agent to holders of Shares
prior to the time a holder's Shares are tendered pursuant to the Offer,
certificates representing a number of Rights equal to the number of Shares
tendered must be delivered to the Depositary, or, if available, a Book-Entry
Confirmation received by the Depositary with respect thereto, in order for such
Shares to be validly tendered. If the Distribution Date occurs and separate
certificates representing the Rights are not distributed prior to the time
Shares are tendered pursuant to the Offer, Rights may be tendered prior to a
stockholder receiving the certificates for Rights by use of the guaranteed
delivery procedure described below. A tender of Shares constitutes an agreement
by the tendering stockholder to deliver certificates representing a number of
Rights equal to the number of Shares tendered pursuant to the Offer to the
Depositary prior to expiration of the period permitted by such guaranteed
delivery procedures for delivery of certificates for, or a Book-Entry
Confirmation with respect to, Rights (the "Rights Delivery Period"). However,
after expiration of the Rights Delivery Period, the Purchaser may elect to
reject as invalid a tender of Shares with respect to which certificates for, or
a Book-Entry Confirmation with respect to, an equal number of Rights have not
been received by the Depositary. Nevertheless, the Purchaser will be entitled to
accept for payment Shares tendered by a stockholder prior to receipt of the
certificates for the Rights required to be tendered with such Shares, or a
Book-Entry Confirmation with respect to such Rights, and either (a), subject to
complying with applicable rules and regulations of the Commission, withhold
payment for such Shares pending receipt of the certificates for, or a Book-Entry
Confirmation with respect to, such Rights or (b) make payment for Shares
accepted for payment pending receipt of the certificates for, or a Book-Entry
Confirmation with respect to, such Rights in reliance upon the agreement of a
tendering stockholder to deliver Rights and such guaranteed delivery procedures.
Any determination by the Purchaser to make payment for Shares in reliance upon
such agreement and such guaranteed delivery procedures or, after expiration of
the Rights Delivery Period, to reject a tender as invalid will be made in the
sole and absolute discretion of the Purchaser.
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. If the Distribution Date occurs, the Depositary will also make
a request to establish an account with respect to the Rights at each of the
Book-Entry Transfer Facilities, but no assurance can be given that book-entry
delivery of Rights will be available. If book-entry delivery of Rights is
available, the foregoing book-entry transfer procedures will also apply to
Rights. If book-entry delivery of Rights is not available and the Distribution
Date occurs, a tendering stockholder will be required to tender Rights by means
of physical delivery to the Depositary of certificates for Rights (in which
event references in this Offer to Purchase to Book-Entry Confirmations with
respect to Rights will be inapplicable). The confirmation of a book-entry
transfer of Shares or Rights 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.
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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, RIGHTS, 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.
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 and Rights
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 and Rights 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
(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 or Rights 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 or Rights
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 and Rights
pursuant to the Offer and such stockholder's certificates for Shares or Rights
are not immediately available (including because certificates for Rights have
not yet been distributed by the Company or the Rights Agent) 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 and/or Rights, in proper
form for transfer (or a Book-Entry Confirmation with respect to all such
Shares and/or Rights), together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), 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 (a),
in the case of Shares, three trading days after the date of execution of
such Notice of Guaranteed Delivery or (b), in the case of Rights, a period
ending on the later of (1) three trading days after the date of execution of
such Notice of Guaranteed Delivery or (2) three business days (as defined
above) after the date certificates for
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Rights are distributed to stockholders by the Company or the Rights Agent. 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 and, if the Distribution Date occurs,
certificates for (or a timely Book-Entry Confirmation, if available, with
respect to) the associated Rights (unless the Purchaser elects to make payment
for such Shares pending receipt of the certificates for, or a Book-Entry
Confirmation with respect to, such Rights as described above), (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 Rights) or Book-Entry
Confirmations with respect to Shares (or Rights, if available) 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.
If the Rights Condition is satisfied, the guaranteed delivery procedures
with respect to certificates for Rights and the requirement for the tender of
Rights will no longer apply.
The valid tender of Shares and, if applicable, Rights 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 and Rights tendered by
such stockholder and accepted for payment by the Purchaser and with respect to
any and all other Shares, Rights or other securities or rights issued or
issuable in respect of such Shares and Rights on or after June 5, 1995. All such
proxies will be considered coupled with an interest in the tendered Shares and
Rights. 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 (except for
any consents issued under the Consent Solicitation), Rights 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, Rights 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 and Rights to
be deemed validly tendered, immediately upon the Purchaser's acceptance for
payment of such Shares and Rights, the Purchaser must be able to exercise full
voting, consent and other rights with respect to such Shares, Rights 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
or Rights 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
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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 or Rights of any particular stockholder
whether or not similar defects or irregularities are waived in the case of other
stockholders. No tender of Shares or Rights 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 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 and Rights
are irrevocable. Shares and Rights 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 August
4, 1995. Shares or Rights may not be withdrawn unless the associated Rights or
Shares, as the case may be, are also withdrawn. A withdrawal of Shares or Rights
will also constitute a withdrawal of the associated Rights or Shares, as the
case may be.
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 and Rights to be
withdrawn, the number of Shares and Rights to be withdrawn and the name of the
registered holder of the Shares and Rights to be withdrawn, if different from
the name of the person who tendered the Shares and Rights. If certificates for
Shares or Rights 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 or Rights have been tendered by an Eligible Institution, the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares or Rights 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 or Rights and otherwise comply
with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of
Shares and Rights may not be rescinded, and any Shares and Rights properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However,
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withdrawn Shares and Rights 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 questions as
to the satisfaction of such terms and conditions will be determined by the
Purchaser in its sole discretion, which determination will be final and binding.
See Sections 1 and 14. The Purchaser expressly reserves the right, in its sole
discretion, 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 June 6, 1995. The waiting period under the HSR Act with respect to
the Offer will expire at 11:59 p.m., New York City time, on June 21, 1995,
unless early termination of the waiting period is granted. However, the
Antitrust Division of the Department of Justice (the "Antitrust Division") or
the Federal Trade Commission (the "FTC") may extend the waiting period by
requesting additional information or documentary material from IBM. 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 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 and, if the
Distribution Date occurs, certificates for (or a timely Book-Entry Confirmation,
if available, with respect to) the associated Rights (unless the Purchaser
elects to make payment for such Shares pending receipt of the certificates for,
or a Book-Entry Confirmation with respect to, such Rights as described in
Section 2), (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.
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<PAGE>
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),
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 and the associated Rights will be
returned, without expense to the tendering stockholder (or, in the case of
Shares or Rights delivered by book-entry transfer of such Shares or Rights into
the Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedure set forth in Section 2, such Shares or Rights 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 Proposed 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 between the amount of cash received by the
stockholder pursuant to the Offer or the Proposed Merger and the aggregate tax
basis in the Shares (together with the Rights) tendered by the stockholder and
purchased pursuant to the Offer or converted in the Proposed Merger, as the case
may be. Gain or loss will be calculated separately for each block of Shares and
Rights tendered and purchased pursuant to the Offer or converted in the Proposed
Merger, as the case may be.
If Shares (and associated Rights) 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 (and associated Rights) 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%.
A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals and entities) 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. A stockholder that
does not furnish its TIN may be subject to a penalty imposed by the IRS. See
"Procedure For Tendering Shares and Rights--Backup Withholding".
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.
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<PAGE>
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 PROPOSED MERGER.
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 LOTS. The following table sets
forth, for each of the periods indicated, the high and low last reported sales
quotations per Share as reported by the Nasdaq National Market and the Dow Jones
News Retrieval Service.
LOTUS DEVELOPMENT CORPORATION
SALES QUOTATION
-------------------
CALENDAR YEAR HIGH LOW
- ------------------------------------------------------ -------- --------
1993
First Quarter....................................... $28 1/2 $18 3/4
Second Quarter...................................... $37 $23 1/2
Third Quarter....................................... $48 1/4 $30 1/4
Fourth Quarter...................................... $58 3/4 $41 3/4
1994
First Quarter....................................... $86 1/2 $51 3/4
Second Quarter...................................... $73 1/2 $33
Third Quarter....................................... $46 1/2 $29 3/4
Fourth Quarter...................................... $46 1/4 $34
1995
First Quarter....................................... $48 1/4 $37 1/4
Second Quarter (through June 2, 1995)............... $38 $29 1/4
On June 2, 1995, the last full trading day before the first public
announcement of the intention to commence the Offer, the last reported sale
quotation of the Shares on the Nasdaq National Market was $32 1/2 per Share. On
June 5, 1995, prior to the commencement of trading, IBM announced the intention
to commence the Offer. On that date, which was the last full trading day before
commencement of the Offer, the last reported sale quotation of the Shares on the
Nasdaq National Market was $61 7/16 per share. STOCKHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR THE SHARES.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (the "Company 1994 10-K"), the Company has never paid
any dividends on the Shares.
As of the date of this Offer to Purchase, the Rights are attached to the
Shares and are not traded separately. As a result, the sales quotations per
Share set forth above are also the high and low sales quotations per Share and
associated Right during such periods. Upon the occurrence of the Distribution
Date, the Rights are to detach, and may trade separately, from the Shares. See
Section 8. The Purchaser believes that, as a result of IBM's announcement on
June 5, 1995 of the intention to commence the Offer, the Distribution Date may
occur as early as June 19, 1995, unless prior to such date the Company's Board
of Directors redeems the Rights, amends the Rights Agreement to make the Rights
inapplicable to the Offer or delays the Distribution Date. IF THE DISTRIBUTION
DATE OCCURS AND THE RIGHTS BEGIN TO TRADE SEPARATELY FROM THE SHARES,
STOCKHOLDERS SHOULD ALSO OBTAIN A CURRENT MARKET QUOTATION FOR THE RIGHTS.
13
<PAGE>
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 1994 10-K, as of
December 31, 1994, there were approximately 46,000 holders of record of Shares
and, according to the Company 1995 10-Q, as of April 29, 1995, there were
47,594,311 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
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, as amended, 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.
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<PAGE>
Based on publicly available information, the Rights are registered under the
Exchange Act, but are attached to the Shares and are not currently separately
transferable. The Purchaser believes that, as a result of IBM's announcement on
June 5, 1995 of the intention to commence the Offer, the Distribution Date may
occur as early as June 19, 1995, unless prior to such date the Company's Board
of Directors redeems the Rights, amends the Rights Agreement to make the Rights
inapplicable to the Offer or delays the Distribution Date. See Section 8.
According to the Company 8-A, as soon as possible after the occurrence of the
Distribution Date, certificates for Rights will be sent to all holders of Rights
and the Rights will become transferable apart from the Shares. If the
Distribution Date occurs and the Rights separate from the Shares, the foregoing
discussion with respect to the effect of the Offer on Exchange Act registration
would apply to the Rights in a similar manner.
If registration of the Shares is not terminated prior to the Proposed
Merger, then the Shares will be delisted from all stock exchanges and the
registration of the Shares and Rights under the Exchange Act will be terminated
following the consummation of the Proposed 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 55
Cambridge Parkway, Cambridge, MA 02142. According to the Company 1994 10-K, the
Company's principal line of business is the development, manufacture, licensing,
marketing and support of software products and services that meet the evolving
technology and business application requirements of individuals, work groups and
entire organizations.
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 1994 Annual Report and the Company 1995 10-Q. More
comprehensive financial information is included in the Company 1994 Annual
Report, 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 1994 Annual Report, the Company 1995 10-Q and such other
documents and all the financial information (including any related notes)
contained therein. The Company 1994 Annual Report, 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."
15
<PAGE>
LOTUS DEVELOPMENT CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
------------------------------------------ ------------------------------
1994 1993 1992 APRIL 1, 1995 APRIL 2, 1994
----------- ------------ ----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUMMARY OF EARNINGS DATA:
Net sales...................... $ 970.7 $981.2 $ 900.1 $ 202.6 $ 247.0
Gross margin................... 798.4 778.7 700.0 163.5 200.6
Operating income............... 77.6 131.5 85.5 --(2) --(2)
Net (loss) income.............. (20.9) 55.5 80.4 (17.5) 21.3
Net (loss) income per share.... (0.44) 1.24 1.87 (0.36) 0.45
BALANCE SHEET DATA: (1)
Total current assets........... $ 652.4 $676.1 $ 647.1
Total assets................... 904.1 905.3 903.1
Total current liabilities...... 260.4 277.4 263.2
Total liabilities.............. 350.0 377.0 352.5
Total stockholders' equity..... 554.1 528.4 550.6
</TABLE>
- ------------
(1) At period end.
(2) Information not reported in the Company 1995 10-Q.
The Rights. Set forth below is a summary description of the Rights derived
from the Company 8-A.
On November 7, 1988, the Board of Directors of the Company declared a
dividend of one Right for each Share. The dividend was payable as of the close
of business on November 23, 1988 to the stockholders of record on that date.
Each Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Junior Participating Preferred Stock, par
value $1.00 per share (the "Preferred Shares"), of the Company at a price of $75
per one one-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment.
Until the earlier to occur of (a) 10 days following a public announcement
that a person or group of affiliated or associated persons has acquired
beneficial ownership of 15% or more of the outstanding Shares (an "Acquiring
Person") or (b) 10 business days (or such later date as may be determined by
action of the Board of Directors prior to the time that a person or group has
become an Acquiring Person) following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer, the consummation of which
would result in a person or group becoming an Acquiring Person (the earlier of
such dates being called the "Distribution Date"), the Rights will be evidenced
by the certificates for Shares.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates for Shares will also constitute the surrender for transfer of the
Rights associated with the Shares represented by such certificates. The Rights
Agreement further provides that, as soon as practicable following the
Distribution Date, separate certificates for Rights will be mailed by the
Company or the Rights Agent to holders of record of the Shares as of the close
of business on the Distribution Date.
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<PAGE>
The Rights will expire on November 23, 1998 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Rights are earlier
redeemed by the Company, in each case as described below.
The Purchase Price payable and the number of Preferred Shares or other
securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time as provided in the Rights Agreement.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a preferential quarterly
dividend payment of the greater of $1 per share or 100 times the dividend
declared per Share. In the event of liquidation, the holders of the Preferred
Shares will be entitled to a minimum preferential liquidation payment of the
greater of $100 per share or 100 times the payment made per Share. Each
Preferred Share will have 100 votes, voting together as a single class with the
Shares. Finally, in the event of any merger, consolidation or other transaction
in which Shares are exchanged, each Preferred Share will be entitled to receive
100 times the amount received per Share. Because of the nature of the Preferred
Shares' dividend, liquidation and voting rights, the value of the one
one-hundredth interest in a Preferred Share purchasable upon exercise of each
Right should, according to the Company 8-A, approximate the value of one Share.
If any person becomes an Acquiring Person, then the Rights Agreement
requires that proper provision be made so that each holder of a Right, other
than Rights beneficially owned by the Acquiring Person and certain affiliated or
associated persons (which will thereafter be void), will thereafter have the
right to receive upon exercise that number of Shares (or, in certain
circumstances, other securities or cash) having a market value of two times the
exercise price of the Right. In the event that the Company is acquired in a
merger or other business combination transaction or rights, assets, properties
or interests in properties accounting for 50% or more of the fair market value
of the assets or more than 50% of the revenues of the Company and its
subsidiaries are sold, the Rights Agreement requires that proper provisions be
made so that each holder of a Right will thereafter have the right to receive,
upon the exercise thereof at the then current exercise price of the Right, that
number of shares of common stock of the acquiring company that at the time of
such transaction will have a market value of two times the exercise price of the
Right.
The Rights Agreement provides that, at any time after any person becomes an
Acquiring Person and prior to the acquisition by such person or group of 50% or
more of the outstanding Shares, the Board of Directors of the Company (with the
concurrence of a majority of the directors (the "Unaffiliated Directors") who
are neither employees or officers of the Company nor affiliated or associated
with an Acquiring Person) may authorize the exchange of the Rights (other than
Rights owned by the Acquiring Person), in whole or in part, at an exchange ratio
of one Share, or one one-hundredth of a Preferred Share (or of a share of a
class or series of the Company's preferred stock having equivalent rights,
preferences and privileges), per Right (subject to adjustment).
The Rights Agreement provides that, at any time prior to the close of
business on the earlier of (a) the tenth day following the public announcement
that a person has become an Acquiring Person (or such later date determined by
the Board of Directors with the concurrence of a majority of the Unaffiliated
Directors) and (b) the Final Expiration Date, the Board of Directors of the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right; provided, however, that the Rights are not redeemable at any time at
which Unaffiliated Directors do not constitute a majority of the Board of
Directors. The redemption of the Rights may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish. The Rights are not exercisable at any time following a
public announcement that a person has become an Acquiring Person and during
which the Company's right to redeem is in effect.
17
<PAGE>
In addition, the Rights Agreement provides that if a person who does not
beneficially own more than 1% of the Shares (and who has not within the past
year owned in excess of 1% of the Shares and, at a time it held such greater
than 1% stake, disclosed, or caused the disclosure of, an intention which
relates to or would result in the acquisition or influence of control of the
Company) (an "offeror") proposes to acquire all of the Shares for cash at a
price that a nationally-recognized investment bank selected by such offeror
states in writing is fair, and such offeror has obtained written financing
commitments (or otherwise has financing) and complies with certain procedural
requirements, then the Company, upon the request of the offeror, will hold a
special meeting of stockholders to vote on a resolution requesting the Board of
Directors of the Company to accept the offeror's proposal. If holders of a
majority of the outstanding Shares vote in favor of such resolution, then the
Rights will be redeemed effective immediately prior to the consummation of any
tender offer by any person for all of the Shares at a price per Share in cash
equal to or greater than the price offered in the original offeror's proposal
(provided that such tender offer is consummated prior to 60 days after the date
of such special meeting). Immediately upon any redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the redemption price.
The Rights Agreement may be supplemented or amended without the approval of
any holder of certificates for Rights in order to cure any ambiguity, to correct
or supplement any provision contained therein that may be defective or
inconsistent with any other provision therein or to make any other provisions
with respect to the Rights which the Company may deem necessary or desirable,
except that from and after such time as any person becomes an Acquiring Person
no such amendment may adversely affect the interests of the holders of the
Rights and except that the exercise price of the Rights, the redemption price of
the Rights and the final expiration date of the Rights Agreement cannot be
amended without the consent of each holder.
The foregoing summary of the Rights Agreement does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement
and the other documents included in the Company 8-A. The Company 8-A should be
available for inspection and copies thereof should be obtainable in the manner
set forth below under "Available Information."
PURSUANT TO THE RIGHTS CONDITION, THE OFFER IS CONDITIONED UPON THE RIGHTS
HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS OF THE COMPANY OR THE PURCHASER
BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE RIGHTS HAVE BEEN INVALIDATED
OR ARE OTHERWISE INAPPLICABLE TO THE OFFER AND THE PROPOSED MERGER.
UNLESS THE RIGHTS CONDITION IS SATISFIED, STOCKHOLDERS WILL BE REQUIRED TO
TENDER ONE RIGHT FOR EACH SHARE TENDERED IN ORDER TO EFFECT A VALID TENDER OF
SHARES IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN SECTION 2. UNLESS THE
DISTRIBUTION DATE OCCURS, A TENDER OF SHARES WILL ALSO CONSTITUTE A TENDER OF
THE ASSOCIATED RIGHTS.
The Purchaser believes that under the circumstances of the Offer, and under
applicable law, the Board of Directors of the Company has a fiduciary obligation
to redeem the Rights (or amend the Rights Agreement to make the Rights
inapplicable to the Offer and the Proposed Merger), and the Purchaser is hereby
requesting that the Company's Board of Directors do so. However, there can be no
assurance that the Board of Directors of the Company will redeem the Rights (or
amend the Rights Agreement). The Purchaser has commenced litigation against the
Company and Mr. Manzi in the United States District Court for the District of
Delaware seeking, among other things, an order compelling the Board of Directors
of the Company to redeem the Rights or to amend the Rights Agreement to make the
Rights inapplicable to the Offer and the Proposed Merger on the grounds that
failure to do so would constitute a breach of fiduciary duty to the Company's
stockholders.
Pursuant to the Consent Solicitation, the Purchaser expects to seek to
remove the members of the current Board of Directors of the Company and to
replace them with the Nominees, who intend to redeem the Rights (or amend the
Rights Agreement to make the Rights inapplicable to the Offer and
18
<PAGE>
the Proposed Merger), subject to the fulfillment of the fiduciary duties that
they would have as directors of the Company. Redemption of the Rights (or such
an amendment of the Rights Agreement) would satisfy the Rights Condition.
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 required to be disclosed in proxy statements
distributed to the Company's stockholders and filed with the Commission. Such
reports, proxy statements and other 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.
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 New York 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 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.
Set forth below is certain selected consolidated financial information with
respect to IBM and its subsidiaries excerpted from the information contained in
IBM's 1994 Annual Report to Stockholders (the "IBM 1994 Annual Report") and
IBM's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 (the
"IBM 1995 10-Q"). More comprehensive financial information is included in the
IBM 1994 Annual Report, the IBM 1995 10-Q and other documents filed by IBM with
the Commission, and the following summary is qualified in its entirety by
reference to the IBM 1994 Annual Report, the IBM 1995 10-Q and such other
documents and all the financial information (including any related notes)
contained therein. The IBM 1994 Annual Report, the IBM 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."
19
<PAGE>
INTERNATIONAL BUSINESS MACHINES CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------- ------------------
1994 1993 1992 1995 1994
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUMMARY OF EARNINGS DATA:
Total revenue............................. $64,052 $62,716 $64,523 $15,735 $13,373
Gross profit.............................. 25,284 24,148 29,454 6,664 4,940
Operating income.......................... 5,005 (8,637) (8,239) 2,118 691
Net earnings (loss)....................... 3,021 (8,101) (4,965) 1,289 392
Net earnings (loss) per share of common
stock................................... 5.02 (14.22) (8.70) 2.12 0.64
BALANCE SHEET DATA:(1)
Total current assets...................... $41,338 $39,202 $41,031
Total assets.............................. 81,091 81,113 80,880
Total current liabilities................. 29,226 33,150 27,890
Total liabilities......................... 57,678 61,375 56,794
Total stockholders' equity................ 23,413 19,738 24,086
</TABLE>
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(1) At period end.
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 Consent
Solicitation will be approximately $3.3 billion. The Purchaser plans to obtain
all funds needed for the Offer through a capital contribution, which will be
made by IBM to the Purchaser at the time Shares tendered pursuant to the Offer
are accepted for payment. 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
(the "Agent"), and the syndicate of lenders party thereto (the "Lenders"). As of
June 1, 1995, approximately $800 million 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
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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.
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
For the past several years, IBM and its subsidiaries have been parties to
various transactions with the Company that have generally involved (i) acquiring
the Company's products for internal use by IBM and its subsidiaries, (ii)
marketing and distribution of the Company's products and (iii) development
transactions designed to enable products from IBM and the Company to function
together more effectively. The following is a summary of such transactions for
the periods specified or that are currently proposed.
Various operating units within IBM and its subsidiaries regularly acquire
the Company's products for internal use. IBM estimates that in 1994 it acquired
approximately $20 million of the Company's products worldwide for internal use
by IBM and its subsidiaries. These products were purchased directly from the
Company or one of the Company's alternate channels of distribution, or they were
acquired as royalty free copies pursuant to the SmartSuite agreement described
below. It is anticipated that IBM and its subsidiaries' acquisition of the
Company's products will continue in 1995 at approximately the 1994 level. For
1993 and 1992, IBM estimates that IBM and its subsidiaries acquired for their
internal use approximately $16 million and $11 million of the Company's
products, respectively.
In 1991, IBM and the Company entered into joint development and marketing
agreements with respect to two Company communications software products--Notes
and cc:Mail. IBM and its subsidiaries received the right to market these
communications products and IBM provided technical expertise and funding of
approximately $25 million to the Company with respect to Notes. Under this
arrangement, IBM and its subsidiaries received fee payments from the Company
that totaled approximately
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$28 million in 1993 and $12 million in 1992. In November 1993, IBM and the
Company entered into new agreements under which IBM and its subsidiaries were
granted the right to market the Company's SmartSuite product. Under these new
agreements, IBM exchanged the rights to further fee payments with respect to
Notes and cc:Mail for 400,000 royalty free copies of the Company's SmartSuite
product in each of 1994 and 1995 and the Company's agreement to continue to
develop products for, and to promote, IBM's software. Under the new SmartSuite
agreement, for additional sales of the SmartSuite product beyond the royalty
free copies, the royalty to be paid to the Company is $100 per copy. As of the
date of the Offer, no royalties have been earned or paid to the Company for the
SmartSuite product.
After November 1993, IBM and certain of its subsidiaries began to market the
Company's communications products under new marketing agreements for a fee,
which agreements resulted in aggregate payments to them by the Company estimated
by IBM at approximately $6 million for 1994. Other IBM subsidiaries have
reseller agreements with the Company, some of which were executed as early as
approximately 1992, under which the IBM subsidiary purchases the Company's
desktop productivity products for resale. After November 1993, the Company's
communications products were also added to many of these reseller agreements.
Aggregate purchases under these reseller agreements are estimated by IBM at
approximately $18.5 million for 1994, $10 million for 1993 and $6 million for
1992. Additional IBM subsidiaries are contemplating entering into such reseller
agreements with the Company. It is anticipated that these marketing and reseller
agreements will continue in 1995 at the 1994 level or higher.
Other distribution agreements between the Company and IBM, executed
beginning in 1994, provide for IBM to preload certain of the Company's software
products on IBM's computer products prior to sale of the computer. Payments made
with respect to these agreements by IBM to the Company are estimated at
approximately $8 million for 1994. It is estimated that these distribution
agreements will generate payments aggregating approximately $15 million in 1995.
IBM has provided in the past, and will continue to provide, technical
support and resources to assist the Company in porting its Notes product to
IBM's AIX operating system platform. In addition, the Company and IBM have been
discussing a series of proposals for potential marketing and development
transactions. Various marketing and licensing arrangements have been discussed,
including the preloading of certain of the Company's products on IBM's computer
products and the packaging of certain of the Company's products with certain of
IBM's products. The development aspects have included, among other things,
collaborating on future development of various of the Company's products.
Numerous products and packaging alternatives at various royalty rates have been
discussed. The value of these various proposals have varied widely and some of
the most recent ones have included guaranteed minimum payments from IBM to the
Company that range from approximately $50 million to $150 million for each of
several years. The Company and IBM have been unable to reach agreement on any of
these various proposals, except that they have generally agreed that any
marketing and development transaction would include as a component thereof the
payment by IBM to the Company of approximately $14 million to upgrade the
functionality of the Company's SmartSuite product by the end of 1995.
During 1994 IBM evaluated internally various alternatives for improving its
business relationship with the Company, including, among other matters, an
acquisition of the Company.
In August 1994, James A. Cannavino, then the Senior Vice President--Strategy
and Development of IBM, met with Mr. Manzi to discuss additional opportunities
for the two companies to work together, with a particular focus on the Company's
SmartSuite product and IBM's use of the Company's Notes product within IBM. Mr.
Manzi suggested the Company and IBM form a joint venture to produce desktop
applications and, as an alternative, expressed an interest in selling the
Company's desktop applications business to IBM. Teams from the Company and IBM
met over the next few weeks. IBM informed the Company that it was not interested
in forming a joint venture to produce desktop applications or in buying the
Company's desktop applications business. However, executives from the Company
and IBM continued to meet, and are continuing on an ongoing basis to meet, to
discuss
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possible marketing and development collaboration. In addition, technical
representatives from IBM and the Company have been meeting on an ongoing basis.
In January 1995, John M. Thompson, Senior Vice President and Group Executive
of IBM, became the head of IBM's software group. On January 31, 1995, Mr.
Thompson met with Mr. Manzi who again proposed that IBM acquire the Company's
desktop application business or, preferably to Mr. Manzi, that IBM enter into a
50/50 joint venture with the Company with respect to that business. Mr. Thompson
inquired as to Mr. Manzi's interest in having IBM acquire the Company, but Mr.
Manzi indicated that the Company (as opposed to the desktop application
business) was not for sale. On February 1, 1995, Mr. Manzi wrote to Mr. Thompson
and provided additional information with respect to the possible joint venture
discussed the previous day.
In a telephone conversation with Mr. Manzi in February 1995, Mr. Thompson
indicated that IBM was not interested in the desktop application business by
itself, but would consider a transaction that involved the Company's
communications business as well. Mr. Manzi indicated that he would not permit
IBM to own more than a small minority share in the communications business. This
led to a discussion of a possible transaction in which the Company would
continue to own the communications business directly, the desktop application
business of the Company would be transferred to a subsidiary of the Company and
IBM would acquire a 50% interest in that subsidiary as well as a 15-20% interest
in the entire Company.
In a subsequent telephone conversation in February 1995, Mr. Thompson and
Mr. Manzi concluded that the transaction structure described above was
undesirable. Instead, they decided to consider a non-equity arrangement that
would not involve dividing up the Company. Any equity participation by IBM would
be secondary and could be done independently. Mr. Manzi suggested that Mr.
Thompson negotiate directly with a major stockholder of the Company to acquire
such stockholder's position, and said he would not object to IBM owning Shares
as long as IBM's equity holding was 15% or less.
Mr. Thompson and Mr. Manzi met on March 16, 1995, to review the status of
the ongoing discussions concerning marketing and development collaboration. At
that meeting, Mr. Thompson outlined three potential business arrangements
between IBM and the Company: (i) a commercial arrangement involving some form of
marketing and development collaboration, but no equity investment by IBM, (ii) a
commercial arrangement along with a minority equity investment by IBM in the
Company and (iii) an acquisition by IBM of the Company. Mr. Thompson and Mr.
Manzi discussed the first two alternatives, but Mr. Manzi said he would have to
think about the third alternative and would discuss it with Mr. Thompson the
following day. With respect to a minority equity investment in the Company by
IBM, Mr. Manzi responded that he did not want to directly sell equity to IBM,
but he reiterated that he would have no objection to IBM buying Shares from one
of the Company's other investors or in the open market. On March 17, 1995, Mr.
Thompson and Mr. Manzi met again to continue their discussions. At that meeting,
Mr. Manzi said he did not want to discuss an acquisition by IBM of the Company.
On March 27, 1995, Mr. Thompson wrote to Mr. Manzi on the subject of the
marketing and development collaboration. In that letter Mr. Thompson mentioned
that if he and Mr. Manzi concluded that IBM should hold a minority equity
interest in the Company, IBM would have board representation. When Mr. Thompson
called Mr. Manzi the following day, Mr. Manzi responded that he had never agreed
to IBM's having board representation.
While Mr. Thompson and Mr. Manzi have had discussions subsequent to March
27, they have dealt only with marketing and development collaboration.
On May 5, 1995, IBM purchased 100 Shares at a price per Share (excluding
mark-ups or commissions) of $32. On June 2, 1995, IBM transferred beneficial
ownership of 50 Shares to the Purchaser.
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On June 5, 1995, the Purchaser commenced litigation against the Company and
Mr. Manzi in the United States District Court for the District of Delaware
seeking, among other things, an order compelling the Board of Directors of the
Company to redeem the Rights or to make the Rights inapplicable to the Offer and
the Proposed Merger, compelling the Board of Directors of the Company to approve
the Offer and Proposed Merger for purposes of Section 203 and enjoining
enforcement of the Massachusetts Control Share Acquisition Statute. In addition,
Louis V. Gerstner, Jr., the Chairman and Chief Executive Officer of IBM,
telephoned Mr. Manzi to inform him of the Offer and the commencement of the
litigation described above. In addition, Mr. Gerstner telecopied the following
letter to Mr. Manzi:
June 5, 1995
Mr. Jim P. Manzi
Chairman, President and Chief Executive Officer
Lotus Development Corporation
55 Cambridge Parkway
Cambridge, Massachusetts 02142
Dear Jim:
As you know from your conversations with IBM Senior Vice President
John M. Thompson, IBM has been interested for some time in
pursuing a business combination with Lotus.
Because you have been unwilling to proceed with such a
transaction, we are announcing this morning our intention to buy
all of Lotus Development Corporation's outstanding common shares
for a price of $60 per share, or $3.3 billion. This is an all-cash
offer. We believe this is now the fastest, most efficient way to
bring our companies together.
We have the highest respect for you and all Lotus employees. We
believe our companies share similar visions of the future of
information technology--a future built on a truly open,
collaborative computing environment where people can work and
communicate across enterprises and across corporate and national
borders. Combining our efforts will mean that both of us reach
that future sooner.
This is truly a win/win opportunity for IBM and Lotus
shareholders, employees and customers. With IBM's financial
resources, technological expertise and unmatched customer base,
Lotus will have greater opportunities for growth and expansion.
With IBM's global marketing and sales capability, we can rapidly
grow Notes' user base and vastly increase its sales potential and
acceptance as an open industry standard. Working with industry
partners and customers around the world, we will help them embrace
this powerful new way of computing, working and communicating. We
also have the strength and resources to support Lotus' mail and
application products.
Our objective is a transaction that is enthusiastically supported
by you and the Lotus Board of Directors, as well as Lotus
employees, shareholders and your many loyal customers, software
developers and industry partners.
We respect the creative environment and entrepreneurial spirit you
have fostered at Lotus. We do not want to change that. We believe
Lotus' employees are among the best in the industry at developing
innovative and successful products. Our intent is to keep Lotus
intact and managed out of its current headquarters in Cambridge
and to make Lotus primarily responsible for key, complementary IBM
software products.
We and our advisors are prepared to meet with you and all other
members of the Lotus Board of Directors, management and advisors
to answer any questions you or
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they may have about our offer. We are convinced that together we
can achieve a business combination that serves the best interests
of Lotus and IBM.
We believe, as you do, that the future of information technology
is one in which anyone, anywhere will be able to share information
and interact--easily and instantaneously--no matter where they are
or what system they use. We look forward to working with you and
your colleagues to develop products and systems that will allow
customers around the world to realize this vision.
Louis V. Gerstner, Jr.
IBM Chairman and Chief Executive Officer
On June 5, 1995, IBM announced the intention to commence the Offer.
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.
12. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY
Purpose. The purpose of the Offer and the Proposed Merger 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. IBM currently intends, as soon as
practicable following consummation of the Offer, to propose and seek to
consummate the Proposed Merger. The purpose of the Proposed Merger is to acquire
all Shares not tendered and purchased pursuant to the Offer or otherwise.
Pursuant to the Proposed Merger, each then outstanding Share (other than Shares
owned by the Purchaser, IBM or any of their subsidiaries, Shares held in the
treasury of the Company and Shares owned by stockholders who perfect any
available appraisal rights under the DGCL) would be converted into the right to
receive an amount in cash equal to the price per Share paid by the Purchaser
pursuant to the Offer.
Except in the case of a "short-form" merger as described below, under the
DGCL the approval of the Company's Board of Directors and the affirmative vote
of holders of a majority of the outstanding Shares (including any Shares owned
by the Purchaser) would be required to approve the Proposed Merger. If the
Purchaser acquires, through the Offer or otherwise, voting power with respect to
at least a majority of the outstanding Shares, which would be the case if the
Minimum Tender 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 Proposed Merger without the vote of any other stockholder of
the Company. If, following the consummation of the Offer, the current members of
the Board of Directors of the Company have not previously been removed pursuant
to the Consent Solicitation and
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do not either resign and cause nominees of the Purchaser to be elected to fill
the resulting vacancies or approve the Proposed Merger, then the Purchaser
intends to act by written consent to remove the members of the Board of
Directors and to cause nominees of the Purchaser to be elected to fill the
resulting vacancies who intend to approve the Proposed Merger as soon as
practicable thereafter, subject to the fiduciary duties they would have as
directors 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 a stockholder vote. Accordingly, if, as a
result of the Offer or otherwise, the Purchaser acquires or controls the voting
power of at least 90% of the outstanding Shares, the Purchaser could, and
intends to, effect the Proposed Merger without prior notice to, or any action
by, any other stockholder of the Company.
If the Proposed Merger has not been consummated, the Purchaser or an
affiliate of the Purchaser may, either immediately following the consummation or
termination of the Offer (whether or not the Purchaser purchases Shares pursuant
to the Offer), or from time to time thereafter, seek to acquire additional
Shares through open market purchases, privately negotiated transactions, a
tender offer or exchange offer or otherwise, upon such terms and at such prices
as it may determine, which may be more or less than the price to be paid
pursuant to the Offer. Alternatively, the Purchaser and its affiliates reserve
the right to sell or otherwise dispose of any or all of the Shares acquired by
them pursuant to the Offer or otherwise, upon such terms and at such prices as
they shall determine.
The precise timing and other details of any merger or other business
combination transaction will depend on a variety of factors such as general
economic conditions and prospects, the future prospects, asset value and
earnings of the Company, the number of Shares acquired by the Purchaser pursuant
to the Offer or otherwise and the statutory requirements described above. The
Purchaser can give no assurance that a merger or other business combination will
be proposed or that, if it is proposed, it will not be delayed or abandoned. The
Purchaser expressly reserves the right not to propose any merger or similar
business combination involving the Company, or to propose a merger or other
business combination on terms other than those set forth herein, and its
ultimate decision could be affected by information hereafter obtained by the
Purchaser, changes in general economic or market conditions or in the business
of the Company or other factors.
IBM intends to seek to negotiate with the Company with respect to the
acquisition of the Company by IBM. If such negotiations result in a definitive
merger agreement with the Company, the consideration to be received by holders
of Shares could include or consist of securities, cash or any combination
thereof. Accordingly, such negotiations could result in, among other things,
termination of the Offer (see Section 14) and submission of a different
acquisition proposal to the Company's stockholders for their approval.
The Purchaser has filed preliminary consent solicitation materials with the
Commission for use in connection with the Consent Solicitation. Pursuant to the
Consent Solicitation, the Purchaser expects to seek written consents from
stockholders of the Company for the following purposes: (i) to remove all six of
the present members of the Board of Directors of the Company, (ii) to amend the
Company By-laws to fix the number of directors of the Company at three, (iii) to
elect the Nominees to serve as the directors of the Company, (iv) to amend the
Company By-laws to eliminate the Control Share By-law and (v) to repeal each
provision of the Company By-laws or amendment thereto adopted subsequent to July
27, 1994 and prior to the effectiveness of the proposals made pursuant to the
Consent Solicitation. The Nominees intend to (a) redeem the Rights (or amend the
Rights Agreement to make the Rights inapplicable to the Offer and the Proposed
Merger) and approve the Offer and the Proposed Merger under Section 203, which
would satisfy the Rights Condition and the Business Combination Condition, and
take such other actions as may be required to expedite the prompt consummation
of the Offer and the Proposed Merger or (b) if any other transaction offering
more value to the Company's stockholders is proposed, take actions to effect
such a transaction, subject in all cases to fulfillment of the fiduciary duties
that they would have as directors of the Company. The elimination of the Control
Share By-law
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pursuant to the proposed By-law amendment described in clause (iv) above would
satisfy the Control Share Condition. Accordingly, adoption of the proposals made
pursuant to the Consent Solicitation would expedite the prompt consummation of
the Offer and the Proposed Merger.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF CONSENTS FROM THE COMPANY'S
STOCKHOLDERS. ANY SUCH SOLICITATION (INCLUDING THE CONSENT SOLICITATION) WILL BE
MADE ONLY PURSUANT TO SEPARATE CONSENT SOLICITATION MATERIALS COMPLYING WITH THE
REQUIREMENTS OF SECTION 14(A) OF THE EXCHANGE ACT.
Plans for the Company. IBM's current intention is to keep the Company's
headquarters in Cambridge, Massachusetts and to retain the key management team.
It is anticipated that the Company will be assigned the responsibility for some
of IBM's related application software products.
The Company has many important development and service contracts with other
companies and these will be continued. 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.
The amounts assigned to the software research and development that is in
progress at the acquisition date will result in a significant, one-time,
non-cash charge against IBM's earnings. 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 will have a significant impact on the net earnings
of IBM in the quarter in which the acquisition is completed and on IBM's net
earnings for the year.
Appraisal Rights. Holders of Shares do not have appraisal rights as a result
of the Offer. However, if the Proposed Merger is consummated, holders of Shares
at the effective time of the Proposed 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 Proposed
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 Proposed 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 Proposed Merger.
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The foregoing summary of Section 262 does not purport to be complete and is
qualified in its entirety by reference to Section 262. In addition, IBM intends
to continue to negotiate with the Company with respect to the acquisition of the
Company by IBM. If such negotiations result in a definitive merger agreement
between the Company and IBM (other than with respect to the Proposed Merger),
holders of Shares may or may not have appraisal rights under Section 262 in
connection with the consummation of the merger contemplated thereby, depending
upon the terms of any such merger.
Going Private Transactions. The Commission has adopted Rule 13e-3 under the
Exchange Act which is applicable to certain "going private" transactions and
which may under certain circumstances be applicable to the Proposed Merger or
any other merger involving the Company. However, Rule 13e-3 would be
inapplicable if (a) the Shares are deregistered under the Exchange Act prior to
the merger or (b) any such merger is consummated within one year after the
purchase of the Shares pursuant to the Offer and such merger provided for
stockholders to receive cash for their Shares in an amount at least equal to the
amount paid per Share in the Offer. If applicable, Rule 13e-3 requires, among
other things, that certain financial information concerning the fairness of the
proposed transaction 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 transaction.
13. DIVIDENDS AND DISTRIBUTIONS
If, on or after June 5, 1995, the Company should (a) split, combine or
otherwise change the Shares or its capitalization (other than by redemption of
the Rights in accordance with their terms as publicly disclosed prior to June 5,
1995), (b) acquire or otherwise cause a reduction in the number of outstanding
Shares or other securities (other than as aforesaid) or (c) issue or sell
additional Shares (other than the issuance of Shares under option prior to June
5, 1995, in accordance with the terms of such options as publicly disclosed
prior to June 5, 1995), 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, 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 June 5, 1995, 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 or provision of the Offer, the Purchaser will
not be required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including
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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), to pay for any Shares not theretofore accepted for
payment or paid for unless (1) the Minimum Tender Condition shall have been
satisfied, (2) the Rights Condition shall have been satisfied, (3) the Business
Combination Condition shall have been satisfied, (4) the Control Share Condition
shall have been satisfied and (5) 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 or provision of the
Offer, the Purchaser will 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 or amend the Offer if, at any time on or after June 5,
1995, and before the acceptance of such Shares for payment or the payment
therefor, any of the following events or facts shall have occurred:
(a) there shall be threatened, instituted or pending any action,
proceeding, application or counterclaim by any government or governmental,
regulatory or administrative authority or agency, domestic, foreign or
supranational (each, a "Governmental Entity"), or by any other person,
domestic or foreign, before any court or Governmental Entity, (i)(A)
challenging or seeking to, or which is reasonably likely to, make illegal,
delay or otherwise directly or indirectly restrain or prohibit, or seeking
to, or which is reasonably likely to, impose voting, procedural, price or
other requirements, in addition to those required by Federal securities laws
and the DGCL (each as in effect on the date of this Offer to Purchase), in
connection with, the making of the Offer, the acceptance for payment of, or
payment for, some of or all the Shares by the Purchaser, IBM or any other
affiliate of IBM or the consummation by the Purchaser, IBM or any other
affiliate of IBM of a merger or other similar business combination with the
Company, (B) seeking to obtain material damages or (C) otherwise directly or
indirectly relating to the transactions contemplated by the Offer or any
such merger or business combination, (ii) seeking to prohibit the ownership
or operation by the Purchaser, IBM or any other affiliate of IBM of all or
any portion of the business or assets of the Company and its subsidiaries or
of the Purchaser, IBM or any other affiliate of IBM or to compel the
Purchaser, IBM or any other affiliate of IBM to dispose of or hold separate
all or any portion of the business or assets of the Company or any of its
subsidiaries or of the Purchaser, IBM or any other affiliate of IBM or
seeking to impose any limitation on the ability of the Purchaser, IBM or any
other affiliate of IBM to conduct such business or own such assets, (iii)
seeking to impose or confirm limitations on the ability of the Purchaser,
IBM or any other affiliate of IBM effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote
any Shares acquired or owned by the Purchaser, IBM or any other affiliate of
IBM on all matters properly presented to the Company's stockholders, (iv)
seeking to require divestiture by the Purchaser, IBM or any other affiliate
of IBM of any Shares, (v) seeking any material diminution in the benefits
expected to be derived by the Purchaser, IBM or any other affiliate of IBM
as a result of the transactions contemplated by the Offer or any merger or
other similar business combination with the Company, (vi) otherwise directly
or indirectly relating to the Offer or which otherwise, in the sole judgment
of the Purchaser, might materially adversely affect the Company or any of
its subsidiaries or the Purchaser, IBM or any other affiliate of IBM or the
value of the Shares or (vii) in the sole judgment of the Purchaser,
materially adversely affecting the business, properties, assets,
liabilities, capitalization, stockholders' equity, condition (financial or
otherwise), operations, licenses or franchises, results of operations or
prospects of the Company or any of its subsidiaries;
(b) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction proposed,
enacted, enforced, promulgated, amended, issued or deemed applicable to (i)
the Purchaser, IBM or any other affiliate of IBM or the Company or any of
its subsidiaries or (ii) the Offer or any merger or other similar business
combination by the Purchaser, IBM or any other affiliate of IBM with the
Company, by any government, legislative body or court, domestic, foreign or
supranational, or Governmental Entity, other than the routine
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application of the waiting period provisions of the HSR Act to the Offer,
that, in the sole judgment of the Purchaser, might, directly or indirectly,
result in any of the consequences referred to in clauses (i) through (vii)
of paragraph (a) above;
(c) any change shall have occurred or been threatened (or any condition,
event or development shall have occurred or been threatened involving a
prospective change) in the business, properties, assets, liabilities,
capitalization, stockholders' equity, condition (financial or otherwise),
operations, licenses or franchises, results of operations or prospects of
the Company or any of its subsidiaries that, in the sole judgment of the
Purchaser, is or may be materially adverse to the Company or any of its
subsidiaries, or the Purchaser shall have become aware of any facts that, in
the sole judgment of the Purchaser, have or may have material adverse
significance with respect to either the value of the Company or any of its
subsidiaries or the value of the Shares to the Purchaser, IBM or any other
affiliate of IBM;
(d) there shall have occurred or been threatened (i) any general
suspension of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market in the United
States, (ii) any extraordinary or material adverse change in the financial
markets or major stock exchange indices in the United States or abroad or in
the market price of Shares, (iii) any change in the general political,
market, economic or financial conditions in the United States or abroad that
could, in the sole judgment of the Purchaser, have a material adverse effect
upon the business, properties, assets, liabilities, capitalization,
stockholders' equity, condition (financial or otherwise), operations,
licenses or franchises, results of operations or prospects of the Company or
any of its subsidiaries or the trading in, or value of, the Shares, (iv) any
material change in United States currency exchange rates or any other
currency exchange rates or a suspension of, or limitation on, the markets
therefor, (v) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (vi) any limitation
(whether or not mandatory) by any government, domestic, foreign or
supranational, or Governmental Entity on, or other event that, in the sole
judgment of the Purchaser, might affect, the extension of credit by banks or
other lending institutions, (vii) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States or (viii) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof;
(e) the Company or any of its subsidiaries shall have (i) split,
combined or otherwise changed, or authorized or proposed a split,
combination or other change of, the Shares or its capitalization (other than
by redemption of the Rights in accordance with their terms as publicly
disclosed prior to June 5, 1995), (ii) acquired or otherwise caused a
reduction in the number of, or authorized or proposed the acquisition or
other reduction in the number of, outstanding Shares or other securities
(other than as aforesaid), (iii) issued or sold, or authorized or proposed
the issuance, distribution or sale of, additional Shares (other than the
issuance of Shares under option prior to June 5, 1995, in accordance with
the terms of such options as publicly disclosed prior to June 5, 1995),
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, (iv) declared or paid, or
proposed to declare or pay, any dividend or other distribution, whether
payable in cash, securities or other property, on or with respect to any
shares of capital stock of the Company, (v) altered or proposed to alter any
material term of any outstanding security (including the Rights) other than
to amend the Rights Agreement to make the Rights inapplicable to the Offer
and the Proposed Merger, (vi) incurred any debt other than in the ordinary
course of business or any debt containing burdensome covenants, (vii)
authorized, recommended, proposed or entered into an agreement with respect
to any merger, consolidation, liquidation, dissolution, business
combination, acquisition of assets, disposition of assets, release or
relinquishment of any material contractual or other right of the Company or
any of its subsidiaries or any comparable event not in the ordinary course
of business, (viii) authorized, recommended, proposed or entered into, or
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announced its intention to authorize, recommend, propose or enter into, any
agreement or arrangement with any person or group that in the sole judgment
of the Purchaser could adversely affect either the value of the Company or
any of its subsidiaries or the value of the Shares to the Purchaser, IBM or
any other affiliate of IBM, (ix) entered into any employment, severance or
similar agreement, arrangement or plan with or for the benefit of any of its
employees other than in the ordinary course of business or entered into or
amended any agreements, arrangements or plans so as to provide for increased
or accelerated benefits to the employees as a result of or in connection
with the transactions contemplated by the Offer, (x) except as may be
required by law, taken any action to terminate or amend any employee benefit
plan (as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended) of the Company or any of its subsidiaries, or the
Purchaser shall have become aware of any such action that was not disclosed
in publicly available filings prior to June 5, 1995, or (xi) amended, or
authorized or proposed any amendment to, its certificate of incorporation or
its by-laws (other than an amendment to eliminate the Control Share By-law
or any amendment effected as a result of the adoption of certain of the
proposals contained in the Consent Solicitation), or the Purchaser shall
become aware that the Company or any of its subsidiaries shall have proposed
or adopted any such amendment that was not disclosed in publicly available
filings prior to June 5, 1995;
(f) a tender or exchange offer for any Shares shall have been made or
publicly proposed to be made by any other person (including the Company or
any of its subsidiaries or affiliates), or it shall have been publicly
disclosed or the Purchaser shall have otherwise learned that (i) any person,
entity (including the Company or any of its subsidiaries) or "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) shall have acquired or
proposed to acquire beneficial ownership of more than 5% of any class or
series of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall have
been granted any right, option or warrant, conditional or otherwise, to
acquire beneficial ownership of more than 5% of any class or series of
capital stock of the Company (including the Shares), other than acquisitions
for bona fide arbitrage purposes only and other than as disclosed in a
Schedule 13G on file with the Commission prior to June 5, 1995, (ii) any
such person, entity or group that prior to June 5, 1995, had filed such a
Schedule with the Commission has acquired or proposes to acquire, through
the acquisition of stock, the formation of a group or otherwise, beneficial
ownership of 1% or more of any class or series of capital stock of the
Company (including the Shares), or shall have been granted any right, option
or warrant, conditional or otherwise, to acquire beneficial ownership of 1%
or more of any class or series of capital stock of the Company (including
the Shares), (iii) any person or group shall have entered into a definitive
agreement or an agreement in principle or made a proposal with respect to a
tender offer or exchange offer or a merger, consolidation or other business
combination with or involving the Company or (iv) any person shall have
filed a Notification and Report Form under the HSR Act (or amended a prior
filing to increase the applicable filing threshold set forth therein) or
made a public announcement reflecting an intent to acquire the Company or
any assets or subsidiaries of the Company; or
(g) any approval, permit, authorization, favorable review or consent of
any Governmental Entity (including those described or referred to in Section
15) shall not have been obtained on terms satisfactory to Purchaser in its
sole discretion; or
(h) the Purchaser shall have reached an agreement or understanding with
the Company providing for termination of the Offer, or the Purchaser, IBM or
any other affiliate of IBM shall have entered into a definitive agreement or
announced an agreement in principle with the Company providing for a merger
or other business combination with the Company or the purchase of stock or
assets of the Company;
which, in the sole judgment of the Purchaser in any such case, and regardless of
the circumstances (including any action or inaction by the Purchaser, IBM or any
other affiliate of IBM) giving rise to any
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such condition, makes it inadvisable to proceed with the Offer and/or with such
acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Purchaser and IBM
and may be asserted by the Purchaser regardless of the circumstances giving rise
to any such condition or may be waived by the Purchaser in whole or in part at
any time and from time to time in its sole discretion. The failure by the
Purchaser at any time to exercise any of the foregoing rights will not be deemed
a waiver of any such right, the waiver of any such right with respect to
particular facts and circumstances will not be deemed a waiver with respect to
any other facts and circumstances and each such right will be deemed an ongoing
right that may be asserted at any time and from time to time. Any determination
by the Purchaser concerning the events described in this Section 14 will be
final and binding upon all parties.
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, 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.
Except as described herein, the Purchaser has not attempted to comply with
any state takeover statutes in connection with the Offer. The Purchaser reserves
the right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in this Offer to Purchase nor any action
taken in connection herewith is intended as a waiver of that right. In the event
that any state takeover statute is found applicable to the Offer, the Purchaser
might be unable to accept for payment or pay for Shares tendered pursuant to the
Offer or be delayed in continuing or consummating the Offer.
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In such case, the Purchaser may not be obligated to accept for payment or pay
for any Shares tendered. See Section 14.
Section 203 of the DGCL. Section 203, 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 (a) 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, (b) upon consummation of the transaction
that resulted in the stockholder becoming an Interested Stockholder, the
Interested Stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding stock held by
directors who are also officers of the corporation and employee stock ownership
plans that do not provide employees with the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer or (c) on or subsequent to the date such person became an Interested
Stockholder, the Business Combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders, and not by written
consent, by the affirmative vote of the holders of at least 66 2/3% of the
outstanding voting stock of the corporation not owned by the Interested
Stockholder.
Under Section 203, the restrictions described above do not apply if, among
other things (a) the corporation's original certificate of incorporation
contains a provision expressly electing not to be governed by Section 203; (b)
the corporation, by action of its stockholders, adopts an amendment to its
certificate of incorporation or by-laws expressly electing not to be governed by
Section 203, provided that, in addition to any other vote required by law, such
amendment to the certificate of incorporation or by-laws must be approved by the
affirmative vote of a majority of the shares entitled to vote, which amendment
would not be effective until 12 months after the adoption of such amendment and
would not apply to any Business Combination between the corporation and any
person who became an Interested Stockholder of the corporation on or prior to
the date of such adoption; (c) the corporation does not have a class of voting
stock that is (1) listed on a national securities exchange, (2) authorized for
quotation on an inter-dealer quotation system of a registered national
securities association or (3) held of record by more than 2,000 stockholders,
unless any of the foregoing results from action taken, directly or indirectly,
by an Interested Stockholder or from a transaction in which a person becomes an
Interested Stockholder; or (d) a stockholder becomes an Interested Stockholder
"inadvertently" and thereafter divests itself of a sufficient number of shares
so that such stockholder ceases to be an Interested Stockholder. Under Section
203, the restrictions described above also do not apply to certain Business
Combinations proposed by an Interested Stockholder following the announcement or
notification of one of certain extraordinary transactions involving the
corporation and a person who had not been an Interested Stockholder during the
previous three years or who became an Interested Stockholder with the approval
of a majority of the corporation's directors.
Section 203 provides that, during such three-year period, the corporation
may not merge or consolidate with an Interested Stockholder or any affiliate or
associate thereof, and also may not engage in certain other transactions with an
Interested Stockholder or any affiliate or associate thereof, including, without
limitation, (a) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets (except proportionately as a stockholder of the
corporation) having an aggregate market value equal to 10% or more of the
aggregate market value of all assets of the corporation determined on a
consolidated basis or the aggregate market value of all the outstanding stock of
a corporation; (b) any transaction which results in the issuance or transfer by
the corporation or by certain subsidiaries thereof of any stock of the
corporation or such subsidiaries to the Interested Stockholder, except pursuant
to a transaction which effects a pro rata distribution to all stockholders of
the corporation; (c) any transaction involving the corporation or certain
subsidiaries thereof which has
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the effect of increasing the proportionate share of the stock of any class or
series, or securities convertible into the stock of any class or series, of the
corporation or any such subsidiary which is owned directly or indirectly by the
Interested Stockholder (except as a result of immaterial changes due to
fractional share adjustments) or (d) any receipt of the Interested Stockholder
of the benefit (except proportionately as a stockholder of such corporation) of
any loans, advances, guarantees, pledges or other financial benefits provided by
or thorough the corporation.
PURSUANT TO THE BUSINESS COMBINATION CONDITION, THE OFFER IS CONDITIONED
UPON THE ACQUISITION OF SHARES PURSUANT TO THE OFFER AND THE PROPOSED MERGER
HAVING BEEN APPROVED PURSUANT TO SECTION 203 OR THE PURCHASER BEING SATISFIED,
IN ITS SOLE DISCRETION, THAT THE PROVISIONS OF SECTION 203 ARE OTHERWISE
INAPPLICABLE TO THE ACQUISITION OF SHARES PURSUANT TO THE OFFER AND THE PROPOSED
MERGER.
The Purchaser has commenced litigation against the Company and Mr. Manzi in
the United States District Court for the District of Delaware seeking, among
other things, an order compelling the Board of Directors of the Company to
approve the Offer and the Proposed Merger for purposes of Section 203 on the
grounds that failure to do so would constitute a breach of fiduciary duty to the
Company's stockholders.
Pursuant to the Consent Solicitation, the Purchaser expects to seek to
remove the members of the current Board of Directors of the Company and to
replace them with the Nominees, who intend to approve the Offer and the Proposed
Merger under Section 203, subject to the fulfillment of the fiduciary duties
that they would have as directors of the Company. Approval of the Offer and the
Proposed Merger under Section 203 would satisfy the Business Combination
Condition.
Massachusetts Control Share Acquisition Statute. The Massachusetts Control
Share Acquisition Statute provides, in general, that shares of an Issuing Public
Corporation acquired in a Control Share Acquisition will not have voting rights
if the Issuing Public Corporation's charter or by-laws provides, at the time of
the Control Share Acquisition, that the Massachusetts Control Share Acquisition
Statute will apply to Control Share Acquisitions of shares of such Issuing
Public Corporation, unless voting rights for such shares are authorized at an
annual or special meeting of stockholders of the Issuing Public Corporation by
the affirmative vote of the holders of a majority of all the shares entitled to
vote generally in the election of directors, excluding Interested Shares.
As used in the Massachusetts Control Share Acquisition Statute:
"Control Share Acquisition" means, in general, the acquisition (other than
pursuant to a merger agreement to which the Issuing Public Corporation is a
party) of beneficial ownership of shares of an Issuing Public Corporation which
(but for the provisions of the statute) would have voting rights and which, when
added to all other shares of such Issuing Public Corporation beneficially owned
by such person, would entitle such person, upon acquisition of such shares, to
vote or direct the voting of shares of such Issuing Public Corporation having
voting power in the election of directors within any of the following ranges of
such voting power: (i) one-fifth or more but less than one-third of all voting
power; (ii) one-third or more but less than a majority of all voting power; or
(iii) a majority of all voting power.
"Interested Shares" means shares of an Issuing Public Corporation that are
beneficially owned by any person who has acquired or proposes to acquire
beneficial ownership of shares of such Issuing Public Corporation in a Control
Share Acquisition, any officer of the Issuing Public Corporation or any employee
of the Issuing Public Corporation who is also a director of such corporation.
"Issuing Public Corporation" means a corporation, other than a Massachusetts
corporation, that has (1) 200 or more stockholders of record, (2) its principal
executive office in Massachusetts and more of its employees or assets, including
employees or assets of its majority-owned subsidiaries, employed or located in
Massachusetts than in any other state as of the end of its four fiscal quarters
immediately preceding the Control Share Acquisition and (3) either more than ten
percent of its stockholders of
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record residing within Massachusetts or more than ten percent of its issued and
outstanding shares owned of record by Massachusetts residents.
Any person who proposes to make or has made a Control Share Acquisition may
deliver to the corporation at its principal office a statement (a "Control Share
Acquisition Statement") identifying the acquiring person, describing the terms
of the Control Share Acquisition and representing that the acquiring person has
the financial capacity to consummate the Control Share Acquisition. If the
acquiring person so requests at the time of delivery of a Control Share
Acquisition Statement, the board of directors of the Issuing Public Corporation
is required to call a special meeting of stockholders for the purpose of
considering the voting rights to be accorded to shares acquired or to be
acquired in the Control Share Acquisition. Such special meeting is required to
be called within 10 days after the Issuing Public Corporation receives the
request and must be held within 50 days after the request has been received.
The foregoing summary of the Massachusetts Control Share Acquisition Statute
does not purport to be complete and is qualified in its entirety by reference to
the provisions of the Massachusetts Control Share Acquisition Statute.
Unless the Massachusetts Control Share Acquisition Statute is rendered
inapplicable to the Offer by elimination of the Control Share By-law or
judicially invalidated or the Purchaser obtains approval of voting rights for
the Shares from stockholders of the Company at an annual or special meeting of
stockholders, the Shares acquired pursuant to the Offer would not have voting
rights. The Purchaser does not presently intend to seek approval of voting
rights for the Shares from stockholders of the Company pursuant to the
provisions of the Massachusetts Control Share Acquisition Statute.
PURSUANT TO THE CONTROL SHARE CONDITION, THE OFFER IS CONDITIONED UPON THE
AMENDMENT OF THE COMPANY BY-LAWS TO ELIMINATE THE CONTROL SHARE BY-LAW OR THE
PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE MASSACHUSETTS
CONTROL SHARE ACQUISITION STATUTE IS INVALID OR OTHERWISE INAPPLICABLE TO THE
PURCHASER OR IBM OR ANY OF THEIR ASSOCIATES OR THE ACQUISITION OF SHARES BY ANY
OF THEM.
The Purchaser has commenced litigation against the Company and Mr. Manzi in
the United States District Court for the District of Delaware seeking, among
other things, an order enjoining the enforcement of the Massachusetts Control
Share Acquisition Statute on the grounds that such statute is unconstitutional.
Pursuant to the Consent Solicitation, the Purchaser expects to seek to amend
the Company By-laws to eliminate the Control Share By-law. Elimination of the
Control Share By-law would satisfy the Control Share Condition.
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 of a
Notification and Report Form with respect to the Offer, unless IBM 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 June 6, 1995. If, within the initial 15-day
waiting period, either the Antitrust Division or the FTC requests additional
information or material from IBM 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 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. 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
35
<PAGE>
addressing those issues and may agree to delay consummation of the transaction
while such negotiations continue.
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 Proposed 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.
Investment Canada Act. According to the Company 1994 Annual Report, the
Company conducts certain operations in Canada. The Investment Canada Act (the
"ICA") requires that notice of the acquisition of "control" (as defined in the
ICA) by "non-Canadians" (as defined in the ICA) of any "Canadian business" (as
defined in the ICA) be furnished to Investment Canada, a Canadian Governmental
Entity.
The acquisition of Shares by the Purchaser pursuant to the Offer may
constitute an indirect acquisition of a "Canadian business" within the meaning
of the ICA. The Purchaser intends to file any notice required under the ICA.
Canadian Pre-Merger Notification Requirements. Certain provisions of
Canada's Competition Act require pre-notification to the Director of
Investigation and Research appointed under the Competition Act (the "Canadian
Director") of significant corporate transactions, such as the acquisition of a
large percentage of the stock of a public company that has Canadian operations,
or a merger or consolidation involving such an entity. Pre-notification is
generally required with respect to transactions in which the parties to the
transactions and their affiliates have assets in Canada, or annual gross
revenues from sales in, from or into Canada, in excess of Cdn. $400 million and
which involve the direct or indirect acquisition of an operating business, the
value of the assets of which, or the gross revenues from sales in or from Canada
generated from these assets, exceed Cdn. $35 million per year. For transactions
subject to the notification requirements, notice must be given seven or 21 days
prior to the completion of the transaction depending on the information provided
to the Canadian Director. The Canadian Director may waive the waiting period.
After the applicable waiting period expires or is waived, the transaction may be
completed. If the Canadian Director determines that the proposed transaction
prevents or lessens, or is reasonably likely to prevent or lessen, competition
substantially in a definable market, the Canadian Director may apply to the
Competition Tribunal, a special purpose Canadian tribunal, to, among other
things, require the disposition of the Canadian assets acquired in such
transaction. The Purchaser intends to file any required notice and information
with respect to its proposed acquisition with the Canadian Director and, to the
extent necessary, observe the applicable waiting period and/or apply to the
Canadian Director for an advance ruling certificate to the effect that the Offer
or Proposed Merger would not prevent or lessen, or be likely to prevent or
lessen, competition substantially.
EEA and National Merger Regulation. According to the Company 1994 Annual
Report, the Company conducts substantial operations in the European Economic
Area (the "EEA"). EEC Regulation 4064/89 (the "Merger Regulation") and Article
57 of the European Economic Area Agreement require that concentrations with a
"Community dimension" be notified in prescribed form to the Commission of the
European Communities (the "European Commission") for review and approval prior
to being put into effect. In such cases, the European Commission will, with
certain exceptions,
36
<PAGE>
have exclusive jurisdiction to review the concentration as opposed to the
individual countries within the EEA.
The Offer will be deemed to have a "Community dimension" if the combined
aggregate worldwide annual revenues of both IBM and the Company exceed ECU 5
billion, if the Community-wide annual revenues of each of IBM and the Company
exceed ECU 250 million and if both IBM and the Company do not receive more than
two-thirds of their respective Community-wide revenues from one and the same
country. Concentrations that are found not to be subject to the Merger
Regulation may be subject to the various national merger control regimes of the
countries of the EEA, resulting in the possibility that it may be necessary or
desirable to obtain approvals from the various national authorities.
Based upon information contained in the Company 1994 Annual Report, the
Purchaser currently believes that the Offer should not be considered to have a
"Community dimension," as the Community-wide revenues of the Company for 1994
appears not to exceed ECU 250 million. Therefore, the Purchaser does not
currently intend to file a notification with the European Commission, but does
expect to obtain approvals from various national authorities.
EEA countries from which it may be necessary to obtain approvals include:
Austria, Belgium, Germany, Greece, Ireland, Italy, Portugal and Sweden. In each
of these jurisdictions mandatory notification obligations may apply to the Offer
and the Proposed Merger. In certain other jurisdictions, although filing is not
mandatory, the Purchaser may consider it to be desirable to obtain clearance
from the relevant national authority. The period within which the relevant
national authority must or may reach a preliminary decision on the Offer and
Proposed Merger, and the length of time available to such national authority if
it decides to commence a full investigation of the transaction, varies from
jurisdiction to jurisdiction. In most cases a decision at the preliminary
inquiry phase can be expected within one to two months of notification; where a
full inquiry into a transaction is undertaken, the detailed investigations may
take several months. The Purchaser intends to make all such notifications or
filings as soon as possible after the commencement of the Offer. The relevant
national authorities are in many cases empowered to take a range of actions
designed to modify or prevent the implementation of transactions that do not
fulfill the criteria for approval under the relevant national laws.
After commencement of the Offer, the Purchaser will seek further information
regarding the 1994 Community-wide revenues of the Company. In the event that the
Purchaser concludes that the 1994 Community-wide revenues of the Company in fact
exceeded ECU 250 million and the Offer and the transactions contemplated thereby
are, therefore, deemed to have a "Community dimension," the Purchaser will file
a notification in the prescribed form with the European Commission in accordance
with the Merger Regulation. Transactions subject to the filing requirements of
the Merger Regulation are suspended automatically until three weeks after
receipt of the notification. The European Commission may extend the suspension
period for such period as it finds necessary to make a final decision on the
legality of the transaction. However, in the case of a public bid the bidder may
acquire shares of the target company during the suspension period (provided that
the transaction has been duly notified to the European Commission), but may not
vote such shares until after the end of the suspension period unless the
European Commission grants permission to do so in order to maintain the full
value of the bidder's investment.
If a filing under the Merger Regulation is made, the European Commission
must decide whether to initiate proceedings within one month after the receipt
of the notification, subject to certain extensions for EEA holidays or if an
individual country has requested a referral of the transaction (or part of it).
If proceedings are initiated, the European Commission must reach a decision in
the proceedings within four months of the commencement of the proceedings. If
the European Commission fails to reach a decision within either of these time
periods the transaction will be deemed to be compatible with the common
market. If the European Commission declares the Offer to be incompatible with
the common
37
<PAGE>
market, it may prevent the consummation of the transaction, order a divestiture
if the transaction has already been consummated or impose conditions or other
obligations.
There can be no assurance that a challenge to the Offer will not be made
pursuant to the merger control regimes of one or more of the various countries
(or alternatively, if applicable, pursuant to the Merger Regulation) or by legal
action brought by private parties or, if such a challenge is made, what the
outcome will be. See Section 14.
Other Foreign Laws. The Company 1994 Annual Report indicates that the
Company and certain of its subsidiaries conduct business in other foreign
countries outside Canada and the EEA 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. After commencement of the
Offer, the Purchaser will seek further information regarding the applicability
of any such laws and currently intends to take such action as may be required or
desirable. If any government or governmental authority or agency takes any
action prior to the completion of the Offer that, in the sole judgment of the
Purchaser, 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
CS First Boston 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 CS First Boston as compensation
for such services (i) financial advisory and other related fees aggregating
$3,000,000, which were payable or became payable upon commencement of the Offer,
and (ii) a transaction fee of $9,000,000, payable upon the acquisition of 50% or
more of the Shares in the Offer. IBM has also agreed to reimburse CS First
Boston for its out-of-pocket expenses, including the reasonable fees and
expenses of its counsel and any other advisor retained by CS First Boston, in
connection with its engagement and to indemnify CS First Boston 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, CS First Boston 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 June 2, 1995, CS First Boston had a long
position of 6,956 Shares held for its own account.
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
38
<PAGE>
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 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 has 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. Such Schedule 14D-1 and any amendments thereto, including exhibits,
should be available for inspection and copies should be obtainable in the manner
set forth in Section 8 (except that such material will not be available at the
regional offices of the Commission).
Lotus, Notes, SmartSuite and cc:Mail are trademarks of the Company. IBM and
AIX are trademarks of IBM.
WHITE ACQUISITION CORP.
June 6, 1995
39
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
IBM AND THE PURCHASER
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. 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>
NAME, AGE AND POSITION WITH IBM; PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY
- ----------------------------- ------------------------------------------------------------
<S> <C>
Louis V. Gerstner, Jr.(53)... Chairman of the Board and Chief Executive Officer of IBM
since 1993. From 1989 until joining IBM in 1993, 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.
Harold Brown (67)............ Director of IBM from 1972 to 1977 and again since 1981.
Center for Strategic and Counselor, Center for Strategic and International Studies
International Studies and a general partner in Warburg, Pincus & Company. From
Suite 400 1984 to 1992 Dr. Brown was Chairman, Foreign Policy
1800 K Street, N.W. Institute, School of Advanced International Studies, The
Washington, D.C. 20006 Johns Hopkins University, Washington, D.C. He is a former
U.S. Secretary of Defense and a former U.S. Secretary of
the Air Force. He is a director of Alumax Inc., CBS 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; and Chairman of the Arnold and Mabel Beckman
Foundation.
Fritz Gerber (66)............ Director of IBM since 1989. Chairman and Chief Executive
Zurich Insurance Company Officer of Roche Holding Ltd since 1978. He is also
P.O. Box CH-8022 Executive Chairman of Zurich Insurance Company. He joined
Zurich Zurich Insurance Company in 1958, became Chief Executive
Switzerland 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, N.A., 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 (54)...... Director of IBM since 1986. President and professor of
Office of the President political science at Duke University. She was formerly
207 Allen Building President of Wellesley College, and a former faculty member
Box 90001 at Swarthmore College and Stanford University. She is a
Duke University member of The Council on Foreign Relations and the American
Durham, NC 27708-0001 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.
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH IBM; PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY
- ----------------------------- ------------------------------------------------------------
<S> <C>
Charles F. Knight (59)....... Director of IBM since 1993. Chairman and Chief Executive
Emerson Electric Co. Officer of Emerson Electric Co. He joined Emerson Electric
8000 West Florissant Avenue Co. in 1972 as Vice Chairman and was elected Chief
P.O. Box 4100 Executive Officer in 1973 and Chairman in 1974. He is a
St. Louis, MO 63136-8506 director of SBC Communications Inc., Anheuser Busch
Companies, Inc., and The British Petroleum Company p.l.c.
Lucio A. Noto (56)........... Director of IBM since 1995. Chairman and Chief Executive
Mobil Corporation Officer of Mobil Corporation. Mr. Noto joined Mobil in 1962
3225 Gallows Road and was elected to Mobil's board in 1988. He was elected
Fairfax, VA 22037 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 College.
Office of the President He is a former Chancellor of the University of Maryland and
Occidental College a former director of the National Science Foundation. He is
1600 Campus Road a director of the Atlantic Richfield Company, Avery
Los Angeles, CA 90041 Dennison Corporation, Monsanto 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 (61) ........... Director of IBM since 1994. Chairman and Chief Executive
Ford Motor Company Officer of the Ford Motor Company. Mr. Trotman joined Ford
American Road of Britain in 1955 and was elected President of Ford
Dearborn, MI 48121-1899 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 (63).. Director of IBM since 1992. Chairman of the supervisory
Royal Dutch Petroleum board of Royal Dutch Petroleum Company. In 1992, Mr. van
Company Wachem retired as President of Royal Dutch Petroleum, a
P.O. Box 162 post he had held since 1982. He is a director of ATCO Ltd.,
2501 AN The Hague CS Holding, and Zurich Versicherungs-Gesellschaft; and a
Netherlands member of the supervisory board of AKZO N.V., Philips
Electronics N.V. and Bavarian Motor Works A.G.
Charles M. Vest (53)......... Director of IBM since 1994. President and professor of
Massachusetts Institute of mechanical engineering at the Massachusetts Institute of
Technology Technology. Dr. Vest was formerly the Provost and Vice
President's Office President for Academic Affairs of the University of
Room 3-208 Michigan. He is a director of E.I. du Pont de Nemours and
77 Massachusetts Avenue Company, a fellow of the American Association for the
Cambridge, MA 02139 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.
Jerome B. York (56).......... Senior Vice President and Chief Financial Officer of IBM
since 1993 and a director since 1995. From 1979 until
joining IBM in 1993, he served in a number of executive
positions at Chrysler Corporation, including Executive Vice
President--Finance and Chief Financial Officer from 1990 to
1993 and Vice President and Controller from 1989 to 1990.
He also served as a director of Chrysler from 1992 to 1993.
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH IBM; PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY
- ----------------------------- ------------------------------------------------------------
<S> <C>
J. Thomas Bouchard (54)...... 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 (49).... 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.
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, IBMWorld Trade
Corporation, from 1994 to 1995; IBM Senior Vice President
and Group Executive and Chairman, IBM World Trade
Corporation, from 1993 to 1994; 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.
James C. McGroddy (58)....... Senior Vice President, Research of IBM since 1994. Dr.
McGroddy was IBM Vice President, Science & Technology and
Director, Research from 1993 to 1994 and IBM Vice President
and Director, Research from 1990 to 1993.
Lawrence R. Ricciardi (54)... 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.
G. Richard Thoman (50)....... Senior Vice President and Group Executive of IBM since 1994.
Mr. Thoman was IBM Senior Vice President and Group Executive
from 1993 to 1994. He was President, 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 (52)........ 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.
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH IBM; PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY
- ----------------------------- ------------------------------------------------------------
<S> <C>
Patrick A. Toole (57)........ 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.
John E. Hickey (51).......... Vice President, Secretary and Assistant General Counsel 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 (36)....... 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>
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 White 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>
POSITION WITH THE PURCHASER; PRINCIPAL OCCUPATION OR
NAME, AGE AND EMPLOYMENT;
BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY
- ----------------------------- ------------------------------------------------------------
<S> <C>
Lee A. Dayton (52)........... Director and President of the Purchaser. General Manager,
Real Estate and Business Development of IBM since 1994. Mr.
Dayton was 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 (42)....... Director, Vice President, Treasurer and Assistant Secretary
of the Purchaser. Business Development Consultant of IBM
since 1994. Business Development Associate since 1989.
</TABLE>
S-4
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and/or Rights 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
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
--------------
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
Toll Free (800) 566-9061
Banks and Brokerage
Firms please call:
(800) 662-5200
The Dealer Manager for the Offer is:
CS First Boston
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055
(212) 909-2000 (Call Collect)
Exhibit (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
LOTUS DEVELOPMENT CORPORATION
Pursuant to the Offer to Purchase
Dated June 6, 1995
by
WHITE 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 MONDAY, JULY 3, 1995,
UNLESS THE OFFER IS EXTENDED.
TO: THE CHASE MANHATTAN BANK, N.A., DEPOSITARY
(800) 355-2663
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
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.
<PAGE>
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
and/or Rights (as such terms are defined below) are to be forwarded herewith or,
unless an Agent's Message (as defined in Section 2 of the Offer to Purchase) is
utilized, if delivery of Shares and/or Rights is to be made by book-entry
transfer (in the case of Rights, if available) 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. UNLESS THE RIGHTS
CONDITION (AS DEFINED IN THE OFFER TO PURCHASE) IS SATISFIED, STOCKHOLDERS WILL
BE REQUIRED TO TENDER ONE RIGHT FOR EACH SHARE TENDERED IN ORDER TO EFFECT A
VALID TENDER OF SHARES. UNLESS THE DISTRIBUTION DATE (AS DEFINED IN THE OFFER TO
PURCHASE) OCCURS, A TENDER OF SHARES WILL ALSO CONSTITUTE A TENDER OF THE
ASSOCIATED RIGHTS. Stockholders who deliver Shares and/or Rights 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 and/or Rights 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/or Rights 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 and/or Rights 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.
<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 SHARES TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
TOTAL NUMBER OF NUMBER
CERTIFICATE SHARES REPRESENTED OF SHARES
NUMBER(S)(1) BY CERTIFICATE(S)(1) TENDERED(2)
<S> <C> <C> <C>
Total Shares
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares described herein are being tendered. See
Instruction 4.
</TABLE>
<TABLE><CAPTION>
DESCRIPTION OF RIGHTS TENDERED (1)
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S) RIGHTS TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
TOTAL NUMBER OF NUMBER
CERTIFICATE RIGHTS REPRESENTED OF RIGHTS
NUMBER(S)(2)(3) BY CERTIFICATE(S)(3) TENDERED(4)
<S> <C> <C> <C>
Total Rights
(1) Need not be completed if the Distribution Date has not occurred.
(2) If the tendered Rights are represented by separate certificates, complete using the certificate numbers
of such certificates for Rights. If the tendered Rights are not represented by separate certificates,
or if such certificates have not been distributed, complete using the certificate numbers of the Shares
with respect to which the Rights were issued. Stockholders tendering Rights that are not represented by
separate certificates should retain a copy of this description in order to accurately complete the
Notice of Guaranteed Delivery if the Distribution Date occurs.
(3) Need not be completed by Book-Entry Stockholders who are delivering Rights by book-entry transfer.
(4) Unless otherwise indicated, it will be assumed that all Rights described herein are being tendered. See
Instruction 4.
</TABLE>
<PAGE>
/ / CHECK HERE IF TENDERED SHARES AND/OR RIGHTS 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 AND/OR RIGHTS 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 AND/OR RIGHTS 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 ____________________________________________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to White Acquisition Corp., a New York
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 $.01 per share (the "Shares"),
of Lotus Development Corporation, a Delaware corporation (the "Company"),
together with an equal number of the associated preferred share purchase rights
(the "Rights") issued pursuant to the Rights Agreement dated as of November 7,
1988, as amended (the "Rights Agreement"), between the Company and The First
National Bank of Boston, as Rights Agent (the "Rights Agent"), upon the terms
and subject to the conditions set forth in the Purchaser's Offer to Purchase
dated June 6, 1995 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 and Rights 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 and Rights that are being tendered hereby (and
any and all other Shares, Rights or other securities or rights issued or
issuable in respect thereof on or after June 5, 1995), 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 Rights (and any such other Shares, Rights or
securities or rights), to (a) deliver certificates for such Shares and Rights
(and any such other Shares, Rights or securities or rights) or transfer
ownership of such Shares and Rights (and any such other Shares, Rights 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) present such
Shares and Rights (and any such other Shares, Rights or securities or rights)
for transfer on the Company's books and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares and Rights (and any
such other Shares, Rights 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
Rights (and any and all other Shares, Rights or other securities or rights
issued or issuable in respect of such Shares or Rights on or after June 5, 1995)
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 Rights (and any and all other
Shares, Rights or other securities or rights issued or issuable in respect
thereof on or after June 5, 1995).
THE UNDERSIGNED UNDERSTANDS THAT, UNLESS THE RIGHTS CONDITION IS SATISFIED,
STOCKHOLDERS WILL BE REQUIRED TO TENDER ONE RIGHT FOR EACH SHARE TENDERED IN
ORDER TO EFFECT A VALID TENDER OF SHARES IN ACCORDANCE WITH THE PROCEDURES SET
FORTH IN SECTION 2 OF THE OFFER TO PURCHASE. If the Distribution Date occurs and
separate certificates representing the Rights are distributed to holders of
Shares prior to the time Shares are tendered herewith, certificates representing
a number of Rights equal to the number of Shares being tendered herewith must be
delivered to the Depositary or, if available, a Book-Entry Confirmation must be
received by the Depositary with respect thereto, in order for such Shares
tendered herewith to be validly tendered. If the Distribution Date occurs and
separate certificates representing the Rights are not distributed prior to the
time Shares are tendered herewith, Rights may be tendered prior to a stockholder
receiving separate certificates for Rights by use of the guaranteed delivery
procedures described in Section 2 of the Offer to Purchase. A tender of Shares
constitutes an agreement by the tendering stockholder to deliver certificates
representing a number of Rights equal to the number of Shares tendered pursuant
to the Offer to the Depositary prior to expiration of the period permitted by
such guaranteed delivery procedures for delivery of certificates for, or a
Book-Entry Confirmation with respect to, Rights (the "Rights Delivery Period").
However, after expiration of the Rights Delivery Period, the Purchaser may elect
to reject as invalid a tender of Shares with respect to which certificates for,
or a Book-Entry Confirmation with respect to, an equal number of Rights has not
been received by the Depositary. Nevertheless, the Purchaser will be entitled to
accept for payment Shares tendered by the undersigned prior to the receipt of
the certificates for the Rights required to be tendered with such Shares, or a
Book-Entry Confirmation with respect to such Rights, and either (a), subject to
complying with the applicable rules and regulations of the Securities and
Exchange Commission, withhold payment for such Shares pending receipt of the
certificates for, or a Book-Entry Confirmation with respect to, such Rights or
(b) make payment for Shares accepted for payment pending receipt of the
certificates for, or a Book-Entry Confirmation with respect to, such Rights in
reliance upon the agreement of a tendering stockholder to deliver Rights and
such guaranteed delivery procedures. Any determination by the Purchaser to make
payment for Shares in reliance upon such agreement and such guaranteed delivery
procedures or, after the expiration of the Rights Delivery Period, to reject a
tender as invalid will be made in the sole and absolute discretion of the
Purchaser.
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, Archie W. Colburn
and Donald D. Westfall, 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 and Rights 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, Rights or other securities or rights issued or issuable in respect
of such Shares and Rights on or after June 5, 1995). 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 and Rights 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 (except for any
consents issued under the Consent Solicitation (as defined in the Offer to
Purchase)), Rights 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) by the
undersigned.
The undersigned understands that the valid tender of Shares and, if
applicable, Rights 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. Without limiting the foregoing, if the price to
be paid in the Offer is amended in accordance with the Offer, the price to be
paid to the undersigned will be the amended price notwithstanding the fact that
a different price is stated in this Letter of Transmittal.
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or return any certificates for
Shares or Rights not tendered or accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered" and
"Description of Rights Tendered", respectively. Similarly, unless otherwise
indicated under "Special Delivery Instructions", please mail the check for the
purchase price and/or return any certificates for Shares or Rights 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" and "Description of Rights Tendered", respectively. In the event that
both the Special Delivery Instructions and the Special Payment Instructions are
completed, please issue the check for the purchase price and/or return any
certificates for Shares or Rights 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. Unless otherwise indicated herein under
"Special Payment Instructions", please credit any Shares and Rights tendered
herewith by book-entry transfer that are not accepted for payment by crediting
the account at the Book-Entry Transfer Facility (as defined herein) designated
above. The undersigned recognizes that the Purchaser has no obligation pursuant
to the Special Payment Instructions to transfer any Shares or Rights from the
name of the registered holder thereof if the Purchaser does not accept for
payment any of the Shares or Rights, respectively, 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 or Rights not tendered or not
accepted for payment and/or the check for the purchase price of Shares or Rights
accepted for payment are to be issued in the name of someone other than the
undersigned, or if Shares or Rights delivered by book-entry transfer that are
not accepted for payment are to be returned by credit to an account maintained
at a Book-Entry Transfer Facility other than the account indicated above.
Issue: / / Check / / Certificate(s) to:
Name............................................................................
(PLEASE PRINT)
Address.........................................................................
...............................................................................
(INCLUDE ZIP CODE)
...............................................................................
(EMPLOYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
/ / Credit unpurchased Shares or Rights delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below:
Check appropriate Box:
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
...............................................................................
(ACCOUNT NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Shares or Rights not tendered or not
accepted for payment and/or the check for the purchase price of Shares or Rights
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
SIGN (Also Complete Substitute Form W-9 Below)
HERE
- --------> ..................................................................
- --------> ..................................................................
(SIGNATURE(S) OF STOCKHOLDER(S))
Dated:......, 1995
(Must be signed by registered holder(s) as name(s) appear(s) on
the certificate(s) for the Shares or Rights 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.)
Dated:..... , 1995
Name(s)...........................................................
..................................................................
(PLEASE PRINT)
Capacity (Full Title).............................................
Address...........................................................
..................................................................
(INCLUDE ZIP CODE)
Daytime Area Code and
Telephone No. ( ).........................................
Employer Identification or
Social Security Number............................................
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature..............................................
Name..............................................................
..................................................................
(PLEASE PRINT)
Name of Firm......................................................
Address...........................................................
..................................................................
(INCLUDE ZIP CODE)
AREA CODE AND TELEPHONE NO. ( ).............................
Dated:......, 1995
<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 and
Rights tendered herewith, unless such registered holder(s) has completed either
the box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (b) if such Shares and
Rights 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 (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 and/or
Rights 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 and Rights pursuant to the Offer, either (a) a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), 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 and Rights must be received by the
Depositary at one of such addresses or Shares and Rights 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.
UNLESS THE RIGHTS CONDITION IS SATISFIED, STOCKHOLDERS WILL BE REQUIRED TO
TENDER ONE RIGHT FOR EACH SHARE TENDERED IN ORDER TO EFFECT A VALID TENDER OF
SHARES. Unless the Distribution Date occurs, a tender of Shares will also
constitute a tender of the associated Rights. The Rights are currently
represented by the certificates for the Shares with respect to which the Rights
were issued. The Rights Agreement provides that until the close of business on
the Distribution Date, the Rights will be evidenced by the certificates for the
Shares and may be transferred with and only with the Shares. The Rights
Agreement further provides that, as soon as practicable following the
Distribution Date, separate certificates representing the Rights are to be
mailed by the Company or the Rights Agent to holders of record of Shares as of
the close of business on the Distribution Date. If the Distribution Date occurs
and separate certificates representing the Rights are distributed prior to the
time Shares are tendered herewith, certificates representing a number of Rights
equal to the number of Shares being tendered herewith must be delivered to the
Depositary or, if available, a Book-Entry Confirmation must be received by the
Depositary with respect thereto, in order for such Shares tendered herewith to
be validly tendered. If the Distribution Date occurs and separate certificates
representing the Rights are not distributed prior to the time Shares are
tendered herewith, Rights may be tendered prior to a stockholder receiving
separate certificates for Rights by use of the guaranteed delivery procedures
described below.
Stockholders whose certificates for Shares or Rights are not immediately
available (including because certificates for Rights have not yet been
distributed by the Company or the Rights Agent) 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 and Rights 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 and/or Rights, in proper
form for transfer (or a Book-Entry Confirmation with respect to all such Shares
and/or Rights), together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), 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 (a), in the case of Shares,
three trading days after the date of execution of such Notice of Guaranteed
Delivery or (b), in the case of Rights, a period ending on the later of (1)
three trading days after the date of execution of such Notice of Guaranteed
Delivery or (2) three business days (as defined in the Offer to Purchase) after
the date certificates for Rights are distributed to stockholders by the Company
or the Rights Agent, all 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.
Stockholders may not extend the foregoing time period for delivery of Rights to
the Depositary by providing a second Notice of Guaranteed Delivery with respect
to such Rights.
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 signatures on this Letter of Transmittal cover the Shares and the Rights
tendered hereby whether or not such Rights are delivered simultaneously with
such Shares.
THE METHOD OF DELIVERY OF SHARES, RIGHTS, 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.
<PAGE>
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares or Rights will be purchased. All tendering stockholders, by
execution of this Letter of Transmittal (or facsimile thereof), waive any right
to receive any notice of the acceptance of their Shares or Rights for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares or Rights should be listed on a
separate schedule attached hereto.
4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE STOCKHOLDERS ONLY). If fewer
than all the Shares or Rights evidenced by any certificate submitted are to be
tendered, fill in the number of Shares or Rights that are to be tendered in the
box entitled "Number of Shares Tendered" or "Number of Rights Tendered", as
appropriate. In any such case, new certificate(s) for the remainder of the
Shares or Rights 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 expiration of the Offer.
All Shares and Rights 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 and
Rights 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 or Rights 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 or Rights 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 and Rights listed and transmitted hereby, no endorsements of certificates
or separate stock powers are required unless payment or certificates for Shares
or Rights 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.
6. STOCK TRANSFER TAXES. The Purchaser will pay any stock transfer taxes
with respect to the transfer and sale of Shares or Rights 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 or Rights not tendered or accepted for payment
are to be registered in the name of, any person(s) other than the registered
holder(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 holder(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 or Rights 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. Any stockholder(s) delivering Shares or Rights
by book-entry transfer may request that Shares or Rights not accepted for
payment be credited to such account maintained at a Book-Entry Transfer Facility
as such stockholder(s) may designate.
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 or Rights 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 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.
<PAGE>
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.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance or additional copies of the Offer to Purchase, the 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 or Rights 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 or Rights 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 THEREOF), 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 AND RIGHTS MUST BE RECEIVED BY THE DEPOSITARY OR SHARES AND RIGHTS 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>
<S> <C> <C>
PAYER'S NAME: WHITE ACQUISITION CORP.
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX _________________________
FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING Social Security Number(s)
BELOW 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
(the "IRS") that I am subject to backup Part 4--
withholding as a result of a failure to Exempt TIN
report all interest or 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
Treasury Internal if 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
Payer's Request for returns. However, if after being notified by the IRS that you were
Taxpayer Identification subject to backup withholding you received another notification from the
Number (TIN) IRS stating that you are no longer subject to backup withholding, do not
cross out such item (2). If you are exempt from backup withholding,
check the box in Part 4 above.
SIGNATURE______________________________________________________ DATE ____________________, 1995
</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.
______________________________________ ______________________________________
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
Toll Free (800) 566-9061
Banks and Brokerage
Firms please call:
(800) 662-5200
The Dealer Manager for the Offer is:
CS First Boston
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055
(212) 909-2000 (Call Collect)
Exhibit (a)(3)
[LOGO] CS FIRST BOSTON
CS First Boston
Corporation
55 East 52nd Street
New York, New York 10055
Tel: (212) 909-2000
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
LOTUS DEVELOPMENT CORPORATION
at
$60 NET PER SHARE
by
WHITE 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 MONDAY, JULY 3, 1995,
UNLESS THE OFFER IS EXTENDED.
June 6, 1995
To Brokers, Dealers, Banks,
Trust Companies and other Nominees:
We have been engaged by White Acquisition Corp., a New York 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 $.01 per share (the "Shares"),
of Lotus Development Corporation, a Delaware corporation (the "Company"),
together with the associated preferred share purchase rights (the "Rights")
issued pursuant to the Rights Agreement dated as of November 7, 1988, as
amended, between the Company and The First National Bank of Boston, as
Rights Agent, at $60 per Share (and associated Right), 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 June 6, 1995 (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.
Unless the Rights Condition (as defined in the Offer to Purchase) is
satisfied, stockholders will be required to tender one Right for each Share
tendered in order to effect a valid tender of Shares in accordance with the
procedures set forth in Section 2 of the Offer to Purchase. Unless the
Distribution Date (as defined in the Offer to Purchase) occurs, a tender of
Shares will also constitute a tender of the associated Rights.
Enclosed herewith are copies of the following documents:
1. Offer to Purchase dated June 6, 1995;
2. Letter of Transmittal to be used by stockholders of the Company in
accepting the Offer;
3. A printed form of letter that may be sent to your clients for
whose account you hold Shares or Rights in your name or in the name of a
nominee, with space provided for obtaining such clients' instructions
with regard to the Offer;
<PAGE>
4. Notice of Guaranteed Delivery;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. 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 DATE THAT NUMBER
OF SHARES THAT WOULD REPRESENT A MAJORITY OF ALL OUTSTANDING SHARES ON A
FULLY DILUTED BASIS ON THE DATE OF PURCHASE, (2) THE RIGHTS HAVING BEEN
REDEEMED BY THE BOARD OF DIRECTORS OF THE COMPANY OR THE PURCHASER BEING
SATISFIED, IN ITS SOLE DISCRETION, THAT THE RIGHTS HAVE BEEN INVALIDATED OR
ARE OTHERWISE INAPPLICABLE TO THE OFFER AND THE PROPOSED MERGER, (3) THE
ACQUISITION OF SHARES PURSUANT TO THE OFFER AND THE PROPOSED MERGER HAVING
BEEN APPROVED PURSUANT TO SECTION 203 OF THE DELAWARE GENERAL CORPORATION
LAW ("SECTION 203") OR THE PURCHASER BEING SATISFIED, IN ITS SOLE
DISCRETION, THAT THE PROVISIONS OF SECTION 203 ARE OTHERWISE INAPPLICABLE TO
THE ACQUISITION OF SHARES PURSUANT TO THE OFFER AND THE PROPOSED MERGER AND
(4) THE AMENDMENT OF THE COMPANY'S BY-LAWS TO ELIMINATE THE CONTROL SHARE
BY-LAW (AS DEFINED IN THE OFFER TO PURCHASE) OR THE PURCHASER BEING
SATISFIED, IN ITS SOLE DISCRETION, THAT THE MASSACHUSETTS CONTROL SHARE
ACQUISITION STATUTE (AS DEFINED IN THE OFFER TO PURCHASE) IS INVALID OR
OTHERWISE INAPPLICABLE TO THE PURCHASER OR IBM OR ANY OF THEIR ASSOCIATES OR
THE ACQUISITION OF SHARES BY ANY OF THEM.
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
Monday, July 3, 1995, unless extended.
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 and Rights 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.
Additional copies of the enclosed material may be obtained by contacting
the Information Agent or 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,
CS FIRST BOSTON CORPORATION
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.
2
Exhibit (a)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
LOTUS DEVELOPMENT CORPORATION
at
$60 NET PER SHARE
by
WHITE 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 MONDAY, JULY 3, 1995,
UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated June 6,
1995 (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 White Acquisition Corp., a New York
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 $.01
per share (the "Shares"), of Lotus Development Corporation, a Delaware
corporation (the "Company"), together with the associated preferred share
purchase rights (the "Rights") issued pursuant to the Rights Agreement dated
as of November 7, 1988, as amended, between the Company and The First
National Bank of Boston, as Rights Agent. UNLESS THE RIGHTS CONDITION (AS
DEFINED IN THE OFFER TO PURCHASE) IS SATISFIED, STOCKHOLDERS WILL BE
REQUIRED TO TENDER ONE RIGHT FOR EACH SHARE TENDERED IN ORDER TO EFFECT A
VALID TENDER OF SHARES IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN
SECTION 2 OF THE OFFER TO PURCHASE. UNLESS THE DISTRIBUTION DATE (AS DEFINED
IN THE OFFER TO PURCHASE) OCCURS, A TENDER OF SHARES WILL ALSO CONSTITUTE A
TENDER OF THE ASSOCIATED RIGHTS.
We are the holder of record of Shares and Rights held by us for your
account. A TENDER OF SUCH SHARES AND RIGHTS 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 OR RIGHTS HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any of or all
the Shares and Rights 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 $60 per Share (and associated Right), 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 and Rights.
3. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, JULY 3, 1995, UNLESS THE OFFER IS EXTENDED BY THE
PURCHASER.
<PAGE>
4. The Offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn prior to the Expiration Date (as
defined in the Offer to Purchase) that number of Shares that would
represent a majority of all outstanding Shares on a fully diluted basis
on the date of purchase, (2) the Rights having been redeemed by the Board
of Directors of the Company or the Purchaser being satisfied, in its sole
discretion, that the Rights have been invalidated or are otherwise
inapplicable to the Offer and the Proposed Merger, (3) the acquisition of
Shares pursuant to the Offer and the Proposed Merger having been approved
pursuant to Section 203 of the Delaware General Corporation Law ("Section
203") or the Purchaser being satisfied, in its sole discretion, that the
provisions of Section 203 are otherwise inapplicable to the acquisition
of Shares pursuant to the Offer and the Proposed Merger and (4) the
amendment of the Company's By-laws to eliminate the Control Share By-law
(as defined in the Offer to Purchase) or the Purchaser being satisfied,
in its sole discretion, that the Massachusetts Control Share Acquisition
Statute (as defined in the Offer to Purchase) is invalid or otherwise
inapplicable to the Purchaser or IBM or any of their associates or the
acquisition of Shares by any of them.
5. Any stock transfer taxes applicable to a sale of Shares or Rights
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 of the Offer.
If you wish to have us tender any of or all the Shares and Rights 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 and Rights, all such Shares and Rights
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 of the Offer.
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 and, if the Distribution Date occurs, certificates for (or a timely
Book-Entry Confirmation, if available, with respect to) the associated
Rights (unless the Purchaser elects to make payment for such Shares pending
receipt of the certificates for, or a Book-Entry Confirmation with respect
to, such Rights as described 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 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 Rights) or Book-Entry Confirmations with respect to Shares (or Rights,
if available) 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 and Rights in any jurisdiction in which the
making or acceptance of the Offer would not be in compliance with the laws
of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
LOTUS DEVELOPMENT CORPORATION
The undersigned acknowledge(s) receipt of your letter, the Offer to Purchase
of White Acquisition Corp. dated June 6, 1995 (the "Offer to Purchase") and the
related Letter of Transmittal relating to shares of Common Stock, par value $.01
per share (the "Shares"), of Lotus Development Corporation, a Delaware
corporation (the "Company"), together with the associated preferred share
purchase rights (the "Rights").
This will instruct you to tender the number of Shares and Rights indicated
below held by you for the account of the undersigned, on the terms and subject
to the conditions set forth in such Offer to Purchase and Letter of Transmittal.
Number of Shares to be Tendered:* SIGN HERE
________________________ Shares ____________________________________
____________________________________
Number of Rights to be Tendered:* SIGNATURE(S)
____________________________________
________________________ Rights
____________________________________
(PLEASE PRINT NAME(S) AND ADDRESS(ES))
Dated: ________________________, 1995
____________
* UNLESS THE RIGHTS CONDITION (AS DEFINED IN THE OFFER TO PURCHASE) IS
SATISFIED, STOCKHOLDERS WILL BE REQUIRED TO TENDER ONE RIGHT FOR EACH SHARE
TENDERED TO EFFECT A VALID TENDER OF SHARES. UNLESS THE DISTRIBUTION DATE (AS
DEFINED IN THE OFFER TO PURCHASE) OCCURS, A TENDER OF SHARES WILL ALSO
CONSTITUTE A TENDER OF THE ASSOCIATED RIGHTS. Unless otherwise indicated, it
will be assumed that all your Shares and Rights are to be tendered.
Exhibit (a)(5)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
LOTUS DEVELOPMENT CORPORATION
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 $.01 per
share (the "Shares"), of Lotus Development Corporation, a Delaware corporation
(the "Company"), and/or certificates for the associated preferred share purchase
rights (the "Rights") issued pursuant to the Rights Agreement dated as of
November 7, 1988, as amended, between the Company and The First National Bank of
Boston, as Rights Agent (the "Rights Agent"), are not immediately available
(including because certificates for Rights have not yet been distributed by the
Company or the Rights Agent) 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 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 the Offer to Purchase). See
Section 2 of the Offer to Purchase.
TO: THE CHASE MANHATTAN BANK, N.A., DEPOSITARY
(800) 355-2663
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
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 White Acquisition Corp., a New York
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 June 6, 1995 (the "Offer to Purchase") and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the number of Shares and
Rights (as such terms are defined in the Offer to Purchase) 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):
Number of Rights........................ ...................................
Certificate Nos. (if available): ...................................
PLEASE PRINT
.......................................
Address(es):.......................
........................................
...................................
(Check one box if Shares or Rights will be ZIP CODE
tendered by book-entry transfer)
/ / The Depository Trust Company
Area Code and
/ / Midwest Securities Trust Company Tel. No.:..........................
/ / Philadelphia Depository Trust Company Signature(s):......................
Account Number............................
...................................
Dated:.............................
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Security Transfer Agent's 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 and/or Rights
tendered hereby, in proper form for transfer, or a Book-Entry Confirmation with
respect to such Shares and/or Rights, 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, and any other required
documents (a) in the case of Shares, within three trading days after the date
hereof and (b) in the case of Rights, within a period ending on the later of (i)
three trading days after the date hereof or (ii) three business days after the
date certificates for Rights are distributed to stockholders by the Company or
the Rights Agent.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares and/or Rights to the Depositary within the time period
shown herein. Failure to do so could result in a financial loss to such Eligible
Institution. All terms used herein have the meanings set forth in the Offer to
Purchase.
<TABLE>
<S> <C>
Name of Firm: .................................... ..................................................
AUTHORIZED SIGNATURE
Address: ......................................... Name: ............................................
PLEASE PRINT
.................................................. Title: ...........................................
ZIP CODE
Area Code and
Tel No.: ......................................... Dated: .........................................
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES AND/OR RIGHTS WITH THIS NOTICE;
CERTIFICATES FOR SHARES AND/OR RIGHTS SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
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 instru mentality thereof.
. A registered dealer in securities or commodities regis tered 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 nonresi dent 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)
For Release: IMMEDIATE
IBM
________________________________________________________________________________
International Business Machines Corporation
Armonk, New York 10504
Contact: Jon Iwata
(914) 765-6630
Rob Wilson
(914) 765-6565
IBM ANNOUNCES OFFER TO ACQUIRE LOTUS DEVELOPMENT CORPORATION
FOR $60 PER LOTUS SHARE IN CASH
ARMONK, N.Y., June 5, 1995 . . . IBM today announced that it expects to
commence tomorrow a cash tender offer for all of the outstanding common shares
and preferred share purchase rights of Lotus Development Corporation at a price
of $60 per common share. The tender offer will be initiated by a subsidiary of
IBM, White Acquisition Corp., which has been created for this transaction.
Lotus has approximately 55 million shares outstanding on a fully diluted
basis, giving the transaction a total equity value of approximately $3.3
billion. IBM said it intends to finance the offer from its approximately $10
billion in cash on hand.
"Combining IBM and Lotus represents a truly unique opportunity," said IBM
Chairman and Chief Executive Officer Louis V. Gerstner, Jr. "Lotus employees are
proven innovators. They've developed some very successful products, particularly
in technology that allows people to work as teams -- frequently called
'groupware.' Working together, Lotus and IBM can make these products even more
successful. We can bring to bear IBM's strong
- more -
<PAGE>
- 2 -
technology, our skills and experience in industrial-strength enterprise
computing, and our unmatched global marketing force.
"Our goal is to accelerate the creation of a truly open, scalable
collaborative computing environment so people can work and communicate across
enterprises and across corporate and national borders. People all over the world
are seeking ways to easily access and share information with co-workers,
customers, suppliers, educators, wherever these people may be. It's a new, much
more powerful way of working, learning and interacting. And its evolving
quickly.
"By combining -- and by working with software developers and our many
industry partners -- we can make these benefits real for our customers much
sooner."
IBM has communicated its offer to Lotus management. A copy of a letter to
Lotus Chairman, President and CEO Jim P. Manzi is attached.
The terms and conditions of the offer will be set forth in offering
documents expected to be filed tomorrow with the Securities and Exchange
Commission. This filing will include conditions relating to the acquisition of a
majority of all outstanding shares of Lotus common stock on a fully diluted
basis. The filing also includes conditions related to the elimination of Lotus'
"poison pill" and certain other anti-takeover provisions.
In addition, IBM announced today that it has commenced legal action
designed to compel Lotus' Board of Directors to redeem the
- more -
<PAGE>
- 3 -
poison pill and to eliminate the applicability to the tender offer of certain of
Lotus' anti-takeover provisions. IBM also said it expects its subsidiary to file
with the Securities and Exchange Commission preliminary materials for
solicitation of written consents from Lotus shareholders that are intended to
expedite the tender offer.
IBM said that this acquisition, when completed, will result in a
significant one-time, non-cash charge against IBM's earnings. The charge
involves accounting writedowns of amounts assigned to research and development
of Lotus software under development. 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 will have a significant effect on the net earnings of
IBM in the quarter in which the acquisition is completed and on IBM's net
earnings for the year.
Additional information about today's announcement, including full text of a
letter from Mr. Gerstner to IBM employees, can be accessed on IBM's Internet
home page: http://www.ibm.com.
# # #
<PAGE>
June 5, 1995
Mr. Jim P. Manzi
Chairman, President and Chief Executive Officer
Lotus Development Corporation
55 Cambridge Parkway
Cambridge, Massachusetts 02142
Dear Jim:
As you know from your conversations with IBM Senior Vice President John M.
Thompson, IBM has been interested for some time in pursuing a business
combination with Lotus.
Because you have been unwilling to proceed with such a transaction, we are
announcing this morning our intention to buy all of Lotus Development
Corporation's outstanding common shares for a price of $60 per share, or $3.3
billion. This is an all-cash offer. We believe this is now the fastest, most
efficient way to bring our companies together.
We have the highest respect for you and all Lotus employees. We believe our
companies share similar visions of the future of information technology -- a
future built on a truly open, collaborative computing environment where people
can work and communicate across enterprises and across corporate and national
borders. Combining our efforts will mean that both of us reach that future
sooner.
This is truly a win/win opportunity for IBM and Lotus shareholders, employees
and customers. With IBM's financial resources, technological expertise and
unmatched customer base, Lotus will have greater opportunities for growth and
expansion. With IBM's global marketing and sales capability, we can rapidly grow
Notes' user base and vastly increase its sales potential and acceptance as an
open industry standard. Working with industry partners and customers around the
world, we will help them embrace this powerful new way of computing, working and
communicating. We also have the strength and resources to support Lotus' mail
and application products.
Our objective is a transaction that is enthusiastically supported by you and the
Lotus Board of Directors, as well as Lotus employees, shareholders and your many
loyal customers, software developers and industry partners.
We respect the creative environment and entrepreneurial spirit you have fostered
at Lotus. We do not want to change that. We believe Lotus' employees are among
the best in the industry at developing innovative and successful products. Our
intent is to keep Lotus intact and managed out of its current headquarters in
Cambridge and to make Lotus primarily responsible for key, complementary IBM
software products.
<PAGE>
- 2 -
We and our advisors are prepared to meet with you and all other members of the
Lotus Board of Directors, management and advisors to answer any questions you or
they may have about our offer. We are convinced that together we can achieve a
business combination that serves the best interests of Lotus and IBM.
We believe, as you do, that the future of information technology is one in which
anyone, anywhere will be able to share information and interact -- easily and
instantaneously -- no matter where they are or what system they use. We look
forward to working with you and your colleagues to develop products and systems
that will allow customers around the world to realize this vision.
Louis V. Gerstner, Jr.
IBM Chairman and Chief Executive Officer
# # #
Exhibit (a)(8)
For Release: IMMEDIATE
IBM
________________________________________________________________________________
International Business Machines Corporation
Armonk, New York 10504
Contact: Jon Iwata
(914) 765-6630
Rob Wilson
(914) 765-6565
IBM ANNOUNCES OFFER TO ACQUIRE LOTUS DEVELOPMENT CORPORATION
FOR $60 PER LOTUS SHARE IN CASH
ARMONK, N.Y., June 5, 1995 . . . IBM today announced that it expects to
commence tomorrow a cash tender offer for all of the outstanding common shares
and preferred share purchase rights of Lotus Development Corporation at a price
of $60 per common share. The tender offer will be initiated by a subsidiary of
IBM, White Acquisition Corp., which has been created for this transaction.
Lotus has approximately 55 million shares outstanding on a fully diluted
basis, giving the transaction a total equity value of approximately $3.3
billion. IBM said it intends to finance the offer from its approximately $10
billion in cash on hand.
"Combining IBM and Lotus represents a truly unique opportunity," said IBM
Chairman and Chief Executive Officer Louis V. Gerstner, Jr. "Lotus employees are
proven innovators. They've developed some very successful products, particularly
in technology that allows people to work as teams -- frequently called
'groupware.' Working together, Lotus and IBM can make these products even more
successful. We can bring to bear IBM's strong
- more -
<PAGE>
- 2 -
technology, our skills and experience in industrial-strength enterprise
computing, and our unmatched global marketing force.
"Our goal is to accelerate the creation of a truly open, scalable
collaborative computing environment so people can work and communicate across
enterprises and across corporate and national borders. People all over the world
are seeking ways to easily access and share information with co-workers,
customers, suppliers, educators, wherever these people may be. It's a new, much
more powerful way of working, learning and interacting. And its evolving
quickly.
"By combining -- and by working with software developers and our many
industry partners -- we can make these benefits real for our customers much
sooner."
IBM has communicated its offer to Lotus management. A copy of a letter to
Lotus Chairman, President and CEO Jim P. Manzi is attached.
The terms and conditions of the offer will be set forth in offering
documents expected to be filed tomorrow with the Securities and Exchange
Commission. This filing will include conditions relating to the acquisition of a
majority of all outstanding shares of Lotus common stock on a fully diluted
basis. The filing also includes conditions related to the elimination of Lotus'
"poison pill" and certain other anti-takeover provisions.
In addition, IBM announced today that it has commenced legal action
designed to compel Lotus' Board of Directors to redeem the
- more -
<PAGE>
- 3 -
poison pill and to eliminate the applicability to the tender offer of certain of
Lotus' anti-takeover provisions. IBM also said it expects its subsidiary to file
with the Securities and Exchange Commission preliminary materials for
solicitation of written consents from Lotus shareholders that are intended to
expedite the tender offer.
IBM said that this acquisition, when completed, will result in a
significant one-time, non-cash charge against IBM's earnings. The charge
involves accounting writedowns of amounts assigned to research and development
of Lotus software under development. 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 will have a significant effect on the net earnings of
IBM in the quarter in which the acquisition is completed and on IBM's net
earnings for the year.
Additional information about today's announcement, including full text of a
letter from Mr. Gerstner to IBM employees, can be accessed on IBM's Internet
home page: http://www.ibm.com.
# # #
<PAGE>
June 5, 1995
Mr. Jim P. Manzi
Chairman, President and Chief Executive Officer
Lotus Development Corporation
55 Cambridge Parkway
Cambridge, Massachusetts 02142
Dear Jim:
As you know from your conversations with IBM Senior Vice President John M.
Thompson, IBM has been interested for some time in pursuing a business
combination with Lotus.
Because you have been unwilling to proceed with such a transaction, we are
announcing this morning our intention to buy all of Lotus Development
Corporation's outstanding common shares for a price of $60 per share, or $3.3
billion. This is an all-cash offer. We believe this is now the fastest, most
efficient way to bring our companies together.
We have the highest respect for you and all Lotus employees. We believe our
companies share similar visions of the future of information technology -- a
future built on a truly open, collaborative computing environment where people
can work and communicate across enterprises and across corporate and national
borders. Combining our efforts will mean that both of us reach that future
sooner.
This is truly a win/win opportunity for IBM and Lotus shareholders, employees
and customers. With IBM's financial resources, technological expertise and
unmatched customer base, Lotus will have greater opportunities for growth and
expansion. With IBM's global marketing and sales capability, we can rapidly grow
Notes' user base and vastly increase its sales potential and acceptance as an
open industry standard. Working with industry partners and customers around the
world, we will help them embrace this powerful new way of computing, working and
communicating. We also have the strength and resources to support Lotus' mail
and application products.
Our objective is a transaction that is enthusiastically supported by you and the
Lotus Board of Directors, as well as Lotus employees, shareholders and your many
loyal customers, software developers and industry partners.
We respect the creative environment and entrepreneurial spirit you have fostered
at Lotus. We do not want to change that. We believe Lotus' employees are among
the best in the industry at developing innovative and successful products. Our
intent is to keep Lotus intact and managed out of its current headquarters in
Cambridge and to make Lotus primarily responsible for key, complementary IBM
software products.
<PAGE>
- 2 -
We and our advisors are prepared to meet with you and all other members of the
Lotus Board of Directors, management and advisors to answer any questions you or
they may have about our offer. We are convinced that together we can achieve a
business combination that serves the best interests of Lotus and IBM.
We believe, as you do, that the future of information technology is one in which
anyone, anywhere will be able to share information and interact -- easily and
instantaneously -- no matter where they are or what system they use. We look
forward to working with you and your colleagues to develop products and systems
that will allow customers around the world to realize this vision.
Louis V. Gerstner, Jr.
IBM Chairman and Chief Executive Officer
# # #
<PAGE>
From: LVG1 --RHQVM01
To: IBM Colleagues
From: L. V. Gerstner, Jr.
3S-25 / Armonk
RHQVM20/GERSTNER, T/L 251-4700
Subject: No Subject
Dear Colleague:
In keeping with my promise to share all items of importance with you, I want you
to know that IBM announced plans moments ago to make a tender offer for 100% of
the common stock of Lotus Development Corp., a leading software developer with
whom we've had a long relationship.
At 1:30 p.m. EDT, we'll hold a press conference, which will be broadcast
internally. But before I meet with the media, I'd like to tell you why we are
making this move; why we think it's a win/win situation for IBM, Lotus and the
customers we both serve; and what's likely to happen next.
In call this a win/win situation, I choose my words carefully.
IBM's strengths include a worldwide team of talented people, an unmatched
customer base, a 140-country sales and distribution network, vast technical
resources, a strong balance sheet, one of the world's most respected brands and
decades of experience in industrial-strength enterprise computing.
Lotus has an array of complementary strengths, the most important being its
Notes and mail products that are rapidly gaining marketplace acceptance, a
strong applications portfolio, a solid brand identity and, of course, some the
of industry's most innovative people.
Our goal, working hand in hand with Lotus, is to accelerate the creation of a
truly open, scalable collaborative computing environment so people can work and
communicate across enterprises and across corporate and national borders --
without worrying about things like incompatible hardware and software.
People all over the world are seeking ways to easily access and share
information with co-workers, customers, suppliers, educators, wherever these
people may be. It's a new, much more powerful way of interacting, and it's
evolving rapidly. By combining IBM and Lotus, we can make these benefits real
for our customers more quickly.
Our intent is to keep Lotus intact and managed out of its present headquarters
in Cambridge, Massachusetts. Lotus will also have primary responsibility for
key, complementary IBM software products. We expect that Lotus' management and
employees will remain and join forces with IBM's software people in creating a
new model for enterprise computing.
IBM has communicated its offer to Lotus management. A copy of a letter to Lotus
chairman , president and CEO Jim Manzi is attached. We are taking these actions
after attempting on several occasions to open discussions that would result in
a friendly merger.
<PAGE>
The next step on our part will be to publish legal notices in tomorrow's
Wall Street Journal and New York Times.
I can't tell you much more at this point because of legal considerations, but I
will keep you up-to-date as developments take place. In addition, a copy of this
letter and other relevant material will be on the IBM home page on the Internet
(http://www.ibm.com). In the meantime, if you receive any inquiries on our plans
from outside the company, it is very important that you refer them to corporate
communications.
At our annual meeting in April, I discussed the progress we have made in terms
of productivity and cost-cutting. I also emphasized our intent to fully re-
establish IBM's leadership position in the industry. We are well on our way to
doing just that. A combination with Lotus will help us get there that much
faster.
Louis V. Gerstner, Jr.
********************************************************************************
June 5, 1995
Mr. Jim P. Manzi
Chairman, President and Chief Executive Officer
Lotus Development Corporation
55 Cambridge Parkway
Cambridge Massachusetts 02142
Dear Jim:
As you know from your conversations with IBM Senior Vice President John M.
Thompson, IBM has been interested for some time in pursuing a business
combination with Lotus.
Because you have been unwilling to proceed with such a transaction, we are
announcing this morning our intention to buy all of Lotus Development
Corporation's outstanding common shares for a price of $60 per share or $3.3
billion. This is an all-cash offer. We believe this is now the fastest, most
efficient way to bring our companies together.
We have the highest respect for you and all Lotus employees. We believe our
companies share similar visions of the future of information technology -- a
future built on a truly open, collaborative computing environment where people
can work and communicate across enterprises and across corporate and national
borders. Combining our efforts will mean that both of us reach that future
sooner.
This is truly a win/win opportunity for IBM and Lotus shareholders, employees
and customers. With IBM's financial resources, technological expertise and
unmatched customer base, Lotus will have greater opportunities for growth and
expansion.
<PAGE>
With IBM's global marketing and sales capability, we can rapidly grow
Notes' user base and vastly increase its sales potential and acceptance as an
open industry standard. Working with industry partners and customers around the
world, we will help them embrace this powerful new way of computing, working and
communicating. We also have the strength and resources to support Lotus' mail
and application products.
Our objective is a transaction that is enthusiastically supported by you and the
Lotus Board of Directors, as well as Lotus employees, shareholders and your many
loyal customers, software developers and industry partners.
We respect the creative environment and entrepreneurial spirit you have fostered
at Lotus. We do not want to change that. We believe Lotus' employees are among
the best in the industry at developing innovative and successful products. Our
intent is to keep Lotus intact and managed out of its current headquarters in
Cambridge and to make Lotus primarily responsible for key, complementary IBM
software products.
We and our advisors are prepared to meet with you and all other members of the
Lotus Board of Directors, management and advisors to answer any questions you or
they may have about our offer. We are convinced that together we can achieve a
business combination that serves the best interests of Lotus and IBM.
We believe, as you do, that the future of information technology is one in which
anyone, anywhere will be able to share information and interact -- easily and
instantaneously -- no matter where they are or what system they use. We look
forward to working with you and your colleagues to develop products and systems
that will allow customers around the world to realize this vision.
Louis V. Gerstner, Jr.
IBM Chairman and Chief Executive Officer
<PAGE>
Combining the strengths of Lotus and IBM represents a truly unique opportunity.
Lotus employees are proven innovators. They've developed some very special
software products, particularly in the groupware area.
Working together, we can make these products even more successful. We can bring
to bear IBM's great technology, our skills and experience in industrial-strength
enterprise computing, and our unmatched global marketing force.
Our goal is to create a truly open, collaborative computing environment so
people can work and communicate across enterprises and across corporate and
national boarders -- without worrying about things like incompatible hardware
and software.
People all over the world are seeking ways to easily access and share
information with co-workers, customers, suppliers, educators, wherever these
people may be. It's a new, much more powerful way of interacting, and its
evolving rapidly.
Together, we can make these benefits real for our customers more quickly.
Together, we can move faster to establish Notes as an open industry standard --
and we can do this before competing products emerge.
Our two companies have a competitive battle on our hands in the world of
collaborative network-based computing. By combining, we are stronger. And we can
create far better opportunities for our employees, our industry partners and,
most importantly, for our customers.
Exhibit (a)(9)
This announcement is neither an offer to purchase nor a
solicitation of an offer to sell Shares or Rights. The Offer is
made solely by the Offer to Purchase dated June 6, 1995 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 or
Rights 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 jurisdictions where 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 CS First Boston Corporation ("CS First Boston") 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
(Including the Associated Preferred Share Purchase Rights)
of
Lotus Development Corporation
at
$60 Net Per Share
by
White Acquisition Corp.
a Wholly Owned Subsidiary of
International Business Machines Corporation
White Acquisition Corp., a New York 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 $.01 per share (the "Shares"), of Lotus Development Corporation,
a Delaware corporation (the "Company"), together with the associated
preferred share purchase rights (the "Rights") issued pursuant to
the Rights Agreement dated as of November 7, 1988, as amended
(the "Rights Agreement"), between the Company and The First
National Bank of Boston, as Rights Agent, at a price of $60
per Share (and associated Right), net to the seller in cash,
without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated June 6, 1995
(the "Offer to Purchase") and in the related Letter of
Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer"). Unless the
context otherwise requires, all references herein to Shares shall
include the Rights.
<PAGE>
UNLESS THE RIGHTS ARE REDEEMED OR THE PURCHASER IS
SATISFIED, IN ITS SOLE DISCRETION, THAT THE RIGHTS HAVE BEEN
INVALIDATED OR ARE OTHERWISE INAPPLICABLE TO THE OFFER AND
THE PROPOSED MERGER (AS DEFINED IN THE OFFER TO PURCHASE),
STOCKHOLDERS ARE REQUIRED TO TENDER ONE RIGHT FOR EACH SHARE
TENDERED IN ORDER TO EFFECT A VALID TENDER OF SHARES IN ACCORDANCE
WITH THE PROCEDURES SET FORTH IN SECTION 2 OF THE OFFER TO
PURCHASE. UNLESS THE DISTRIBUTION DATE (AS DEFINED IN THE OFFER
TO PURCHASE) OCCURS, A TENDER OF SHARES WILL ALSO CONSTITUTE A
TENDER OF THE ASSOCIATED RIGHTS.
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 OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JULY 3, 1995,
UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE
BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION
DATE (AS DEFINED IN THE OFFER TO PURCHASE) THAT NUMBER OF SHARES
THAT WOULD REPRESENT A MAJORITY OF ALL OUTSTANDING SHARES ON A
FULLY DILUTED BASIS ON THE DATE OF PURCHASE, (II) THE RIGHTS
HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS OF THE COMPANY OR
THE PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE
RIGHTS HAVE BEEN INVALIDATED OR ARE OTHERWISE INAPPLICABLE TO THE
OFFER AND THE PROPOSED MERGER, (III) THE ACQUISITION OF SHARES
PURSUANT TO THE OFFER AND THE PROPOSED MERGER HAVING BEEN
APPROVED PURSUANT TO SECTION 203 OF THE DELAWARE GENERAL
CORPORATION LAW ("SECTION 203") OR THE PURCHASER BEING SATISFIED,
IN ITS SOLE DISCRETION, THAT THE PROVISIONS OF SECTION 203 ARE
OTHERWISE INAPPLICABLE TO THE ACQUISITION OF SHARES PURSUANT TO
THE OFFER AND THE PROPOSED MERGER AND (IV) THE AMENDMENT OF THE
COMPANY'S BY-LAWS TO ELIMINATE THE CONTROL SHARE BY-LAW (AS
DEFINED IN THE OFFER TO PURCHASE) OR THE PURCHASER BEING
SATISFIED, IN ITS SOLE DISCRETION, THAT THE MASSACHUSETTS CONTROL
SHARE ACQUISTION STATUTE (AS DEFINED IN THE OFFER TO PURCHASE) IS
INVALID OR OTHERWISE INAPPLICABLE TO THE PURCHASER OR IBM OR
ANY OF THEIR ASSOCIATES OR THE ACQUISITION OF SHARES BY ANY OF THEM.
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 Chase Manhattan
Bank, N.A. (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
<PAGE>
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 (i) certificates for (or a timely
Book-Entry Confirmation (as defined in the Offer to Purchase)
with respect to) such Shares and, if the Distribution Date
occurs, certificates for (or a timely Book-Entry Confirmation
with respect to) the associated Rights (unless the Purchaser elects
to make payment for such Shares pending receipt of the certificates
for, or a Book-Entry Confirmation with respect to, such Rights),
(ii) 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 (iii) any other documents
required by the Letter of Transmittal. 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.
Except as otherwise provided below, tenders of Shares and
Rights are irrevocable. Shares and Rights tendered pursuant to
the Offer may be withdrawn 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 August 4, 1995. Shares or Rights may not be withdrawn
unless the associated Rights or Shares, as the case may be, are also
withdrawn. A withdrawal of Shares or Rights will also constitute a
withdrawal of the associated Rights or Shares, as the case may be.
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 as set forth below and must
specify the name of the person having tendered the Shares and Rights
to be withdrawn, the number of Shares and Rights to be withdrawn and
the name of the registered holder of the Shares and Rights to be
withdrawn, if different from the name of the person who tendered the
Shares and Rights. If certificates for Shares or Rights 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 or Rights 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 or Rights have been delivered
pursuant to the procedure 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 (as defined in the Offer
to Purchase) to be credited with the withdrawn Shares or Rights
and otherwise comply with such Book-Entry Transfer Facility's
procedures. Withdrawals of tenders of Shares and Rights may not
be rescinded, and any Shares and Rights properly withdrawn will
thereafter be deemed not validly tendered for any purposes of the
Offer. However, withdrawn Shares and Rights may be retendered by
<PAGE>
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 Purchaser expressly reserves the right, in its sole
discretion, at any time or from time to time, to extend the
period of time during which the Offer is open by giving oral or
written notice of such extension to the Depositary.
The information required to be disclosed by paragraph
(e)(1)(vii) of Rule 14d-6 under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is
incorporated herein by reference.
Requests are being made to the Company for the use of the
Company's stockholder lists and security position listings for
the purpose of disseminating the Offer to holders of Shares. The
Offer to Purchase, the related Letter of Transmittal and other
relevant materials will be mailed 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 OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS
MADE WITH RESPECT TO THE OFFER.
Questions and requests for assistance or for copies of the
Offer to Purchase, the Letter of Transmittal and other tender
offer documents may be directed to the Information Agent or the
Dealer Manager, as set forth below, and copies will be furnished
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 and Rights pursuant to the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue
20th Floor
New York, NY 10022
Toll Free (800) 566-9061
Banks and Brokerage
Firms please call:
(800) 662-5200
<PAGE>
The Depositary for the Offer is:
THE CHASE MANHATTAN BANK, N.A.
(800) 355-2663
By Overnight Delivery:
c/o Chase Securities Processing Corp.
Ft. Lee Executive Park
1 Executive Drive (6th Floor)
Ft. Lee, NJ 07024
By Mail: By Hand:
Box 3032 (9:00 a.m.-5:00 p.m.
4 Chase MetroTech Center New York City time)
Brooklyn, NY 11245 1 Chase Manhattan Plaza, Floor 1-B
Nassau and Liberty Streets
New York, NY 10081
By Facsimile Transmission:
(201) 592-4372
Confirm by Telephone:
(201) 592-4370
The Dealer Manager for the Offer is:
CS First Boston
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055
(212) 909-2000 (Call Collect)
June 6, 1995
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:
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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).
<PAGE>
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
<PAGE>
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).
<PAGE>
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
<PAGE>
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.
<PAGE>
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,
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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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28
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
<PAGE>
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
<PAGE>
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
<PAGE>
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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62
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.
<PAGE>
69
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
<PAGE>
70
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
<PAGE>
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 (g)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
INTERNATIONAL BUSINESS MACHINES
CORPORATION and WHITE ACQUISITION Civil Action No.
CORP.,
Plaintiffs,
COMPLAINT
---------
-against-
LOTUS DEVELOPMENT CORPORATION and
JIM P. MANZI,
Defendants.
International Business Machines Corporation
("IBM") and White Acquisition Corp. ("White"), as and for
their complaint, allege upon knowledge with respect to
themselves and their own acts, and upon information and
belief as to all other matters, as follows:
Nature of the Action
--------------------
1. Plaintiffs bring this action for injunctive
and/or declaratory relief:
(a) to prevent the application of defendant Lotus
Development Corporation's ("Lotus") anti-takeover
devices and other defensive measures to White's tender
offer, proposed merger and consent solicitation, in
<PAGE>
violation of fiduciary duties owed to Lotus's
stockholders;
(b) to prevent the application of certain
Massachusetts statutes to White's tender offer, in
violation of the Constitution of the United States; and
(c) to prevent Lotus from otherwise impeding
White's tender offer, proposed merger and consent
solicitation, which comply with all applicable laws,
obligations and agreements.
2. On June 5, 1995, White announced its intention
to commence an all cash tender offer for all outstanding
shares of common stock of Lotus, at a price of $60 per share
(the "Offer"). The Offer is conditioned on removal or
inapplicability of a number of Lotus's anti-takeover
devices. IBM intends, as soon as practicable following
consummation of the Offer, to have Lotus merge with White or
another IBM subsidiary (the "Proposed Merger"). At the same
time as it announced the Offer, White announced its
intention to commence a consent solicitation to replace
Lotus's current Board of Directors with other nominees and
to take certain other actions to facilitate consummation of
the Offer and Proposed Merger (the "Consent Solicitation").
3. The Offer is fully financed, non-coercive and
fair to Lotus stockholders. The Offer represents a
-2-
<PAGE>
substantial premium over the market price for Lotus shares
prior to announcement of the Offer. The Offer, Proposed
Merger and Consent Solicitation do not pose any threat to
the interests of Lotus's stockholders or to Lotus's
corporate policy and effectiveness.
4. Lotus has previously expressed its opposition
to being acquired by IBM. Lotus has available various
defensive measures--including a "poison pill", the Delaware
Business Combinations Statute, 8 Del. C. Sec. 203
("Section 203"), the Massachusetts Control Share Acquisition
Statute, Mass. Gen. L. ch. 110E ("Chapter 110E") and the
Massachusetts Anti-Takeover Statute, Mass. Gen. L. ch. 110C
("Chapter 110C")--which may be used to block the Offer. In
light of its opposition to an acquisition, Lotus may also
take steps to block the Consent Solicitation.
5. Given the nature of the Offer and its
substantial value to Lotus's stockholders, the Lotus Board
should not be allowed to deprive the stockholders of the
opportunity to decide upon the merits of the Offer for
themselves. Use of Lotus's anti-takeover devices or other
defensive measures against the Offer, Proposed Merger or
Consent Solicitation represent an unreasonable response to
the Offer, Proposed Merger and Consent Solicitation, in
violation of fiduciary duties owed to Lotus's stockholders.
-3-
<PAGE>
6. Chapters 110E and 110C are unconstitutional,
both on their face and as applied in this case, because they
violate the Commerce Clause of the United States
Constitution. These Massachusetts statutes purport to
regulate unsolicited takeovers with respect to a significant
number of foreign corporations throughout the United States,
which engage in interstate commerce, even though most or all
of these corporations' stockholders are not located in
Massachusetts. This extraterritorial reach here invades
Delaware's regulatory authority over its domestic
corporations, and subjects non-Massachusetts corporations to
inconsistent regulation. Moreover, each statute's
application to foreign stockholders creates a burden that is
excessive in relation to its purported local benefits.
7. Chapter 110C is also pre-empted by the
Williams Act and thus violates the Supremacy Clause of the
United States Constitution. The Williams Act establishes a
regime designed to provide even-handed regulation of tender
offers. Chapter 110C frustrates this objective by imposing
disclosure, hearing and adjudication provisions that are
inconsistent with the Williams Act and the regulations
thereunder, in violation of the Supremacy Clause.
8. The Offer, Proposed Merger and Consent
Solicitation comply or will comply with all applicable laws,
-4-
<PAGE>
obligations and agreements, including, without limitation,
the securities laws, the antitrust laws, and all other legal
obligations to which plaintiffs are subject, including any
contractual and common law obligations that may be owed by
plaintiffs to Lotus. Given the nature of the Offer and its
benefits, Lotus should assist plaintiffs in obtaining any
necessary regulatory approvals. In any event, Lotus should
not be permitted to attempt to delay consummation of the
Offer, Proposed Merger or Consent Solicitation by litigation
in other forums.
9. Lotus's use of defensive measures and
unconstitutional statutes to obstruct the Offer, Proposed
Merger and Consent Solicitation will deprive Lotus's
stockholders of the opportunity to decide upon their merits
for themselves and will cause plaintiffs irreparable injury
as a result of the loss of the unique opportunity to acquire
control of Lotus.
Jurisdiction and Venue
----------------------
10. The Court has jurisdiction of the subject
matter of this action pursuant to 28 U.S.C. Sec.Sec. 1331,
1332(a), 1337(a), 1367(a) and 2201. The plaintiffs and
defendants are citizens of different states, and the matter
in controversy exceeds the sum of $50,000, exclusive of
interest and costs.
-5-
<PAGE>
11. Venue is proper in this district pursuant to
28 U.S.C. Sec. 1391(b) and (c).
The Parties
-----------
12. Plaintiff IBM is a New York corporation with
its principal place of business in New York. IBM's business
activities (including research and development,
manufacturing, marketing and service) are primarily in the
field of information processing products and services. IBM
owns common stock of Lotus.
13. Plaintiff White is a New York corporation
with its principal place of business in New York. It is a
wholly owned subsidiary of IBM and was incorporated for the
purpose of making the Offer and Consent Solicitation and
acquiring all the stock of Lotus. White owns common stock
of Lotus.
14. Defendant Lotus is a Delaware corporation
with its principal place of business in Massachusetts. It
is engaged in the business of developing, manufacturing,
marketing and supporting applications software and services.
15. Defendant Jim P. Manzi is a citizen of the
Commonwealth of Massachusetts. Since 1984, he has been
President of Lotus and since 1986 he has been Chairman of
the Board and Chief Executive Officer of Lotus.
-6-
<PAGE>
The Offer, Proposed Merger and Consent Solicitation
---------------------------------------------------
16. On June 5, 1995, White announced its
intention to commence a tender offer for all outstanding
shares of Lotus common stock (together with the associated
preferred share purchase rights issued in connection with
Lotus's poison pill), at the price of $60 per share (and
associated right) net to the seller in cash. The Offer is
conditioned, inter alia, upon (a) valid tender of a majority
----- ----
of the outstanding shares of Lotus's common stock;
(b) redemption, invalidation or inapplicability of the share
purchase rights; (c) approval of the acquisition of shares
pursuant to the Offer and the Proposed Merger under
Section 203, or inapplicability of Section 203; and
(d) elimination from Lotus's bylaws, invalidity or
inapplicability of Chapter 110E. The Offer is not subject
to any condition relating to plaintiffs' ability to finance
the Offer or the Proposed Merger.
17. IBM intends, as soon as practicable following
consummation of the Offer, to propose and seek to have Lotus
consummate a merger or similar business combination with
White or another direct or indirect wholly owned subsidiary
of IBM. The purpose of the Proposed Merger is to acquire
all shares not tendered and purchased pursuant to the Offer
or otherwise. Pursuant to the Proposed Merger, each such
-7-
<PAGE>
share (other than those held by stockholders who perfect
appraisal rights) would be converted into the right to
receive an amount in cash equal to the price per share paid
pursuant to the Offer.
18. On June 5, 1995, White announced its
intention to file preliminary consent solicitation materials
with the Securities and Exchange Commission (the "SEC") for
use in connection with the solicitation of written consents
from Lotus's stockholders to, inter alia, (i) remove all six
----- ----
of the present members of the Board of Directors of Lotus,
(ii) replace them with other nominees (who intend to redeem
the poison pill or make it inapplicable to the Offer and
Proposed Merger, approve the Offer and Proposed Merger for
the purposes of Section 203, and take any other appropriate
action to facilitate consummation of the Offer and Proposed
Merger, or, if any other transaction offering more value to
Lotus's stockholders is proposed, take action to facilitate
such a transaction) and (iii) take certain other actions
designed to facilitate consummation of the Offer and
Proposed Merger, including the elimination from Lotus's
bylaws of the provision purporting to provide for the
application of Chapter 110E.
19. White's Offer is clearly in the best
interests of Lotus's stockholders. It is a fully financed,
-8-
<PAGE>
all cash offer, available to all Lotus stockholders, for all
outstanding shares. It is not "front-end loaded" or
otherwise coercive in nature. Moreover, it provides Lotus's
stockholders with the opportunity to realize a substantial
premium over the market price of their shares prior to
announcement of the Offer. On the last Nasdaq National
Market trading day before announcement of the Offer, the
closing price of Lotus shares was $32-1/2 per share. The
Offer price therefore represents a premium of $27-1/2 per
share (or 85%) over the market price of the shares
immediately prior to announcement of the Offer.
20. The Offer, Proposed Merger and Consent
Solicitation do not pose any threat to the interests of
Lotus's stockholders or to Lotus's corporate policy and
effectiveness.
21. The Offer, Proposed Merger and Consent
Solicitation comply or will comply with all applicable laws,
obligations and agreements, including, without limitation,
the securities laws, the antitrust laws, and all other legal
obligations to which plaintiffs are subject, including any
contractual and common law obligations that may be owed by
plaintiffs to Lotus. The offering documents and preliminary
Consent Solicitation materials will be filed with the SEC
and NASD and delivered to Lotus upon commencement of the
-9-
<PAGE>
Offer. The offering documents fairly disclose all
information material to the decision of Lotus's stockholders
whether to accept or reject the Offer, in compliance with
plaintiffs' obligations under the securities laws.
Plaintiffs will also make the filings required by the Hart-
Scott-Rodino Act. The Offer, Proposed Merger and Consent
Solicitation are lawful under the antitrust laws.
22. The Offer and Proposed Merger cannot be
completed successfully unless the Lotus Board agrees to
remove Lotus's anti-takeover devices or allows the Consent
Solicitation to proceed unhindered.
23. Lotus's Chairman, Mr. Manzi, has previously
expressed opposition to an acquisition by IBM. On January
31, 1995, John M. Thompson, the senior vice president in
charge of IBM's software development activities, inquired as
to Mr. Manzi's interest in having IBM acquire Lotus, but Mr.
Manzi indicated that Lotus (as opposed to only a part of its
business) was not for sale. On March 16, 1995, Mr. Thompson
met with Mr. Manzi to review the status of ongoing
discussions concerning marketing and development
collaboration between IBM and Lotus. One of the potential
business arrangements suggested by Mr. Thompson was an
acquisition by IBM of Lotus. Mr. Manzi stated that he would
not sell equity directly to IBM. On March 17, 1995, Mr.
-10-
<PAGE>
Manzi informed Mr. Thompson that he would not discuss an
acquisition by IBM of Lotus.
Lotus's Defensive Measures
--------------------------
Poison Pill
-----------
24. On November 7, 1988, Lotus's Board adopted a
stockholder rights plan (the "Poison Pill"), which
effectively allows the Board unilaterally to block
acquisition offers, even those providing substantial
benefits to Lotus's stockholders. The Registration
Statement which was filed by Lotus with the SEC stated:
"The Rights have certain anti-takeover effects.
The Rights will cause substantial dilution to a
person or group that attempts to acquire the
Company on terms not approved by the Company's
Board of Directors, except pursuant to an offer
conditioned on a substantial number of Rights
being acquired."
25. The Board declared a dividend of one
preferred share purchase right per share of common stock (a
"Right"), payable to each of Lotus's stockholders of record
as of November 23, 1988. Each Right entitles the holder to
purchase a unit of a new issue of Lotus's preferred stock,
amounting to one one-hundredth of a share of such stock, at
a price of $75 per unit. If the Rights are "triggered"--
inter alia, by an acquisition of 15% or more of Lotus's
----- ----
common stock--each holder of a Right will be able to
exercise the Right to receive common stock (or in certain
-11-
<PAGE>
circumstances, cash, assets or other securities of Lotus)
having a market value of twice the then current exercise
price of such Right. Under a "sterilizing" provision of the
Poison Pill, in the event of an unsolicited takeover, any
Rights held by the acquiror will be null and void.
26. Lotus's Board can redeem the Rights at a
redemption price of $.01 per Right, or alternatively, can
amend the Poison Pill to make the Rights inapplicable to the
Offer and the Proposed Merger. Although the Rights may be
redeemed pursuant to a stockholder vote at a special meeting
called to vote upon a tender offer which complies with
certain specified conditions, this meeting need not be
called by the Board until up to 120 days after the later of
(1) the date the offer is received and (2) the date of any
meeting of stockholders already scheduled as of the offer
date.
27. The Poison Pill, at a minimum (and aside from
the prohibitively expensive effect of its triggering),
enables the Lotus Board to stall any tender offer for a
period of at least 4 months from the date of the offer,
regardless of the interests of Lotus's stockholders. This
potential delay is especially unjustified in this case,
given the non-coercive nature of White's Offer and the
substantial benefits it would generate. Given the nature
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and value of the Offer, the Lotus Board should redeem the
Rights, or amend the Poison Pill to make the Rights
inapplicable to the Offer and Proposed Merger, to enable
stockholders to decide upon the merits of the Offer for
themselves.
Delaware Business Combination Statute, Section 203
--------------------------------------------------
28. Section 203, entitled "Business Combinations
with Interested Stockholders", applies to any Delaware
corporation that has not opted out of the statute's
coverage. Lotus has not opted out of the statute's
coverage.
29. Section 203 was designed to impede coercive
and inadequate tender offers. Section 203 provides that if
a person acquires 15% or more of a corporation's voting
stock (thereby becoming an "interested stockholder"), such
interested stockholder may not engage in a "business
combination" with the corporation (defined to include a
merger or consolidation) for three years after the
interested stockholder becomes such, unless: (i) prior to
the 15% acquisition, the Board of Directors has approved
either the acquisition or the business combination, (ii) the
interested stockholder acquires 85% of the corporation's
voting stock in the same transaction in which it crosses the
15% threshold, or (iii) on or subsequent to the date of the
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15% acquisition, the business combination is approved by the
Board of Directors and authorized at an annual or special
meeting of stockholders (and not by written consent) by the
affirmative vote of at least 66-2/3% of the outstanding
voting stock which is not owned by the interested
stockholder.
30. Because the Lotus Board should approve
White's Offer, Section 203 should not be applicable.
Section 203 should not be used by the Lotus Board to
obstruct the Offer, which is non-coercive, offers Lotus's
stockholders a substantial premium for their shares, and
poses no threat to the interests of Lotus's stockholders or
to Lotus's corporate policy and effectiveness.
Massachusetts Control Share Acquisition Statute,
------------------------------------------------
Chapter 110E
------------
31. Chapter 110E, entitled "Regulation of Control
Share Acquisitions of Foreign Corporations", purports to
apply to any foreign corporation ("issuing public
corporation") whose bylaws provide for its application and
which meets the following jurisdictional requirements:
(i) two hundred or more stockholders; (ii) its principal
executive office within the Commonwealth of Massachusetts
and more of its employees or assets, including employees or
assets of its majority owned subsidiaries, employed or
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located in the Commonwealth than in any other state as of
the end of any of its four fiscal quarters immediately
preceding the control share acquisition or the date on which
the control share acquisition statement is delivered; and
(iii) either more than 10% of its stockholders residing
within the Commonwealth or more than 10% of the issued and
outstanding shares owned of record by residents of the
Commonwealth. By virtue of this definition, the provisions
of Chapter 110E purport to apply to acquisitions of shares
in foreign corporations where up to 90% of the shareholders
or ownership of up to 90% of the shares are located outside
of Massachusetts.
32. Section 5 of Chapter 110E provides that
shares in an issuing public corporation which are acquired
in a control share acquisition shall have voting rights only
to the extent authorized by a majority of stockholders other
than holders of interested shares (defined to include shares
which are beneficially owned by any person who has made or
proposes to make a control share acquisition). A control
share acquisition is defined as the acquisition of
beneficial ownership of shares with (i) one-fifth or more
but less than one-third of all voting power; (ii) one-third
or more but less than a majority of all voting power; or
(iii) a majority or more of all voting power. It does not
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include an acquisition pursuant to a tender offer, merger or
consolidation which is made pursuant to an agreement of
merger or consolidation to which the issuing public
corporation is a party.
33. The effect of Chapter 110E is, therefore,
that shares acquired in an unsolicited tender offer shall
only carry voting rights to the extent authorized by holders
of shares other than those already acquired in the tender
offer. Moreover, the shareholder vote on the resolution
regarding the voting rights to be accorded the acquiror's
control shares is not required to be taken until the next
scheduled special or annual meeting of stockholders unless
the person delivering the control share acquisition
statement makes a contemporaneous written demand on the
target corporation for a special meeting of stockholders for
this specific purpose. In that event, the directors of the
corporation may wait for up to 50 days after receipt of the
demand by the corporation before holding such a meeting.
34. In short, the purpose and effect of
Massachusetts' Chapter 110E is to deter and prevent
takeovers of foreign corporations, such as Lotus, with up to
90% foreign stockholders, by depriving any person who seeks
to acquire control of such a company, without Board
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approval, of many of the substantial benefits and incentives
of such an acquisition.
35. Given the nature and value to Lotus's
stockholders of White's Offer, Lotus's Board should not take
any steps to apply or enforce the provisions of Chapter 110E
and should permit the Offer to proceed unhindered so that
Lotus's stockholders can decide upon its merits for
themselves.
Massachusetts Anti-Takeover Statute, Chapter 110C
-------------------------------------------------
36. Chapter 110C, entitled "Regulation of Take-
Over Bids in the Acquisition of Corporations", purports to
apply, inter alia, to takeover bids for any corporation that
----- ----
has its principal place of business in Massachusetts.
Accordingly, it purports to apply even to takeover bids for
foreign corporations where all of the corporation's
shareholders or ownership of all of the corporation's shares
are located outside Massachusetts.
37. Section 2 of Chapter 110C provides that no
offeror will make a "takeover bid"--defined to exclude any
takeover bid to which the target Board consents--unless,
among other things, the offeror publicly announces the terms
of the proposed takeover bid and files with the Secretary of
State of Massachusetts and the target, on the date of the
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commencement of the bid, copies of all information required
by Section 4. Section 2 further provides that the Secretary
of State may, on his own initiative or at the request of the
target or an offeree, order a hearing to consider whether
the bid complies with the provisions of the chapter.
Pursuant to Section 6, the Secretary has up to 45 days to
render a decision.
38. Chapter 110C therefore requires a tender
offeror to comply with onerous requirements--in addition to
the disclosure obligations under the Williams Act--and to
wait for up to 45 days before consummating the offer, unless
the offeror is prepared to run the risk that the Secretary
of State may deem the disclosures inadequate in some respect
and that stockholders who have already accepted the offer
may then seek to rescind and recover their securities.
39. Given the nature and value to Lotus
stockholders of White's Offer, Lotus's Board should not take
any steps to apply or enforce the provisions of Chapter 110C
and should permit the Offer to proceed unhindered so that
Lotus's stockholders can decide upon its merits for
themselves.
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Irreparable Injury
------------------
40. Plaintiffs have no adequate remedy at law.
Only through the exercise of the Court's equitable powers
will plaintiffs and Lotus's other stockholders be protected
from immediate and irreparable injury. Unless the Court
enjoins the application of Lotus's anti-takeover devices to
White's Offer and enjoins Lotus from impeding the Offer,
Proposed Merger and Consent Solicitation by any other
measures, including litigation in other forums, Lotus
stockholders will be deprived of the opportunity to decide
for themselves whether or not to accept the Offer.
Moreover, White will be precluded from consummating the
Offer, which is conditioned on removal or inapplicability of
Lotus's anti-takeover devices, will be denied any meaningful
access to or control over the assets of Lotus, and will be
hindered in or prevented from exercising its fundamental
stockholder rights under Delaware law. Should that occur,
plaintiffs will have lost the unique opportunity to acquire
Lotus, and other Lotus stockholders will have lost the
opportunity to sell their shares for a substantial premium.
COUNT ONE
41. Plaintiffs repeat, reaver and incorporate
each averment contained in Paragraphs 1 through 40 of this
Complaint as if fully set forth herein.
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<PAGE>
42. White's Offer is fully financed; it is non-
coercive and non-discriminatory; it is fair to Lotus
stockholders; and it represents a substantial premium over
the market price of Lotus shares prior to announcement of
the Offer. The Offer, Proposed Merger and Consent
Solicitation comply with all applicable laws, obligations
and agreements--including, without limitation, the
securities laws, the antitrust laws, and all other legal
obligations to which plaintiffs are subject, including any
contractual and common law obligations that may be owed by
plaintiffs to Lotus--and pose no threat to the interests of
Lotus's stockholders or to Lotus's corporate policy or
effectiveness. Use of Lotus's anti-takeover devices or any
other defensive measures to prevent Lotus stockholders from
deciding for themselves whether or not to accept the Offer
or Consent Solicitation is not proportionate to any threat
posed, nor within the range of reasonable responses to the
Offer, Proposed Merger or Consent Solicitation, in breach of
the Board's fiduciary duties to Lotus stockholders.
Plaintiffs seek injunctive relief against such breaches of
fiduciary duties.
43. Plaintiffs have no adequate remedy at law.
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COUNT TWO
44. Plaintiffs repeat and reaver as if fully set
forth herein each averment in Paragraphs 1 through 40 of
this Complaint.
45. This cause of action arises under the
Commerce and Supremacy Clauses of the United States
Constitution, U.S. Const. art. 1, Sec. 8, cl. 3, and art. 6,
Sec. 2, respectively.
46. The Offer constitutes a substantial
securities transaction in interstate commerce, employing
interstate instrumentalities and facilities in the
communication of the Offer, and in transactions for the
purchase and sale of Lotus's securities occurring across
state lines.
47. The extraterritorial application of
Chapters 110E and 110C here invades Delaware's regulatory
authority over its domestic corporations, and subjects non-
Massachusetts corporations to inconsistent regulation.
Massachusetts is but one of numerous states with which Lotus
has significant contacts. To allow Massachusetts to
regulate an acquisition of a Delaware corporation with
significant contacts in states other than Massachusetts is
to guarantee inconsistent regulation, in violation of the
Commerce Clause.
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<PAGE>
48. Chapters 110E and 110C also violate the
Commerce Clause because they impose direct, substantial and
adverse burdens on interstate commerce that are excessive in
relation to local interests served by the statutes. Among
other things, Chapters 110E and 110C inhibit the making and
consummation of nationwide control share acquisitions and
takeover bids involving purely out of state shares and share
transactions. Chapter 110E deters out of state control
share acquisitions because of the risk or actuality that an
acquiror will not gain voting rights in the corporation even
if the acquisition is otherwise successful and because of
the delay necessary to consummate the acquisition. Chapter
110C deters out of state takeover bids by imposing
substantial filing and disclosure burdens on bidders and by
delaying consummation of bids or creating uncertainty with
respect to the status of share transactions entered into
pursuant to such bids.
49. Chapters 110E and 110C do not serve any
legitimate local interests sufficient to justify the burdens
they impose on interstate commerce. Massachusetts has no
legitimate interest in the purely out of state sales and
purchases of shares in a Delaware corporation acquired
pursuant to a tender offer or in the voting rights attendant
upon these shares to weigh in its balance against the
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substantial burdens that Chapters 110E and 110C place on
interstate commerce. Massachusetts also has no interest in
protecting nonresident shareholders of nonresident
corporations. There are no local benefits that arise from
the statutes' application to such persons.
50. Chapters 110E and 110C are unconstitutional
and null and void on their face under the Commerce Clause.
In addition, Chapters 110E and 110C are unconstitutional and
null and void under the Commerce Clause in their application
under the circumstances of this case. Lotus is a foreign
corporation with numerous foreign shareholders to which
these statutes purport to apply, and plaintiffs are both
foreign corporations. Accordingly, the risk of inconsistent
regulation and the undue burden on interstate commerce that
are created by these statutes have a direct and substantial
impact in this case.
51. Chapter 110C also violates the Supremacy
Clause of the United States Constitution. The Offer is
subject to the federal laws and regulations governing tender
offers, including the Williams Act amendments to the
Securities Exchange Act, 15 U.S.C. Sec.Sec. 78m and 78n, and the
rules and regulations promulgated thereunder. The Williams
Act is intended to establish even-handed regulation of
tender offers which favors neither the offeror nor incumbent
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management of the target but leaves the decision concerning
the merits of the offer to the target's stockholders.
52. The provisions of Chapter 110C conflict with
the provisions of the Williams Act and the regulations
thereunder, inter alia, by imposing additional disclosure
----- ----
requirements on the tender offeror which are not required by
the Williams Act, by providing for a hearing at the instance
of the Massachusetts Secretary of State or any offeree, and
by allowing the Secretary of State to pass on the
substantive fairness of the offer. These provisions impose
substantial and unnecessary burdens on the offeror,
introduce extended delay into the offer process, interfere
with the freedom of the target's stockholders to make their
own decisions concerning the merits of the offer, and upset
the balance struck by Congress in enacting the Williams Act
by favoring target management at the expense of
stockholders.
53. The provisions of Chapter 110C are
unconstitutional and null and void on their face under the
Supremacy Clause because they conflict with and stand as an
obstacle to the accomplishment and execution of the full
purposes and objectives of the Williams Act. Moreover,
because Lotus is a corporation to which Chapter 110C
purports to apply, the unconstitutional burdens imposed by
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Chapter 110C have a direct and substantial impact in this
case. Accordingly, Chapter 110C is also unconstitutional
and null and void in its application under the circumstances
of this case under the Supremacy Clause.
54. Plaintiffs seek declaratory relief with
respect to the unconstitutionality of Chapters 110E and
110C, pursuant to the Federal Declaratory Judgments Act, 28
U.S.C. Sec. 2201, and injunctive relief against the application
and enforcement of these unconstitutional statutes.
55. Plaintiffs have no adequate remedy at law.
COUNT THREE
56. Plaintiffs repeat and reaver as if fully set
forth herein each averment in Paragraphs 1 through 40 of
this Complaint.
57. The Offer, Proposed Merger and Consent
Solicitation comply or will comply with all applicable laws,
obligations and agreements, including, without limitation,
the securities laws, the antitrust laws, and all other legal
obligations to which plaintiffs are subject, including any
contractual and common law obligations that may be owed by
plaintiffs to Lotus. Given the nature of the Offer and its
benefits, Lotus should assist plaintiffs in obtaining any
necessary regulatory approvals. In any event, Lotus should
not be permitted to attempt to delay consummation of the
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Offer, Proposed Merger or Consent Solicitation by litigation
in other forums. To prevent any unnecessary impediment to
consummation of the Offer, Proposed Merger and Consent
Solicitation, plaintiffs seek a declaratory judgment with
respect to their validity and declaratory and injunctive
relief against Lotus's commencement of proceedings in any
forum other than this Court which would impede their
commencement, continuation or consummation.
58. Plaintiffs have no adequate remedy at law.
WHEREFORE, plaintiffs respectfully request that this Court
enter an order:
(a) enjoining Lotus, its directors, officers,
successors, agents, servants, subsidiaries, employees
and attorneys, and all persons acting in concert or
participating with them, from taking any steps to
impede or frustrate the ability of Lotus's stockholders
to consider and make their own determination as to
whether to accept the terms of the Offer or give or
withhold consent to the terms of the Consent
Solicitation, or taking any other action to thwart or
interfere with the Offer, Proposed Merger or Consent
Solicitation;
(b) compelling Lotus's Board of Directors to
redeem the Rights associated with the Poison Pill or to
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amend the Poison Pill so as to make the Rights
inapplicable to the Offer and the Proposed Merger, and
enjoining Lotus, its directors, officers, successors,
agents, servants, subsidiaries, employees and
attorneys, and all persons acting in concert or
participating with them, from taking any action to
implement, distribute or recognize any rights or powers
with respect to said Rights (other than to redeem the
Rights), and from taking any actions pursuant to the
Poison Pill that would dilute or interfere with White's
voting rights or in any other way discriminate against
White in the exercise of its rights with respect to its
Lotus stock;
(c) compelling Lotus's Board of Directors to
approve the Offer and the Proposed Merger for the
purposes of Section 203, and enjoining Lotus, its
directors, officers, successors, agents, servants,
subsidiaries, employees and attorneys, and all persons
acting in concert or participation with them, from
taking any actions to enforce or apply Section 203 that
would interfere with the commencement, continuation or
consummation of White's Offer;
(d) declaring and adjudging that Chapter 110E
violates the Constitution of the United States and that
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it is null and void on its face and as applied in this
case, and enjoining Lotus, its directors, officers,
successors, agents, servants, subsidiaries, employees
and attorneys, and all persons acting in concert or
participation with them, from taking any actions to
enforce or apply Chapter 110E that would interfere with
the commencement, continuation or consummation of
White's Offer;
(e) declaring and adjudging that Chapter 110C
violates the Constitution of the United States and that
it is null and void on its face and as applied in this
case, and enjoining Lotus, its directors, officers,
successors, agents, servants, subsidiaries, employees
and attorneys, and all persons acting in concert or
participation with them, from taking any actions to
enforce or apply Chapter 110C that would interfere with
the commencement, continuation or consummation of
White's Offer;
(f) declaring and adjudging that the Offer,
Proposed Merger and Consent Solicitation comply with
all applicable laws, obligations and agreements,
including, without limitation, the securities laws, the
antitrust laws, and all other legal obligations to
which plaintiffs are subject, including any contractual
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and common law obligations that may be owed by
plaintiffs to Lotus;
(g) declaring and adjudging that Lotus, its
directors, officers, successors, agents, servants,
subsidiaries, employees and attorneys, and all persons
acting in concert or participation with them, may not
commence, and enjoining them from commencing, in any
forum other than this Court, any judicial proceedings
that would require litigation, by way of claim, defense
or counterclaim, of any of the claims, defenses or
counterclaims which may be asserted in this lawsuit and
that would delay or impede commencement, continuation
or consummation of the Offer, Proposed Merger or
Consent Solicitation, including, without limitation,
any proceedings challenging the Offer, Proposed Merger
or Consent Solicitation or seeking to enforce or apply
any of Lotus's anti-takeover devices;
(h) awarding plaintiffs their costs and
disbursements in this action, including reasonable
attorneys' fees; and
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(i) granting such other and further relief as to
the Court seems just and proper.
June 5, 1995
-----------------------------
R. Franklin Balotti (I.D.
No. 679)
Jesse A. Finkelstein (I.D.
No. 1090)
Anne C. Foster (I.D. No. 2513)
RICHARDS, LAYTON & FINGER
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
(302) 658-6541
Attorneys for Plaintiffs
Of Counsel:
Lawrence R. Ricciardi
Senior Vice President and
General Counsel
INTERNATIONAL BUSINESS MACHINES
CORPORATION
Old Orchard Road
Armonk, NY 10504
(914) 765-1900
CRAVATH, SWAINE & MOORE
825 Eighth Avenue
New York, NY 10019
(212) 474-1000
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