<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
AURUM SOFTWARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
AURUM SOFTWARE, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
<PAGE> 2
[AURUM LOGO]
3385 SCOTT BOULEVARD
SANTA CLARA, CALIFORNIA 95054
JULY 28, 1997
Dear Stockholder:
A Special Meeting of the Stockholders (the "Aurum Special Meeting") of
Aurum Software, Inc., a Delaware corporation ("Aurum"), will be held at 9:00
a.m., local time, on August 26, 1997, at Aurum's principal executive offices at
2350 Mission College Boulevard, Suite 1300, Santa Clara, California 95054.
At the Aurum Special Meeting, you will be asked to consider and vote upon a
proposal to approve the Agreement and Plan of Reorganization, dated as of May
13, 1997 (the "Merger Agreement"), by and among Aurum, Baan Company N.V., a
Netherlands corporation ("Baan"), and Green Software Acquisition Corporation, a
newly-formed, wholly-owned Delaware subsidiary of Baan ("Merger Sub"), and the
transactions contemplated thereunder, including a merger (the "Merger") pursuant
to which Merger Sub will be merged with and into Aurum, whereby, among other
things, Aurum will survive the Merger and become a wholly-owned subsidiary of
Baan.
In connection with the Merger, each share of Aurum common stock, $.001 par
value ("Aurum Common Stock"), issued and outstanding as of the time the Merger
becomes effective, which will occur upon the filing of a certificate of merger
with the Delaware Secretary of State or at such other time as may be agreed by
Baan and Aurum (the "Effective Time"), will be automatically assigned and
transferred to Baan at the Effective Time and in exchange therefor the holders
of such shares of Aurum Common Stock will be entitled to receive a number of
Baan Company N.V. common shares, par value NLG .01 per share ("Baan Common
Shares"), equal to the Exchange Ratio (as defined below). To receive their Baan
Common Shares, Aurum stockholders must, after the Merger, deliver their Aurum
Common Stock certificates (or a bond in respect thereof) in the manner described
in the attached Proxy Statement/Prospectus. Aurum stockholders should not send
certificates at this time.
The "Exchange Ratio" is a fraction, the numerator of which is $21.00 and
the denominator of which is $59.00 (or approximately 0.3559). The Exchange Ratio
was based upon the closing market price of Baan Common Shares on The Nasdaq
National Market on May 9, 1997, and reflects a 27% premium over the closing
price of Aurum Common Stock on that date. The Exchange Ratio is subject to
adjustment in the event that the average closing sales price of Baan Common
Shares over the 10 trading days prior to the closing of the Merger (the "Baan
Stock Value") is less than $50.00 per share. In such event, the Exchange Ratio
increases to a ratio equal to the product of the initial Exchange Ratio times a
fraction, the numerator of which is $50.00 and the denominator of which is the
Baan Stock Value. The Exchange Ratio does not adjust further once the Baan Stock
Value reaches $40.00 or less per share. Accordingly, the maximum Exchange Ratio
is approximately 0.4449. As an example, a holder of 1,000 shares of Aurum Common
Stock would receive 355 Baan Common Shares at a Baan Stock Value in excess of
$50.00 per share, between 355 and 444 Baan Common Shares at a Baan Stock Value
between $50.00 and $40.00 per share and 444 Baan Common Shares at a Baan Stock
Value of less than $40.00 per share (plus in each case cash in lieu of
fractional Baan Common Shares). On July 23, 1997, the most recent practicable
date prior to the printing of the Proxy Statement/Prospectus, the Baan Stock
Value was $ 76.66 and the closing price per Baan Common Share was $75.75 on The
Nasdaq National Market. Based on such Baan Stock Value, in the Merger a holder
of 1,000 shares of Aurum Common Stock would be issued 355 Baan Common Shares
(plus cash in lieu of fractional Baan Common Shares) and the aggregate number of
Baan Common Shares to be issued in the Merger would be approximately 4,153,000
(based on 11,667,626 shares of Aurum Common Stock outstanding on June 30, 1997).
Neither Aurum nor Baan is entitled to terminate the Merger Agreement based on
the per share trading price of Baan Common Shares or of Aurum Common Stock.
Aurum's stockholders are strongly encouraged to
<PAGE> 3
obtain current market quotations for the Baan Common Shares and shares of Aurum
Common Stock. The current market quotations for the Baan Common Shares and
shares of Aurum Common Stock may be obtained on the Internet at
http://www.nasdaq.com.
In addition, in connection with the Merger each option to purchase shares
of Aurum Common Stock (the "Aurum Stock Options") outstanding immediately prior
to the Effective Time under Aurum's 1995 Stock Option Plan and 1996 Director
Stock Option Plan (collectively, the "Aurum Stock Option Plans") which has not
been exercised in accordance with its terms, will be assumed or substituted in a
manner consistent with applicable laws by Baan, with appropriate adjustments to
be made to the number of shares issuable thereunder and the exercise price
thereof based on the Exchange Ratio. Furthermore, each right to purchase shares
of Aurum Common Stock pursuant to Aurum's 1996 Employee Stock Purchase Plan will
be exercised automatically on a date prior to the Effective Time for that number
of shares of Aurum Common Stock issuable pursuant to such right.
Aurum's Board of Directors has received an opinion of Cowen & Company,
Aurum's financial advisor, that, as of the date of and based upon and subject to
certain matters stated in such opinion, the financial terms of the Merger were
fair from a financial point of view to the holders of Aurum Common Stock. A copy
of this opinion is attached as Appendix B to the Proxy Statement/Prospectus,
which you should read carefully.
If the requisite approval of Aurum's stockholders is received, the Merger
is expected to be consummated on or before August 31, 1997.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS PROVIDED FOR THEREIN,
INCLUDING THE MERGER, AND HAS UNANIMOUSLY CONCLUDED THAT THEY ARE FAIR TO AND IN
THE BEST INTERESTS OF AURUM AND ITS STOCKHOLDERS. YOUR BOARD OF DIRECTORS HAS
UNANIMOUSLY RECOMMENDED THAT THE STOCKHOLDERS OF AURUM APPROVE THE MERGER.
In the material accompanying this letter, you will find a Notice of Special
Meeting of Stockholders, a Proxy Statement/Prospectus relating to the actions to
be taken by stockholders at the Aurum Special Meeting and a proxy card. The
Proxy Statement/Prospectus, which you should read carefully, more fully
describes the terms of the Merger Agreement and the Merger and includes or
incorporates by reference information about Baan and Aurum. The Merger Agreement
is attached as Appendix A to the Proxy Statement/Prospectus, which you should
read carefully.
Certain stockholders of Aurum beneficially owning a majority of the
outstanding shares of Aurum Common Stock have entered into stockholder voting
agreements pursuant to which they have agreed to vote their shares of Aurum
Common Stock in favor of the Merger Agreement and the Merger at the Aurum
Special Meeting. Accordingly, the approval of the Merger and the Merger
Agreement is likely assured. Notwithstanding these stockholder voting
agreements, the vote of each Aurum stockholder is important and all stockholders
are encouraged to vote.
Aurum stockholders are cordially invited to attend the Aurum Special
Meeting in person. However, whether or not you plan to attend the Aurum Special
Meeting, please complete, sign, date and return your proxy in the enclosed
envelope. If you attend the Aurum Special Meeting, you may vote in person if you
wish, even though you have previously returned your proxy card. Signed and
unmarked proxy cards will be voted in favor of the Merger. It is important that
your shares be represented and be voted at the Aurum Special Meeting.
Sincerely,
/s/ MARY E. COLEMAN
-------------------------------------
MARY E. COLEMAN
President and Chief Executive Officer
2
<PAGE> 4
[AURUM LOGO]
3385 SCOTT BOULEVARD
SANTA CLARA, CALIFORNIA 95054
------------------------------
NOTICE OF THE SPECIAL MEETING OF STOCKHOLDERS
------------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders (the
"Aurum Special Meeting") of Aurum Software, Inc., a Delaware corporation
("Aurum"), will be held at 9:00 a.m., local time, on August 26, 1997 at Aurum's
principal executive offices at 2350 Mission College Boulevard, Suite 1300, Santa
Clara, California 95054, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Reorganization, dated as of May 13, 1997, (the "Merger Agreement"),
by and among Aurum, Baan Company N.V., a Netherlands corporation ("Baan"), and
Green Software Acquisition Corporation, a newly-formed, wholly-owned Delaware
subsidiary of Baan ("Merger Sub"), pursuant to which Merger Sub will be merged
with and into Aurum, whereby, among other things, Aurum will survive the merger
and become a wholly-owned subsidiary of Baan (referred to herein as the
"Merger").
In connection with the Merger, each share of Aurum common stock, $.001 par
value ("Aurum Common Stock"), issued and outstanding as of the time the Merger
becomes effective, which will occur upon the filing of a certificate of merger
with the Delaware Secretary of State or at such other time as may be agreed by
Baan and Aurum (the "Effective Time"), will be automatically assigned and
transferred to Baan at the Effective Time and in exchange therefor the holders
of such shares of Aurum Common Stock will be entitled to receive a number of
Baan Company N.V. common shares, par value NLG .01 per share ("Baan Common
Shares"), equal to the Exchange Ratio (as defined below). To receive their Baan
Common Shares, Aurum stockholders must, after the Merger, deliver their Aurum
Common Stock certificates (or a bond in respect thereof) in the manner described
in the attached Proxy Statement/Prospectus. Aurum stockholders should not send
certificates at this time.
The "Exchange Ratio" is a fraction, the numerator of which is $21.00 and
the denominator of which is $59.00 (or approximately 0.3559). The Exchange Ratio
was based upon the closing market price of Baan Common Shares on The Nasdaq
National Market on May 9, 1997, and reflects a 27% premium over the closing
price of Aurum Common Stock on that date. The Exchange Ratio is subject to
adjustment in the event that the average closing sales price of Baan Common
Shares over the 10 trading days prior to the closing of the Merger (the "Baan
Stock Value") is less than $50.00 per share. In such event, the Exchange Ratio
increases to a ratio equal to the product of the initial Exchange Ratio times a
fraction, the numerator of which is $50.00 and the denominator of which is the
Baan Stock Value. The Exchange Ratio does not adjust further once the Baan Stock
Value reaches $40.00 or less per share. Accordingly, the maximum Exchange Ratio
is approximately 0.4449. As an example, a holder of 1,000 shares of Aurum Common
Stock would receive 355 Baan Common Shares at a Baan Stock Value in excess of
$50.00 per share, between 355 and 444 Baan Common Shares at a Baan Stock Value
between $50.00 per share and $40.00 and 444 Baan Common Shares at a Baan Stock
Value of less than $40.00 per share (plus in each case cash in lieu of
fractional Baan Common Shares). On July 23, 1997, the most recent practicable
date prior to the printing of the Proxy Statement/Prospectus, the Baan Stock
Value was $ 76.66 and the closing price per Baan Common Share was $75.75 on The
Nasdaq National Market. Based on such Baan Stock Value, in the Merger a holder
of 1,000
<PAGE> 5
shares of Aurum Common Stock would be issued 355 Baan Common Shares (plus cash
in lieu of fractional Baan Common Shares) and the aggregate number of Baan
Common Shares to be issued in the Merger would be approximately 4,153,000 (based
on 11,667,626 shares of Aurum Common Stock outstanding on June 30, 1997).
Neither Aurum nor Baan is entitled to terminate the Merger Agreement based on
the per share trading price of Baan Common Shares or of Aurum Common Stock.
Aurum's stockholders are strongly encouraged to obtain current market quotations
for the Baan Common Shares and shares of Aurum Common Stock. The current market
quotations for the Baan Common Shares and shares of Aurum Common Stock may be
obtained on the Internet at http://www.nasdaq.com.
In addition, in connection with the Merger each option to purchase shares
of Aurum Common Stock (the "Aurum Stock Options") outstanding immediately prior
to the Effective Time under Aurum's 1995 Stock Option Plan and 1996 Director
Stock Option Plan (the "Aurum Stock Option Plans") which has not been exercised
in accordance with its terms, will be assumed or substituted in a manner
consistent with applicable laws by Baan, with appropriate adjustments to be made
to the number of shares issuable thereunder and the exercise price thereof based
on the Exchange Ratio. Furthermore, each right to purchase shares of Aurum
Common Stock pursuant to Aurum's 1996 Employee Stock Purchase Plan will be
exercised automatically on a date prior to the Effective Time for that number of
shares of Aurum Common Stock issuable pursuant to such right.
2. To transact such other business as may properly come before the Aurum
Special Meeting, including any motion to adjourn to a later date to permit
further solicitation of proxies, if necessary.
The foregoing items of business are more fully described in the Proxy
Statement/Prospectus accompanying this Notice.
Only stockholders of record of Aurum Common Stock at the close of business
on June 30, 1997 are entitled to notice of, and will be entitled to vote at, the
Aurum Special Meeting or any adjournment thereof. Approval of the Merger
Agreement and the Merger will require the affirmative vote of the holders of a
majority of the issued and outstanding shares of Aurum Common Stock.
Certain stockholders of Aurum beneficially owning a majority of the
outstanding shares of Aurum Common Stock have entered into agreements to vote
their shares of Aurum Common Stock in favor of the Merger Agreement and the
Merger at the Aurum Special Meeting. Accordingly, the approval of the Merger and
the Merger Agreement is likely assured. Notwithstanding these stockholder voting
agreements, the vote of each Aurum stockholder is important and all stockholders
are encouraged to vote.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ CHRISTOPHER L. DIER
----------------------------------
CHRISTOPHER L. DIER
Secretary
Santa Clara, California
July 28, 1997
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE AURUM SPECIAL MEETING YOU
ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN
THE POSTAGE PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE AURUM
SPECIAL MEETING IN PERSON. YOUR PROXY CAN BE WITHDRAWN BY YOU AT ANY TIME BEFORE
IT IS VOTED. EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
DO NOT SEND ANY AURUM STOCK CERTIFICATES IN YOUR PROXY ENVELOPES.
2
<PAGE> 6
BAAN COMPANY N.V. PROSPECTUS
------------------------------
AURUM SOFTWARE, INC. PROXY STATEMENT
------------------------------
This Proxy Statement/Prospectus is furnished in connection with the
solicitation by the Board of Directors of Aurum Software, Inc., a Delaware
corporation ("Aurum"), of proxies from holders of its common stock, $.001 par
value ("Aurum Common Stock") for use at its special meeting of stockholders to
be held at 9:00 a.m., local time, on August 26, 1997 at Aurum's principal
executive offices at 2350 Mission College Boulevard, Suite 1300, Santa Clara,
California 95054 (together with any adjournment or postponement thereof, the
"Aurum Special Meeting").
At the Aurum Special Meeting, the holders of Aurum Common Stock will be
asked to approve and adopt the Agreement and Plan of Reorganization, dated as of
May 13, 1997, (the "Merger Agreement") by and among Aurum, Baan Company N.V., a
Netherlands corporation ("Baan"), and Green Software Acquisition Corporation, a
newly-formed, wholly-owned Delaware subsidiary of Baan ("Merger Sub"), pursuant
to which Merger Sub will be merged with and into Aurum whereby, among other
things, Aurum will survive the merger and become a wholly-owned subsidiary of
Baan (referred to herein as the "Merger"). A copy of the Merger Agreement is
attached as Appendix A to this Proxy Statement/Prospectus.
In connection with the Merger, each share of Aurum common stock, $.001 par
value ("Aurum Common Stock"), issued and outstanding as of the time the Merger
becomes effective, which will occur upon the filing of a certificate of merger
with the Delaware Secretary of State or at such other time as may be agreed by
Baan and Aurum (the "Effective Time"), will be automatically assigned and
transferred to Baan at the Effective Time and in exchange therefor the holders
of such shares of Aurum Common Stock will be entitled to receive a number of
Baan Company N.V. common shares, par value NLG .01 per share ("Baan Common
Shares"), equal to the Exchange Ratio (as defined below). To receive their Baan
Common Shares, Aurum stockholders must, after the Merger, deliver their Aurum
Common Stock certificates (or a bond in respect thereof) in the manner provided
in this Proxy Statement/Prospectus. Aurum stockholders should not send
certificates at this time.
The "Exchange Ratio" is a fraction, the numerator of which is $21.00 and the
denominator of which is $59.00 (or approximately 0.3559). The Exchange Ratio was
based upon the closing market price of Baan Common Shares on The Nasdaq National
Market on May 9, 1997, and reflects a 27% premium over the closing price of
Aurum Common Stock on that date. The Exchange Ratio is subject to adjustment in
the event that the average closing sales price of Baan Common Shares over the 10
trading days prior to the closing of the Merger (the "Baan Stock Value") is less
than $50.00 per share. In such event, the Exchange Ratio increases to a ratio
equal to the product of the initial Exchange Ratio times a fraction, the
numerator of which is $50.00 and the denominator of which is the Baan Stock
Value. The Exchange Ratio does not adjust further once the Baan Stock Value
reaches $40.00 or less per share. Accordingly, the maximum Exchange Ratio is
approximately 0.4449. As an example, a holder of 1,000 shares of Aurum Common
Stock would receive 355 Baan Common Shares at a Baan Stock Value in excess of
$50.00 per share, between 355 and 444 Baan Common Shares at a Baan Stock Value
between $50.00 and $40.00 per share and 444 Baan Common Shares at a Baan Stock
Value of less than $40.00 per share (plus in each case cash in lieu of
fractional Baan Common Shares). On July 23, 1997, the most recent practicable
date prior to the printing of this Proxy Statement/Prospectus, the Baan Stock
Value was $76.66 and the closing price per Baan Common Share was $75.75 on The
Nasdaq National Market. Based on such Baan Stock Value, in the Merger a holder
of 1,000 shares of Aurum Common Stock would be issued 355 Baan Common Shares
(plus cash in lieu of fractional Baan Common Shares) and the aggregate number of
Baan Common Shares to be issued in the Merger would be approximately 4,153,000
(based on 11,667,626 outstanding shares of Aurum Common Stock on June 30, 1997).
Neither Aurum nor Baan is entitled to terminate the Merger Agreement based on
the per share trading price of Baan Common Shares or of Aurum Common Stock.
Aurum's stockholders are strongly encouraged to obtain current market quotations
for the Baan Common Shares and shares of Aurum Common Stock. The current market
quotations for the Baan Common Shares and shares of Aurum Common Stock may be
obtained on the Internet at http://www.nasdaq.com.
In addition, in connection with the Merger each option to purchase shares of
Aurum Common Stock (the "Aurum Stock Options") outstanding immediately prior to
the Effective Time under Aurum's 1995 Stock Option Plan and 1996 Director Stock
Option Plan (collectively, the "Aurum Stock Option Plans") which has not been
exercised in accordance with its terms, will be assumed or substituted in a
manner consistent with applicable laws by Baan, with appropriate adjustments to
be made to the number of shares issuable thereunder and the exercise price
thereof based on the Exchange Ratio. Furthermore, each right to purchase shares
of Aurum Common Stock pursuant to Aurum's 1996 Employee Stock Purchase Plan will
be exercised automatically on a date prior to the Effective Time for that number
of shares of Aurum Common Stock issuable pursuant to such right. Based on
options to purchase shares of Aurum Common Stock outstanding as of June 30,
1997, options to purchase 1,273,097 shares of Aurum Common Stock will be assumed
or substituted for options to purchase a number of Baan Common Shares determined
by multiplying the number of shares of Aurum Common Stock subject to such
options and the Exchange Ratio.
Only stockholders of record of Aurum Common Stock at the close of business
on June 30, 1997 are entitled to notice of, and will be entitled to vote at, the
Aurum Special Meeting. Approval and adoption of the Merger Agreement and the
Merger will require the affirmative vote of the holders of a majority of the
issued and outstanding shares of the Aurum Common Stock. Assuming all conditions
to the Merger are met or waived prior thereto, it is anticipated that the
closing and the Effective Date of the Merger, if approved by Aurum's
stockholders, will occur on the date of or promptly following the Aurum Special
Meeting.
This Proxy Statement/Prospectus is first being mailed to stockholders of
Aurum on or about July 28, 1997.
This Proxy Statement/Prospectus also constitutes the Prospectus of Baan
under the Securities Act of 1933, as amended (the "Securities Act"), for the
offer and issuance of the Baan Common Shares issuable to the Aurum stockholders
in connection with the Merger. This Proxy Statement/Prospectus does not cover
resales of such shares, and no person is authorized to use this Proxy
Statement/Prospectus in connection with any such resale.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS PROXY
STATEMENT/PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX TRANSACTION. THE
STOCKHOLDERS OF AURUM ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS
PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY, PARTICULARLY THE MATTERS REFERRED TO
BEGINNING ON PAGE 16 UNDER "RISK FACTORS."
THE BAAN COMMON SHARES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY FOREIGN OR STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
FOREIGN OR STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is July 28, 1997.
<PAGE> 7
As the Exchange Ratio is subject to adjustment in the event that the
average closing sales price of Baan Common Shares over the 10 trading days prior
to the closing of the Merger (the "Baan Stock Value") is less than $50.00 per
share, holders of Aurum Common Stock may not know the exact number of Baan
Common Shares to be received in respect of each share of Aurum Common Stock or
the value of such shares until the closing of the Merger. See "Risk
Factors -- Risks Related to the Merger -- Risks Associated with the Exchange
Ratio." In this regard, the number of Baan Common Shares to be issued in the
Merger is fixed in the event that the Baan Stock Value is $50.00 per share or
more. As an example, a holder of 1,000 shares of Aurum Common Stock would
receive 355 Baan Common Shares at a Baan Stock Value in excess of $50.00 per
share, between 355 and 444 Baan Common Shares at a Baan Stock Value between
$50.00 and $40.00 per share and 444 Baan Common Shares at a Baan Stock Value of
less than $40.00 per share (plus in each case cash in lieu of fractional Baan
Common Shares). If the Baan Stock Value decreases to between $50.00 and $40.00
per share, the number of Baan Common Shares issued in respect of each share of
Aurum Common Stock would increase proportionately so that the total value of the
consideration per share of Aurum Common Stock would remain unchanged at $17.80
within a Baan Stock Value range of $50.00 to $40.00 per share. However, the
Exchange Ratio is not adjusted further if the Baan Stock Value is $40.00 or less
per share, and accordingly the maximum Exchange Ratio is fixed at 0.4449152542.
On July 23, 1997, the most recent practicable date prior to the printing of this
Proxy Statement/Prospectus, the Baan Stock Value was $76.66 and the closing
price per Baan Common Share was $75.75 on The Nasdaq National Market. Based on
such Baan Stock Value, in the Merger a holder of 1,000 shares of Aurum Common
Stock would be issued 355 Baan Common Shares (plus cash in lieu of fractional
Baan Common Shares) and the aggregate number of Baan Common Shares to be issued
in the Merger would be approximately 4,153,000 (based on 11,667,626 outstanding
shares of Aurum Common Stock on June 30, 1997). The trading price of Baan Common
Shares is subject to volatility. See "Risk Factors -- Possible Volatility of
Baan Common Share Price." Neither Aurum nor Baan is entitled to terminate the
Merger Agreement based on the per share trading price of Baan Common Shares or
of Aurum Common Stock. Aurum's stockholders are strongly encouraged to obtain
current market quotations for the Baan Common Shares and shares of Aurum Common
Stock. The current market quotations for the Baan Common Shares and shares of
Aurum Common Stock may be obtained on the Internet at http://www.nasdaq.com.
NO PERSON HAS BEEN AUTHORIZED BY BAAN OR AURUM TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY BAAN OR AURUM. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS OR A
SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT
WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF THE SECURITIES TO WHICH THIS PROXY STATEMENT/PROSPECTUS RELATES
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN
ANY CHANGE IN THE INFORMATION CONTAINED HEREIN SINCE THE DATE HEREOF.
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................ 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...................................... 1
TRADEMARKS........................................................................... 2
FORWARD LOOKING STATEMENTS........................................................... 2
ENFORCEABILITY OF CIVIL LIABILITIES.................................................. 2
SUMMARY.............................................................................. 4
Introduction....................................................................... 4
The Companies...................................................................... 4
Baan's Reasons For The Merger...................................................... 5
Aurum Board Recommendation; Aurum's Reasons for the Merger......................... 5
Opinion of Aurum's Financial Advisor............................................... 6
The Aurum Special Meeting.......................................................... 6
The Merger......................................................................... 6
Certain Related Agreements......................................................... 9
Risk Factors....................................................................... 11
Interests of Certain Persons in the Merger......................................... 11
Certain Federal Income Tax Considerations.......................................... 11
Governmental and Regulatory Matters................................................ 11
Accounting Treatment............................................................... 11
Affiliates' Restrictions on Sale of Baan Common Shares............................. 12
No Appraisal Rights................................................................ 12
Market and Price Data.............................................................. 12
Effect of Baan Stock Value and Per Baan Common Share Market Price.................. 12
Summary Historical and Unaudited Pro Forma Combined Condensed Financial
Information..................................................................... 14
Comparative Per Share Data......................................................... 15
RISK FACTORS......................................................................... 16
MARKET PRICE AND DIVIDENDS........................................................... 28
THE PLAN OF MERGER................................................................... 30
Effective Time..................................................................... 30
Manner and Basis of Transferring Shares; Assumption of Options..................... 30
Background of the Merger........................................................... 33
Reasons for the Merger; Aurum's Board Recommendation............................... 35
Aurum Board Recommendation; Aurum's Reasons for the Merger......................... 35
Opinion of Cowen & Company......................................................... 36
Stock Ownership Following the Merger............................................... 41
Conduct Following the Merger....................................................... 42
Conduct of Baan's and Aurum's Business Prior to the Merger......................... 42
No Solicitation.................................................................... 44
Conditions to the Merger........................................................... 45
Termination of the Merger Agreement................................................ 46
Break Up Fee....................................................................... 47
Related Agreements................................................................. 47
Interests of Certain Persons....................................................... 49
Certain Federal Income Tax Considerations.......................................... 51
Governmental and Regulatory Matters................................................ 52
Accounting Treatment............................................................... 53
</TABLE>
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<PAGE> 9
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Affiliates' Restrictions on Sale of Baan Common Shares............................. 53
No Appraisal Rights................................................................ 53
THE AURUM SPECIAL MEETING............................................................ 54
General............................................................................ 54
Record Date and Outstanding Shares................................................. 54
Voting of Proxies.................................................................. 54
Vote Required...................................................................... 55
Quorum; Abstentions; Broker Non-Votes.............................................. 55
Solicitation of Proxies and Expenses............................................... 55
Appraisal Rights................................................................... 55
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS.......................... 56
AURUM BUSINESS....................................................................... 59
AURUM MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS......................................................................... 68
AURUM MANAGEMENT..................................................................... 75
Directors and Officers............................................................. 75
Executive Compensation............................................................. 76
Stock Option Grants................................................................ 77
Option Exercises and Fiscal 1996 Year-End Values................................... 78
AURUM SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................. 79
CERTAIN TRANSACTIONS OF AURUM........................................................ 82
DESCRIPTION OF AURUM CAPITAL STOCK................................................... 83
BAAN BUSINESS........................................................................ 85
DESCRIPTION OF BAAN CAPITAL STOCK.................................................... 87
SHARE CERTIFICATES AND TRANSFER...................................................... 89
COMPARISON OF RIGHTS OF SHAREHOLDERS OF BAAN AND STOCKHOLDERS OF AURUM............... 91
TAXATION............................................................................. 100
LEGAL MATTERS........................................................................ 103
EXPERTS.............................................................................. 104
INDEX TO FINANCIAL STATEMENTS........................................................ F-1
FINANCIAL STATEMENT SCHEDULE......................................................... S-1
</TABLE>
APPENDICES
<TABLE>
<S> <C>
A Agreement and Plan of Reorganization
B Opinion of Cowen & Company
C Stock Option Agreement
</TABLE>
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<PAGE> 10
AVAILABLE INFORMATION
Baan and Aurum are each subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports and other information with the Securities and
Exchange Commission (the "Commission"). The Registration Statement (as defined
below), the exhibits and schedules forming a part thereof and the reports and
other information filed by Baan and Aurum with the Commission in accordance with
the Exchange Act may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and will also be available for inspection and
copying at the regional offices of the Commission located at 7 World Trade
Center, 13th Floor, New York, New York 10048 and at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. In addition, certain of the documents filed by Baan and Aurum with the
Commission are available through the Commission's Electronic Data Gathering and
Retrieval System ("EDGAR") at http://www.sec.gov. The Baan Common Shares and the
Aurum Common Stock are listed on The Nasdaq National Market and reports or other
information concerning Baan and Aurum may be inspected at the offices of the
National Association of Securities Dealers, Inc. located at 9513 Key West
Avenue, Rockville, Maryland 20850. After the consummation of the Merger, Aurum
will no longer file reports, proxy statements or other information with the
Commission or The Nasdaq National Market. Instead such information will be
provided, to the extent required, in filings made by Baan.
Under the rules and regulations of the Commission, the solicitation of
proxies from stockholders of Aurum to approve and adopt the Merger Agreement and
the Merger constitutes an offering of Baan Common Shares to be issued in
connection with the Merger. Accordingly, Baan has filed with the Commission a
Registration Statement on Form F-4 under the Securities Act, with respect to
such offering (the "Registration Statement"). This Proxy Statement/Prospectus
constitutes the prospectus of Baan that is filed as part of the Registration
Statement. Other parts of the Registration Statement are omitted from this Proxy
Statement/Prospectus in accordance with the rules and regulations of the
Commission. Copies of the Registration Statement, including the exhibits to the
Registration Statement and other material that is not included herein, may be
inspected without charge at the regional offices of the Commission referred to
above, or obtained at prescribed rates from the Public Reference Section of the
Commission at the address set forth above. The omitted portions of the Proxy
Statement/Prospectus may be obtained through EDGAR at http://www.sec.gov.
Statements made in this Proxy Statement/Prospectus concerning the contents
of any contract or other document are not necessarily complete. With respect to
each contract or other document filed as an exhibit to the Registration
Statement, reference is hereby made to that exhibit for a more complete
description of the matter involved and each such statement is hereby qualified
in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
RELATING TO BAAN WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THERE
WILL BE PROVIDED WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER
OF AURUM COMMON STOCK, TO WHOM A PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON
ORAL OR WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF ALL DOCUMENTS INCORPORATED
BY REFERENCE HEREIN (EXCLUDING EXHIBITS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE HEREIN). REQUESTS FOR SUCH DOCUMENTS SHOULD BE
DIRECTED TO BAAN COMPANY N.V., VANENBURGERALLEE 13, 3882 RH PUTTEN, THE
NETHERLANDS, TELEPHONE NUMBER (31) 341-375555, ATTENTION: JAN WESTERHOUD OR AT
4600 BOHANNON DRIVE, MENLO PARK, CALIFORNIA 94025, TELEPHONE NUMBER (1)
415-462-4949, ATTENTION: MARK WABSCHALL.
Baan incorporates herein by reference Baan's Annual Report on Form 20-F for
the fiscal year ended December 31, 1996; Baan's report on Form 6-K regarding its
Annual General Meetings of Shareholders held on May 20, 1997; and Baan's report
on Form 6-K regarding its financial results for the quarter ended March 31,
1997.
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<PAGE> 11
All reports and definitive proxy or information statements filed by Baan
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Proxy Statement/Prospectus and prior to the date of the Aurum
Special Meeting shall be deemed to be incorporated by reference into this Proxy
Statement/Prospectus from the date of the filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document that also is, or is deemed to be, incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Proxy Statement/Prospectus.
ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS RELATING TO
BAAN AND ITS AFFILIATES HAS BEEN SUPPLIED BY BAAN, AND ALL INFORMATION CONTAINED
IN THIS PROXY STATEMENT/PROSPECTUS RELATING TO AURUM AND ITS AFFILIATES HAS BEEN
SUPPLIED BY AURUM.
TRADEMARKS
This Proxy Statement/Prospectus contains trademarks of Baan and Aurum and
may contain trademarks of others. Aurum trademarks include without limitation
Aurum(R), Aurum EventTrak, Aurum QualityTrak(R), Aurum SalesTrak(R), Aurum
ServiceTrak, Aurum SupportTrak(R), Aurum TeleTrak, Aurum WebTrak, dbSync, and
TeleTrak(R).
FORWARD LOOKING STATEMENTS
OTHER THAN STATEMENTS OF HISTORICAL FACT, STATEMENTS MADE IN THIS PROXY
STATEMENT/PROSPECTUS, INCLUDING STATEMENTS AS TO THE BENEFITS EXPECTED TO RESULT
FROM THE MERGER AND AS TO FUTURE FINANCIAL PERFORMANCE AND THE ANALYSES
PERFORMED BY THE FINANCIAL ADVISOR TO AURUM AND THE PROJECTIONS RELIED UPON BY
SUCH FINANCIAL ADVISOR, ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN "RISK
FACTORS" BEGINNING ON PAGE 16 HEREIN, WHICH AURUM STOCKHOLDERS SHOULD CAREFULLY
REVIEW.
Neither Aurum nor Baan makes any express or implied representation or
warranty as to the attainability of the projected or estimated financial
information referenced or set forth herein under "The Plan of Merger-Opinion of
Cowen & Company" or elsewhere herein or as to the accuracy or completeness of
the assumptions from which such projected or estimated information is derived.
Projections or estimations of Baan and Aurum's future performance are
necessarily subject to a high degree of uncertainty and may vary materially from
actual results. Reference is made to the particular discussions set forth under
"Risk Factors" and "Aurum Management's Discussion and Analysis of Financial
Conditions and Results of Operations."
ENFORCEABILITY OF CIVIL LIABILITIES
Baan is a Netherlands corporation and a substantial portion of Baan's
assets are located outside the United States. In addition, members of the
Management and Supervisory Boards of Baan and certain experts named herein are
residents of countries other than the United States. As a result, it may not be
possible for investors to effect service of process within the United States
upon such persons or to enforce against such persons, or Baan, judgments of
courts of the United States predicated upon civil liabilities under the United
States federal securities laws. In the absence of a treaty between the United
States and The Netherlands providing for the reciprocal recognition and
enforcement of judgments, U.S. judgments are not automatically enforceable in
The Netherlands. However, a final judgment for the payment of money obtained in
a U.S. court and not rendered by default, which is not subject to appeal or any
other means of contestation and is
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<PAGE> 12
enforceable in the United States, would in principle be upheld and be regarded
by a Netherlands court of competent jurisdiction as conclusive evidence when
asked to render a judgment in accordance with such final judgment by a U.S.
court, without substantive re-examination or relitigation on the merits of the
subject matter thereof, provided that such judgment has been rendered by a court
of competent jurisdiction, in accordance with rules of proper procedure, that it
has not been rendered in proceedings of a penal or revenue nature and that its
content and possible enforcement are not contrary to public policy or public
order of The Netherlands. Notwithstanding the foregoing, there can be no
assurance that United States investors will be able to enforce against Baan, or
members of the Baan Management or Supervisory Boards or certain experts named
herein who are residents of The Netherlands or countries other than the United
States, any judgments in civil and commercial matters, including judgments under
the federal securities laws. In addition, there is doubt as to whether a
Netherlands court would impose civil liability on Baan or on the members of the
Management or Supervisory Boards of Baan in an original action predicated solely
upon the federal securities laws of the United States brought in a court of
competent jurisdiction in The Netherlands against Baan or such members.
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<PAGE> 13
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. The summary does not contain a complete
description of the terms of the Merger Agreement and the Merger and is qualified
in its entirety by reference to the full text of this Proxy Statement/Prospectus
and the Appendices hereto. Aurum stockholders are urged to read this Proxy
Statement/Prospectus and the Appendices hereto.
Information contained in this Proxy Statement/Prospectus contains
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act, which can be identified by the use of
forward-looking terminology, such as "may," "will," "expect," "anticipate,"
"estimate," "project," "continue," "potential" or "opportunity" or the negative
thereof or other variations thereon or comparable terminology. See "FORWARD
LOOKING STATEMENTS." The matters set forth under the caption "RISK FACTORS" in
this Proxy Statement/Prospectus constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to differ
materially from those in such forward-looking statements.
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation by the Board of Directors of Aurum (the "Aurum Board") of proxies
from holders of Aurum Common Stock for use at the Aurum Special Meeting. At the
Aurum Special Meeting, the holders of Aurum Common Stock will be asked to
approve and adopt the Merger Agreement, by and among Aurum, Baan and Merger Sub
and to approve the Merger. As a result of the Merger, Aurum will become a
wholly-owned subsidiary of Baan. A copy of the Merger Agreement is attached as
Appendix A to this Proxy Statement/Prospectus.
THE COMPANIES
Baan. Baan Company N.V. is a leading provider of enterprise-wide business
management software for an open systems, client/server computing environment.
Companies of all sizes around the world use Baan's software to control and
automate business processes, ranging from accounting, order management, and
inventory procurement, to manufacturing and finished goods delivery.
Baan Company N.V. is a Netherlands holding company with its statutory seat
at Barneveld, The Netherlands, and conducts business through its domestic and
international subsidiaries. Baan's business was founded in 1978 and Baan Holding
B.V., the predecessor of Baan Company N.V., was incorporated in 1983. References
in this Proxy Statement/Prospectus to "Baan," unless the context otherwise
requires, relate to Baan Company N.V., its predecessor, Baan Holding B.V. and
its subsidiaries. Baan's headquarters are located at Vanenburgerallee 13, 3882
RH Putten, The Netherlands, telephone number (31) 341-375555, and at 4600
Bohannon Drive, Menlo Park, California 94025, telephone number (1) 415-462-4949.
Aurum. Aurum Software, Inc. is a leading provider of enterprise-wide sales
and marketing information software. Aurum develops, markets and supports
application software that helps to automate the sales, marketing and customer
support functions of a business. Aurum products are designed to address the
sales and marketing requirements of businesses ranging from medium-sized
enterprises to large multinational corporations and are specifically designed to
improve the operational efficiency of such companies' sales and marketing
business processes.
Aurum was initially incorporated in California in 1991 and reincorporated
in Delaware in 1996. Unless the context otherwise requires, the term "Aurum"
refers to Aurum Software, Inc., a Delaware corporation, its predecessor Aurum
Software, Inc., a California corporation and its subsidiaries. Aurum's executive
offices are currently located at 3385 Scott Boulevard, Santa Clara, California
95054. Its telephone number at that address is (1) 408-986-8100. Prior to the
Aurum Special Meeting, Aurum will be relocating its executive offices to 2350
Mission College Boulevard, Suite 1300, Santa Clara, California 95054.
Based on sales, operating and other data through June 30, 1997, Aurum
believes that total revenues for the three months ended June 30, 1997 were $11.5
million, with net income and net income per share of
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<PAGE> 14
$502,000 and $0.04 per share, respectively, for such period. The increase in
total revenues from $9.3 million for the three months ended March 31, 1997 was
due primarily to increased license revenues. The increase in net income from
$467,000 for the three months ended March 31, 1997 to $502,000 was due primarily
to increased revenues, offset by increased expenses incurred in connection with
evaluating and planning the Merger.
Merger Sub. Merger Sub, a Delaware corporation, is a newly-formed,
wholly-owned subsidiary of Baan formed solely for the purpose of the Merger.
Merger Sub has no material assets or liabilities and has not engaged in any
material operations since its incorporation.
BAAN'S REASONS FOR THE MERGER
The Baan Supervisory and Management Boards have approved the Merger
Agreement and have identified several potential benefits of the Merger that they
believe will contribute to the success of both Aurum and Baan following the
Merger. Historically, enterprise software applications have focused on the
manufacturing, finance, distribution functions in the "back-office" of a
business, or on the customer service, marketing and sales functions in the
"front-office" of a business, with limited integration of these applications.
Baan is a leading provider of back-office enterprise business software and Aurum
is a leading provider of front-office enterprise customer relationship software.
Baan believes that the Merger would, among other things, allow Baan and Aurum
the opportunity to provide a range of software solutions which address both
back-office manufacturing, distribution and finance applications and
front-office sales, marketing and customer support applications. Other potential
benefits include the opportunity to (i) combine UNIX- and NT-based software
technologies from both companies to offer a robust technology platform for
existing and future applications and (ii) leverage Baan's extensive customer
base and channels of distribution in connection with the sales and marketing of
Aurum's products.
AURUM BOARD RECOMMENDATION; AURUM'S REASONS FOR THE MERGER
The Aurum Board has unanimously approved the Merger Agreement, has
unanimously determined that the Merger is fair to, and in the best interests of,
Aurum and its stockholders, and unanimously recommends that holders of shares of
Aurum Common Stock vote FOR approval and adoption of the Merger Agreement and
the Merger.
The Aurum Board's decision to approve the Merger Agreement and the Merger
was based in significant part upon its assessment of the trends developing in
the enterprise application software industry, and the changes which may come
about in such market as a result of increasing competition, consolidation and
customer demands. The Aurum Board believes that companies which are able to
provide customers a complete software solution, integrating both back-office
manufacturing, distribution and finance applications, with front-office sales,
marketing and customer support applications will be well positioned to compete
in such markets in the long term. The Aurum Board believes a potential merger
with Baan provides an opportunity for the merged companies to realize the
potential competitive advantages of including Aurum's sales force automation
software with Baan's enterprise application software offerings.
Aurum also identified several other potential strategic benefits of the
Merger that Aurum believes will contribute to the success of the merged
companies including (i) increased leverage with Aurum's primary system
integrators with the product offerings of the combined companies, (ii) the
opportunity to realize synergies and cash savings associated with combining the
underlying technologies of Aurum and Baan, (iii) the opportunity to increase the
available sales force to market Aurum's products, (iv) the opportunity to
broaden and expand Aurum's distribution channels, and (v) the opportunity to
market Aurum's products to Baan's installed customer base.
The Aurum Board also took into consideration the fact that the Baan Common
Shares represent a more liquid investment followed by a much greater number of
stock analysts. The Aurum Board also considered the appreciation potential of
the Baan Common Shares and that the calculation of the Exchange Ratio is
designed to reduce the risk to Aurum stockholders of stock price fluctuations in
the trading price of the Baan Common Shares prior to consummation of the Merger.
The Aurum Board also considered the opinion of its financial
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<PAGE> 15
advisor and other potential benefits and synergies that may result from the
Merger. A more complete description of the primary factors considered and relied
upon by the Aurum Board in reaching its recommendation are referred to in "The
Plan of Merger -- Reasons for the Merger; Aurum's Board Recommendation."
OPINION OF AURUM'S FINANCIAL ADVISOR
Cowen & Company ("Cowen") has delivered its written opinion, dated May 12,
1997 (the "Cowen Opinion"), to the Aurum Board, stating that, as of such date
and based upon and subject to certain matters stated therein, the financial
terms of the Merger were fair, from a financial point of view, to the holders of
Aurum Common Stock. The full text of the Cowen Opinion, which sets forth the
assumptions made, matters considered and limitations on the review undertaken in
connection with the Cowen Opinion, is attached as Appendix B to this Proxy
Statement/Prospectus and is incorporated herein by reference. AURUM STOCKHOLDERS
ARE URGED TO READ, AND SHOULD READ, THE COWEN OPINION IN ITS ENTIRETY. See "The
Plan of Merger -- Cowen Opinion."
THE AURUM SPECIAL MEETING
Date, Time and Place. The Aurum Special Meeting will be held on August 26,
1997 at 9:00 a.m. local time at Aurum's principal executive offices located at
2350 Mission College Boulevard, Suite 1300, Santa Clara, California 95054. At
the Aurum Special Meeting, stockholders of record of Aurum, as of the close of
business on June 30, 1997 (the "Aurum Record Date") will be asked to consider
and vote upon a proposal to approve and adopt the Merger Agreement and the
Merger.
Record Date; Shares Entitled to Vote. Holders of record of Aurum Common
Stock at the close of business on the Aurum Record Date are entitled to notice
of and to vote at the Aurum Special Meeting. At the close of business on the
Aurum Record Date, there were a total of 11,667,626 shares of Aurum Common Stock
outstanding, each of which will be entitled to one vote on each matter to be
acted upon.
Quorum. The required quorum for the transaction of business at the Aurum
Special Meeting is a majority of the shares of Aurum Common Stock issued and
outstanding on the Aurum Record Date. Abstentions and broker non-votes each will
be included in determining the number of shares present for purposes of
determining the presence of the quorum.
Vote Required. Pursuant to the Delaware General Corporation Law ("DGCL"),
the Restated Certificate of Incorporation of Aurum (the "Aurum Certificate of
Incorporation") and the Bylaws of Aurum (the "Aurum Bylaws"), approval of the
Merger Agreement and the Merger requires the affirmative vote of at least a
majority of the outstanding shares of Aurum Common Stock entitled to vote at the
Aurum Special Meeting. Abstentions and broker non-votes will have the same
effect as a vote against the Merger. In connection with the execution of the
Merger Agreement, certain stockholders of Aurum beneficially owning a majority
of the outstanding shares of Aurum Common Stock have agreed to vote their shares
in favor of the Merger Agreement and the Merger at the Aurum Special Meeting.
See "The Plan of Merger -- Related Agreements -- Stockholder Voting Agreements"
and "The Aurum Special Meeting."
THE MERGER
Terms of the Merger; Exchange Ratio
At the Effective Time (as defined below) of the Merger, Merger Sub will
merge with and into Aurum and Baan will become the owner of all of the
outstanding capital stock of Aurum. As a result of the Merger, each outstanding
share of Aurum Common Stock, other than shares held in the treasury of Aurum,
will be automatically assigned and transferred to Baan at the Effective Time
without any further action required on the part of Aurum or the individual
stockholders of Aurum or Baan, and in exchange therefor the holders of such
shares of Aurum Common Stock will be entitled to receive for each share of Aurum
Common Stock a number of Baan Common Shares equal to the Exchange Ratio (as
defined below). To receive their Baan Common Shares, Aurum stockholders must
after the Merger deliver their Aurum Common Stock certificates (or a bond in
respect thereof) in the manner provided in this Proxy Statement/Prospectus.
AURUM STOCKHOLDERS SHOULD NOT SEND CERTIFICATES AT THIS TIME. The "Exchange
Ratio" is a fraction, the numerator of
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<PAGE> 16
which is $21.00 and the denominator of which is $59.00 (or 0.3559322034),
subject to adjustment as described herein. The denominator in the initial
Exchange Ratio ($59.00) corresponds to the closing market price for Baan Common
Shares on May 9, 1997, and the numerator in the initial Exchange Ratio ($21.00)
corresponds to a 27% premium over the $16.50 closing market price for Aurum
Common Stock on May 9, 1997, in each case on The Nasdaq National Market on May
9, 1997. The Exchange Ratio is subject to adjustment in the event that the
average closing sales price of Baan Common Shares over the 10 trading days prior
to the Closing Date (as defined below) (the "Baan Stock Value") is less than
$50.00 per share. In such event, the Exchange Rate increases to a ratio equal to
the product of the initial Exchange Ratio times a fraction, the numerator of
which is $50.00 and the denominator of which is the Baan Stock Value. The
Exchange Ratio does not adjust further in the event that the Baan Stock Value
reaches $40.00 or less per share, and accordingly, the maximum Exchange Ratio is
0.4449152542.
As the Exchange Ratio is subject to adjustment based on the determination
of the Baan Stock Value, holders of Aurum Common Stock may not know the exact
number of Baan Common Shares to be received in respect of each share of Aurum
Common Stock or the value of such shares until the Closing Date. Assuming all
conditions to the Merger are met or waived prior thereto, it is anticipated that
the Closing Date and the Effective Date of the Merger, if the Merger is approved
by Aurum's stockholders, will occur on the date of or promptly following the
Aurum Special Meeting. Based on 11,667,626 outstanding shares of Aurum Common
Stock at June 30, 1997, at the minimum Exchange Ratio of 0.3559322034 the
holders of Aurum Common Stock would receive an aggregate of approximately
4,153,000 Baan Common shares in the Merger, and at the maximum Exchange Ratio of
0.4449152542, the holders of Aurum Common Stock would receive an aggregate of
approximately 5,191,000 Baan Common Shares. As an example, a holder of 1,000
shares of Aurum Common Stock would receive 355 Baan Common Shares at a Baan
Stock Value in excess of $50.00 per share, between 355 and 444 Baan Common
Shares at a Baan Stock Value between $50.00 and $40.00 per share and 444 Baan
Common Shares at a Baan Stock Value of less than $40.00 per share (plus in each
case cash in lieu if fractional Baan Common Shares). Neither Aurum nor Baan is
entitled to terminate the Merger Agreement based on the per share trading price
of Baan Common Shares or of Aurum Common Stock. On July 23, 1997, the most
recent practicable date prior to the printing of this Proxy
Statement/Prospectus, the Baan Stock Value was $76.66. Based on this Baan Stock
Value, in the Merger a holder of 1,000 shares Aurum Common Stock would be issued
355 Baan Common Shares (plus cash in lieu of fractional Baan Common Shares) and
the aggregate number of Baan Common Shares to be issued to Aurum stockholders in
the Merger would be approximately 4,153,000 (based on the outstanding shares of
Aurum Common Stock on June 30, 1997). Aurum's stockholders are strongly
encouraged to obtain current market quotations for the Baan Common Shares and
shares of Aurum Common Stock. The current market quotations for the Baan Common
Shares and shares of Aurum Common Stock may be obtained on the Internet at
http://www.nasdaq.com. See "Risk Factors -- Risks Related to the Merger -- Risks
Associated with the Exchange Ratio."
No fractional shares will be issued by virtue of the Merger, but in lieu
thereof each holder of shares of Aurum Common Stock who would otherwise be
entitled to a fraction of a Baan Common Share (after aggregating all fractional
shares of Baan Common Shares to be received by such holder) will receive from
Baan an amount of cash (rounded to the nearest whole cent) equal to the product
of (i) such fraction, multiplied by (ii) the average closing price of one Baan
Common Share for the five (5) most recent trading days ending on the trading day
immediately prior to the Effective Time, as reported on The Nasdaq National
Market. See "The Plan of Merger -- Manner and Basis of Transferring Shares."
At the Effective Time, each outstanding option to purchase Aurum Common
Stock under the Aurum Stock Option Plans will be assumed or substituted by Baan,
with appropriate adjustments to be made to the number of shares issuable
thereunder and the exercise price thereof based on the Exchange Ratio. As of
June 30, 1997 there were outstanding options to purchase 1,273,097 shares of
Aurum Common Stock. In addition, each right to purchase shares of Aurum Common
Stock pursuant to Aurum's 1996 Employee Stock Purchase Plan will be exercised
automatically on a date prior to the Effective Time for that number of shares of
Aurum Common Stock issuable pursuant to such right.
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<PAGE> 17
Effective Time of the Merger
The Merger will become effective upon the filing of a certificate of merger
(the "Certificate of Merger") with the Secretary of State of the State of
Delaware or at such later time as may be agreed in writing by Baan, Aurum and
Merger Sub and specified in the Certificate of Merger (the "Effective Time").
Assuming all conditions to the Merger are met or waived prior thereto, it is
anticipated that the Closing Date of the Merger (the "Closing Date") and
Effective Time will be on or promptly following August 26, 1997, the date of the
Aurum Special Meeting. See "The Plan of Merger -- Effective Time."
Transfer of Aurum Stock Certificates
Promptly after the Effective Time, Baan, acting through J.P. Morgan as its
exchange agent (the "Exchange Agent"), will deliver to each Aurum stockholder of
record (as of the Effective Time) a letter of transmittal with instructions to
be used by such stockholder in transferring their Aurum Common Stock
certificates. CERTIFICATES SHOULD NOT BE SURRENDERED BY THE HOLDERS OF AURUM
COMMON STOCK UNTIL SUCH HOLDERS RECEIVE THE LETTER OF TRANSMITTAL FROM THE
EXCHANGE AGENT. OPTION AGREEMENTS NEED NOT BE SURRENDERED. See "The Plan of
Merger -- Manner and Basis of Transferring Shares."
Form S-8 Registration Statement
No later than five days after the Closing Date, Baan will file a
registration statement on Form S-8 for the Baan Common Shares issuable with
respect to the Aurum Stock Options assumed or substituted by Baan pursuant to
the Merger Agreement. See "The Plan of Merger -- Manner and Basis of
Transferring Shares."
Stock Ownership Following the Merger
Based on 11,667,626 outstanding shares of Aurum Common Stock at June 30,
1997, at the minimum Exchange Ratio of 0.3559322034 the holders of Aurum Common
Stock would receive an aggregate of approximately 4,153,000 Baan Common Shares
in the Merger, and at the maximum Exchange Ratio of 0.4449152542, the holders of
Aurum Common Stock would receive an aggregate of approximately 5,191,000 Baan
Common Shares. Such share amounts would represent approximately 4% and 5% of
Baan's outstanding capital stock, respectively. On July 23, 1997, the most
recent practicable date prior to the printing of this Proxy
Statement/Prospectus, the Baan Stock Value was $76.66. Based on this Baan Stock
Value, the aggregate number of Baan Common Shares to be issued to Aurum
stockholders in the Merger would be approximately 4,153,000 (based on the
outstanding Shares of Aurum Common Stock on June 30, 1997). The foregoing
numbers of shares and percentages are subject to change in the event that the
capitalization of either Baan or Aurum changes or the Baan Stock Value changes,
in each case, subsequent to June 30, 1997 and prior to the Effective Time. See
"The Plan of Merger -- Stock Ownership Following the Merger." In addition,
Aurum's stockholders are strongly encouraged to obtain current market quotations
for the Baan Common Shares and shares of Aurum Common Stock. The current market
quotations for the Baan Common Shares and shares of Aurum Common Stock may be
obtained on the Internet at http://www.nasdaq.com.
Conduct Following the Merger
Upon consummation of the Merger, Merger Sub will cease to exist as a
corporation, and all of the business, assets, liabilities and obligations of
Merger Sub will be merged into Aurum, with Aurum remaining as the surviving
corporation. Following the Merger, Aurum will become a wholly-owned subsidiary
of Baan. It is expected that the business operations of Aurum and Baan's
subsidiary Antalys, Inc. will be combined following the Merger. Furthermore,
stockholders of Aurum will become shareholders of Baan, and their rights as
shareholders will be governed by the Baan Articles of Association and the laws
of The Netherlands. See "Risk Factors -- Risks Related to the
Merger -- Integration of Aurum into Baan Business," "-- Netherlands Law
Implications" and "Comparison of Rights of Shareholders of Baan and Stockholders
of Aurum."
8
<PAGE> 18
Conduct of Business Prior to the Merger
Pursuant to the Merger Agreement, until the earlier of the termination of
the Merger Agreement pursuant to its terms or the Effective Time, each of Aurum
and Baan have agreed, except (i) as otherwise contemplated by the Merger
Agreement or (ii) to the extent that the other party shall otherwise consent in
writing, to carry on its business in the usual, regular and ordinary course, in
substantially the same manner as conducted prior to execution of the Merger
Agreement, to pay its debts or perform its other obligations when due and use
its commercially reasonable efforts consistent with past practices and policies
to preserve intact its present business organization, keep available the
services of its present officers and employees and preserve its business
relationships. In addition, without the prior consent of Baan, Aurum is not
permitted to perform or engage in certain activities in the conduct of business.
See "The Plan of Merger -- Conduct of Baan's and Aurum's Business Prior to the
Merger."
No Solicitation
Under the terms of the Merger Agreement, Aurum has agreed that it will not
engage in certain activities relating to, or which could result in, a proposal
to be acquired by a third party except under certain limited circumstances
related to the performance by the Aurum Board of its fiduciary obligations under
Delaware law. See "The Plan of Merger -- No Solicitation."
Termination; Fee
The Merger Agreement may be terminated under certain circumstances.
Furthermore, Aurum has agreed to pay to Baan the sum of $2.5 million if: (i) the
Merger Agreement is terminated by either Aurum or Baan in the event that the
required approval of the Merger Agreement and the Merger by the Aurum
stockholders shall not have been obtained (in the absence of Baan having
suffered any change, event or effect which constitutes a material adverse
effect, as defined); (ii) the Merger Agreement is terminated by Baan because the
Aurum Board accepts or recommends an alternative proposal to the stockholders of
Aurum, or the Aurum Board withholds, withdraws or modifies in a manner adverse
to Baan its recommendation in favor of adoption and approval of the Merger
Agreement and the Merger (in each case, in the absence of Baan having suffered
any change, event or effect which constitutes a material adverse effect); or
(iii) the Merger Agreement is terminated by Baan as a result of uncured breaches
by Aurum of certain representations, warranties, covenants or agreements set
forth in the Merger Agreement. See "The Plan of Merger -- Termination of the
Merger Agreement" and "-- Break Up Fee."
Conditions to the Merger
Consummation of the Merger is subject to certain conditions, including: (i)
approval by the stockholders of Aurum of the Merger and Merger Agreement; (ii)
declaration by the SEC of the effectiveness of the Registration Statement and no
issuance of any stop order relating thereto; (iii) absence of any law or order
prohibiting consummation of the Merger; (iv) receipt by Baan and Aurum of tax
opinions that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the United States Internal Revenue Code of 1986 (the "Code");
(v) receipt by Baan and Aurum of letters from their independent accountants
reaffirming the accountants' concurrence with Baan management's and Aurum
management's conclusions as to the appropriateness of pooling-of-interests
accounting for the Merger under Accounting Principles Board No. 16 ("APB 16");
(vi) the accuracy of the representations and warranties given by each party in
the Merger Agreement; (vii) performance of all covenants required by the Merger
Agreement; and (viii) the absence of any change, event or effect which could
have a material adverse effect (as defined) with regard to either Baan or Aurum.
See "The Plan of Merger -- Conditions to the Merger."
CERTAIN RELATED AGREEMENTS
Stock Option Agreement
As an inducement to Baan to enter into the Merger Agreement, Aurum entered
into a stock option agreement (the "Stock Option Agreement"), a copy of which is
attached as Appendix C to this Proxy
9
<PAGE> 19
Statement/Prospectus. Pursuant to the Stock Option Agreement, Aurum has granted
to Baan the right, subject to certain conditions, to acquire up to a number of
shares of Aurum Common Stock equal to 19.9% of the issued and outstanding shares
of Aurum Common Stock on the occurrence of certain events. See "The Plan of
Merger -- Related Agreements -- Stock Option Agreement."
Affiliate Agreements
Each of the members of the Aurum Board, certain officers of Aurum and
certain stockholders of Aurum have entered into agreements restricting sales,
dispositions or other transactions reducing their risk of investment in the
shares of Aurum Common Stock held by them prior to the Merger and the Baan
Common Shares received by them in the Merger, so as to comply with the
requirements of applicable federal securities laws and to help ensure that the
Merger will be treated as a tax free reorganization and as a pooling-of-
interests for accounting and financial reporting purposes. See "The Plan of
Merger -- Related Agreements -- Affiliate Agreements."
Stockholder Voting Agreements
Certain stockholders of Aurum beneficially owning a majority of the
outstanding shares of Aurum Common Stock have entered into agreements to vote
their shares of Aurum Common Stock in favor of the Merger Agreement and the
Merger at the Aurum Special Meeting. Accordingly, the approval of the Merger and
the Merger Agreement is likely assured. See "The Plan of Merger -- Related
Agreements -- Stockholder Voting Agreements."
Employment and Non-Competition Agreements
Each of Mary Coleman, Aurum's Chief Executive Officer and President, and
certain other key Aurum officers and employees (including Aurum's Chief
Financial Officer, Vice President of Marketing and Chief Technology Officer)
will enter into an Employment Agreement with Aurum, as a condition to the
Merger, to be effective immediately following the Merger. See "The Plan of
Merger -- Interests of Certain Parties." In addition, each of Mary Coleman and
certain Aurum founders, as a condition to the Merger, will enter into a
Non-Competition Agreement with Baan which will provide that, during the period
beginning on the Effective Date and ending two years thereafter (or, in the case
of Mary Coleman, three years thereafter), the employee will not, directly or
indirectly: (i) participate or engage in the design, development, manufacture,
production, marketing, sale or servicing of any product, or the provision of any
service, that directly or indirectly relates to or competes with any of Aurum's
products or services in existence or under development as of the Effective Time
of the Merger; (ii) induce or attempt to induce any employee of Aurum or Baan to
perform work or services for any other person other than Aurum or Baan; or (iii)
permit the name of the employee to be used in connection with any business
competitive with Aurum's business, in each case in certain geographic areas. See
"The Plan of Merger -- Interests of Certain Persons," "-- Conditions to the
Merger" and "Related Agreements -- NonCompetition Agreements."
10
<PAGE> 20
RISK FACTORS
See "Risk Factors" for a discussion of certain factors pertaining to the
Merger and the businesses of Baan and Aurum. Risks related to the Merger,
include (i) integration of Aurum into Baan's businesses, (ii) risks associated
with the Exchange Ratio, (iii) dependence on key Aurum personnel, (iv)
substantial expenses resulting from the Merger, and (v) Netherlands law
implications. Risks relating to Baan and Aurum include the operating history and
limited profitability of such companies; variability of quarterly operating
results and seasonality of Baan's and Aurum's operating results; Baan North
American operations; Aurum international operations; management of growth;
control by existing Baan shareholders; possible volatility of Baan Common Share
price; foreign personal holding company tax risk; enforceability of United
States judgments against Netherlands corporations, directors and officers; and
other matters related to Dutch companies.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Aurum Board with respect to the
Merger Agreement, holders of Aurum Common Stock should be aware that members of
the Aurum Board and the executive officers of Aurum have certain interests in
the Merger that are in addition to the interests of holders of Aurum Common
Stock generally. These interests include certain employment arrangements with
Baan, the lapsing of repurchase restrictions on certain shares of restricted
Aurum Common Stock, the acceleration of the vesting of certain options to
acquire Aurum Common Stock, and certain rights to indemnification. See "The Plan
of Merger -- Interests of Certain Persons."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Merger is intended to qualify as a reorganization under Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), in which case no
gain or loss generally should be recognized by the holders of shares of Aurum
Common Stock on the exchange of their shares of Aurum Common Stock solely for
Baan Common Shares pursuant to the Merger. As a condition to the consummation of
the Merger, Baan and Aurum will have received an opinion from their respective
tax counsel that the Merger will constitute a reorganization under Section
368(a) of the Code. However, all Aurum stockholders are urged to consult their
own tax advisors. See "The Plan of Merger -- Certain Federal Income Tax
Considerations" and "-- Conditions to the Merger."
GOVERNMENTAL AND REGULATORY MATTERS
Consummation of the Merger is subject to compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). The notifications required under the HSR Act have been furnished to the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the specified waiting
period under the HSR Act for the Merger has been terminated. In addition, in
connection with the consummation of the Merger, certain notification
requirements under antitrust laws in certain foreign countries must be complied
with. The Merger must also satisfy the requirements of federal, certain state
and Netherlands securities laws. See "The Plan of Merger -- Governmental and
Regulatory Matters."
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for financial
reporting purposes in accordance with U.S. generally accepted accounting
principles. Consummation of the Merger is conditioned upon Baan and Aurum having
received letters from each of Moret Ernst & Young Accountants and Coopers &
Lybrand L.L.P., their respective independent public accountants, each dated
within two (2) business days prior to the Effective Time, regarding those firms'
concurrence with Baan's management's and Aurum's management's conclusions as to
the appropriateness of pooling of interests accounting for the Merger under
Accounting Principles Board Opinion No. 16. See "The Plan of
Merger -- Accounting Treatment" and "-- Conditions to the Merger."
11
<PAGE> 21
AFFILIATES' RESTRICTIONS ON SALE OF BAAN COMMON SHARES
The Baan Common Shares to be issued in the Merger will have been registered
under the Securities Act by a Registration Statement on Form F-4, thereby
allowing those shares to be traded without restriction by all former holders of
Aurum Common Stock who (i) are not deemed to be "affiliates" of Aurum at the
time of the Aurum Special Meeting (as "affiliates" is defined for purposes of
Rule 145 under the Securities Act) and (ii) who do not become "affiliates" of
Baan after the Merger.
The Merger Agreement requires Aurum to use its reasonable best efforts to
cause its affiliates to enter into agreements not to make any public sale of any
Baan Common Shares received upon consummation of the Merger, except in
compliance with Rule 145 under the Securities Act. See "The Plan of
Merger -- Related Agreements -- Affiliates Agreements." In general, Rule 145, as
currently in effect, imposes restrictions on the manner in which such affiliates
may make resales of Baan Common Shares and also on the number of shares of Baan
Common Shares that such affiliates, and others (including persons with whom the
affiliates act in concert), may sell within any three-month period. These
restrictions will generally apply for at least a period of one year after the
Merger (or longer if the person is an affiliate of Baan).
NO APPRAISAL RIGHTS
Aurum stockholders are not entitled to appraisal rights under the DGCL in
connection with the Merger. See "The Plan of Merger -- No Appraisal Rights."
Accordingly, stockholders who do not wish to receive Baan Common Shares in
exchange for their shares of Aurum Common Stock must liquidate their investment
by selling their Aurum Common Stock prior to the consummation of the Merger.
MARKET AND PRICE DATA
Baan Common Shares are traded on The Nasdaq National Market under the
symbol "BAANF" and are traded on the Amsterdam Stock Exchange under the symbol
"BAAN." On May 12, 1997, the last trading day before the execution of the Merger
Agreement, the closing price of a Baan Common Share as reported on The Nasdaq
National Market was $62.125 per share and on July 23, 1997, the closing price of
a Baan Common Share as reported on The Nasdaq National Market was $75.75 per
share. There can be no assurance as to the actual price of Baan Common Shares
prior to, at or any time following the Effective Time of the Merger. Holders of
Aurum Common Stock are urged to obtain current market quotations prior to voting
on the Merger.
Aurum Common Stock is traded on The Nasdaq National Market under the symbol
"AURM." On May 12, 1997, the last day before the execution of the Merger
Agreement, the closing price of Aurum Common Stock as reported on The Nasdaq
National Market was $16.625 per share and on July 23, 1997, the closing price of
Aurum Common Stock as reported on The Nasdaq National Market was $26.25 per
share. Following the Merger, Aurum Common Stock will no longer be publicly
traded. See "Risk Factors -- Possible Volatility of Baan Common Share Price" and
"Comparison of Rights of Shareholders of Baan and Aurum."
Aurum stockholders are strongly encouraged to obtain current market prices
for the Baan Common Shares and the Aurum Common Stock. The current market prices
for Baan Common Shares and shares of Aurum Common Stock may be obtained on the
Internet at http://www.nasdaq.com.
EFFECT OF BAAN STOCK VALUE AND PER BAAN COMMON SHARE MARKET PRICE
As described above, the Exchange Ratio is subject to adjustment in the
event that the Baan Stock Value (the average closing sales price of a Baan
Common Share over the 10 trading days prior to the closing of the Merger) is
less than $50.00. Accordingly, the value of the consideration received by Aurum
stockholders in the Merger will vary depending on the market price per Baan
Common Share on The Nasdaq National Market during the price measurement period
and the resulting number of Baan Common Shares to be issued in the Merger. The
table below illustrates the Exchange Ratio determined at various illustrative
Baan Stock Values, and the value per share of Aurum Common Stock of the Baan
Common shares to be received in the
12
<PAGE> 22
Merger and the approximate total number of Baan Common Shares to be issued in
the Merger, at each such Baan Stock Value. As illustrated by the table, in the
event the Baan Stock Value is between $40.00 and $50.00 per share, the value
received for each share of Aurum Common Stock remains constant at $17.80. In the
event the Baan Stock Value is less than $40.00 per share, the value received for
each share of Aurum Common Stock declines. In the event the Baan Stock Value is
greater than $50.00 per share, the value received for each share of Aurum Common
Stock will increase. Although the Baan Stock Value is currently significantly
greater than $50.00 per share, the trading price of the Baan Common Shares is
subject to fluctuation. See "Risk Factors -- Possible Volatility of Baan Common
Share Price."
<TABLE>
<CAPTION>
APPROXIMATE
TOTAL NUMBER
VALUE FOR EACH OF BAAN COMMON
ILLUSTRATIVE EXCHANGE SHARE OF AURUM SHARES ISSUED
BAAN STOCK VALUE RATIO COMMON STOCK(1) IN THE MERGER(2)
---------------- ------------ ---------------- -----------------
<S> <C> <C> <C> <C>
$76.66(a) 0.3559322034(3) $27.29 4,153,000
$70.00 0.3559322034(3) $24.92 4,153,000
Exchange Ratio fixed at minimum; $65.00 0.3559322034(3) $23.14 4,153,000
value variable $59.00 0.3559322034(3) $21.00 4,153,000
$55.00 0.3559322034(3) $19.58 4,153,000
$50.00 0.3559322034(4) $17.80 4,153,000
Exchange Ratio variable; value fixed $45.00 0.3954802200(4) $17.80 4,614,000
$40.00 0.4449152542(4) $17.80 5,191,000
Exchange Ratio fixed at maximum; $37.50 0.4449152542(5) $16.68 5,191,000
value variable $35.00 0.4449152542(5) $15.72 5,191,000
</TABLE>
- ---------------
(a) Baan Stock Value if the Closing had occurred on July 23, 1997, the most
recent practicable date prior to the printing of this Proxy
Statement/Prospectus.
(1) The value of each share of Aurum Common Stock is calculated by multiplying
the illustrative Baan Stock Value by the corresponding Exchange Ratio.
(2) Based on 11,667,626 shares of Aurum Common Stock outstanding as of June 30,
1997.
(3) Represents ($21.00/$59.00).
(4) Represents ($21.00/$59.00) x ($50.00/the illustrative Baan Stock Value).
(5) Represents the Exchange Ratio determined by the formula in footnote (4) at
an illustrative Baan Stock Value of $40.00.
13
<PAGE> 23
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION
The following table sets forth certain selected historical financial
information for Baan and Aurum and selected unaudited pro forma financial
information after giving effect to the Merger as a "pooling of interests" for
accounting purposes, assuming the Merger had occurred at the beginning of the
periods presented. The pro forma combined condensed statement of operations
information is presented without giving effect to anticipated transaction costs
associated with combining the operations of the two companies. Baan and Aurum
selected historical financial information at and for each of the years in the
five year period ended December 31, 1996 is derived from the respective
historical financial statements of Baan and Aurum, as audited, in the case of
Baan, by Moret Ernst & Young Accountants, independent accountants, and, in the
case of Aurum, Coopers & Lybrand, L.L.P., independent accountants, and should be
read in conjunction with such financial statements and the notes thereto
incorporated by reference herein or included elsewhere herein. The Baan and
Aurum selected historical financial information at and for the three month
periods ended March 31, 1997 and 1996 are derived from the respective unaudited
condensed historical financial statements of Baan and Aurum, which are also
incorporated by reference herein or included elsewhere herein and, in the
opinion of management of Baan and Aurum, respectively, include all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
information for such periods. The unaudited results of operations for the three
months ended March 31, 1997 are not indicative of the results of operations for
the 1997 year or for any other period. The pro forma information is presented
for illustrative purposes only and is not necessarily indicative of the results
of operations or the financial condition that would have been reported had the
Merger been consummated as of the beginning of the earliest period presented or
that may be reported by Baan in the future.
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS ENDED
AS OF OR FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- -------- -------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BAAN -- HISTORICAL
Statement of Operations Data:
Net revenues..................................... $46,810 $63,426 $122,924 $216,210 $387,958 $77,926 $123,872
Income (loss) from operations.................... 5,746 (1,962) 5,336 23,481 59,500 6,976 20,140
Net income (loss)................................ 6,849 (2,129) 1,198 15,279 36,333 4,331 12,317
Net income (loss) per share...................... $ 0.10 $ (0.03) $ 0.02 $ 0.17 $ 0.38 $ 0.05 $ 0.13
Shares used in computing per share amounts....... 67,510 75,470 79,388 89,044 94,707 93,504 97,672
Balance Sheet Data:
Working capital.................................. $ 6,880 $ 2,577 $ 5,286 $ 71,740 $260,507 $295,915
Total assets..................................... 29,947 47,273 77,587 186,621 440,692 506,786
Long-term debt, less current portion............. 5,055 4,682 2,005 1,714 176,223 200,986
Total shareholders' equity....................... 8,906 14,794 27,811 114,120 156,007 171,090
AURUM -- HISTORICAL
Statement of Operations Data:
Net revenues..................................... $ 3,180 $ 4,901 $ 5,912 $ 10,475 $ 27,584 $ 4,883 $ 9,345
Income (loss) from operations.................... (610) (4,258) (4,305) (4,358) 82 (650) 234
Net income (loss)................................ (624) (4,262) (4,388) (4,452) 279 (663) 467
Net income (loss) per share...................... $ (0.31) $ (2.02) $ (2.18) $ (1.44) $ 0.03 $ (0.17) $ 0.04
Shares used in computing per share amounts....... 2,007 2,115 2,010 3,092 9,948 3,959 11,969
Balance Sheet Data:
Working capital (deficit)........................ $ (900) $ 3,348 $ 1,034 $ 2,205 $ 44,356 $ 43,451
Total assets..................................... 1,169 6,188 5,744 9,795 56,281 58,490
Long-term debt, less current portion............. -- 341 370 237 451 336
Total stockholders' equity (net capital
deficiency).................................... (452) (4,706) (9,080) (13,528) 47,009 47,472
UNAUDITED PRO FORMA COMBINED
Statement of Operations Data:
Net revenues..................................... $128,836 $226,685 $415,542 $82,809 $133,217
Income from operations........................... 1,031 19,123 59,582 6,326 20,374
Net income (loss)................................ (3,190) 10,827 36,612 3,668 13,067
Net income (loss) per share...................... $ (0.04) $ 0.12 $ 0.37 $ 0.04 $ 0.13
Shares used in computing per share amounts(1).... 79,339 91,433 98,248 96,618 101,932
Balance Sheet Data:
Working capital.................................. $335,119
Total assets..................................... 565,209
Long-term debt, less current portion............. 200,986
Total shareholders' equity (2)................... 213,965
</TABLE>
- ---------------
(1) Assumes the issuance of 0.3559322 of a Baan Common Share for each then
outstanding share of Aurum Common Stock. Use of the maximum Exchange Ratio
of 0.4449153 per share of Aurum Common Stock would have no impact upon the
pro forma combined net income (loss) per share amounts in these periods.
(2) Total pro forma shareholders' equity at March 31, 1997 reflects $8.0 million
in estimated charges to operations expected to be incurred in connection
with the Merger, including $5.5 million in direct transaction costs and $2.5
million in additional anticipated costs associated with integrating the two
companies.
14
<PAGE> 24
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data of Baan
and Aurum and selected unaudited pro forma financial information after giving
effect to the Merger on a pooling-of-interests basis assuming the issuance of
0.3559322 of a Baan Common Share (0.4449153 for maximum Exchange Ratio purposes)
for each outstanding share of Aurum Common Stock and assuming the Merger had
occurred at the beginning of the periods presented. The actual number of Baan
Common Shares to be exchanged for all of the outstanding Aurum Common Stock will
be determined at the Effective Time based on the Exchange Ratio at the Effective
Time. The following data should be read in conjunction with the Summary
Historical and Unaudited Pro Forma Condensed Combined Financial Information, the
Unaudited Pro Forma Combined Condensed Financial Statements and the separate
historical financial statements of Baan and Aurum included elsewhere herein or
incorporated herein by reference. The unaudited pro forma combined per share
data are not necessarily indicative of the operating results that would have
been achieved had the Merger been consummated as of the beginning of the
earliest period presented and should not be construed as representative of
future operations or financial position of Baan. No cash dividends have ever
been declared or paid on Baan Common Shares or Aurum Common Stock.
<TABLE>
<CAPTION>
AS OF OR FOR THE
AS OF OR FOR THE YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
---------------------------- ----------------
1994 1995 1996 1996 1997
------- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
BAAN -- HISTORICAL
Net income per share......................... $ 0.02 $ 0.17 $0.38 $ 0.05 $0.13
Unaudited book value per share(1)............ 1.74 1.88
AURUM -- HISTORICAL
Net income (loss) per share.................. $ (2.18) $(1.44) $0.03 $(0.17) $0.04
Unaudited book value per share(1)............ 4.06 4.10
Unaudited pro forma combined net income (loss)
per share:
Per Baan share............................ $ (0.04) $ 0.12 $0.37 $ 0.04 $0.13
Equivalent per Aurum share(3)............. (0.01) 0.04 0.13 0.01 0.05
Equivalent per Aurum share -- maximum
exchange ratio(4)....................... (0.02) 0.05 0.13 0.02 0.06
------ ------ ----- ------ -----
Unaudited pro forma combined book value per
share:
Per Baan share(1)(2)...................... $2.11 $2.25
Per Baan share -- maximum exchange ratio
(4)..................................... 2.09 2.23
Equivalent per Aurum share(1)(2)(3)....... 0.75 0.80
Equivalent per Aurum share -- maximum
exchange ratio(4)....................... 0.93 0.99
</TABLE>
- ---------------
(1) Historical book value per share is computed by dividing shareholders' equity
by the number of common shares outstanding at the end of each period. Baan
pro forma combined book value per share is computed by dividing pro forma
shareholders' equity by the pro forma number of Baan Common Shares which
would have been outstanding had the Merger been consummated as of each
balance sheet date.
(2) Pro forma book value reflects $8.0 million in estimated charges to
operations expected to be incurred in connection with the Merger, including
$5.5 million in direct transaction costs and $2.5 million in additional
anticipated costs associated with integrating the two companies.
(3) Aurum equivalent pro forma combined amounts are calculated by multiplying
the Baan pro forma combined per share amounts by an assumed Exchange Ratio
of 0.3559322.
(4) Equivalent per Aurum share -- maximum exchange ratio assumes an Exchange
Ratio of 0.4449153.
15
<PAGE> 25
RISK FACTORS
The following factors should be considered carefully by each Aurum
stockholder in connection with voting upon the Merger and the Merger Agreement
and the transactions contemplated thereby. The following discussion contains
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act, which can be identified by the use of
forward-looking terminology, such as "may," "will," "expect," "anticipate,"
"estimate," "project" or "continue," "potential" or "opportunity" or the
negative thereof or other variations thereon or comparable terminology. See
"FORWARD LOOKING STATEMENTS." The matters set forth below constitute cautionary
statements identifying important factors with respect to such forward-looking
statements, including certain risks and uncertainties, that could cause actual
results to differ materially from those in such forward-looking statements.
RISKS RELATED TO THE MERGER
Integration of Aurum into Baan's Businesses. Although Aurum will continue
to operate independently as a wholly-owned subsidiary of Baan after the Merger,
the Merger involves a significant amount of integration of two companies that
have previously operated independently. Among the factors considered by the
Board of Supervisory Directors and the Board of Managing Directors of Baan and
the Aurum Board in connection with their respective approval of the Merger
Agreement and the Merger were the perceived opportunities for broadened product
offerings and marketing efficiencies that could result from the Merger. No
assurance can be given that difficulties will not be encountered in integrating
certain products, technologies or operations of Aurum with Baan or that the
benefits expected from such integration will be realized or that Aurum employee
morale will not be adversely affected by the integration process. There can be
no assurance that either company will retain its key personnel, that the
engineering teams of Baan and Aurum will successfully cooperate and realize any
technological benefits or that Baan or Aurum will realize any of the other
anticipated benefits of the Merger. In addition, the public announcement of the
Merger and the consummation of the Merger could result in the cancellation,
termination or nonrenewal of arrangements with Aurum by suppliers, distributors
or customers of Aurum or the loss of certain key Aurum employees, or the
termination of negotiations or delays in ordering by prospective customers of
Aurum as a result of uncertainties that may be perceived as a result of the
Merger. For example, customers or potential customers of Aurum who utilize
back-office enterprise software marketed by competitors of Baan could terminate
or delay orders with Aurum due to perceived uncertainties over Aurum's continued
commitment to providing products and enhancements or support services for Aurum
products which are used in conjunction with a competing back-office enterprise
software. In fact, Aurum believes it has experienced some delays in product
orders due to the announcement of the Merger. Any significant amount of
cancellations, terminations, delays or nonrenewals of arrangements with Aurum or
loss of key employees or termination of negotiations or delays in ordering could
have a material adverse effect on the business, operating results or financial
condition of Aurum, particularly in the quarter ended June 30, 1997 and other
near-term quarters.
The risks and difficulties associated with integrating Aurum with Baan will
be increased as a result of Baan's recent acquisition of Antalys, which
following the Merger is expected to be combined with Aurum. Although Baan
believes that Antalys' sales force configurator software products are
complementary to Aurum's software products, the integration of Aurum with Baan
(including Antalys) will also require the integration of Aurum's software
product offerings and coordination of Aurum's research and development and sales
and marketing efforts with those of Baan's (including Antalys'). The
difficulties of such assimilation may be increased by the necessity of
coordinating geographically separated organizations, integrating personnel with
disparate business backgrounds and combining three different corporate cultures.
In addition, the process of integrating Aurum with Baan (including Antalys) will
require substantial attention from management and could cause the interruption
of, or a loss of momentum in, the business activities of Baan or Aurum.
Aurum recently entered into a supply arrangement with a competitor of
Antalys to provide Aurum with software products that compete with Antalys'
software products. In connection with this supply arrangement, Aurum made a $1.4
million equity investment in the Antalys competitor and has made significant
royalty advances to such competitor. Under the terms of their arrangement, the
competitor may terminate its relationship with Aurum as a result of the
acquisition of control of Aurum pursuant to the proposed Merger. If
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the arrangement is terminated, although Aurum will be entitled to have its
initial $1.4 million investment returned, Aurum will likely incur a significant
charge to its earnings related to the write-off of the royalties advanced to
such competitor. In any event, until Antalys' and Aurum's competing software
offerings are consolidated or reconciled, there could be uncertainty in the
marketplace which could result in cancellations, terminations or delays of
orders from customers.
Risks Associated with Exchange Ratio. As a result of the Merger, each share
of Aurum Common Stock will represent the right to receive a number of Baan
Common Shares equal to the Exchange Ratio. The Exchange Ratio is initially fixed
at 0.3559322034 but is subject to adjustment in the event that the Baan Stock
Value is less than $50.00 but greater than $40.00 per share. In such event, the
Exchange Rate increases to a ratio equal to the product of the initial Exchange
Ratio times a fraction, the numerator of which is $50.00 and the denominator of
which is the Baan Stock Value, with the result that the value received for each
share of Aurum Common Stock will remain constant at $17.80. The Exchange Ratio
does not adjust further once the Baan Stock Value reaches $40.00 or less per
share, and accordingly, the maximum Exchange Ratio is fixed at 0.4449152542.
Therefore, any further decrease in the Baan Stock Value will not affect the
Exchange Ratio but will reduce the value for each share of Aurum Common Stock.
In addition, the Exchange Ratio is not subject to adjustment in the event that
the Baan Stock Value is between $59.00 and $50.00 per share. The specific value
of the consideration to be received by Aurum stockholders in the Merger will
depend on the market price of Baan Common Shares at the Effective Time. In the
event that the market price of Baan Common Shares decreases or increases prior
to the Effective Time, the market value at the Effective Time of the Baan Common
Shares to be received by Aurum stockholders in the Merger will be affected. In
particular, in the event that the Baan Stock Value falls below $59.00 but above
$50.00 per share the value of the consideration to be received by the Aurum
stockholders will decrease. Furthermore, in the event that the Baan Stock Value
falls below $40.00 per share the value of the consideration to be received by
Aurum stockholders will decrease further. (Between $50.00 and $40.00, the
exchange ratio adjusts so that the value received by the Aurum stockholders is
fixed, as described more fully elsewhere herein). The Merger Agreement is not
subject to termination in the event the Baan Stock Value increases or declines
to any particular price. The market prices of Baan Common Shares and Aurum
Common Stock as of a recent date are set forth herein under "Summary -- Market
and Price Data" and "Market Price and Dividends." Aurum stockholders are advised
to obtain recent market quotations for Baan Common Shares and Aurum Common
Stock. The Baan Common Shares and the Aurum Common Stock historically have been
subject to substantial price volatility. No assurance can be given as to the
market prices of Baan Common Shares or Aurum Common Stock at any time before the
Effective Time or as to the market price of the Baan Common Shares at any time
thereafter. See "Summary -- Market and Price Data" and "Market Price and
Dividends."
Dependence on Key Aurum Personnel. Aurum's success depends to a significant
extent upon a limited number of members of Aurum's senior management and other
key Aurum employees. Aurum's future performance will also depend in significant
part upon the continued service of its key technical, sales and senior
management personnel following the Merger. Of the foregoing individuals, only
Aurum's Chief Executive Officer and certain other individuals will be bound by
an employment agreement, which employment will nonetheless be at-will. Only
certain of these individuals (including Aurum's Chief Executive Officer) will be
bound by non-competition agreements. In addition, in connection with agreements
previously entered into with Aurum, based on holdings as of June 30, 1997, the
repurchase restrictions on 185,240 shares of restricted Aurum Common Stock held
by Ms. Coleman will lapse and options held by Ms. Coleman in respect of 100,000
shares of Aurum Common Stock will vest and become immediately exercisable in
connection with the Merger. Similarly, based on holdings as of June 30, 1997,
the restrictions on 26,250 shares of restricted Aurum Common Stock held by
Christopher Dier, Aurum's Chief Financial Officer, will lapse and options held
by Mr. Dier in respect of 85,224 shares of Aurum Common Stock will vest and
become immediately exercisable in connection with the Merger. The loss of the
services of one or more of Aurum's executive officers or key employees or the
decision of one or more of such officers or key employees to join a competitor
or otherwise compete directly or indirectly with Aurum could have a material
adverse effect on Aurum's business, operating results and financial condition.
See "The Plan of Merger -- Related Agreements -- Non-Competition Agreements" and
"-- Interests of Certain Persons" and "Aurum Management."
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Substantial Expenses Resulting from the Merger. The negotiation and
implementation of the Merger will result in aggregate pre-tax expenses to Baan
and Aurum of approximately $6.0 million to $10.0 million. The anticipated
charge, before estimated tax benefits, relates to direct transaction costs and
costs associated with integrating the operations of the two companies. There can
be no assurance that the companies' estimate is correct or that unanticipated
contingencies will not occur that will substantially increase the costs of
combining the operations of the two companies. In any event, costs associated
with the Merger will negatively impact results of operations in the quarter
ending September 30, 1997 and may affect subsequent quarters.
Netherlands Law Implications. As a result of the Merger, stockholders of
Aurum will become shareholders of Baan, and their rights will be governed by
Netherlands law and the Articles of Association of Baan which differ in certain
material respects from the Restated Certificate of Incorporation of Aurum and
Aurum's by-laws. See "Risk Factors -- Other Matters Related to Dutch Companies"
and "Comparison of Rights of Shareholders of Baan and Stockholders of Aurum."
OPERATING HISTORY; LIMITED PROFITABILITY
Baan has experienced substantial revenue growth in recent years, but its
profitability, as a percentage of net revenues, has varied widely on a quarterly
and annual basis. Baan was not profitable in 1993, and was only slightly
profitable in 1994 due largely to recognition of $14.8 million in software
license revenues from one large customer contract. Absent such contract, Baan
would not have been profitable in 1994. Due to Baan's limited operating history
on a significant international scale, the rate of growth of Baan's business and
the variability of operating results in past periods, there can be no assurance
that Baan's revenues will continue at the current level or will grow, or that
Baan will be able to sustain profitability on a quarterly or annual basis.
During 1996, Baan has experienced increases in accounts receivable as revenues
have increased. Accounts receivable days sales outstanding (the ratio of the
quarter-end accounts receivable balance to quarterly revenues, multiplied by 90)
were 104 and 109 days as of December 31, 1995 and 1996, respectively. These
increases in accounts receivable, together with increased investments by Baan in
infrastructure and expansion of operations, have impacted cash flow from
operations. Although Baan has in recent periods generated cash from operations,
there can be no assurance that cash flow from operations in future periods will
not be further impacted.
Aurum was incorporated in October 1991 and did not begin shipping its
software products until January 1992. Although Aurum has experienced significant
growth in revenues during the past two years, Aurum does not believe that prior
growth rates are sustainable or indicative of future operating results. Aurum
has incurred losses in each year since inception and, as of March 31, 1997, had
an accumulated deficit of $12.9 million. Aurum's limited operating history makes
the prediction of future operating results difficult, if not impossible.
Although Aurum achieved limited profitability during the last three quarters of
1996, for the full year ended 1996 and the first quarter of 1997, there can be
no assurance that Aurum will be able to sustain profitability on a quarterly or
annual basis. See "Aurum Selected Financial Data" and "Aurum Management's
Discussion and Analysis of Financial Condition and Results of Operations."
VARIABILITY OF QUARTERLY OPERATING RESULTS; SEASONALITY
Each of Baan's and Aurum's operating results have been subject to
significant fluctuations, particularly on a quarterly basis, and Baan's
operating results could fluctuate significantly quarter to quarter after the
Merger.
Baan's net revenues and operating results can vary, sometimes
substantially, from quarter to quarter. Baan's license revenues have in recent
periods increased as a percentage of total net revenues. License revenues
increased from 49% of total net revenues in 1994 to 52%, 58% and 62% of total
net revenues in 1995, 1996 and the three month period ended March 31, 1997,
respectively. Baan's revenues in general, and in particular its license
revenues, are relatively difficult to forecast due to a number of reasons,
including (i) the relatively long sales cycles for Baan's products, (ii) the
size and timing of individual license transactions, (iii) the timing of the
introduction of new products or product enhancements by Baan or its competitors,
(iv) the potential for delay or deferral of customer implementations of Baan's
software, (v) changes in customer budgets, and (vi) seasonality of technology
purchases and other general economic conditions. In the last three years, and
particularly in its U.S. operations, Baan has made significant changes in its
business focus,
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including greater emphasis on sales to larger customers. As a result, Baan has
realized an increasingly high portion of total net revenues from individually
large licenses which could contribute to greater quarterly variability. While
Baan believes that its allowance for doubtful accounts as of March 31, 1997
remains adequate, a significant portion of Baan's accounts receivable at such
date are derived from sales of large licenses, often to new customers with which
Baan does not have a payment history. Accordingly, there can be no assurances
that the allowance will be adequate to cover any receivables which are later
determined to be uncollectible, particularly if one or more large receivables
becomes uncollectible.
Baan's software products generally are shipped as orders are received. As a
result, license revenues in any quarter are substantially dependent on orders
booked and shipped in that quarter. Because Baan's operating expenses are based
on anticipated revenue levels and because a high percentage of Baan's expenses
are relatively fixed, a delay in the recognition of revenue from a limited
number of license transactions could cause significant variations in operating
results from quarter to quarter and could result in losses. Baan plans to
increase expenditures in order to fund continued build-up of international
operations, greater levels of research and development, a larger direct sales
and marketing staff, development of new distribution and resale channels, and
broader customer support capability, although annual expenditures will depend
upon ongoing results and evolving business needs. To the extent such expenses
precede or are not subsequently followed by increased revenues, Baan's operating
results would be materially adversely affected.
Baan believes that fourth quarter revenues have historically been
positively impacted by year-end capital purchases by larger corporate customers.
This seasonality, which Baan believes is common in the computer software
industry, is likely to increase as Baan focuses on larger corporate accounts,
and typically result in first quarter revenues in any year being lower than
revenues in the immediately preceding fourth quarter.
Baan's operating results may also be affected following the Merger by risks
and uncertainties associated with Aurum's business. Aurum's quarterly results
have varied significantly in the past and may vary significantly in the future,
depending on a number of factors, many of which are beyond Aurum's control.
These factors include, among others, the ability of Aurum to develop, introduce
and market new and enhanced versions of its software on a timely basis, the
demand for Aurum's software, the size, timing and contractual terms of
significant orders, the timing and significance of software product enhancements
and new software product announcements by Aurum or its competitors, budgeting
cycles of Aurum's potential customers, customer order deferrals in anticipation
of enhancements of new software products, the cancellations of licenses or
maintenance agreements, software defects and other product quality problems, and
general domestic and international economic and political trends. Moreover, the
timing of revenue recognition can be affected by many factors, including the
timing of contract execution and delivery and customer acceptance, if
applicable. In part because of lengthy sales and implementation cycles, the
timing between initial customer contact and fulfillment of criteria for revenue
recognition can be lengthy and unpredictable, and revenues in any given period
may be adversely affected as a result of such unpredictability. Aurum has
limited backlog. As a result, software revenues in any quarter are substantially
dependent on orders booked and shipped in that quarter, cannot be accurately
predicted, and may vary significantly. Aurum has also experienced seasonality in
its business, in part due to customer buying patterns. In recent years, Aurum
has generally had stronger demand for its software products in the quarters
ending in June and December and weaker demand in the quarters ending in March
and September. See "Aurum Management's Discussion and Analysis of Financial
Condition and Results of Operations."
BAAN NORTH AMERICAN OPERATIONS
Baan commenced its investment program in North America in 1993 and has a
limited number of operational installations of its products at customer sites in
North America. Accordingly, Baan has only a limited number of reference customer
sites in North America. Many of these customers continue to implement Baan's
products, and some of these customers are in the early stage of implementation.
If Baan were to experience significant implementation problems at these or other
reference sites in North America (or elsewhere), it could significantly impact
future sales and operating results in North America (and elsewhere). In
addition, in order to support the anticipated growth of Baan's business in the
North American market, Baan continues to incur significant costs to build
corporate infrastructure ahead of anticipated revenues. This
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includes developing experienced resources, through both internal hiring and
establishing relationships with third party implementation providers, that are
necessary to support customer installations of Baan's software and provide other
customer services. The number of Baan employees in North America has grown from
168 at December 31, 1993 to 180 at December 31, 1994, 309 at December 31, 1995
and 637 at December 31, 1996 and 699 at March 31, 1997, respectively. In
addition, Baan's operating expenses (exclusive of general corporate expenses) in
North America have increased from $13.1 million for the year ended December 31,
1993 to $29.2 million, $44.7 million, $102.7 million and $34.0 million for the
years ended December 31, 1994, 1995, 1996 and for the three months ended March
31, 1997, respectively. As a result of this expansion, Baan must continue to
implement and improve its operational and financial control systems and to
expand, train and manage its employee base and relationships with third party
implementation providers, in order to provide high-quality training, product
implementation and other customer services. These factors have placed, and are
expected to continue to place (particularly in the light of the acquisition of
Antalys and the proposed acquisition of Aurum, both of which are based in North
America), a significant strain on Baan's management and operations. There can be
no assurance that Baan's North American operations will continue to experience
growth or that Baan will be able to manage effectively an increased level of
operations in North America. Any failure to expand in North American markets or
inability to manage such activities effectively would have a material adverse
effect on Baan's results of operations.
AURUM INTERNATIONAL OPERATIONS
Aurum believes that its continued growth and profitability as a
wholly-owned subsidiary of Baan will require expanded distribution for its
products, particularly internationally. In North America, Aurum has sold its
products primarily through its direct sales organization and has supported its
customers with its technical and customer support staff. International sales
have been insignificant to date, however Aurum intends to expand its
international operations and enter additional international markets by marketing
through Baan's distribution network, establishing partnerships with other
international distributors and, as appropriate, in selected countries, through
expansion of Aurum's direct sales capabilities. Continued expansion,
domestically and internationally, will require significant investments of
management attention and financial resources, which could adversely affect
Aurum's operating margins and earnings, if any. Aurum's growth to date has
challenged Aurum's personnel and management resources. Aurum's ability to
achieve international revenue growth in the future will depend in part on its
ability to establish productive relationships with qualified distributors in
Europe and the Pacific Rim. The competition for qualified international
distributors is intense, however. Aurum has in the past experienced difficulty
in obtaining qualified distributors and there can be no assurance that Aurum can
attract and retain qualified distributors after the consummation of the Merger.
MANAGEMENT OF GROWTH
Baan's business has grown rapidly in the last five years, with total net
revenues increasing from $46.8 million in 1992 to $388.0 million in 1996 and
$123.9 million in the three months ended March 31, 1997. The growth of Baan's
business and expansion of Baan's customer base has placed a significant strain
on Baan's management and operations. Baan's recent expansion has resulted in
substantial growth in the number of its employees, the scope of its operating
and financial systems and the geographic area of its operations, resulting in
increased responsibility for both existing and new management personnel. Baan's
ability to support the growth of its business will be substantially dependent
upon having in place highly trained internal and third party resources to
conduct pre-sales activity, product implementation, training and other customer
support services.
Aurum's business has also grown rapidly in recent periods, with revenues
increasing from $5.9 million in 1994 to $10.5 million in 1995 and $27.6 million
in 1996. At the same time, Aurum has experienced significant growth in the
number of employees, in the geographic scope of its operations as well as its
target customers, and in the scope of the operating and financial systems
required to support a growing organization. In order to manage future growth and
the integration with Antalys, Aurum will be required to integrate additional
general and administrative personnel and to augment or replace its existing
financial and management systems. Such integration with Antalys may result in
disruption of operations and impact financial results.
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Baan and Aurum's future operating results will depend on the ability of
their officers and other key employees to continue to implement and improve
operational, customer support and financial control systems, to expand, train
and manage its employee base and to work effectively with third party
implementation providers. There can be no assurance that Baan or Aurum will be
able to manage its recent or any future expansion successfully, and any
inability to do so would have a material adverse effect on Baan or Aurum's
results of operations.
BAAN CONVERTIBLE SUBORDINATED NOTES; LEVERAGE
In December 1996 and January 1997, Baan incurred $200 million of
indebtedness through the sale of 4.5% convertible subordinated notes due 2001.
As a result of this indebtedness, Baan's principal and interest obligations
increased substantially. The degree to which Baan is leveraged could materially
adversely affect Baan's ability to obtain additional financing for working
capital, acquisitions or other purposes and could make it more vulnerable to
industry downturns and competitive pressures. Baan's ability to meet its debt
service obligations will be dependent upon Baan's future performance, which will
be subject to financial, business and other factors affecting the operations of
Baan, many of which are beyond its control.
COMPETITION
Baan Software Products. The information management application software
market is highly competitive, is changing rapidly, and is significantly affected
by new product introductions and other market activities of industry
participants. Baan's products are targeted at the emerging market for open
systems, client/server, Enterprise Resource Planning ("ERP") software solutions,
and Baan's current and prospective competitors offer a variety of products and
solutions to address this market. Baan's primary competition comes from a large
number of independent software vendors and other sources including SAP AG
("SAP"), Oracle Corporation ("Oracle"), System Software Associates, Inc.
("SSA"), and PeopleSoft, Inc. ("PeopleSoft"). In addition, Baan faces indirect
competition from suppliers of custom-developed business application software
that have focused mainly on proprietary mainframe and minicomputer-based systems
with highly customized software, such as the systems consulting groups of major
accounting firms and systems integrators. Baan also faces indirect competition
from systems developed by the internal MIS departments of large organizations.
Many of Baan's competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources than Baan, greater
name recognition, and a larger installed base of customers. In addition, certain
competitors, including SAP, Oracle and PeopleSoft, have well-established
relationships with customers of Baan. Further, because Baan's products run on
relational database management systems (RDBMS) and Oracle has the largest market
share for RDBMS software, Oracle may have a competitive advantage in selling its
application products to its RDBMS customer base. Baan may also face market
resistance from the large installed base of legacy systems because of the
reluctance of these customers to commit the time and effort necessary to convert
to an open systems-based client/server software solution. Furthermore, as the
client/server computing market develops, companies with significantly greater
resources than Baan could attempt to increase their presence in this market by
acquiring or forming strategic alliances with competitors of Baan.
Baan relies on a number of systems consulting and systems integration firms
for implementation and other customer support services, as well as
recommendations of its products during the evaluation stage of the purchase
process. Although Baan seeks to maintain close relationships with these third
party implementation providers, many of these third parties have similar, and
often more established, relationships with Baan's principal competitors. If Baan
is unable to develop and retain effective, long-term relationships with these
third parties, it would adversely affect Baan's competitive position. Further,
there can be no assurance that these third parties, many of which have
significantly greater financial, technical and marketing resources than Baan,
will not market software products in competition with Baan in the future or will
not otherwise reduce or discontinue their relationships with or support of Baan
and its products.
Baan believes that its success has been due in part to its focus on the
client/server architecture of its software products. Certain of Baan's
competitors currently offer products using client/server architecture, and
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Baan believes that many of its other competitors are actively developing
client/server-based products, including certain large, well-established software
companies that have announced their intent to introduce client/server ERP
products. As a result, competition (including price competition) is likely to
increase substantially, which could result in price reductions and loss of
market share. There can be no assurance that Baan will be able to compete
successfully with existing or new competitors or that competition will not have
a material adverse effect on Baan's business.
Aurum Software Products. The market for Aurum's client/server applications
is highly competitive, fragmented and subject to rapid technological change and
frequent new product introductions and enhancements. Aurum has a large number of
competitors which range from internally developed custom application development
efforts to packaged application vendors. Aurum offers a suite of applications
which can be used as part of an integrated customer management application suite
or on a stand-alone basis. Aurum competes with packaged application vendors that
provide tactical departmental solutions in specific market segments as well as
with competitors that provide a broader suite of integrated customer management
applications. Many of these competitors have longer operating histories,
significantly greater financial, technical, product development, marketing and
other resources, greater name recognition or a larger installed base of
customers than Aurum. As a result, these competitors may be able to respond more
quickly to new or emerging technologies and to changes in customer requirements
or to devote greater resources to the development, promotion and sale of their
products than can Aurum.
Aurum's principal competitors in the sales force automation market include
Brock Control Systems, Inc., Metropolis Software, Inc. (recently acquired by
Clarify Inc.), SalesBook Systems, Sales Kit Software Corporation, SaleSoft,
Inc., Saratoga Systems, Inc. and Siebel Systems, Inc. Aurum also depends for the
marketing and implementation of its products upon a number of third party
systems integrators, including Cambridge Technology Partners, Deloitte & Touche
LLP, IBM and KPMG Peat Marwick LLP. Many of these firms also have established
relationships with Aurum's competitors. There can be no assurance that these
third parties, many of which have significantly greater financial resources than
Aurum, will not in the future compete directly with Aurum or otherwise
discontinue their support of Aurum's products. Aurum also faces competition from
customer support application vendors, which are attempting to expand from their
customer support market into the sales automation area either through internal
product development or through acquisitions. These customer support competitors
include Astea International, Inc., Clarify Inc., Scopus Technology, Inc. and The
Vantive Corporation. Over time, Aurum expects large enterprise software vendors
such as Oracle and SAP to extend their enterprise application suites by offering
sales force automation, telemarketing and customer support, with the appropriate
integration to leading financial, order entry and manufacturing applications. In
addition, because the barriers to entry in the software market are relatively
low, additional competitors may emerge as the sales and marketing software
market continues to develop and expand. It is also possible that acquisitions of
competitors by large software companies or alliances among competitors could
occur. Aurum expects that significant consolidation in its industry will occur
over the next few years and increased competition from new entrants or through
strategic acquisitions or alliances could result in price erosion, reduced gross
margins or loss of market share, any of which could have a material adverse
effect on Aurum's contribution to Baan's business, operating results and
financial condition.
RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS
The market for Baan's ERP software products and Aurum's sales and marketing
software is characterized by rapid technological advances, evolving industry
standards in computer hardware and software technology, changes in customer
requirements, and frequent new product introductions and enhancements. The
introduction of products embodying new technologies or new industry standards
can render existing products obsolete and unmarketable. The future success of
Baan will depend upon its ability to continue to enhance its current product
lines and to develop, integrate and introduce new products, including Aurum's
and Antalys' software offerings, that keep pace with technological developments,
satisfy increasingly sophisticated customer requirements and achieve market
acceptance. In particular, Baan must continue to anticipate and respond
adequately to advances in RDBMS software and desktop computer operating systems
such as Microsoft Windows and successor operating systems. There can be no
assurance that Baan will be successful in
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developing and marketing, on a timely and cost-effective basis, fully functional
product enhancements or new products that respond to technological advances by
others, or that Baan and Aurum's new products will achieve market acceptance.
Historically, Baan has issued significant new releases of its software
products approximately every two years with interim releases on a more frequent
basis. As a result of the complexities inherent in both the RDBMS and
client/server environments and the broad functionality and performance demanded
by customers for ERP products, major new product enhancements and new products
can require long development and testing periods to achieve market acceptance.
Baan has on occasion experienced delays in the scheduled introduction of new and
enhanced products. In addition, software programs as complex as those offered by
Baan may contain undetected errors or "bugs" when first introduced or as new
versions are released that, despite testing by Baan, are discovered only after a
product has been installed and used by customers. For example, Version 3.0
contained certain identified software errors which required correction in
Version 3.1. There can be no assurance that Baan's most recent software release,
BAAN IV, or future releases of Baan's products will not contain further software
errors. Any such errors could impair the market acceptance of these products and
adversely affect operating results. Problems encountered by customers installing
and implementing new releases or with the performance of Baan's products could
also have a material adverse effect on Baan's business and operating results.
Customers have only recently commenced implementation of the BAAN IV version of
Baan's software. If Baan were to experience delays in the introduction of new
and enhanced products, or if customers were to experience significant problems
with the implementation and installation of new releases or were to be
dissatisfied with product functionality or performance, it could materially
adversely affect Baan's business and operating results.
The success of Aurum's products may depend, in part, on Aurum's ability to
introduce products which are compatible with the Internet and on the broad
acceptance of the Internet and World Wide Web as a viable commercial
marketplace. It is difficult to predict with any assurance whether the Internet
will prove to be a viable commercial marketplace or whether the demand for
Internet-related products and services will increase or decrease in the future.
There can be no assurance that Aurum will be successful in developing and
marketing enhancements to its products that respond to technological
developments, evolving industry standards or changing customer requirements, or
that Aurum will not experience difficulties that could delay or prevent the
successful development, introduction and sale of such enhancements or that such
enhancements will adequately meet the requirements of the marketplace and
achieve any significant degree of market acceptance. If release dates of any
future product enhancements or new products are delayed or if these products or
enhancements fail to achieve market acceptance when released, Aurum's business,
operating results and financial condition could be materially and adversely
affected. In addition, the introduction or announcement of new product offerings
or enhancements by Aurum or Aurum's competitors or major hardware, systems or
software vendors may cause customers to defer or forgo purchases of Aurum's
products, which could have a material adverse effect on Aurum's business,
operating results and financial condition. See "Aurum Business -- Strategy,"
"-- Software Products," "-- Product Architecture" and "-- Research and
Development."
INTERNATIONAL OPERATIONS AND CURRENCY FLUCTUATIONS
Baan's products are currently marketed in the United States, The
Netherlands, Germany and 56 other countries. Sales in the United States, The
Netherlands and Germany accounted for 31%, 15% and 12%, respectively, of Baan's
net revenues in the three months ended March 31, 1997. Baan's operations are
subject to risks inherent in international business activities, including, in
particular, general economic conditions in each country, overlap of different
tax structures, management of an organization spread over various countries,
unexpected changes in regulatory requirements, compliance with a variety of
foreign laws and regulations, and longer accounts receivable payment cycles in
certain countries. Other risks associated with international operations include
import and export licensing requirements, trade restrictions and changes in
tariff and freight rates.
A significant portion of Baan's business is conducted in currencies other
than the U.S. dollar (the currency in which its financial statements are
stated), primarily the Dutch guilder and the German mark.
23
<PAGE> 33
Baan has historically recorded a majority of its expenses in guilders,
especially research and development expenses, and a substantial majority of its
revenues has been denominated in guilders, marks and, more recently, U.S.
dollars. As a result, appreciation in the value of the guilder relative to the
value of the U.S. dollar could adversely affect operating results. Foreign
currency transaction gains and losses arising from normal business operations
are credited to or charged against earnings in the period incurred. As a result,
fluctuations in the value of the currencies in which Baan conducts its business
relative to the U.S. dollar have caused and will continue to cause foreign
currency transaction gains and losses. In 1994, Baan incurred $1.9 million in
foreign currency transaction losses. At the end of 1994, Baan reevaluated its
currency management process, and established programs to reduce its foreign
currency exposure. Baan incurred a foreign currency transaction net loss of
$253,000 and $170,000 for the years ended December 31, 1995 and 1996,
respectively. Starting in the fourth quarter of 1995, Baan established controls
regarding the use of derivative financial instruments, which it uses primarily
to offset the effects of exchange rate changes on intracompany cash flow
exposures denominated in foreign currencies. These exposures include firm trade
accounts, royalties, service fees and loans. Baan continues to evaluate its
currency management policies. Notwithstanding the measures Baan has adopted, due
to the number of currencies involved, the constantly changing currency exposures
and the substantial volatility of currency exchange rates, there can be no
assurance that Baan will not continue to experience currency losses in the
future, nor can Baan predict the effect of exchange rate fluctuations upon
future operating results.
RELIANCE ON CERTAIN RELATIONSHIPS -- BAAN
Baan relies on a number of consulting and systems integration firms to
enhance its marketing, sales and customer support efforts, particularly with
respect to implementation and support of its products as well as lead generation
and assistance in the sales process. As Baan continues to implement its strategy
of focusing on the licensing of its core software products, Baan will remain
dependent upon third party implementation providers for product implementation,
customization, customer support services and end user training. Many such firms
have similar, and often more established, relationships with Baan's principal
competitors. There can be no assurance that these third party implementation
providers will provide the level and quality of service required to meet the
needs of Baan's customers, that Baan will be able to maintain an effective, long
term relationship with these third parties, or that these parties will continue
to meet the needs of Baan's customers. If Baan is unable to develop and maintain
effective, long-term relationships with these third parties, or if these parties
fail to meet the needs of Baan's customers, Baan's business would be adversely
affected. Although Baan has agreements with certain of these providers, these
agreements are generally terminable by the third party providers at any time and
do not impose specific obligations on the part of the third party providers.
Further, there can be no assurance that these third party implementation
providers, many of which have significantly greater financial, technical,
personnel and marketing resources than Baan, will not market software products
in competition with Baan in the future or will not otherwise reduce or
discontinue their relationships with or support of Baan and its products.
RELIANCE ON CERTAIN RELATIONSHIPS -- AURUM
Aurum incorporates into its products certain software and other
technologies licensed to it by third-party developers. Among the principal
developers of these licensed technologies are Business Objects, Inc., which
licenses an On-Line Analytical Processing ("OLAP") tool that enables the
analysis of sales and customer data at both the server and client sites of a
user's network; Centura Corporation, which licenses a SQL-based laptop database
that is used principally in Aurum's SalesTrak product; and First Floor Software,
Inc., which licenses an intelligent agent that monitors changes in sales and
customer data accessed through the World Wide Web. Aurum's license agreements
with Business Objects and Centura expire in March 2000 and December 1997,
respectively. The license agreement with First Floor, which is being
renegotiated, expires in June 1997. There can be no assurance that any of these
agreements will be renewed following expiration. Because Aurum's products
incorporate software developed and maintained by third parties, Aurum is to a
certain extent dependent upon such third parties' abilities to maintain or
enhance their current products, to develop new products on a timely and
cost-effective basis and to respond to emerging industry standards and other
technological changes. In the event that Aurum's agreements with its third-party
vendors should fail to
24
<PAGE> 34
be renewed or the products licensed from such vendors should fail to address the
requirements of Aurum's software products, Aurum would be required to find
alternative software products or technologies of equal performance or
functionality. There can be no assurance that Aurum would be able to replace
such functionality provided by the third-party software currently offered in
conjunction with Aurum's products in the event that such software becomes
obsolete or incompatible with future versions of Aurum's products or is
otherwise not adequately maintained or updated. The absence of or any
significant delay in the replacement of that functionality could have a material
adverse effect on Aurum's business, operating results and financial condition.
DEPENDENCE ON KEY PERSONNEL
Baan's success depends to a significant extent upon a limited number of
members of senior management of Baan and other key employees of Baan. Baan does
not maintain key man life insurance on any personnel. The loss of the service of
one or more key employees could have a material adverse effect on Baan. In
addition, Baan (which after the Merger would include Aurum) believes that its
future success will depend on its ability to attract and retain highly skilled
technical, management, sales and marketing personnel. Competition for such
personnel in the computer software industry is intense. There can be no
assurance that Baan will be successful in attracting and retaining such
personnel, and the failure to attract and retain such personnel could have a
material adverse effect on Baan's business.
ABILITY TO ENFORCE INTELLECTUAL PROPERTY RIGHTS
Baan and Aurum rely on a combination of the protections provided under
applicable copyright, trademark and trade secret laws, as well as on
confidentiality procedures and licensing arrangements, to establish and protect
their rights in their software. Despite Baan and Aurum's efforts, it may be
possible for unauthorized third parties to copy certain portions of Baan and
Aurum's products or to reverse engineer or obtain and use information that Baan
or Aurum regards as proprietary. In addition, the laws of certain countries do
not protect Baan or Aurum's proprietary rights to the same extent as do the laws
of the United States or The Netherlands. Accordingly, there can be no assurance
that Baan or Aurum will be able to protect their proprietary software against
unauthorized third party copying or use, which could adversely affect Baan and
Aurum's competitive position.
Aurum submitted a patent application for its dbSync technology in August
1996, and such application is still pending. There can be no assurance that any
patent covering Aurum's inventions will issue or that any patent, if issued,
will provide sufficiently broad protection or will prove enforceable in actions
against alleged infringers. Despite precautions taken by Aurum, it may be
possible for unauthorized third parties to copy aspects of its products or
future products or to obtain and use information that Aurum regards as
proprietary. In particular, Aurum provides its licensees with access to its data
model and other proprietary information underlying its licensed applications.
Aurum also makes source code available for certain of Aurum's products and
occasionally enters into source code escrow agreements also with certain
customers for the balance of the source code. There can be no assurance that
Aurum's means of protecting its proprietary rights will be adequate or that
Aurum's competitors will not independently develop similar or superior
technology or design around any patents owned by Aurum.
Baan and Aurum, from time to time, receive notices from third parties
claiming infringement by Baan or Aurum's products of third party proprietary
rights. There can be no assurance that legal action claiming patent or other
intellectual property infringement will not be commenced against Baan or Aurum,
or that Baan or Aurum would necessarily prevail in such litigation given the
complex technical issues and inherent uncertainties in intellectual property
litigation; and in the event a claim against Baan or Aurum was successful and
Baan or Aurum could not obtain a license on acceptable terms or develop or
license a substitute technology, Baan or Aurum's business and operating results
would be materially adversely affected. Baan and Aurum expect that software
products will increasingly be subject to such claims as the number of products
and competitors in the enterprise application software industry segment grows
and the functionality of products overlap. Any such claim, with or without
merit, could be time-consuming, result in costly litigation and require Baan or
Aurum to enter into royalty and licensing agreements. Such royalty or licensing
25
<PAGE> 35
agreements, if required, may not be available on terms acceptable by Baan, or at
all. In the event of a successful claim against Baan or Aurum and the failure of
Baan or Aurum to develop or license a substitute technology, Baan or Aurum's
business and operating results would be materially adversely effected.
CONTROL BY EXISTING BAAN SHAREHOLDERS
Baan Investment B.V. owns approximately 43% of Baan's outstanding Common
Shares as of March 31, 1997. Jan Baan and J.G. Paul Baan, by virtue of their
positions as managing directors of Baan Investment B.V. and the control they
exercise over the entities that own and control the shares of Baan Investment
B.V., effectively have the power to vote the Baan Common Shares owned by Baan
Investment B.V. Messrs. Baan and Baan will therefore also have the effective
power to influence significantly the outcome of matters submitted for
shareholder action, including the appointment of members of Baan's Management
and Supervisory Boards and the approval of significant change in control
transactions, and may be deemed to have control over the management and affairs
of Baan. This significant equity interest in Baan may have the effect of making
certain transactions more difficult absent the support of Jan Baan and J.G. Paul
Baan, and may have the effect of delaying or preventing a change in control of
Baan.
POSSIBLE VOLATILITY OF BAAN COMMON SHARE PRICE
The market price of Baan Common Shares has experienced significant
fluctuations and may continue to fluctuate significantly. The market price of
the Common Shares may be significantly affected by factors such as the
announcement of new products or product enhancements by Baan, Aurum or their
competitors, technological innovation by Baan, Aurum or their competitors,
quarterly variations in Baan's results of operations, changes in earnings
estimates by market analysts, general market conditions or market conditions
specific to particular industries, and political conditions. In particular, the
stock prices for many companies in the technology and emerging growth sector
have experienced wide fluctuations which have often been unrelated to the
operating performance of such companies. Such fluctuations may adversely affect
the market price of the Baan Common Shares.
FOREIGN PERSONAL HOLDING COMPANY TAX RISK
Baan or certain of its subsidiaries may in the future be characterized as a
foreign personal holding company ("FPHC") if: (i) Jan Baan or J.G. Paul Baan or
a member of either of their families were to become a U.S. resident or citizen,
or to marry a U.S. resident or citizen and (ii) more than 60% of the gross
income of Baan or a subsidiary were considered foreign personal holding company
income. If such treatment were to occur, U.S. residents, citizens, corporations
and other persons subject to U.S. taxation on the basis of net income who hold
Baan Common Shares would be required to include in their gross income as a
dividend their pro rata portion of any undistributed income of Baan or a
subsidiary so classified as a FPHC, even if no cash dividend were actually paid.
Although neither Baan nor any subsidiary is currently a FPHC, Baan can give no
assurances that changes in ownership of the shares currently held by Baan
Investment B.V., or changes in ownership or residency of Jan Baan or J.G. Paul
Baan or members of either of their families, will not cause Baan to be treated
as a FPHC, nor is Baan undertaking any obligation to determine or disclose at
any time in the future its status as a FPHC. See "Taxation -- United States
Federal Income Taxation -- Foreign Personal Holding Companies."
ENFORCEABILITY OF UNITED STATES JUDGMENTS AGAINST NETHERLANDS CORPORATIONS,
DIRECTORS AND OFFICERS
Judgments of United States courts, including judgments against Baan, its
directors or its officers predicated on the civil liability provisions of the
federal securities laws of the United States, are not directly enforceable in
The Netherlands. See "Enforceability of Civil Liabilities."
OTHER MATTERS RELATED TO DUTCH COMPANIES
As a Netherlands "naamloze vennootschap" (N.V.), Baan is subject to certain
requirements not generally applicable to corporations organized in United States
jurisdictions. Among other things, the issuance
26
<PAGE> 36
of shares by Baan must be submitted for resolution of the general meeting of
shareholders, except to the extent such authority to issue shares has been
delegated by the general meeting of shareholders to another corporate body. The
issuance of shares by Baan is generally subject to shareholder preemptive
rights, except to the extent that such preemptive rights have been excluded or
limited by the general meeting of shareholders (subject to a qualified majority
of two-thirds of the votes if less than 50% of the outstanding share capital is
present or represented) or, in case the authority to issue shares has been
delegated to another corporate body that has also been empowered by the general
meeting of shareholders to exclude or limit such preemptive rights, by such
corporate body. In this regard, the general meeting of shareholders has
authorized the Management Board of Baan, upon approval by the Supervisory Board,
to issue any authorized and unissued shares of Baan at any time up to and
including April 30, 2002, and has authorized the Management Board, upon approval
by the Supervisory Board, to exclude or limit shareholder preemptive rights with
respect to any issuance of such shares up to and including such date. Such
authorizations may be renewed by the general meeting of shareholders from time
to time, or by Baan's Articles of Association pursuant to an amendment to that
effect, for up to five years at a time. This authorization would also permit the
issuance of shares in an acquisition, provided that shareholder approval is
required in connection with a statutory merger (except that, in certain limited
circumstances, the board of management of a surviving company may resolve to
legally merge Baan). Shareholders do not have preemptive rights with respect to
shares which are issued against payment other than in cash, shares which are
issued to employees of Baan or of a group company or shares which are issued to
someone exercising a previously acquired right to subscribe for shares. In
addition, certain major corporate decisions are subject to prior advice by the
Works Councils established at Baan Development B.V. and/or Baan Nederland B.V.,
two Dutch subsidiaries of Baan. Furthermore, certain decisions that may have an
impact on the remuneration or fringe benefits of employees may be subject to
approval of the Work Councils. Furthermore, in case of a change of control,
directly or indirectly, in the activities of a company or part of a company, in
which a hundred employees or more are employed, certain notifications
requirements pursuant to the Dutch Merger Code may have to be observed. In
addition, certain major corporate decisions are subject to prior approval or
advice by the Works Council established at Baan Development B.V. and Baan
Nederland B.V., two Dutch subsidiaries of Baan.
27
<PAGE> 37
MARKET PRICE AND DIVIDENDS
BAAN
Baan Common Shares are quoted on The Nasdaq National Market under the
symbol "BAANF" and on the Official Market of the Amsterdam Stock Exchange under
the symbol "BAAN." The following table sets forth the quarterly high and low
closing prices for the Baan Common Shares as reported by The Nasdaq National
Market and the Amsterdam Stock Exchange since the Baan Company Shares began
trading on The Nasdaq National Market on May 19, 1995 and on the Official Market
of the Amsterdam Stock Exchange on May 23, 1995. Prior to such dates there was
no established public trading market for the Baan Common Shares.
<TABLE>
<CAPTION>
NASDAQ
NATIONAL
MARKET AMSTERDAM STOCK EXCHANGE
-------------- ------------------------
HIGH LOW HIGH LOW
---- --- ---------- ----------
<S> <C> <C> <C> <C>
Fiscal 1995:
Second Quarter (From May 19, 1995)............ $15 7/16 $111/8 NLG 23.95 NLG 17.25
Third Quarter................................. 24 3/16 147/8 39.15 25.75
Fourth Quarter................................ 23 1/16 1729/32 37.60 28.25
Fiscal 1996:
First Quarter................................. 30 11/16 2011/32 51.40 33.45
Second Quarter................................ 37 11/16 255/16 66.80 42.50
Third Quarter................................. 36 263/4 62.80 45.90
Fourth Quarter................................ 40 1/8 311/4 69.90 56.50
Fiscal 1997:
First Quarter................................. 50 3/8 347/8 95.40 61.00
Second Quarter................................ 69 3/4 425/8 139.00 77.00
Third Quarter (through July 23, 1997)......... 81 695/16 170.00 133.00
</TABLE>
On June 30, 1997 the exchange rate of Dutch guilders into U.S. dollars (the
New York foreign exchange selling rate as of such date) was NLG 1.9641/$1.
AURUM
Aurum Common Stock is quoted on The Nasdaq National Market under the symbol
"AURM." The following table sets forth the quarterly high and low closing sales
prices for Aurum's Common Stock as reported by The Nasdaq National Market since
Aurum Common Stock began trading on The Nasdaq National Market on October 29,
1996. Prior to such date, there was no established public trading market for
Aurum Common Stock.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1996:
Fourth Quarter (From October 29, 1996)..................... $42 1/2 $19
Fiscal 1997:
First Quarter.............................................. 26 1/4 131/4
Second Quarter............................................. 24 1/8 10 1/8
Third Quarter (through July 23, 1997)...................... 26 3/4 23 1/8
</TABLE>
RECENT SHARE PRICES
On May 12, 1997, the last trading day prior to the public announcement of
the proposed Merger, the per share closing sale price of Baan Common Shares and
Aurum Common Stock as reported by The Nasdaq National Market, were $62.125 and
$16.625, respectively. On July 23, 1997, the latest practicable date trading day
prior to the printing of this Proxy Statement/Prospectus, the closing per share
sale prices of Baan Common Shares and Aurum Common Stock, as reported by The
Nasdaq National Market were $75.75 and $26.25, respectively. Aurum stockholders
are strongly encouraged to obtain current market prices for the Baan
28
<PAGE> 38
Common Shares and the Aurum Common Stock. The current market prices for Baan
Common Shares and shares of Aurum Common Stock may be obtained on the Internet
at http://www.nasdaq.com.
AURUM STOCKHOLDERS
As of June 30, 1997, Aurum had issued and outstanding 11,667,626 shares of
its Common Stock held by 157 stockholders of record. Aurum estimates that there
are approximately 1,200 beneficial stockholders.
DIVIDENDS
No cash dividends have been paid on the Baan Shares or Aurum Shares. Baan
intends to retain all available funds and any future earnings for use in the
operation of its business and does not anticipate paying any cash dividends in
the foreseeable future.
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<PAGE> 39
THE PLAN OF MERGER
The following is a brief summary of the material provisions of the Merger
Agreement, a copy of which is attached as Appendix A to this Proxy
Statement/Prospectus and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full and complete text of the
Merger Agreement.
EFFECTIVE TIME
Subject to the provisions of the Merger Agreement, Baan, Aurum and Merger
Sub shall cause the Merger to be consummated by filing a Certificate of Merger
with the Secretary of State of the State of Delaware in accordance with the
relevant provisions of Delaware law as soon as practicable on or after the
Closing Date. The closing of the Merger (the "Closing") shall take place at the
offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, at a time
and date to be specified by the parties, which shall be no later than the second
business day after the satisfaction or waiver of the conditions set forth in the
Merger Agreement, or at such other time, date and location as the parties
thereto agree in writing. The Closing is anticipated to occur on or before
August 31, 1997.
MANNER AND BASIS OF TRANSFERRING SHARES; ASSUMPTION OF OPTIONS
At the Effective Time, by virtue of the Merger and without any action on
the part of Merger Sub, Aurum or any of their security holders, each share of
Aurum Common Stock issued and outstanding immediately prior to the Effective
Time, (other than any shares of Aurum Common Stock to be transferred to Baan as
provided below) will be automatically assigned and transferred to Baan at the
Effective Time without any further action required on the part of Aurum or the
individual stockholders of Aurum or shareholders of Baan, and in exchange
therefor the holder thereof will be entitled to receive a number of Baan Common
Shares equal to the Exchange Ratio, upon surrender of the certificate
representing such share of Aurum Common Stock in the manner provided below (or
in the case of a lost, stolen or destroyed certificate, upon delivery of an
affidavit (and bond, if required)).
The "Exchange Ratio" is initially fixed at 0.3559322034 (representing a
fraction, the numerator of which is $21.00, appropriately adjusted for any Aurum
Recapitalization, as defined below, and the denominator of which is $59.00
appropriately adjusted for any Baan Recapitalization, as defined below (the
"Initial Exchange Ratio")), and is subject to adjustment as provided below.
Notwithstanding any failure of any holder of Aurum Common Stock to surrender the
certificate representing such shares for exchange in the manner provided below,
immediately following the Effective Time, Aurum shall be entitled to effect a
transfer to Baan, on the books, records and stock ledger of Aurum of all shares
of Common Stock of Aurum issued and outstanding immediately prior to the
Effective Time, and in connection therewith to cancel on such books, records and
ledger all certificates theretofore representing such shares and to issue a new
certificate or certificates therefor in the name of and to Baan.
The Exchange Ratio is equal to the Initial Exchange Ratio defined above for
so long as the average closing price per share of the Baan Common Shares on The
Nasdaq National Market over the ten consecutive trading days ending on the
trading day immediately preceding the Closing Date (the "Baan Stock Value") is
more than $50.00 per share. In the event the Baan Stock Value is less than
$50.00 and more than $40.00 per share (in each case, as appropriately adjusted
for any Baan Recapitalization) the Exchange Ratio adjusts proportionately to
maintain the value of the Baan Common Shares issuable in respect of a share of
Aurum Common Stock. Within such $50.00 to $40.00 range, the Exchange Ratio shall
be equal to the product of (i) The Initial Exchange Ratio, times (ii) a
fraction, the numerator of which is $50.00 (appropriately adjusted for any Baan
Recapitalization) and the denominator of which shall be the Baan Stock Value. If
the Baan Stock Value (calculated with reference to the scheduled Closing) is
$40.00 or less per share (appropriately adjusted for any Baan Recapitalization),
the Exchange Ratio is again fixed, at a value of 0.4449152542 (appropriately
adjusted for any Aurum Recapitalization or Baan Recapitalization).
As a result of the foregoing Exchange Ratio calculation, for a Baan Stock
Value in excess of $50.00, the Exchange Ratio is at 0.3559322034. If the Baan
Stock Value decreases to between $50.00 and $40.00 per share, the number of Baan
Common Shares issued in respect of each share of Aurum Common Stock would
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<PAGE> 40
increase proportionately so that the total value of the consideration per share
of Aurum Common Stock would remain unchanged at $17.80 within a Baan Stock Value
range of $50.00 to $40.00 per share. The Exchange Ratio is not adjusted further
if the Baan Stock Value is $40.00 or less per share, and accordingly the maximum
Exchange Ratio is fixed at 0.4449152542. Thus, for any decrease in the Baan
Stock Value below $40.00 per share, the aggregate dollar value of the Baan
Common Shares issuable in respect of each share of Aurum Common Stock will
decrease. On the other hand, the Exchange Ratio is not adjusted in the event
that the Baan Stock Value increases above $59.00 per share (at July 23, 1997,
the Baan Stock Value was $76.66), so that the total dollar value of
consideration received in the Merger in respect of each share of Aurum Common
Stock increases. The Exchange Ratio is not subject to adjustment based on the
per share trading price of Aurum Common Stock. As an example, a holder of 1,000
shares of Aurum Common Stock would receive 355 Baan Common Shares at a Baan
Stock Value in excess of $50.00 per share, between 355 and 444 Baan Common
Shares at a Baan Stock Value between $50.00 and $40.00 per share and 444 Baan
Common Shares at a Baan Stock Value of less than $40.00 per share (plus in each
case cash in lieu of fractional Baan Common Shares). In addition, based on
11,667,626 shares of Aurum Common Stock outstanding on June 30, 1997, the
approximate minimum and maximum number of Baan Common Shares to be issued to
Aurum stockholders in the Merger is 4,153,000 and 5,191,000, respectively.
Neither Aurum nor Baan is entitled to terminate the Merger Agreement based
on the per share trading price of Baan Common Shares of Aurum Common Stock.
As the Exchange Ratio is subject to adjustment as described above, holders
of Aurum Common Stock may not know the exact number of Baan Common shares to be
received in respect of each share of Aurum Common Stock or the value of such
shares until the Closing Date. In addition, the trading price of Baan Common
Shares is subject to volatility. See "Risk Factors -- Possible Volatility of
Baan Common Share Price." Assuming all conditions to the Merger are met or
waived prior thereto, it is anticipated that the Closing Date and the Effective
Date of the Merger, if the Merger is approved by Aurum's stockholders, will
occur on the date of or promptly following the Aurum Special Meeting.
On July 23, 1997, the most recent practicable date prior to the printing of
this Proxy Statement/ Prospectus, the Baan Stock Value was $76.66 and the
closing price per Baan Common Share on The Nasdaq National Market was $75.75.
Based on such Baan Stock Value, in the Merger a holder of 1,000 shares of Aurum
Common Stock would be issued 355 Baan Common Shares (plus cash in lieu of
fractional Baan Common Shares) and the aggregate number of Baan Common Shares to
be issued in the Merger would be approximately 4,153,000 (based on 11,667,626
outstanding shares of Aurum Common Stock on June 30, 1997). Aurum's stockholders
are strongly encouraged to obtain current market quotations for the Baan Common
Shares and shares of Aurum Common Stock. The current market quotations for the
Baan Common Shares and the Aurum Common Stock may be obtained on the Internet at
http://www.nasdaq.com.
31
<PAGE> 41
The table below illustrates the Exchange Ratio determined at various
illustrative Baan Stock Values, and the value per share of Aurum Common Stock of
the Baan Common Shares to be received in the Merger and the approximate total
number of Baan Common Shares to be issued in the Merger, at each such Baan Stock
Value.
<TABLE>
<CAPTION>
APPROXIMATE
TOTAL NUMBER
OF BAAN
VALUE FOR EACH COMMON
ILLUSTRATIVE EXCHANGE SHARE OF AURUM SHARES ISSUED
BAAN STOCK VALUE RATIO COMMON STOCK(1) IN THE MERGER(2)
---------------- ------------ ---------------- -----------------
<S> <C> <C> <C> <C>
$76.66(a) 0.3559322034(3) $27.29 4,153,000
$70.00 0.3559322034(3) $24.92 4,153,000
Exchange Ratio fixed at minimum; value $65.00 0.3559322034(3) $23.14 4,153,000
variable $59.00 0.3559322034(3) $21.00 4,153,000
$55.00 0.3559322034(3) $19.58 4,153,000
$50.00 0.3559322034(4) $17.80 4,153,000
Exchange Ratio variable; value fixed $45.00 0.3954802200(4) $17.80 4,614,000
$40.00 0.4449152542(4) $17.80 5,191,000
Exchange Ratio fixed at maximum; value $37.50 0.4449152542(5) $16.68 5,191,000
variable $35.00 0.4449152542(5) $15.72 5,191,000
</TABLE>
- ---------------
(a) Baan Stock Value if the Closing had occurred on July 23, 1997, the most
recent practicable date prior to the printing of this Proxy
Statement/Prospectus.
(1) The value of each share of Aurum Common Stock is calculated by multiplying
the illustrative Baan Stock Value by the corresponding Exchange Ratio.
(2) Based on 11,667,626 shares of Aurum Common Stock outstanding as of June 30,
1997.
(3) Represents ($21.00/$59.00).
(4) Represents ($21.00/$59.00) x ($50.00/the illustrative Baan Stock Value).
(5) Represents the Exchange Ratio determined by the formula in footnote 4 at an
illustrative Baan Stock Value of $40.00.
An "Aurum Recapitalization" means any stock split, reverse stock split,
stock dividend (including any dividend or distribution of securities convertible
into Aurum Common Stock), reorganization, recapitalization or other like change
with respect to Aurum Common Stock occurring after the date of the Merger
Agreement and prior to the Effective Time. A "Baan Recapitalization" means any
stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Baan Common Shares), reorganization,
recapitalization or other like change with respect to Baan Common Shares
occurring after the date of the Merger Agreement and prior to the Effective
Time.
No fractional shares will be issued by virtue of the Merger, but in lieu
thereof each holder of shares of Aurum Common Stock who would otherwise be
entitled to a fraction of a share of Baan Common Shares (after aggregating all
fractional shares of Baan Common Shares to be received by such holder) will
receive from Baan an amount of cash (rounded to the nearest whole cent) equal to
the product of (i) such fraction, multiplied by (ii) the average closing price
of one Baan Common Share for the five (5) most recent days that Baan Common
Shares have traded ending on the trading day immediately prior to the Effective
Time, as reported on The Nasdaq National Market.
Each share of Aurum Common Stock held by Aurum or owned by Merger Sub, Baan
or any direct or indirect wholly owned subsidiary of Aurum or of Baan
immediately prior to the Effective Time shall be transferred to Baan.
At the Effective Time, all options to purchase Aurum Common Stock then
outstanding under the Aurum Stock Option Plans (as defined in the Merger
Agreement) shall be assumed by Baan or at Baan's discretion
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otherwise substituted in a manner consistent with applicable laws. At the
Effective Time, each Aurum stock option so assumed or substituted will continue
to have, and be subject to, the same terms and conditions set forth in the
applicable Aurum Stock Option Plan immediately prior to the Effective Time
(including, without limitation, any repurchase rights), except that (i) each
such Aurum stock option will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of Baan Common Shares
equal to the product of the number of shares of Aurum Common Stock that were
issuable upon exercise of such Aurum stock option immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded to the nearest whole
number of Baan Common Shares, and (ii) the per share exercise price for the Baan
Common Shares issuable upon exercise of such assumed Aurum Stock Option will be
equal to the quotient determined by dividing the exercise price per share of
Aurum Common Stock at which such Aurum stock option was exercisable immediately
prior to the Effective Time by the Exchange Ratio, rounded up to the nearest
whole cent. Based upon 1,273,097 Aurum Stock Options outstanding on June 30,
1997 and such Baan Stock Value, Aurum Stock Options will be assumed or
substituted for options to purchase approximately 453,136 Baan Common Shares. At
the Effective Time, in accordance with the terms of Aurum's 1996 Employee Stock
Purchase Plan (the "Aurum Employee Stock Purchase Plan"), all offering periods
then in progress shall terminate on a date prior to the Effective Time (the "New
Exercise Date") and all options to purchase shares of Aurum Common Stock under
the Aurum Employee Stock Purchase Plan shall be exercised automatically on the
New Exercise Date.
No later than five days after the Closing, Baan will file a registration
statement on Form S-8 to register the Baan Common Shares issuable with respect
to the Aurum stock options assumed or substituted by Baan pursuant to the Merger
Agreement.
At or promptly after the Effective Time, Baan, acting through the Exchange
Agent, will deliver to each Aurum stockholder of record as of such date a letter
of transmittal with instructions to be used by such stockholder in surrendering
certificates which, prior to the Merger, represented shares of Aurum Common
Stock and which, pursuant to the Merger, will be exchanged for Baan Common
Shares. CERTIFICATES SHOULD NOT BE SURRENDERED BY THE HOLDERS OF AURUM COMMON
STOCK UNTIL SUCH HOLDERS RECEIVE THE LETTER OF TRANSMITTAL FROM THE EXCHANGE
AGENT.
BACKGROUND OF THE MERGER
Historically, enterprise software applications have focused on the
manufacturing, finance and distribution functions in the "back-office" of a
business, or on the customer service, marketing and sales functions in the
"front-office" of a business, with limited integration of these applications.
Baan is a leading provider of back-office enterprise business software and Aurum
is leading provider of front-office enterprise customer relationship software.
In November 1996, as an initial step in addressing the benefits to be realized
through the integration of back-office and front-office applications, Baan
acquired Antalys. Antalys, now a wholly-owned subsidiary of Baan, provides
software that enables a company's sales force to accurately and rapidly
configure and price products and services. Baan believes that the Merger would,
among other things, allow Baan and Aurum the opportunity to provide a range of
software solutions which address both back-office and front-office applications.
Over the past several months, representatives of Aurum and Antalys have
from time to time had conversations concerning the possibility of a combination
of Aurum and Antalys. All such conversations were exploratory in nature, and did
not progress beyond the preliminary stage. The last discussions were held in the
fall of 1996.
In November 1996, Baan acquired Antalys.
Between January and early April 1997, Mr. David Weidner, the Chief
Executive Officer of Antalys, contacted Ms. Mary Coleman, the Chief Executive
Officer of Aurum, on several occasions to discuss a potential business
partnership or merger between Baan and Aurum.
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In February 1997, Mr. Weidner discussed with Ms. Amal Johnson, Executive
Vice President of Baan, and other senior representatives of Baan, the nature of
the previous conversations between representatives of Antalys and Aurum and the
possibility and strategic benefits of a combination of Baan and Aurum.
During February and March 1997, representatives from Cowen met with
representatives from Aurum to discuss potential strategic opportunities between
Aurum and various Customer Interaction Software Companies and Enterprise
Resource Planning companies. During March, at the request of Aurum, Cowen
approached several ERP companies, including Baan, to discuss the effects of a
strategic merger with Aurum.
On April 14, 1997, Ms. Johnson met with Mr. Weidner and Ms. Coleman, and
indicated that Baan had an interest in potentially acquiring a sales force
automation software company such as Aurum. However, due to Baan's focus on other
activities and the integration of operations resulting from Baan's other
acquisitions, it was suggested by Baan that any such acquisition would not
occur, if at all, until the end of 1997.
On April 23, 1997, Mr. Weidner contacted Ms. Coleman at an industry trade
show to discuss establishing a cooperative working relationship between Baan and
Aurum, and to possibly expedite a proposed merger discussion with Baan.
On April 23, 1997, Mr. Weidner met with Tom Tinsley, President and Chief
Operating Officer of Baan, and Jan Baan, a founder of Baan, to discuss a
possible merger with Aurum.
On April 30, 1997, Ms. Johnson, Mr. Tinsley, and Messrs. Jan and Paul Baan,
founders of Baan, met with Ms. Coleman to discuss a potential business
partnership or merger of Baan and Aurum.
On May 5, 1997, Ms. Johnson from Baan met Ms. Coleman from Aurum and
indicated Baan's interest in exploring business options with Aurum.
On May 6, 1997, Ms. Coleman discussed the potential merger with Baan with
the Aurum Board and she received the Aurum Board's approval to proceed with
further discussions with Baan.
On May 6, 1997, Milo Nadir, Baan's U.S. Director of Product Development,
visited Aurum's headquarters to conduct technical evaluation, and Ms. Coleman
met with technical personnel of Antalys to view a product demonstration and to
discuss possible means for integrating Aurum's sales force automation products
with Antalys' sales configurator products.
On May 7, 1997, Aurum and Baan executed a mutual nondisclosure agreement
and representatives of the two companies met together with their legal and
financial advisors to conduct due diligence and discuss the terms of a possible
merger.
From May 6 through May 9, 1997, representatives of the two companies met
together with their legal and financial advisors to further discuss proposed
merger terms. Matters covered included the structure of the transaction, the
value of the Baan Common Shares to be received by the Aurum stockholders in the
merger, the terms of the Stock Option, termination rights, the amount of the
break-up fee and the circumstances under which the break-up fee would be
payable. During these discussions, Baan indicated to Aurum that it desired a
fixed exchange ratio pursuant to which the number of Baan Common Shares to be
received in exchange for each share of Aurum Common Stock in the merger would be
fixed, and that it was willing to issue to Aurum stockholders Baan Common Shares
having a value of $20.00 per share (based on such fixed exchange ratio and
Baan's per share market price at that time).
On May 9, 1997, the Aurum Board met together with Aurum's legal and
financial advisors and with Aurum senior management representatives to review
the discussions. After evaluating the possible terms of a merger transaction and
conferring with legal counsel as to various aspects thereof, the Aurum Board
directed Aurum's management to determine the principal financial and other terms
upon which a merger might be structured. In particular, the Aurum Board
indicated that any proposal from Baan should be at a higher price and should
provide protection to Aurum's stockholders in the event of a significant decline
in the market price of Baan Common Shares.
From May 9 through May 12, 1997, representatives of Baan and Aurum met
together with their legal and financial advisors to continue due diligence and
to negotiate the definitive agreement providing for the Merger.
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During this period, several conversations were held among Aurum's senior
management, legal and financial advisors and individual directors of Aurum
concerning the status of negotiations and the definitive terms of the Merger.
During these negotiations, it was agreed (based on Baan's $59.00 per share stock
price on May 9, 1997) that Aurum stockholders would receive Baan Common Shares
having a value of $21.00 per share in the Merger and that the exchange ratio in
the Merger would be adjusted at the effective time of the Merger in the event
that the market price for Baan's Common Shares subsequently declined below
$50.00 per share, with a fixed exchange ratio applying in the event that the
market price of Baan Common Shares was $40.00 or less per share at such time.
On May 12, 1997, the Board of Supervisory Directors and the Board of
Managing Directors of Baan approved the terms of the Merger, and the Board of
Directors of Aurum approved the terms of the Merger.
On May 13, 1997, Baan and Aurum executed the Merger Agreement and certain
related agreements and issued a joint news release announcing the Merger.
REASONS FOR THE MERGER; AURUM'S BOARD RECOMMENDATION
Baan's Reasons for the Merger
The Board of Supervisory Directors and the Board of Managing Directors of
Baan have approved the Merger Agreement and have identified several potential
benefits of the Merger that they believe will contribute to the success of the
combined companies. These potential benefits include the opportunity to (i)
provide a range of software solutions that offer both back-office and
front-office solutions, (ii) combine UNIX- and NT-based software technologies
from both companies to offer a robust technology platform for existing and
future applications; and (iii) leverage Baan's extensive customer base and
channels of distribution in connection with the sales and marketing of Aurum's
products.
AURUM BOARD RECOMMENDATION; AURUM'S REASONS FOR THE MERGER
The Aurum Board has unanimously approved the Merger Agreement, has
unanimously determined that the Merger is fair to, and in the best interests of
Aurum and its stockholders, and unanimously recommends that holders of shares of
Aurum Common Stock vote FOR approval and adoption of the Merger Agreement and
the Merger.
The Aurum Board's decision to approve the Merger Agreement and the Merger
was based in significant part upon its assessment of the trends developing in
the enterprise application software industry, and the changes which may come
about in such market as a result of increasing competition, consolidation and
customer demands. The Aurum Board believes that companies which are able to
provide customers with a complete software solution, integrating both
back-office manufacturing, distribution and finance applications with
front-office sales, marketing and customer support applications, will be
better-positioned to compete in such environment in the long term. The Aurum
Board believes that ERP companies such as Baan, Oracle, PeopleSoft and SAP,
entities which have much greater resources than Aurum, intend to broaden their
product offerings by entering the sales force automation market and thereby
positioning themselves to offer such a complete integrated front-office and
back-office solution. Baan was viewed by the Aurum Board as a well-managed
company, with very high quality products. A potential merger with Baan was also
considered to be complementary with Aurum's long term objectives and provides an
opportunity to offer a complete solution through the combination of Aurum's
sales force automation and customer support technologies and Baan's technology.
In addition to the foregoing, Aurum identified several other potential
strategic benefits of the Merger that Aurum believes will contribute to the
success of the Merger. These potential benefits include:
(i) the potential to provide a broader and more complete product
offering of the merged companies will provide an opportunity for increased
leverage with Aurum's primary system integration partners, certain Big Six
system integration partners, who are also primary partners of Baan;
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(ii) the potential realization of synergies and cost savings
associated with combining the underlying technologies of Aurum and Baan;
(iii) the opportunity to greatly increase the available sales force to
market Aurum's products by marketing such products through Baan's extensive
sales force;
(iv) the opportunity to broaden and expand Aurum's international
distribution channels by using Baan's extensive sales and distribution
presence in Europe; and
(v) the opportunity to market Aurum's products to Baan's larger
installed base of customers.
Aurum further evaluated the merits of an investment in the Baan Common
Shares and concluded that the Baan Common Shares have appreciation potential in
the long term and represent a more liquid investment than the Aurum Common Stock
and is followed by a much greater number of stock analysts. In this regard, the
Aurum Board considered the fact that the Exchange Ratio is designed to partially
reduce the risk to Aurum stockholders from stock price fluctuations in the
trading price of the Baan Common Shares prior to consummation of the Merger.
In the course of its deliberations, the Aurum Board reviewed with Aurum's
management a number of other factors relevant to the Merger. In particular, the
Aurum Board considered, among other things: (i) the proposed terms of the
Merger, (ii) the likelihood of realizing superior benefits through alternative
business strategies; (iii) information concerning Aurum's and Baan's respective
businesses, historical financial performances, operations and products,
including public SEC and analysts' reports and the due diligence reports from
Aurum's management and financial advisors; (iv) comparative stock prices of
Aurum and Baan; (v) comparative volatility and trading volumes of the two
companies' stock; (vi) an analysis of the relative value that Aurum might
contribute to the future business and prospects of Baan following the Merger;
(vii) the compatibility of the management and businesses of Aurum and Baan; and
(viii) the detailed financial analysis presented by Cowen, including the opinion
of Cowen that the financial terms of the Merger were fair from a financial point
of view to the stockholders of Aurum, as of the date of such opinion.
The Aurum Board also considered certain risks arising in connection with
the Merger, including (i) the potential disruption of Aurum's business that
might result from employee and customer uncertainty and lack of focus following
announcement of the Merger in connection with integrating the operations of
Aurum and Baan; (ii) the possibility that the Merger might not be consummated;
(iii) the effects of the public announcement of the Merger on Aurum's sales and
operating results; (iv) the effects on Aurum's ability to attract and retain key
management, marketing and technical personnel and the progress of certain of its
development projects; (v) the risk that the announcement of the Merger could
result in decisions by customers to cancel or delay purchases of products of
Aurum or Baan; (vi) the risk that Baan's stock price might decline substantially
prior to the closing, thus reducing the value per share to be received by
Aurum's stockholders in the Merger; (vii) the risk associated with attempting to
integrate Baan's Antalys product with Aurum's products; (viii) the risk that the
other benefits sought to be achieved by the Merger will not be achieved; and
(ix) other risks described under the caption "Risk Factors." In the view of the
Aurum Board, these considerations were not sufficient, either individually or in
the aggregate, to outweigh the advantages of the proposed merger in the manner
in which it was proposed.
The foregoing discussion of the information and factors considered by the
Aurum Board is not intended to be exhaustive but is believed to include all
material factors considered by the Aurum Board. In view of the wide variety of
factors, both positive and negative, considered by the Aurum Board, the Aurum
Board did not find it practical to, and did not, quantify or otherwise assign
relative weights to the specific factors considered. After taking into
consideration all of the factors set forth above, the Aurum Board continues to
believe that the Merger is in the best interests of Aurum and its stockholders
and continues to recommend approval and adoption of the Merger Agreement and the
Merger.
OPINION OF COWEN & COMPANY
Pursuant to an engagement letter dated May 6, 1997 (the "Cowen Engagement
Letter"), Cowen has acted as financial advisor to the Aurum Board in connection
with the Merger. As part of this assignment,
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Cowen was asked to render an opinion to the Aurum Board as to the fairness, from
a financial point of view, to the holders of Aurum Common Stock of the financial
terms of the Merger.
On May 12, 1997, Cowen delivered certain written analyses and its oral
opinion to the Aurum Board, subsequently confirmed in writing as of the same
date, to the effect that, as of such date, the financial terms of the Merger
were fair, from a financial point of view, to the holders of Aurum Common Stock.
THE FULL TEXT OF THE WRITTEN OPINION OF COWEN, DATED MAY 12, 1997, IS ATTACHED
HERETO AS APPENDIX B AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF AURUM
COMMON STOCK ARE URGED TO READ THE OPINION IN ITS ENTIRETY FOR THE ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, OTHER MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY
COWEN. THIS SUMMARY OF THE WRITTEN OPINION OF COWEN SET FORTH HEREIN IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. COWEN'S
ANALYSES AND OPINION WERE PREPARED FOR AND ADDRESSED TO THE AURUM BOARD AND ARE
DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE FINANCIAL
TERMS OF THE MERGER AND DO NOT CONSTITUTE AN OPINION AS TO THE MERITS OF THE
MERGER OR A RECOMMENDATION TO ANY HOLDERS OF AURUM COMMON STOCK AS TO HOW TO
VOTE AT THE AURUM SPECIAL MEETING.
Cowen was selected by the Aurum Board as its financial advisor, and to
render an opinion to the Aurum Board, because Cowen is a nationally recognized
investment banking firm and certain principals of Cowen have substantial
experience in transactions similar to the Merger and are familiar with Aurum and
its businesses. As part of its investment banking business, Cowen is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, and valuations for corporate and other purposes. Cowen
acted as a co-manager in the initial public offering of Aurum, which was
declared effective on October 29, 1996, for which Cowen received a customary
fee. Cowen also acted as a co-manager of the initial public offering and a
follow-on public offering of Baan which were declared effective on May 19, 1995
and March 1, 1996, respectively, for which Cowen received a customary fee. In
addition, in the ordinary course of its business, Cowen and its affiliates trade
the equity securities of Aurum and Baan for their own account and for the
accounts of their customers, and accordingly may at any time hold a long or
short position in such securities.
In arriving at its opinion, Cowen (a) reviewed Aurum's financial statements
for the fiscal years ended December 31, 1995 and December 31, 1996 and for the
three month periods ended March 31, 1996 and March 31, 1997 and certain publicly
available filings with the Securities and Exchange Commission, (b) reviewed
Baan's financial statements for the fiscal years ended December 31, 1995 and
December 31, 1996 and for the three month periods ended March 31, 1996 and March
31, 1997 and certain publicly available filings with the Securities and Exchange
Commission, (c) reviewed First Call consensus earnings per share estimates of
financial institutions and financial projections from Cowen equity research
analysts for calendar years 1997 and 1998 relating to Aurum, (d) reviewed First
Call consensus earnings per share estimates of financial institutions and
financial projections from Cowen equity research analysts for calendar years
1997 and 1998 relating to Baan (such estimates and projections, together with
the estimates and projections relating to Aurum, the "Third-Party Estimates"),
(e) held meetings and discussions with management and senior personnel of Aurum
to discuss the business, operations, historical financial results and future
prospects of Aurum and the combined company, (f) conducted a conference call
with management of Baan to discuss the business operations of Baan, the
historical financial results of Baan and future strategies and initiatives of
Baan, and (g) reviewed a summary of the terms of the Merger Agreement provided
to Cowen by counsel to Baan. In addition, Cowen (i) compared certain financial
and stock market information regarding Aurum and Baan with similar information
regarding certain other companies which Cowen deemed relevant, (ii) considered
the financial terms, to the extent publicly available, of selected recent
business transactions which Cowen deemed to be comparable in whole or in part to
the Merger, (iii) analyzed the Third-Party Estimates for the cash flows
generated by Aurum on a stand-alone basis to determine the present value of the
discounted cash flows, (iv) analyzed the potential pro forma financial effects
of the Merger, and (v) reviewed historical market prices and trading volumes of
Aurum Common Stock from October 29, 1996 to May 9, 1997, and of Baan Common
Shares from May 19, 1995 to May 9, 1997, and compared those trading histories
with those of other companies which Cowen deemed relevant. Cowen also reviewed
other publicly available information and conducted such other studies, analyses,
inquiries and investigations as it deemed
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appropriate. Cowen was not requested to, and did not, solicit third party
indications of interest in a merger with, or acquisition of, Aurum.
Cowen assumed and relied, without independent verification, upon the
accuracy and completeness of the financial and other information that was
available to it from public sources, that was provided to it by Aurum or its
representatives, or that was otherwise reviewed by it. With respect to the
Third-Party Estimates, the management of Aurum confirmed to Cowen that such
estimates and projections appeared reasonable. Cowen also assumed, with the
consent of the Aurum Board, that the Third Party Estimates were reasonably
prepared and provided a reasonable basis for Cowen's opinion. Upon the advice of
Aurum management, and with the consent of the Aurum Board, Cowen relied upon the
Third-Party Estimates in performing its analyses. Because projections and
estimates, such as those included in the Third-Party Estimates, are inherently
subject to uncertainty, none of Aurum, Baan, Cowen or any other person assumes
responsibility for their accuracy or attainability. Neither the management of
Aurum nor the management of Baan provided Cowen with financial projections.
Cowen did not make any independent valuation or appraisal of the assets or
liabilities of Aurum or Baan, nor was Cowen furnished with any such appraisals.
Cowen made no independent investigations of any legal matters affecting Aurum or
Baan. Cowen did not express any opinion as to what the value of the Baan Common
Shares actually will be when issued to holders of Aurum Common Stock, or the
prices at which the Baan Common Shares will trade subsequent to the Merger.
Cowen's opinion was necessarily based on economic, market, financial and other
conditions as in effect on, and the information made available to it as of, May
9, 1997 (the last trading day prior to the issuance of the Cowen Opinion). It
should be understood that, although developments subsequent to May 9, 1997 may
affect its opinion, Cowen does not have any obligation to update, revise or
reaffirm its opinion.
The following is a summary of certain financial analyses performed by Cowen
to arrive at its opinion. Cowen performed certain procedures, including each of
the financial analyses described below, and reviewed with the management of
Aurum the assumptions on which such analyses were based and other factors,
including the historical financial results of Aurum and Baan and the Third-Party
Estimates. No limitations were imposed by the Aurum Board with respect to the
investigations made or procedures followed by Cowen in rendering its opinion.
Analysis of Certain Transactions. Cowen reviewed the financial terms, to
the extent publicly available, of thirty-five selected transactions
(collectively, the "Selected Public Software Transactions") involving the
acquisition of public companies in the software industry, which were announced
or completed since May 31, 1990. Cowen also separately reviewed the financial
terms, to the extent publicly available, of a second group of ten selected
transactions (which included one of the Selected Public Software Transactions
and nine non-publicly traded company transactions) involving the acquisition of
companies in the Customer Fulfillment Software ("CFS") industry (the "Selected
CFS Transactions" and, together with the Selected Public Software Transactions,
the "Selected Transactions") since August 9, 1995.
Cowen reviewed the market capitalization of common stock plus total debt
less cash and equivalents ("Enterprise Value") paid in the Selected Transactions
as a multiple of latest reported twelve month ("LTM") revenues, earnings before
interest expense, income taxes, depreciation and amortization ("EBITDA") and
earnings before interest expense and income taxes ("EBIT"), and also examined
the multiples of equity value paid to LTM earnings. In addition, Cowen reviewed
the premium of the offer price over the trading prices one trading day and four
weeks prior to the announcement date of the Selected Transactions.
Such analyses indicated that, (i) on the basis of the Enterprise Value
paid, the Selected Public Software Transactions had a median valuation of 2.85
times LTM revenues, 22.1 times LTM EBITDA and 31.0 times LTM EBIT, and the
Selected CFS Transactions had a median valuation of 1.7 times LTM revenues and
46.4 times LTM EBITDA, and did not have a meaningful median valuation in terms
of LTM EBIT; (ii) on the basis of equity value paid, the Selected Public
Software Transactions had a median valuation of 28.1 times LTM earnings while
the Selected CFS Transactions did not have a meaningful median valuation in
terms of LTM earnings; and (iii) the median premiums by which offer prices
exceeded the closing stock prices one
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trading day and four weeks prior to the announcement date of the Selected Public
Software Transactions were 36.7% and 47.3%, respectively.
The corresponding multiples of LTM revenues, EBITDA, and EBIT for Aurum
implied by Baan's offer on the basis of Enterprise Value are 6.56 times, 88.6
times and 217.6 times, respectively. The corresponding multiple of LTM earnings
implied by Baan's offer on the basis of equity value is 179.5 times. In
addition, Baan's offer represents premiums of 27.3% and 32.3%, respectively,
over the Aurum Common Stock closing price one trading day and four weeks prior
to May 9, 1997.
Although the Selected Transactions were used for comparison purposes, none
of such transactions is directly comparable to the Merger, and none of the
companies in such transactions is directly comparable to Aurum or Baan.
Accordingly, an analysis of the results of such a comparison is not purely
mathematical but instead involves complex considerations and judgments
concerning differences in historical and projected financial and operating
characteristics of the companies involved and other factors that could affect
the acquisition value of such companies or Aurum to which they are being
compared.
Analysis of Certain Publicly Traded Companies. To provide contextual data
and comparative market information, Cowen compared selected historical operating
and financial data and ratios for Aurum to the corresponding data and ratios of
nine public Customer Interaction Software ("CIS") companies (the "Selected CIS
Companies") whose securities are publicly traded and which Cowen deemed to be
relevant to its analysis with respect to Aurum. These companies included: Astea
International, Inc.; Brock International, Inc.; Clarify, Inc.; Pegasystems,
Inc.; Remedy Corporation; Scopus Technology, Inc.; Siebel Systems, Inc.;
Software Artistry, Inc. and Vantive Corporation. Additionally, Cowen reviewed
other selected CIS companies with certain operations deemed to be relevant to
its analysis with respect to Aurum (the "Selected Other CIS Companies" and,
together with the Selected CIS Companies, the "Selected Companies"). These
companies included: Applix, Inc.; Data Systems & Software, Inc.; Datawatch
Corp.; Inference Corp. and McAfee Associates, Inc. Such data and ratios included
the Enterprise Value of such Selected Companies as multiples of revenues, EBITDA
and EBIT for the LTM period. Cowen also examined the ratios of the current
prices of the Selected Companies to the LTM earnings per share ("EPS"),
estimated calendar year 1997 EPS (as estimated by First Call) and estimated
calendar year 1998 EPS (as estimated by First Call) for these companies.
Such analysis indicated that (i) on the basis of the Enterprise Value paid,
the Selected CIS Companies had a median valuation of 8.11 times LTM revenues,
37.9 times LTM EBITDA and 38.4 times LTM EBIT, and the Selected Other CIS
Companies had a median valuation of 0.56 times LTM revenues, 5.9 times LTM
EBITDA and 11.7 times LTM EBIT, respectively; and (ii) on a basis of price per
share, the Selected CIS Companies had a median valuation of 58.1 times LTM EPS,
46.3 times estimated calendar year 1997 EPS and 31.3 times estimated calendar
year 1998 EPS, and the Selected Other CIS Companies had a median valuation of
13.7 times LTM EPS, 27.3 times estimated calendar year 1997 EPS and 20.4 times
estimated calendar year 1998 EPS.
The corresponding multiples of LTM revenues, EBITDA and EBIT for Aurum
implied by Baan's offer on the basis of Enterprise Value are 6.56 times, 88.6
times and 217.6 times, respectively. The corresponding multiples of the LTM EPS
and estimated EPS for the 1997 and 1998 calendar years for Aurum implied by
Baan's offer on the basis of equity value are 89.9 times, 67.7 times and 34.4
times, respectively.
Although the Selected Companies were used for analysis purposes, none of
such companies is directly comparable to Aurum. Accordingly, such an analysis is
not purely mathematical but instead involves complex considerations and
judgments concerning differences in historical and projected financial and
operating characteristics of the Selected Companies and other factors that could
affect the public trading value of the Selected Companies or Aurum to which they
are being compared.
Pro Forma Earnings Analysis. Cowen analyzed the potential effect of the
Merger on the projected combined income statement of Aurum and Baan for Baan's
calendar years ending December 31, 1997 and 1998. This analysis was based on:
(i) the Third-Party Estimates for earnings of Aurum and Baan; and (ii) Baan's
prevailing market price of $59.00 per share as of May 9, 1997. This analysis
concluded that the
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Merger could increase Baan's projected EPS for the year ending December 31, 1997
by approximately $0.01 and could increase Baan's projected EPS for the year
ending December 31, 1998 by approximately $0.03. Cowen's pro forma earnings
analysis excluded the possible effect of cost savings and synergies in the
Merger, as no such information was provided to Cowen.
Exchange Ratio Analysis. Cowen reviewed the ratios of the closing stock
prices per share of Aurum Common Stock to those of Baan Common Shares over
certain periods ending May 9, 1997. Cowen noted that the average of the ratios
of the closing stock prices of Aurum Common Stock and Baan Common Shares for
such periods were 0.471 times for the previous six months, 0.296 times for the
previous three months and 0.270 times for the previous one month. Cowen also
noted that the ratio of the closing market prices of Aurum Common Stock and Baan
Common Shares on May 9, 1997 of $16.50 and $59.00, respectively, was
approximately 0.275 times.
Contribution Analysis. Cowen analyzed the respective financial and other
contributions of Aurum and Baan to the combined company's revenues, EBIT and net
income for calendar years 1996 and, based upon the Third-Party Estimates, 1997
and 1998. This analysis showed that Aurum would contribute to the combined
company 6.9%, 6.8% and 7.2% of revenues, 1.3%, 3.5% and 5.6% of EBIT, and 3.1%,
4.9% and 6.6% of net income, in each case for calendar years 1996, 1997 and
1998, respectively.
Discounted Cash Flow Analysis. Cowen estimated the range of values for
Aurum Common Stock based upon the discounted present value of the projected
after-tax free cash flows of Aurum for the years ended December 31, 1997 and
December 31, 1998, and of the terminal value of Aurum at December 31, 1998,
based upon multiples of projected calendar year 1998 revenue, in each case based
upon the Third-Party Estimates and discussions held with the management of
Aurum. After-tax free cash flow was calculated by taking projected EBIT and
subtracting from such amount projected taxes, capital expenditures, changes in
working capital and changes in other assets and liabilities. In performing this
analysis, Cowen utilized discount rates ranging from 17.9% to 25%, which were
selected based on the actual weighted average cost of capital of Aurum and the
estimated industry weighted average cost of capital. Cowen utilized terminal
multiples of revenues ranging from 3.0 times to 5.0 times, which represented the
general range of revenue multiples for the Selected Transactions. Utilizing this
methodology, Aurum's value per share ranged from $16.71 to $23.39 per share.
Because of the limited number of years for which projected financial information
from the Third-Party Estimates for Aurum was available, and because the
discounted terminal value accounted for such a high percentage of the discounted
present value of Aurum, Cowen did not ascribe significance to this analysis in
reaching its opinion.
Stock Trading History. Cowen reviewed the historical market prices and
trading volumes of Aurum Common Stock from October 29, 1996 (the date of Aurum's
initial public offering) to May 9, 1997, and of Baan Common Shares from May 19,
1995 (the date of Baan's initial public offering) to May 9, 1997. Cowen also
compared Aurum's and Baan's closing stock prices with an index of the Selected
Companies and an index of Enterprise Resource Planning companies (including
Computer Associates International, Inc.; Informix Corporation; JBA Holdings PLC;
Oracle Corporation; PeopleSoft, Inc.; Ross Systems, Inc.; SAP AG, and System
Software Associates, Inc.), respectively. This information was presented solely
to provide the Aurum Board with background information regarding the stock
prices of Aurum and Baan over the periods indicated. Cowen noted that over the
indicated periods the high and low prices for shares of Aurum Common Stock were
$42.50 and $9.25, respectively, and the high and low prices for Baan Common
Shares were $59.00 and $11.13, respectively, and that the average daily trading
volume of Aurum's shares traded was approximately 148,341 shares.
The summary set forth above does not purport to be a complete description
of the analyses performed by Cowen. The preparation of a fairness opinion
involves various determinations as to the most appropriate and relevant methods
of financial analyses and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
partial analysis or summary description. Cowen did not attribute any particular
weight to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Accordingly, notwithstanding the separate factors summarized above, Cowen
believes, and has advised the Aurum Board, that its analyses must
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be considered as a whole and that selecting portions of its analyses and the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the process underlying its opinion. In performing
its analyses, Cowen made numerous assumptions with respect to industry
performance, business and economic conditions and other matters, many of which
are beyond the control of Aurum and Baan. These analyses performed by Cowen are
not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses. In
addition, analyses relating to the value of businesses do not purport to be
appraisals or to reflect the prices at which businesses or securities may
actually be sold. Accordingly, such analyses and estimates are inherently
subject to substantial uncertainty and none of Aurum, Baan, Cowen or any other
person assumes responsibility for their accuracy. As mentioned above, the
analyses supplied by Cowen and its opinion were among several factors taken into
consideration by the Aurum Board in making its determination to enter into the
Merger Agreement. See "Reasons for the Merger; Aurum's Board Recommendation."
The analyses of Cowen and its opinion should not be considered as determinative
of the decision of the Aurum Board to enter into the Merger Agreement.
Pursuant to the Cowen Engagement Letter, Aurum has agreed to pay certain
fees to Cowen for its financial advisory services provided in connection with
the Merger. Aurum has paid Cowen a non-refundable retainer fee of $25,000. If
the Merger is consummated, Cowen will be entitled to receive a transaction fee
in an amount currently estimated, based on the three month weighted average
outstanding shares of Aurum Common Stock and Aurum's net debt, in each case as
of March 31, 1997, and a $59.75 price for Baan Common Stock as of June 13, 1997,
to be approximately $1.6 million (against which transaction fee the retainer fee
will be credited). Additionally, Aurum has agreed to reimburse Cowen for its
out-of-pocket expenses (including the reasonable fees and expenses of its
counsel) incurred or accrued during the period of, and in connection with,
Cowen's engagement, without regard as to whether the Merger is consummated.
Aurum has also agreed to indemnify Cowen against certain liabilities, including
liabilities under the federal securities laws, relating to or arising out of
services performed by Cowen as financial advisor to the Aurum Board in
connection with the Merger, unless it is finally judicially determined that such
liabilities arose out of Cowen's gross negligence or willful misconduct. The
terms of the fee arrangement with Cowen, which are customary in transactions of
this nature, were negotiated at arm's length between Aurum and Cowen, and the
Aurum Board was aware of such arrangement, including the fact that a significant
portion of the aggregate fee payable to Cowen is contingent upon consummation of
the Merger.
STOCK OWNERSHIP FOLLOWING THE MERGER
Based on 11,667,626 outstanding shares of Aurum Common Stock at June 30,
1997, at the minimum Exchange Ratio of 0.3559322034 the holders of Aurum Common
Stock would receive an aggregate of approximately 4,153,000 Baan Common Shares
in the Merger, and at the maximum Exchange Ratio of 0.4449152542, the holders of
Aurum Common Stock would receive an aggregate of approximately 5,191,000 Baan
Common Shares. Such share amounts would represent approximately 4% and 5% of
Baan's outstanding capital stock, respectively. On July 23, 1997, the most
recent practicable date prior to the printing of this Proxy
Statement/Prospectus, the Baan Stock Value was $76.66. Based on this Baan Stock
Value, the aggregate number of Baan Common Shares to be issued to Aurum
stockholders in the Merger would be approximately 4,153,000 (based on the
outstanding shares of Aurum Common Stock on June 30, 1997). Based upon 1,273,097
Aurum Stock Options outstanding on June 30, 1997 and such Baan Stock Value,
Aurum Stock Options will be assumed or substituted for options to purchase
approximately 453,136 Baan Common Shares. The foregoing numbers of shares and
percentages are subject to change in the event that the capitalization of either
Baan or Aurum changes or the Baan Stock Value changes, in each case, subsequent
to June 30, 1997 and prior to the Effective Time. In addition, Aurum's
stockholders are strongly encouraged to obtain current market quotations for the
Baan Common Shares and shares of Aurum Common Stock. The current market
quotations for the Baan Common Shares and shares of Aurum Common Stock may be
obtained on the Internet at http://www.nasdaq.com.
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CONDUCT FOLLOWING THE MERGER
Once the Merger is consummated, Merger Sub will cease to exist as a
corporation, and all of the business, assets, liabilities and obligations of
Merger Sub will be merged into Aurum with Aurum remaining as the surviving
corporation. Following the Merger, Aurum will continue to operate independently
as a wholly owned subsidiary of Baan. It is expected that the business
operations of Aurum and Baan's subsidiary Antalys, Inc. will be merged following
the Merger. The stockholders of Aurum will become shareholders of Baan, and
their rights as shareholders will be governed by the Baan Articles of
Association and the laws of The Netherlands.
Pursuant to the Merger Agreement, the Certificate of Incorporation of
Merger Sub in effect immediately prior to the Effective Time will become the
Certificate of Incorporation of the surviving corporation and the Bylaws of
Merger Sub will become the Bylaws of the surviving corporation. At the Effective
Time, the Board of Directors of the surviving corporation will consist of the
directors who were serving as directors of Merger Sub immediately prior to the
Effective Time. The officers of Aurum immediately prior to the Effective Time
will remain as officers of the surviving corporation, until their successors are
duly elected or appointed or qualified.
CONDUCT OF BAAN'S AND AURUM'S BUSINESS PRIOR TO THE MERGER
Pursuant to the Merger Agreement, until the earlier of the termination of
the Merger Agreement pursuant to its terms or the Effective Time, Aurum (and
each of its subsidiaries) and Baan agree, except (i) as otherwise contemplated
by the Merger Agreement, or (ii) to the extent that the other party shall
otherwise consent in writing, to carry on its business in the usual, regular and
ordinary course, in substantially the same manner as conducted prior to the
execution of the Merger Agreement, to pay its debts and taxes when due subject
to good faith disputes over such debts or taxes, to pay or perform other
material obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to preserve intact its present
business organization, keep available the services of its present officers and
employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings. Baan has agreed to cause its material subsidiaries to act in
accordance with the foregoing provisions.
In addition, notwithstanding the above described provisions, without the
prior consent of Baan, Aurum shall not do any of the following, nor shall Aurum
permit its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize
cash payments in exchange for any options granted under any of such plans;
(b) Grant any severance or termination pay to any officer or employee
except payments in amounts consistent with policies and past practices or
pursuant to written agreements outstanding, or policies existing, on the
date of the Merger and as previously disclosed in writing to Baan, or adopt
any new severance plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Aurum
intellectual property (other than in the ordinary course of business and in
the best interests of Aurum), or enter into grants of future patent rights,
other than licenses in the ordinary course of business and consistent with
past practice;
(d) Declare or pay any dividends on or make any other distributions
(whether in cash, stock, equity securities or property) in respect of any
capital stock or split, combine or reclassify any capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(e) Repurchase or otherwise acquire, directly or indirectly, any
shares of capital stock, or any securities convertible into shares of
capital stock, or subscriptions, rights, warrants or options to acquire any
shares of capital stock or any securities convertible into shares of
capital stock, or enter into other
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agreements or commitments of any character obligating it to repurchase any
such shares, warrants, options or convertible securities, except for the
repurchase at cost of unvested shares held by Aurum employees on the
termination of their employment;
(f) Issue, deliver, sell, authorize or propose the issuance, delivery
or sale of, any shares of capital stock or any securities convertible into
shares of capital stock, or subscriptions, rights, warrants or options to
acquire any shares of capital stock or any securities convertible into
shares of capital stock, or enter into other agreements or commitments of
any character obligating it to issue any such shares or convertible
securities, other than the issuance of (i) shares of Aurum Common Stock
pursuant to the exercise of stock options therefor outstanding as of the
date of the Merger Agreement or granted as described in clause (iv) below
of this paragraph, (ii) shares of Aurum Common Stock issuable to
participants in the Aurum Employee Stock Purchase Plan, consistent with
past practice, and the terms thereof, (iii) shares of the Aurum Common
Stock issuable pursuant to the Stock Option Agreement, and (iv) options to
purchase Aurum Common Stock granted at fair market value, consistent with
past practices and in accordance with the Aurum Stock Option Plans and
Aurum's option grant guidelines;
(g) Cause, permit or propose any amendments to any charter document or
bylaw (or similar governing instruments of any subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a material portion of the assets
of, or by any other manner, any business or any corporation, partnership
interest, association or other business organization or division thereof,
or otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the business of Aurum or enter into
any material joint ventures, strategic partnerships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate,
to the business of Aurum, except in the ordinary course of business
consistent with past practice;
(j) Incur any indebtedness for borrowed money (other than ordinary
course trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire debt securities
of Aurum or guarantee any debt securities of others;
(k) Adopt or amend any employee benefit or employee stock purchase or
employee option plan, or enter into any employment contract, pay any
special bonus or special remuneration to any director or employee other
than in the ordinary course of business consistent with past practice, or
increase the salaries or wage rates of its officers or employees other than
in the ordinary course of business, consistent with past practice;
(l) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than any such payment, discharge or satisfaction in the ordinary course of
business;
(m) Make any grant of exclusive rights to any third party;
(n) Enter into any material partnership arrangements, joint
development agreements or strategic alliances, agreements to create
standards or agreements with "Standards" bodies;
(o) Take any action that would be reasonably likely to interfere with
Baan's ability to account for the Merger as a pooling of interests; or
(p) Agree in writing or otherwise to take any of the actions described
in (a) through (o) above.
The prior consent of Baan will be deemed to have been received if, prior to
the taking of any of the above described actions, such action shall have been
discussed with Amal Johnson, Baan's Executive Vice President, and she shall have
received such additional information as she may have reasonably requested and
shall have not objected to the taking of the proposed action.
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Until the earlier of the termination of the Merger Agreement pursuant to
its terms or the Effective Time, Baan shall not acquire or agree to acquire by
merging or consolidating with, or by purchasing any equity interest in or a
material portion of the assets of, any direct competitor of Aurum in the United
States if such acquisition would have a reasonable likelihood of preventing or
materially delaying the consummation of the transactions contemplated by the
Merger Agreement or would result in a material adverse effect on Aurum or Baan.
Prior to the Effective Time, without the prior written consent of Baan,
Aurum has agreed not to adopt a shareholders rights plan.
Until the earlier of the termination of the Merger Agreement pursuant to
its terms or the Effective Time, neither Baan nor Aurum is required to take any
action pursuant to the above described provisions that would cause a violation
of the HSR Act.
NO SOLICITATION
Subject to the provisions of the Merger Agreement summarized in the next
following paragraph, from and after the date of the Merger Agreement until the
earlier of the Effective Time or termination of the Merger Agreement pursuant to
its terms, Aurum and its subsidiaries will not, and will instruct their
respective directors, officers, employees, representatives, investment bankers,
agents and affiliates not to, directly or indirectly, (i) solicit or knowingly
encourage submission of, any Acquisition Proposal (as defined below) by any
person, entity or group (other than Baan and its affiliates, agents and
representatives), or (ii) participate in any discussions or negotiations with,
or disclose any non-public information concerning Aurum or any of its
subsidiaries to, or afford any access to the properties, books or records of
Aurum or any of its subsidiaries to, or otherwise assist or facilitate, or enter
into any agreement or understanding with, any person, entity or group (other
than Baan and its affiliates, agents and representatives), in connection with
any Acquisition Proposal with respect to Aurum. For the purposes of the Merger
Agreement, an "Acquisition Proposal" means any proposal or offer relating to (i)
any merger, consolidation, sale or license of substantial assets or similar
transactions involving Aurum or any of its subsidiaries (other than sales or
licenses of assets or inventory in the ordinary course of business or as
permitted under the terms of the Merger Agreement), (ii) sale by Aurum of any
shares of capital stock of Aurum (including without limitation by way of a
tender offer or an exchange offer) except as expressly permitted under the
Merger Agreement, (iii) the acquisition by any person of beneficial ownership or
a right to acquire beneficial ownership of, or the formation of any "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) which beneficially owns, or has the right to acquire beneficial
ownership of, 10% or more of the then outstanding shares of capital stock of
Aurum (except for acquisitions for passive investment purposes of not more than
15% of the then outstanding shares of capital stock of Aurum only in
circumstances where the person or group qualifies for and files a Schedule 13G
with respect thereto and does not become obligated to file a Schedule 13D); or
(iv) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing. Under the terms of
the Merger Agreement, Aurum has agreed to (i) cease any and all existing
activities, discussions or negotiations with any parties with respect to any of
the foregoing; (ii) notify Baan as promptly as practicable if it receives any
proposal or written inquiry or written request for information in connection
with an Acquisition Proposal or potential Acquisition Proposal; and (iii) as
promptly as practicable, notify Baan of the significant terms and conditions of
any such Acquisition Proposal. In addition, subject to the other provisions of
the Merger Agreement summarized herein, until the earlier of the Effective Time
or termination of the Merger Agreement pursuant to its terms, Aurum and its
subsidiaries will not, and will instruct their respective directors, officers,
employees, representatives, investment bankers, agents and affiliates not to,
directly or indirectly, make or authorize any public statement, recommendation
or solicitation in support of any Acquisition Proposal made by any person,
entity or group (other than Baan); provided, however, that the Aurum Board may
take and disclose to Aurum's stockholders a position with respect to a tender
offer pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act.
Notwithstanding the provisions described above, prior to the Effective Time
Aurum may, to the extent the Aurum Board determines in good faith, after
consultation with outside legal counsel, that the Board's fiduciary duties under
applicable law require it to do so, participate in discussions or negotiations
with, and
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furnish information to, any person, entity or group after such person, entity or
group has delivered to Aurum in writing an unsolicited bona fide Acquisition
Proposal which the Aurum Board in its good faith reasonable judgment determines,
after consultation with its independent legal and financial advisors, would
result in a transaction more favorable than the Merger to the stockholders of
Aurum (an "Aurum Alternative Proposal"). In addition, in connection with a
possible Acquisition Proposal, Aurum may refer any third party to the section of
the Merger Agreement summarized herein or make a copy of such section available
to a third party. In the event Aurum receives an Aurum Alternative Proposal,
nothing contained in the Merger Agreement (but subject to the terms thereof)
will prevent the Aurum Board from recommending such Aurum Alternative Proposal
to its stockholders, if the Board determines, in good faith, after consultation
with outside legal counsel, that such action is required by its fiduciary duties
under applicable law; in such case, the Aurum Board may withdraw, modify or
refrain from making its recommendation concerning the Merger, and, to the extent
it does so, Aurum may refrain from soliciting proxies and taking such other
action necessary to secure the vote of its stockholders as may be required by
the Merger Agreement; provided, however, that Aurum has agreed to (i) provide at
least forty-eight (48) hours prior notice of any Aurum Board meeting at which it
is reasonably expected to contemplate an Aurum Alternative Proposal and (ii) not
recommend to its stockholders a Aurum Alternative Proposal for a period of not
less than 5 business days after Baan's receipt of a copy of such Aurum
Alternative Proposal (or a description of the significant terms and conditions
thereof, if not in writing); and provided further, that nothing contained in the
Merger Agreement limits Aurum's obligation to hold and convene the Aurum
Stockholders' Meeting (regardless of whether the recommendation of the Aurum
Board shall have been withdrawn, modified or not yet made) or to provide the
Aurum stockholders with material information relating to such meeting.
Notwithstanding the above described provisions, Aurum will not provide any
non-public information to a third party unless: (i) Aurum provides such
non-public information pursuant to a nondisclosure agreement with terms
regarding the protection of confidential information at least as restrictive as
the terms in a certain confidentiality agreement between Aurum and Baan; (ii)
such non-public information has been previously delivered to Baan; and (iii)
Aurum advises Baan in writing of such disclosure, including the party to whom
disclosed.
CONDITIONS TO THE MERGER
The respective obligations of each party to the Merger Agreement to effect
the Merger are subject to the satisfaction at or prior to the Effective Time of
the following conditions: (i) approval of the Merger Agreement and the Merger by
the stockholders of Aurum shall have been obtained; (ii) the SEC shall have
declared the Registration Statement effective and no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose, and no similar proceeding in respect
of the Proxy Statement/Prospectus shall have been initiated or threatened in
writing by the SEC; (iii) no governmental entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger and all waiting periods under
the HSR Act relating to the transactions contemplated by the Merger Agreement
will have expired or terminated early; (iv) Baan and Aurum shall each have
received written opinions from legal counsel to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code;
provided, however, that if the legal counsel to either Baan or Aurum does not
render such opinion, this condition shall nonetheless be deemed to be satisfied
with respect to such party if counsel to the other party renders such opinion to
such party; and (v) the Baan Common Shares issuable to the stockholders of Aurum
pursuant to the Merger Agreement and such other shares required to be reserved
for issuance in connection with the Merger shall have been authorized for
listing on The Nasdaq National Market and on the Amsterdam Stock Exchange.
In addition, the obligation of Aurum to consummate and effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any of which may be waived, in writing, exclusively
by Aurum: (i) the representations and warranties of Baan and Merger Sub
contained in the Agreement shall be true and correct in all material respects as
of the date of the Merger Agreement and on
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and as of the Effective Time except for changes contemplated by the Merger
Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such particular date), with the same force and effect as if made on and as of
the Effective Time, and except in such cases (other than the representation with
respect to Baan's and Merger Sub's capitalization) where the failure to be so
true and correct would not have a material adverse effect on Baan; (ii) Baan and
Merger Sub shall have performed or complied in all material respects with all
agreements and covenants required by the Merger Agreement to be performed or
complied with by them on or prior to the Effective Time; and (iii) no event or
condition which could have a material adverse effect with respect to Baan shall
have occurred since the date of the Merger Agreement.
Further, the obligations of Baan and Merger Sub to consummate and effect
the Merger are subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived, in writing,
exclusively by Baan: (i) subject to a specified materiality threshold specified
in the Merger Agreement, the representations and warranties of Aurum contained
in the Merger Agreement shall be true and correct in all material respects on
the date of the Merger Agreement and on and as of the Effective Time except for
changes contemplated by the Merger Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such particular date), with the
same force and effect as if made on and as of the Effective Time, except in such
cases (other than certain specified representations) where the failure to be so
true and correct would not have a material adverse effect on Aurum; (ii) Aurum
shall have performed or complied in all material respects with all agreements
and covenants required by the Merger Agreement to be performed or complied with
by it on or prior to the Effective Time; (iii) no material adverse effect (as
defined in the Merger Agreement) with respect to Aurum shall have occurred since
the date of the Merger Agreement; (iv) employment and non-competition agreements
in the specified forms shall have been entered into by certain key officers and
employees of Aurum and such agreements shall be in full force and effect; (v)
each of Baan and Aurum shall have received letters from each of Moret Ernst &
Young Accountants and Coopers & Lybrand L.L.P., each dated within two (2)
business days prior to the Effective Time, regarding those firms' concurrence
with Baan management's and Aurum management's conclusions as to the
appropriateness of pooling of interest accounting for the Merger under
Accounting Principles Board Opinion No. 16, if the Merger is consummated in
accordance with the Merger Agreement; and (vi) Aurum shall have obtained
required material consents under certain agreements to which Aurum is a party.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time of the Merger, whether before or after approval of the Merger by the
stockholders of Aurum: (i) by mutual written consent duly authorized by the
Boards of Directors of Baan and Aurum; (ii) by either Aurum or Baan if the
Merger shall not have been consummated by October 14, 1997 for any reason;
provided, however, that (A) if the failure of the Merger to occur prior to such
date shall have resulted solely from the failure to obtain any necessary
governmental approval, clearance or consent (including termination or waiver of
all HSR waiting periods and clearance of the Registration Statement by the SEC)
such date for termination shall be automatically extended to the date upon which
such governmental approval, clearance or consent is obtained (but not beyond
December 13, 1997) and (B) the right to terminate the Merger Agreement under
this provision is not available to any party whose action or failure to act has
been a principal cause of or resulted in the failure of the Merger to occur on
or before such date and such action or failure to act constitutes a breach of
the Merger Agreement; (iii) by either Aurum or Baan if a governmental entity
shall have issued an order, decree or ruling or taken any other action which has
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree or ruling is final and nonappealable; (iv) by either
Aurum or Baan if the required approval of the Merger Agreement and the Merger by
the Aurum stockholders shall not have been obtained at a meeting of the Aurum
stockholders duly convened therefor or at any adjournment thereof (provided that
the right to terminate the Merger Agreement shall not be available to Aurum
where the failure to obtain Aurum stockholder approval shall have been caused by
the action or failure to act of Aurum in breach of the Merger Agreement); (v) by
Baan, if the Aurum Board accepts or recommends a Aurum Alternative Proposal to
the stockholders of Aurum, or if the Aurum Board shall have
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withheld, withdrawn or modified in a manner adverse to Baan its recommendation
in favor of adoption and approval of the Merger Agreement and approval of the
Merger; (vi) by Aurum upon certain breaches of any representation, warranty,
covenant or agreement on the part of Baan set forth in the Merger Agreement, or
if any representation or warranty of Baan shall become untrue (provided that if
such inaccuracy in Baan's representations and warranties or breach by Baan is
curable by Baan through the exercise of its commercially reasonable efforts,
then Aurum may only terminate the Merger Agreement if the breach is not cured
within ten (10) days following the date of written notice from Aurum of such
breach, provided that Baan continues to exercise such commercially reasonable
efforts to cure such breach); or (vii) by Baan upon certain breaches of any
representation, warranty, covenant or agreement on the part of Aurum set forth
in the Merger Agreement, or if any representation or warranty of Aurum shall
become untrue (provided that if such inaccuracy in Aurum's representations and
warranties or breach by Aurum is curable by Aurum through the exercise of its
commercially reasonable efforts, then Baan may only terminate the Merger
Agreement if the breach is not cured within ten (10) days following the date of
written notice from Baan of such breach, provided that Aurum continues to
exercise such commercially reasonable efforts to cure such breach).
BREAK UP FEE
Aurum has agreed to pay to Baan the sum of $2,500,000 if:
(a) the Merger Agreement is terminated by either Aurum or Baan in the
event that the required approval of the Merger Agreement and the Merger by
the Aurum stockholders shall not have been obtained at a meeting of the
Aurum stockholders duly convened therefor or at any adjournment thereof (in
the absence of Baan having suffered an event which constitutes a material
adverse effect, as defined);
(b) the Merger Agreement is terminated by Baan because the Aurum Board
accepts or recommends an Aurum Alternative Proposal to the stockholders of
Aurum, or the Aurum Board withholds, withdraws or modifies in a manner
adverse to Baan its recommendation in favor of adoption and approval of the
Merger Agreement and the Merger (in each case in the absence of Baan having
suffered an event which constitutes a material adverse effect); or
(c) the Merger Agreement is terminated by Baan in connection with
uncured breaches by Aurum of certain representations, warranties, covenants
or agreements set forth in the Merger Agreement.
Except as set forth above, Baan and Aurum have agreed that all fees and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such expenses whether
or not the Merger is consummated, except that Baan and Aurum will share equally
all fees and expenses, other than attorneys' and accountants fees and expenses,
incurred in connection with the printing and filing of this Proxy
Statement/Prospectus, the Registration Statement of which this Proxy
Statement/Prospectus forms part and any amendments or supplements thereto.
RELATED AGREEMENTS
Stock Option Agreement
As an inducement to Baan to enter into the Merger Agreement, Aurum entered
into the Stock Option Agreement. A copy of the Stock Option Agreement is
attached as Appendix C to this Proxy Statement/Prospectus. Pursuant to the Stock
Option Agreement, Aurum granted to Baan an irrevocable option (the "Option") to
acquire up to a number of shares of Aurum Common Stock equal to 19.9% of the
issued and outstanding shares as of the first date, if any, upon which an
Exercise Event (as defined below) shall occur (the "Option Shares"), in the
manner set forth below (i) by paying cash at a price of $21.00 per share (the
"Exercise Price") and/or, at Baan's election, (ii) by exchanging therefor Baan
Common Shares at a rate for each Option Share, of a number of Baan Common Shares
equal to the Exercise Price divided by the average closing sale prices during
the previous 30 trading days of Baan Common Shares on the Nasdaq National Market
immediately preceding the date of the closing of the particular Option exercise.
The Option may be exercised in whole or in part, at any time or from time
to time following the occurrence of an Exercise Event. An "Exercise Event" shall
have occurred upon the occurrence of both:
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(i) the individuals or entities entering into Stockholder Voting Agreements and
providing the related proxies on the date of the Stock Option Agreement having
ceased to own, in the aggregate, at least a majority of the capital stock of
Aurum or (ii) any of such Stockholder Voting Agreements or the related proxies
having been declared invalid or unenforceable and (x) the earlier of the
consummation of, or the record date, if any, for a meeting of Aurum's
stockholders with regard to an Acquisition Proposal with respect to Aurum with
any party other than Baan (or an affiliate of Baan) if the Aurum Board shall
have withheld, withdrawn, or modified in a manner adverse to Baan its
recommendation in favor of adoption and approval of the Merger Agreement and
approval of the Merger (and at that time there shall not have occurred a
material adverse effect on Baan) after receipt of and in connection with an
Acquisition Proposal with respect to Aurum, (y) the commencement of a tender or
exchange offer for 20% or more of any class of Aurum's capital stock (and/or
during any time which such tender or exchange offer remains open or has been
consummated), or (z) a termination of the Merger Agreement by Baan (1) because
the Aurum Board accepts or recommends a Aurum Alternative Proposal to the
stockholders of Aurum, or the Aurum Board withholds, withdraws or modifies in a
manner adverse to Baan its recommendation in favor of adoption and approval of
the Merger Agreement and the Merger (in each case in the absence of Baan having
suffered an event which constitutes a material adverse effect) or (2) in
connection with uncured breaches by Aurum of certain representations,
warranties, covenants or agreements set forth in the Merger Agreement.
The Option shall terminate upon the earlier of (i) the Effective Time and
(ii) 12 months following the termination of the Merger Agreement in accordance
with its terms if an Exercise Event shall have occurred on or prior to the date
of such termination, and (iii) the date on which the Merger Agreement is
terminated in accordance with its terms if no Exercise Event shall have occurred
on or prior to such date; provided, however, that if the Option is exercisable
but cannot be exercised by reason of any applicable government order or because
the waiting period related to the issuance of the Option Shares under the HSR
Act shall not have expired or been terminated, then the Option shall not
terminate until the tenth business day after such impediment to exercise shall
have been removed or shall have become final and not subject to appeal.
Notwithstanding the above described provisions, the Option may not be exercised
if (i) Baan shall have breached in any material respect any of its covenants or
agreements contained in the Merger Agreement or (ii) the representations and
warranties of Baan contained in the Merger Agreement shall not have been true
and correct in all material respects on and as of the date when made.
If Baan shall have exercised the Option, Baan may thereafter deliver to
Aurum a written notice (a "Put Notice"), at any time during which Baan may
exercise the Option, specifying that it wishes to sell (as specified in such Put
Notice) all or a portion of the Option Shares acquired as a result of such
exercise at the price, and in the form, described below. At any closing in
respect of a Put Notice, (i) Baan shall surrender to Aurum the certificates
evidencing the Option Shares to be purchased by Aurum at such Put closing and
(ii) Aurum shall deliver to Baan a proportionate amount of the aggregate
consideration paid by Baan in connection with any exercise of the Option. In
addition, the consideration to be paid by Aurum to Baan at any Put closing shall
be in the form that is proportionate to the form previously paid by Baan to
Aurum. By way of example only, if (x) one third of the aggregate Option Shares
shall have been acquired for cash and two-thirds shall have been acquired for
Baan Common Shares, then (y) the consideration to be paid by Aurum to Baan at
such Put closing shall consist of one-third cash and two-thirds Baan Common
Shares.
The Stock Option Agreement provides for the grant of certain registration
rights to Baan with respect to the Option Shares.
Affiliate Agreements
Each of the members of the Aurum Board, certain officers of Aurum and
certain stockholders of Aurum have entered into agreements restricting sales,
dispositions or other transactions reducing their risk of investment with
respect to the shares of Aurum Common Stock held by them prior to the Merger and
the Baan Common Shares to be received by them in the Merger so as to comply with
the requirements of applicable federal securities and tax laws and to help
ensure that the Merger will be treated as a pooling-of-interests for accounting
and financial reporting purposes. Pursuant to such agreements, such directors,
officers and stockholders have also acknowledged the resale restrictions imposed
by Rule 145 under
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the Securities Act on Baan Common Shares to be received by them in the Merger
and have made certain representations pertaining to the "continuity of interest"
requirements so as to qualify the Merger as a reorganization within the meaning
of Section 368(a) of the Code.
Stockholder Voting Agreements
Certain stockholders of Aurum have each entered into a Stockholder Voting
Agreement with Baan pursuant to which such holders have agreed to vote their
shares of Aurum Common Stock (representing a majority of the votes entitled to
be cast by holders of Aurum Common Stock as of June 30, 1997) in favor of
approval and adoption of the Merger Agreement and the Merger and any matter that
could reasonably be expected to facilitate the Merger. Contemporaneously with
the execution of such Stockholder Voting Agreements, such stockholders executed
and delivered to Baan an irrevocable proxy granting Baan the authority to vote
their shares for the Merger.
Non-Competition Agreements
Mary Coleman, Aurum's Chief Executive Officer, and certain Aurum founders,
as a condition to the Merger will enter into a Non-Competition Agreement with
Baan providing that, during the period beginning on the Effective Date and
ending two years thereafter (or, in the case of Mary Coleman, three years
thereafter), such employee will not, directly or indirectly, either as an
individual or as an employee, agent, consultant, advisor, independent
contractor, general partner, officer, director, shareholder, investor, lender,
or in any other capacity whatsoever, of any person, firm, corporation,
partnership or other entity or in any other capacity directly or indirectly: (i)
participate or engage in the design, development, manufacture, production,
marketing, sale or servicing of any product, or the provision of any service,
that directly or indirectly relates to or competes with any of Aurum's products
or services in existence or under development at the Effective Time; (ii) induce
or attempt to induce any person who at the time of such inducement is an
employee of Aurum or Baan to perform work or services for any other person other
than Aurum or Baan; or (iii) permit the name of the Employee to be used in
connection with any business competitive with Aurum's business of the
development, manufacturing, distribution and selling of sales force automation
software and the provision of services in relation to the same, in each case in
certain geographic areas.
INTERESTS OF CERTAIN PERSONS
In considering the recommendation of the Aurum Board with respect to the
Merger Agreement, holders of Aurum Common Stock should be aware that members of
the Aurum Board and the executive officers of Aurum have certain interests in
the Merger that are in addition to the interests of holders of Aurum Common
Stock generally. These interests include certain employment arrangements with
Baan, the lapse of certain restrictions with respect to shares of Aurum Common
Stock held by such persons, the acceleration of the vesting of certain options
to acquire Aurum Common Stock and certain rights to indemnification.
Employment Agreements
In connection with the anticipated Merger, Mary Coleman and certain other
key Aurum officers or employees (including Aurum's Vice President of Marketing
and Chief Technology Officer) will, as a condition to the Merger, enter into an
Employment Agreement with Aurum effective upon the Merger. These Employment
Agreements will provide for, among other things, continued employment at Aurum
following the Merger at the specified positions and at salary levels consistent
with the current salaries received by such employees. In addition, each such
employee will be eligible to receive an additional year-end bonus from Baan of
$50,000 (or, in the case of Ms. Coleman, $125,000) upon achievement of certain
financial objectives. Although each Employment Agreement provide for a term of
one year (or, in the case of Ms. Coleman, three years), employment under these
agreements may nonetheless be at-will under law. The success of Aurum following
the Merger will depend, in part, upon the continued employment of these and
other key officers and employees of Aurum. See "Risk Factors -- Risks Associated
with the Merger -- Dependence on Key Aurum Personnel."
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Aurum Options
In connection with agreements previously entered into with Aurum, based on
holdings as of June 30, 1997, the repurchase restriction on 185,240 shares of
restricted Aurum Common Stock held by Ms. Coleman will lapse and options held by
Ms. Coleman in respect of 100,000 shares of Aurum Common Stock will vest and
become immediately exercisable in connection with the Merger. Similarly, based
on holdings as of June 30, 1997, the repurchase restrictions on 26,250 shares of
restricted Aurum Common Stock held by Christopher Dier, Aurum's Chief Financial
Officer, will lapse and options held by Mr. Dier in respect of 85,224 shares of
Aurum Common Stock will vest and become immediately exercisable in connection
with the merger, depending on the ultimate determination of Mr. Dier's
responsibilities. The weighted average purchase price/exercise price of such
restricted shares and options as of June 30, 1997 was $6.42 for Ms. Coleman and
$7.75 for Mr. Dier. In light of the difference between such purchase/exercise
prices and the Exchange Ratio and the lapsing of the restrictions on their
restricted Aurum Common Stock and the ability to immediately exercise their
options, Ms. Coleman and Mr. Dier will receive a significant benefit from the
Merger.
Indemnification and Insurance
The Merger Agreement provides that, from and after the Effective Time, Baan
shall cause the surviving corporation in the Merger to fulfill and honor in all
respects the obligations of Aurum pursuant to any indemnification agreements
between Aurum and its directors and officers existing prior to the date of the
Merger Agreement whether or not such persons continue in their position with the
surviving corporation following the Effective Time. The Certificate of
Incorporation and By-laws of the surviving corporation in the Merger will
contain provisions providing for indemnification and the limitation of liability
which are substantially equivalent to those set forth in Aurum's Certificate of
Incorporation and By-laws, which provisions will not be amended, repealed or
otherwise modified from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who, immediately prior to the
Effective Time, were directors, officers, employees or agents of Aurum, unless
such modification is required by law.
After the Effective Time, the surviving corporation in the Merger will to
the fullest extent permitted under applicable law, indemnify and hold harmless,
each present and former director or officer of Aurum or any Aurum subsidiary
(collectively, the "Indemnified Parties") against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal administrative or
investigative, to the extent arising out of or pertaining to any action or
omission in his or her capacity as a director or officer of Aurum or any Aurum
subsidiary arising out of or pertaining to the transactions contemplated by the
Merger Agreement for a period of six years after the date of the Merger
Agreement. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (a) any
counsel retained for the defense of the Indemnified Parties for any period after
the Effective Time will be reasonably satisfactory to the Indemnified Parties,
(b) after the Effective Time, the surviving corporation will pay the reasonable
fees and expenses of such counsel promptly after statements therefor are
received, and (c) the surviving corporation will cooperate in the defense of any
such matter; provided, however, that the surviving corporation will not be
liable for any settlement effected without its written consent (which consent
will not be unreasonably withheld); and provided, further, that, in the event
that any claim or claims for indemnification are asserted or made within such
six-year period, all rights to indemnification in respect of any such claim or
claims will continue until the disposition of any and all such claims. The
Indemnified Parties as a group may be defended by only one law firm (in addition
to local counsel) with respect to any single action unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties.
Baan will or will cause the surviving corporation in the Merger to maintain
in effect directors' and officers' liability insurance covering those persons
who are currently covered by Aurum's directors' and officers' liability
insurance policy, to the extent and in such amounts that Baan provides such
coverage to its directors and officers.
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The surviving corporation in the Merger shall pay all expenses, including
attorneys' fees, that may be incurred by any Indemnified Parties in enforcing
the indemnity and other obligations provided for above. The indemnification
provisions described above will survive any termination of the Merger Agreement
and the consummation of the Merger at the Effective Time, are intended to
benefit Aurum, the surviving corporation and the Indemnified Parties, and will
be binding on all successors and assigns of the surviving corporation.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
considerations relevant to the transfer of shares of Aurum Common Stock for Baan
Common Shares pursuant to the Merger that are generally applicable to holders of
Aurum Common Stock. This discussion is based on currently existing provisions of
the Code, existing and proposed Treasury Regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Any such change, which may or may not be retroactive, could alter the tax
consequences to Baan, Aurum or Aurum's stockholders as described herein.
Aurum stockholders should be aware that this discussion does not deal with
all federal income tax considerations that may be relevant to particular Aurum
stockholders in light of their particular circumstances, such as stockholders
who are dealers in securities, who are subject to the alternative minimum tax
provisions of the Code, who are foreign persons, who do not hold their Aurum
Common Stock as capital assets or who acquired their shares in connection with
stock option or stock purchase plans or in other compensatory transactions. In
particular, this discussion does not address the tax consequences to an Aurum
stockholder owning at least 5% of either the total voting power or the total
value of the Baan Ordinary Shares after the Merger (determined after taking into
account ownership under the attribution rules of the Code). In addition, the
following discussion does not address the tax consequences of the Merger under
foreign, state or local laws, the tax consequences of transactions effectuated
prior or subsequent to, or concurrently with, the Merger (whether or not any
such transactions are undertaken in connection with the Merger), including
without limitation any transaction in which shares of Aurum Common Stock are
acquired or Baan Common Shares are disposed of, or the tax consequences of the
assumption by Baan of the Aurum options. Accordingly, AURUM STOCKHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO
THEM OF THE MERGER, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN
TAX CONSEQUENCES.
The Merger is intended to constitute a "reorganization" within the meaning
of the Code (a "Reorganization"), in which case, subject to the limitations and
qualifications referred to herein, the Merger will generally result in the
following federal income tax consequences:
(a) No gain or loss will be recognized by holders of Aurum Common
Stock solely as a result of the transfer of their shares of Aurum Common
Stock for Baan Common Shares in the Merger (except to the extent of cash
received in lieu of fractional shares).
(b) The aggregate tax basis of the Baan Common Shares received by
Aurum stockholders in the Merger (including any fractional share of Baan
Ordinary Shares not actually received) will be the same as the aggregate
tax basis of the Aurum Common Stock surrendered in exchange therefor.
(c) The holding period of the Baan Common Shares received by each
Aurum stockholder in the Merger will include the period for which the Aurum
Common Stock surrendered in exchange therefor was considered to be held,
provided that the Aurum Common Stock so surrendered is held as a capital
asset at the time of the Merger.
(d) Cash payments received by holders of Aurum Common Stock in lieu of
a fractional share will be treated as if a fractional share of Baan
Ordinary Shares had been issued in the Merger and then redeemed by Baan. An
Aurum stockholder receiving such cash will recognize gain or loss upon such
payment, measured by the difference (if any) between the amount of cash
received and the basis in such fractional share. The gain or loss should be
capital gain or loss provided that such share of Aurum Common Stock was
held as a capital asset at the Effective Time.
(e) Neither Baan nor Aurum will recognize any gain solely as a result
of the Merger.
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The parties are not requesting a ruling from the Internal Revenue Service
("IRS") in connection with the Merger. The obligations of each of Baan and Aurum
to effect the Merger are contingent on receipt of an opinion from their
respective counsel (Wilson Sonsini Goodrich & Rosati and Fenwick & West LLP,
respectively), to the effect that, for federal income tax purposes, the Merger
will qualify as a "reorganization" within the meaning of Section 368(a) of the
Code. These opinions, which are collectively referred to herein as the "Tax
Opinions," will neither bind the IRS nor preclude the IRS from adopting a
contrary position. In addition, the Tax Opinions will be subject to certain
assumptions and qualifications and will be based on the truth and accuracy of
certain representations made by Baan, Merger Sub and Aurum, including
representations in certificates delivered to counsel by the respective
managements of Baan, Merger Sub and Aurum. Of particular importance are those
assumptions and representations relating to the "continuity of interest"
requirement.
To satisfy the continuity of interest requirement, Aurum stockholders must
not, pursuant to a plan or intent existing at or prior to the Merger, dispose of
or transfer so much of either (i) their Aurum Common Stock in anticipation of
the Merger or (ii) the Baan Common Shares to be received in the Merger
(collectively, "Planned Dispositions"), such that Aurum stockholders, as a
group, would no longer have a significant equity interest in the Aurum business
being conducted after the Merger. Aurum stockholders will generally be regarded
as having a significant equity interest as long as the number of Baan Common
Shares received in the Merger less the number of shares subject to Planned
Dispositions (if any) represents, in the aggregate, a substantial portion of the
entire consideration received by the Aurum stockholders in the Merger. No
assurance can be made that the continuity of interest requirement will be
satisfied, and if such requirement is not satisfied, that the Merger would not
be treated as a Reorganization. The Tax Opinions rely in part on representations
from Baan and Aurum relating to the continuity of interest requirement.
A successful IRS challenge to the Reorganization status of the Merger (as a
result of a failure to satisfy the continuity of interest requirement or
otherwise) would result in Aurum stockholders recognizing taxable gain or loss
with respect to each share of Aurum Common Stock surrendered equal to the
difference between the stockholder's basis in such share and the fair market
value, as of the Effective Time, of the Baan Common Shares received in exchange
therefor. In such event, a stockholder's aggregate basis in the Baan Common
Shares so received would equal its fair market value, and the stockholder's
holding period for such stock would begin the day after the Merger.
The termination of Aurum's repurchase option with respect to certain shares
of Aurum Common Stock owned by Mary Coleman and the acceleration of
exercisability of options held by Mary Coleman constitute an "excess parachute
payment" pursuant to Section 280G of the Code. The excess-parachute payment also
creates a potential loss of deduction for Aurum that is not expected to exceed
$741,083. See "-- Interests of Certain Persons -- Aurum Option."
GOVERNMENTAL AND REGULATORY MATTERS
Under the HSR Act, and the rules promulgated thereunder by the FTC, the
Merger cannot be consummated until notifications have been given to the FTC and
the Antitrust Division and the specified waiting period has expired or
terminated early. All required filings under the HSR Act have been made and the
applicable waiting period has been terminated early. In addition, in connection
with the consummation of the Merger, certain notification and waiting period
requirements under antitrust laws in certain foreign countries will be complied
with. At any time before or after consummation of the Merger, and
notwithstanding the expiration of the applicable waiting periods under the HSR
Act and other applicable antitrust laws, the Antitrust Division, the FTC or any
state or foreign governmental authority could take such action under the
antitrust laws as it deems necessary or desirable in the public interest. Such
action could include seeking to enjoin the consummation of the Merger, seeking
divestiture of Aurum or businesses of Baan or Aurum by Baan or seeking to impose
conditions on the combined companies with respect to the business of the
combined companies. Private parties may also seek to take legal action under the
antitrust laws under certain circumstances.
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ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for financial
reporting purposes in accordance with generally accepted accounting principles.
This accounting method would permit the recorded assets and liabilities of Aurum
to be carried forward to the consolidated financial statements of Baan at their
recorded historical amounts. No recognition of goodwill in the combination is
required of either party to the Merger. The obligations of Baan and Merger Sub
to consummate and effect the Merger are subject to each of Baan and Aurum having
received letters from each of Moret Ernst & Young and Coopers & Lybrand L.L.P.,
each dated within two (2) business days prior to the Effective Time, regarding
those firms' concurrence with Baan's managements' and Aurum's management's
conclusions as to the appropriateness of pooling of interests accounting for the
Merger under APB 16. To support the treatment of the Merger as a pooling of
interests, certain affiliates of Aurum have entered into agreements imposing
certain resale restrictions on their stock. See "The Plan of Merger -- Affiliate
Agreements."
AFFILIATES' RESTRICTIONS ON SALE OF BAAN COMMON SHARES
The Baan Common Shares to be issued in the Merger will have been registered
under the Securities Act by a Registration Statement on Form F-4, thereby
allowing those shares to be traded without restriction by all former holders of
Aurum Common Stock who (i) are not deemed to be "affiliates" of Aurum at the
time of the Aurum Special Meeting (as "affiliates" is defined for purposes of
Rule 145 under the Securities Act) and (ii) who do not become "affiliates" of
Baan after the Merger.
The Merger Agreement requires Aurum to use its reasonable best efforts to
cause its affiliates to enter into agreements not to make any public sale of any
Baan Common Shares received upon consummation of the Merger, except in
compliance with Rule 145 under the Securities Act. See "-- Related Agreements --
Affiliates Agreements" above. In general, Rule 145, as currently in effect,
imposes restrictions on the manner in which such affiliates may make resales of
Baan Common Shares and also on the number of shares of Baan Common Shares that
such affiliates, and others (including persons with whom the affiliates act in
concert), may sell within any three-month period. These restrictions will
generally apply for at least a period of one year after the Merger (or longer if
the person is an affiliate of Baan).
NO APPRAISAL RIGHTS
Aurum stockholders are not entitled to appraisal rights under the DGCL in
connection with the Merger. Accordingly, stockholders who do not wish to receive
Baan Common Shares in exchange for their shares of Aurum Common Stock must
liquidate their investment by selling their Aurum Common Stock prior to the
consummation of the Merger.
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THE AURUM SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of Aurum
Common Stock as part of the solicitation of proxies by the Aurum Board for use
at the Aurum Special Meeting to be held August 26, 1997 at 9:00 a.m., local
time, at Aurum's principal executive offices at 2350 Mission College Boulevard,
Santa Clara, California 95054 and at any adjournments or postponements thereof.
This Proxy Statement/Prospectus, and the accompanying Proxy Card, are first
being mailed to holders of Aurum Common Stock on or about July 28, 1997.
The purpose of the Aurum Special Meeting is to consider and vote upon a
proposal to approve and adopt the Merger and the Merger Agreement, which sets
forth the terms and conditions of the Merger and the transactions contemplated
thereby. The Merger Agreement is attached hereto as Appendix A. See "The Plan of
Merger."
On July 23, 1997, the most recent practicable date prior to the printing of
this Proxy Statement/Prospectus, the Baan Stock Value was $76.66 and the closing
price per Baan Common Share on The Nasdaq National Market was $75.75. Based on
such Baan Stock Value, in the Merger a holder of 1,000 shares Aurum Common Stock
would be issued 355 Baan Common Shares (plus cash in lieu of fractional Baan
Common Shares). Aurum's stockholders are strongly encouraged to obtain current
market quotations for the Baan Common Shares and shares of Aurum Common Stock.
The current market quotations for the Baan Common Shares and shares of Aurum
Common Stock may be obtained on the Internet at http://www.nasdaq.com. If the
Merger is completed, Aurum stockholders will no longer hold any interest in
Aurum other than through their interest in shares of Baan Common Shares.
Consummation of the Merger is subject to a number of conditions, including the
receipt of required regulatory and Aurum stockholder approval.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of Aurum Common Stock at the close of business on
June 30, 1997 are entitled to notice of and to vote at the Aurum Special
Meeting. As of the close of business on the Aurum Record Date, there were shares
of Aurum Common Stock outstanding and entitled to vote, held of record by
stockholders (although Aurum has been informed that there are in excess of
beneficial owners). Each Aurum stockholder is entitled to one vote for each
share of Aurum Common Stock held as of the Aurum Record Date.
VOTING OF PROXIES
The Aurum Proxy Card accompanying this Proxy Statement/Prospectus is
solicited on behalf of the Aurum Board for use at the Aurum Special Meeting.
Stockholders are requested to complete, date and sign the accompanying proxy and
promptly return it in the accompanying envelope or otherwise mail it to Aurum.
All proxies that are properly executed and received by Aurum prior to the vote
at the Aurum Special Meeting, and that are not revoked, will be voted at the
Aurum Special Meeting in accordance with the instructions indicated thereon.
EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE MERGER. The Aurum Board does not presently intend to
bring any other business before the Aurum Special Meeting other than the
specific proposal referred to in this Proxy Statement/Prospectus and specified
in the Notice of the Aurum Special Meeting. So far as is known to the Aurum
Board, no other matters are to be brought before the Aurum Special Meeting. As
to any business that may properly come before the Aurum Special Meeting,
including, among other things, consideration of any motion made for adjournment
of the Aurum Special Meeting (including, without limitation, for purposes of
soliciting additional votes for approval and adoption of the Merger Agreement),
however, it is intended that proxies, in the form enclosed, will be voted in
respect thereof in accordance with the judgment of the persons voting such
proxies. An Aurum stockholder who has given a proxy may revoke it at any time
before it is exercised at the Aurum Special Meeting, by (i) filing a written
notice of revocation with, or delivering a duly executed proxy bearing a later
date, to, Christopher Dier, Secretary, Aurum Software, Inc., 3385 Scott
Boulevard, Santa Clara, California 95054, or (ii) attending the Aurum Special
Meeting and voting in person (although attendance at the Aurum Special Meeting
will not, by itself, revoke a proxy). Please note, however, that if a
stockholder's shares are held of record by a broker, bank or other nominee and
that stockholder wishes to vote
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at the Aurum Special Meeting, the stockholder must bring to the Aurum Special
Meeting a letter from the broker, bank or other nominee confirming that
stockholder's beneficial ownership of the shares.
VOTE REQUIRED
Pursuant to the DGCL and the Aurum Restated Certificate of Incorporation
and the Aurum Bylaws, approval and adoption of the Merger Agreement and the
Merger requires the affirmative vote of the holders of at least a majority of
the outstanding shares of Aurum Common Stock entitled to vote at the Aurum
Special Meeting. SINCE THE REQUIRED VOTE OF THE AURUM STOCKHOLDERS IS BASED UPON
THE NUMBER OF OUTSTANDING SHARES OF AURUM COMMON STOCK, RATHER THAN UPON THE
SHARES ACTUALLY VOTED IN PERSON OR BY PROXY AT THE AURUM SPECIAL MEETING, THE
FAILURE BY THE HOLDER OF ANY SUCH SHARES TO SUBMIT A PROXY OR TO VOTE IN PERSON
AT THE AURUM SPECIAL MEETING (INCLUDING ABSTENTIONS AND "BROKER NON-VOTES") WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE MERGER.
THE MATTERS TO BE CONSIDERED AT THE AURUM SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE STOCKHOLDERS OF AURUM. ACCORDINGLY, STOCKHOLDERS ARE URGED TO
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Certain stockholders of Aurum beneficially owning a majority of the
outstanding shares of Aurum Common Stock have entered into agreements to vote
their shares of Aurum Common Stock in favor of the Merger Agreement and the
Merger at the Aurum Special Meeting. Accordingly, the approval of the Merger and
the Merger Agreement is likely assured. Notwithstanding these stockholder voting
agreements, the vote of each Aurum stockholder is important and all stockholders
are encouraged to vote. See "The Plan of Merger-- Related
Agreements--Stockholder Voting Agreements."
QUORUM; ABSTENTIONS; BROKER NON-VOTES
A majority, or 5,833,813 of the shares of Aurum Common Stock on the Aurum
Record Date, present in person or represented by proxy, will constitute a quorum
for the transaction of business. If an executed Aurum proxy is returned and the
stockholder has specifically abstained from voting on any matter, the shares
represented by such proxy will be considered present at the Aurum Special
Meeting for purposes of determining a quorum. If an executed proxy is returned
by a broker holding shares in street name which indicates that the broker does
not have discretionary authority as to certain shares to vote on the Merger
Agreement and the Merger, such shares will be considered present at the meeting
for purposes of determining a quorum. Since the required vote of the Aurum
stockholders is based upon the number of outstanding shares of Aurum Common
Stock, abstentions and broker non-votes will have the same effect as a vote
against approval and adoption of the Merger Agreement and the Merger.
SOLICITATION OF PROXIES AND EXPENSES
Aurum will bear the cost of the solicitation of proxies in the enclosed
form from its stockholders. In addition to solicitation by mail, the directors,
officers and employees of Aurum may solicit proxies from stockholders by
telephone, telegram, letter, facsimile or in person. Following the original
mailing of the proxies and other soliciting materials, Aurum will request that
brokers, custodians, nominees and other record holders forward copies of the
proxy and other soliciting materials to persons for whom they hold shares of
Aurum Common Stock and request authority for the exercise of proxies. In such
cases, Aurum, upon the request of the record holders, will reimburse such record
holders for their reasonable expenses.
APPRAISAL RIGHTS
Aurum stockholders are not entitled to appraisal rights under the DGCL in
connection with the Merger. See "The Plan of Merger -- No Appraisal Rights."
Accordingly, stockholders who do not wish to receive Baan Common Shares in
exchange for their shares of Aurum Common Stock must liquidate their investment
by selling their Aurum Common Stock prior to the consummation of the Merger.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial information assumes a
business combination between Baan and Aurum, is accounted for as a pooling of
interests and is based on the respective historical consolidated financial
statements and the notes thereto, which in the case of Aurum are included in
this Proxy Statement/Prospectus and in the case of Baan are incorporated by
reference in this Proxy Statement/Prospectus. The pro forma combined condensed
balance sheet combines Baan's March 31, 1997 consolidated balance sheet with
Aurum's March 31, 1997 balance sheet. The pro forma statements of operations
combine Baan's and Aurum's historical results for each of the periods indicated
below.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results or financial position
that would have occurred if the Merger had occurred during the periods
presented, nor is it necessarily indicative of future operating results or
financial positions.
These pro forma financial statements are based on, and should be read in
conjunction with, the historical consolidated financial statements, and the
related notes thereto, of Baan and Aurum included or incorporated by reference
in this Proxy Statement/Prospectus.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1997
AFTER GIVING EFFECT TO THE MERGER
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BAAN AURUM ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................... $199,172 $ 42,085 $241,257
Marketable securities................................................... 38,990 -- 38,990
Accounts receivable, net................................................ 170,567 10,735 181,302
Other current assets.................................................... 16,402 1,313 $ 283 17,998
-------- ------- ------- --------
Total current assets.................................................. 425,131 54,133 283 479,547
Property and equipment, at cost........................................... 56,562 6,759 (100) 63,221
Less accumulated depreciation and amortization............................ (22,663) (3,093) (25,756)
-------- ------- ------- --------
Net property and equipment................................................ 33,899 3,666 (100) 37,465
Software development costs, net........................................... 17,361 -- 17,361
Intangible assets, net.................................................... 22,384 -- 22,384
Other non current assets.................................................. 8,011 691 (250) 8,452
-------- ------- ------- --------
Total assets.......................................................... $506,786 $ 58,490 $ (67) $565,209
======== ======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings from banks........................................ $ 38 $ -- $ 38
Accounts payable........................................................ 31,180 998 32,178
Income taxes payable.................................................... 24,675 230 (3,120) 21,785
Accrued and other current liabilities................................... 47,498 4,865 7,650 60,013
Deferred revenue........................................................ 25,205 4,024 29,229
Current portion of capital leases....................................... -- 403 403
Current portion of long-term debt....................................... 620 162 782
-------- ------- ------- --------
Total current liabilities............................................. 129,216 10,682 4,530 144,428
Long-term debt............................................................ 200,986 -- 200,986
Long-term lease obligation................................................ -- 336 336
Other long-term liabilities............................................... 5,494 -- 5,494
Shareholders' equity:
Common shares........................................................... 529 12 10 551
Additional paid-in capital.............................................. 103,004 61,565 (10) 164,559
Notes receivable from shareholders...................................... -- (1,125) (1,125)
Deferred compensation................................................... (425) -- (425)
Retained earnings (deficit)............................................. 70,975 (12,980) (8,000) 53,398
3,120
283
Accumulated translation adjustment...................................... (2,993) -- (2,993)
-------- ------- ------- --------
Total shareholders' equity............................................ 171,090 47,472 (4,597) 213,965
-------- ------- ------- --------
$506,786 $ 58,490 $ (67) $565,209
======== ======= ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
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<PAGE> 66
BAAN COMPANY N.V.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
AFTER GIVING EFFECT TO THE MERGER
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- --------------------
1994 1995 1996 1996 1997
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net revenues:
License revenue.................. $ 63,704 $118,894 $240,667 $42,937 $ 83,441
Maintenance and service
revenue....................... 48,762 84,434 163,580 34,809 49,459
Hardware and other revenue....... 16,370 23,357 11,295 5,063 317
-------- -------- -------- ------- --------
Total net revenues............ 128,836 226,685 415,542 82,809 133,217
Costs and expenses:
Cost of license revenue.......... 3,397 6,678 14,442 3,200 5,733
Cost of maintenance and service
revenue....................... 37,702 68,174 134,851 29,811 37,844
Cost of hardware and other
revenue....................... 13,229 18,714 8,895 3,938 165
Sales and marketing.............. 45,097 63,803 111,103 22,130 37,253
Research and development......... 10,233 21,004 45,843 8,378 19,167
General and administrative....... 11,803 24,488 34,701 7,583 11,233
Amortization of intangible
assets........................ 2,172 4,701 6,125 1,443 1,448
Non-recurring operating
expenses...................... 4,172 -- -- -- --
-------- -------- -------- ------- --------
Total costs and
expenses............... 127,805 207,562 355,960 76,483 112,843
Income from operations............. 1,031 19,123 59,582 6,326 20,374
Interest income (expense), net..... (1,192) 522 285 110 524
Other income, net.................. 118 1,071 -- -- --
-------- -------- -------- ------- --------
Income (loss) before income taxes
and minority interest............ (43) 20,716 59,867 6,436 20,898
Provision for income taxes......... 2,171 9,817 23,255 2,768 7,831
Minority interest in earnings of
consolidated subsidiaries........ (976) (72) -- -- --
-------- -------- -------- ------- --------
Net income (loss).................. $ (3,190) $ 10,827 $ 36,612 $ 3,668 $ 13,067
======== ======== ======== ======= ========
Net income (loss) per share........ $ (0.04) $ 0.12 $ 0.37 $ 0.04 $ 0.13
Shares used in computing per share
amounts.......................... 79,339 91,433 98,248 96,618 101,932
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
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NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(1) The pro forma combined condensed financial statements reflect the
issuance of 0.3559322 Baan Common Shares for each outstanding share of Aurum
Common Stock. Use of the maximum Exchange Ratio of 0.4449153 per share of Aurum
Common Stock would have no impact upon the pro forma combined net income (loss)
per share amounts in these periods.
(2) The combined company expects to incur charges to operations currently
estimated to be between $6 million and $10 million primarily in the quarter in
which the Merger is consummated to reflect direct transaction costs of between
$5.5 million and $7.5 million and additional anticipated costs of approximately
$2.5 million associated with integrating the two companies. Costs of integrating
the companies are expected to include asset writedowns and alterations of
distributor arrangements attributable to the Merger. An estimated charge of $8
million, representing the midpoint of the estimated range (with an associated
tax benefit of $3.1 million), is reflected in the pro forma condensed combined
balance sheet as a reduction to retained earnings and an increase to accrued
liabilities. The estimated charge is not reflected in the pro forma condensed
combined statement of operations data. The amount of this charge is a
preliminary estimate and therefore is subject to change.
(3) There were no material transactions between Baan and Aurum during any
period presented. The unaudited pro forma combined condensed statements of
operations reflect a conforming reclassification adjustment of $87,000 and
$125,000 for 1994 and 1995, respectively from general and administrative
expenses to sales and marketing. No such conforming adjustment was required for
the other periods shown. No additional conforming adjustments were required. The
three month period ended March 31, 1997 includes an income tax expense reduction
of $283,000 to reflect the partial tax benefiting of Aurum's cumulative tax
losses.
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AURUM BUSINESS
The following discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical results or anticipated results, including those set
forth under "Risk Factors" in the "Aurum Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this Proxy
Statement/Prospectus. The following discussion and analysis should be read in
conjunction with "Selected Financial Data" and Aurum's Financial Statements and
Notes thereto included elsewhere in this Proxy Statement/Prospectus.
THE COMPANY
Aurum Software, Inc. is a leading provider of enterprise-wide sales and
marketing information software. Aurum develops, markets and supports application
software that helps to automate the sales, marketing and customer support
functions of a business. Aurum's products are based on advanced client/server
and Internet/Intranet technologies. They are designed to address the sales and
marketing requirements of businesses ranging from medium-sized enterprises to
large multinational corporations and specifically to improve the operational
efficiency of such companies' sales and marketing business processes. Aurum has
deployed its applications in a diverse set of industries, including financial
services, chemicals, high technology, health care, information services,
manufacturing, publishing, telecommunications and utilities.
Aurum was initially incorporated in California in 1991 and reincorporated
in Delaware in 1996. Unless the context otherwise requires, the term "Aurum"
refers to Aurum Software, Inc., a Delaware corporation and its predecessor Aurum
Software, Inc., a California corporation. Aurum currently maintains its
executive offices at 3385 Scott Boulevard, Santa Clara, California 95054. Its
telephone number at that address is (408) 986-8100. Aurum is relocating its
executive offices to 2350 Mission College Boulevard, Suite 1300, Santa Clara,
California 95054 prior to the holding of the Aurum Special Meeting.
The market for Aurum's products has developed in recent years as businesses
have sought new ways to improve organizational and operational efficiency and as
advanced client/server technologies have permitted user-friendly,
enterprise-wide automation solutions. In an effort to improve administrative
efficiency and reduce costs, many companies have already applied such
technologies to automate "back office" operations, including manufacturing,
finance, order entry and human resources. The automation of these back office
operations has not, however, addressed the competitive challenges associated
with "front office" sales and marketing functions. Automation solutions for
front office functions have been slower to develop, in part due to the complex
dynamics and highly individualized nature of sales and marketing business
processes within organizations. Companies are, however, increasingly focusing on
their front office sales and marketing operations as the next major business
function to be automated and are recognizing the importance of integrating front
office and back office applications. Aurum believes that many companies are now
looking for packaged sales and marketing application software capable of mapping
to their specific business processes, supporting multi-tiered distribution
channels, interfacing with back office applications, adapting to emerging
technologies such as the Internet and providing scalable synchronization
capabilities to coordinate customer information among geographically dispersed
and mobile users.
Aurum offers the Aurum Customer Enterprise, a suite of software
applications intended to address the functional needs of sales, marketing and
support organizations involved in the management of customer relationships. Its
client/server and Internet-enabled applications manage information describing
sales opportunities, customer relationships, forecasts and quoting, sales
methodologies, sales cycles and customer support. Aurum Customer Enterprise is
designed to enable a multi-tier team selling model by permitting a company's
sales force, marketing staff and administrative and operations personnel to
share information relating to customers and prospective customers as well as
information relating to products, pricing, forecasts, competitive intelligence,
sales metrics and optimal selling practices. Aurum's applications are intended
to provide better customer support by providing current information on customer
issues to all members of the sales and
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support team. In addition, Aurum provides technical support to its customers,
including business consulting, requirements definition, installation, training
and customer support.
Aurum believes that the determining factors in its ability to achieve broad
market acceptance of its products will include the functionality of its
software, the ability of its software to integrate with other enterprise
applications, its database synchronization technology and the ability of its
products to scale to the growth requirements of large multinational
organizations. In that regard, Aurum has focused its strategy on maintaining and
enhancing its technological position, including the integration of Internet and
corporate-based Intranets into its products, as well as on improving its ability
to deploy its products rapidly in large-scale implementations. In addition,
Aurum has established a number of strategic business and technology partnerships
with industry leaders in consulting services and implementation as well as
strategic technology partnerships with other technology companies. Aurum intends
to continue to work with these firms and companies to address new markets and
initiatives. Finally, Aurum is also seeking to extend distribution of its
products in North America through its direct sales force and internationally by
adding additional distributors and, where appropriate, by employing a direct
sales force.
SOFTWARE PRODUCTS
The Aurum Customer Enterprise application suite utilizes common
administrative modules and a central customer database that contains key
information about active and historical marketing campaigns, customer contacts
and relationships, account strategy, task and activity history, the account
sales team and the business accomplishments necessary to move each customer to
the next phase in the sales process. Aurum's software makes customer support
histories available to a company's sales force and can also supply relevant
financial, order history and shipment data when its sales and marketing
applications are linked to other enterprise applications.
Aurum's applications operate on a UNIX or NT based server with an Oracle,
Sybase, Informix or Microsoft SQL Server database accessed through Windows 3.1,
Windows NT or Windows 95 clients. In addition, mobile, detached users may
operate on a laptop database and perform on-demand real-time database
synchronization to a corporate or local database server using Aurum's dbSync
product through a LAN/WAN, dial-up, RAS, XcelleNet, wireless or Internet
connection. These applications may be used individually or as part of an
integrated customer management solution.
Business Applications
Aurum SalesTrak. SalesTrak is an enterprise-wide sales force automation
application designed to enable mobile and connected sales professionals to
manage leads, opportunities, customer relationships, contact information,
account activities, calendars, literature fulfillment, price lists, quotes and
forecasts. To support team selling, SalesTrak helps the mobile sales
professional manage all of the key milestone events and assign team
responsibilities during the sales cycle, including key contact information,
account information, account strategy, key influencers and team tasks.
Aurum TeleTrak. TeleTrak is a telemarketing/telesales application designed
to improve call center performance and enhance productivity in both inbound and
outbound operations. Customer inquiries enter the process through toll-free
telephone calls, the Internet, targeted marketing campaigns or seminars and may
be followed up by the pre-assigned or next available telemarketing
representative who will "work" the contact through a series of strictly or
loosely defined accomplishments to the pre-qualified phase. Activities can
include lead generation, call scripting, activity management, follow up contact,
literature fulfillment, quotes, order generation and forecasting.
Aurum SupportTrak. SupportTrak is a call management application for
customer support call centers. SupportTrak handles customer support calls
through the Web, telephone call, e-mail or facsimile through call resolution. It
also provides call routing or dispatch capabilities, call management, activity
tracking, calendaring, information bulletin and literature fulfillment.
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Aurum Management Information System. The Management Information System
includes Aurum Explorer and Aurum Reporter and provides a comprehensive approach
to utilizing Aurum's customer information system as a data warehouse. It
combines On-Line Analytical Processing ("OLAP") technology with the Aurum
Customer Enterprise and enables a variety of functions from ad-hoc reporting to
on-line analytical processing and drill down analysis of the customer data. The
Management Information System includes an Aurum-specific customer object
repository, a set of 35 predefined analyses and templates and end-user tools for
drill down and ad hoc analysis.
Enabling Technology
Aurum dbSync. Aurum's dbSync technology employs a real-time scanning
approach to provide scalable database synchronization designed to facilitate the
timely exchange of information among sales team members with efficient updates
because only net changes and additions are exchanged. Its design offers
collision detection and error recovery capabilities and transport independence
with support for multiple communications links including dial-up, LAN, WAN, RAS,
XcelleNet, wireless and the Internet. dbSync is designed to support
server-to-server synchronization so that smaller regional SalesTrak servers can
be placed in foreign countries. dbSync also provides Electronic Software
Distribution which can be used to distribute the latest release of SalesTrak or
other Windows applications electronically to mobile users. The Electronic
Software Distribution feature also supports the transfer of marketing
encyclopedia files from Aurum's Intranet-based marketing encyclopedia system.
Aurum EventTrak. EventTrak is an escalation and workflow engine designed to
facilitate the mapping of an individual company's business process by defining
key business rules for escalation and notification of events and issues. This
module enables a user to set up pre-defined events and business processes for
handling specific customer processes such as a type of service call, a
literature fulfillment request or an information inquiry through telemarketing.
Aurum CTITrak. CTITrak is a computer telephony interface that connects
Aurum's applications with automatic call distributors ("ACD"), interactive voice
response ("IVR"), dialers and other telephony equipment. In connection with an
incoming customer call, CTITrak enables a company representative to access and
retrieve all data related to the calling customer from the sales and marketing
database and forward both the data and the call directly to the call center
representative.
Internet/Intranet Applications
Aurum WebTrak. WebTrak is an Internet-enabled application that provides an
interface to Aurum's sales and marketing applications from the World Wide Web.
WebTrak enables the publishing of Aurum database application forms on a Web
server HTML home page. These forms can be directly accessed by a prospect or
customer to indicate their interest in a specific product, to register for a
seminar or to place an order directly. Once the data is entered on the Web
server, WebTrak captures this information and transfers it to the sales and
marketing database where it can be acted upon further with the aid of
intelligent agents. In addition, customer profile information is captured in the
Aurum customer database, enabling a company to understand and better market to
Internet visitors.
Aurum Smart Encyclopedia. The Smart Encyclopedia provides complete product,
competitive, industry and technical information and a set of monitoring agents
that can actively alert a representative to new information that affects the
sales cycle or existing customer relationships. This system enables marketing
and sales professionals to subscribe to product, company, technical and
competitive information from other Web sites on the Internet and from their
corporate Intranet server.
The Smart Encyclopedia contains intelligent agents which actively monitor
Internet Web sites and the Intranet marketing encyclopedia content for net
changes. Mobile representatives have the ability to periodically connect to the
corporate Intranet through the dbSync process to update the information stored
on their notebook computers and to download new information.
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PRODUCT ARCHITECTURE
Aurum's software is developed using technologies such as 3-Tier
client/server component architecture, modern graphical user-interface designs,
object-oriented rapid application development tools, relationship modeling
tools, commercial relational databases and Web-centric development tools. In
addition, Aurum's software products employ a database synchronization technology
with a scalable architecture.
Aurum Customer Enterprise Server. The customer management database serves
as the foundation of all Aurum's applications and contains information such as
leads, companies, contacts, tasks, sales cycle phases, price books, support
information, telemarketing scripts, campaign data and other related customer
information. The common database is a normalized schema that is optimized for
scalability. Data stored in the common database is distributed to mobile users
through Aurum's database synchronization technology. The common database schema
is extensible and configurable to model a company's business requirements.
Adaptable and Configurable Development Environment. Aurum uses an
object-oriented rapid application development environment so the software can be
configured to support changing field names, field labels and changes in the user
interface and layout forms. The class library objects contain key components and
business processes which can be adapted to match a company's sales and marketing
process. This approach enables customers to prototype, model and implement their
specific business processes and also gives them the ability to change their
processes over time as business needs change.
3-Tier Client/Server Architecture. Aurum developed a 3-Tier client/server
adaptable architecture that conceptually consists of a visual layer, business
layer and transaction layer. The architecture employs Microsoft technology for
ease of use and industry compatibility and Aurum technology for high performance
and remote user support. The visual layer, which is the sales user component,
provides a Windows interface and permits the user to prioritize information
views. The business layer allows managers to adapt and implement management
decisions and business process rules across the enterprise. The transaction
layer serves as the repository of customer data and access point to other
enterprise databases and is designed to manage the connections between the
client and server to optimize performance and scalability to support a large
number of clients. Each layer is designed to support upgrades of user-defined
content to newer versions of Aurum products.
Database Synchronization. Aurum's database synchronization provides
on-demand database synchronization, heterogeneous database synchronization,
complex data distribution models (team selling support and other
applicationspecific logic), customizable business objects (business rules reside
in the database), high performance extraction of net data changes, collision
handling, full extensibility and customization, support for electronic software
distribution, transport independence (works over WAN, LAN, XcelleNet, dial-up
and the Internet) and full recoverability if the communications session fails.
SALES AND MARKETING
In North America, Aurum markets its software primarily through its direct
sales organization. To support its sales efforts, Aurum conducts an active set
of marketing programs including public relations, advertising, direct mail,
seminars, trade shows, and ongoing customer communications including a user
group council. As of March 31, 1997, Aurum's sales and marketing organization
consisted of 60 full time employees.
Aurum's direct sales force employs a consultative sales process, working
closely with customers to understand and define their needs to determine how
they are best addressed by both Aurum's product offerings and complementary
technology and services offered by Aurum's strategic and technology partners.
Because the implementation of sales and marketing applications is typically
mission-critical, Aurum's sales and marketing efforts are generally directed to
the senior management of a prospective customer.
The direct sales force works closely with strategic systems integration,
technology and sales methodology partners to identify specific customer
opportunities and requirements. Aurum believes that joint marketing activities
conducted with these partners will assist it to increase market coverage and
acceptance of Aurum's products. These activities include jointly conducted
seminars, trade shows and conferences. A key part of Aurum's strategy is to
expand and enhance these marketing efforts with leading systems integration
partners.
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Outside North America, Aurum has historically marketed its software through
key distribution organizations. In March 1997, Aurum acquired all the
outstanding shares of Aurum Software UK Limited, an English corporation, which
had previously acted as a distributor for Aurum in the United Kingdom. Aurum is
now marketing and selling its products in the United Kingdom through a direct
sales force employed by its new subsidiary. Aurum also has established
distributor agreements in place with Aurum France, GE Information Services, Inc.
and IBM EMEA (Europe, Middle East, and Africa). In addition to marketing and
selling Aurum's software, these distributors provide technical support as well
as educational and consulting services.
Aurum intends to continue to grow its direct sales force in North America
and to pursue international distribution primarily through key distribution
agreements and, in selected countries where management determines it to be
appropriate, through a direct sales force. Aurum's existing direct sales forces
in the United States and the United Kingdom are relatively small, however.
Aurum's ability to achieve revenue growth in the future will depend in large
part on its success in recruiting and training sufficient direct sales,
technical, and customer support personnel, in developing distribution
relationships with third party distributors outside the United States, and
establishing and maintaining relationships with its strategic partners. Any
failure by Aurum to expand its direct sales force or other distribution
channels, or to expand its technical and customer support staff, could
materially and adversely affect Aurum's business, operating results and
financial condition. Competition for suitable distribution partners is intense
in many markets outside North America. For example, Aurum has identified the
Pacific Rim as an important international market for Aurum's products but has
not yet entered into any distribution partnerships. There can be no assurance
that Aurum will be successful in attracting and retaining qualified
international distributors or that it will be successful in implementing direct
sales programs in selected international markets. If Aurum is unable to obtain
qualified international distribution partners or is otherwise unable to
penetrate strategically important international markets, Aurum's business,
operating results and financial condition could be materially and adversely
affected.
In addition, although Aurum believes that its continued growth and
profitability will require expansion of its international operations,
international expansion poses a number of risks. Specifically, international
expansion will require significant investments of management attention and
financial resources, which could adversely affect Aurum's operating margins and
earnings, if any. Although international revenues comprised less than 5% of
total revenues in the year ended December 31, 1996 and were insignificant in the
quarter ended March 31, 1997, in the event that international revenues increase
in the future as a percentage of Aurum's total revenues, Aurum's business,
operating results or financial condition could be materially and adversely
affected by risks inherent in conducting business internationally, including
changes in foreign currency exchange rates, longer payment cycles, greater
difficulty in accounts receivable collection, difficulties in managing and
staffing international operations, seasonality in various parts of the world,
including the slow-down in European business activity during Aurum's third
fiscal quarter, cultural differences in the conduct of business, tariffs,
duties, price controls or other restrictions on foreign currencies, trade
barriers and other factors.
RESEARCH AND DEVELOPMENT
As of March 31, 1997, there were 40 full time employees on Aurum's product
development staff. Aurum's research and development expenditures in 1994, 1995
and 1996 were $2.2, $2.3 and $3.7 million, respectively, and represented 38%,
22% and 13% of revenues in the respective periods. Research and development
expenses increased from $626,000 for the three months ended March 31, 1996 to
$1.7 million for the three months ended March 31, 1997. Research and development
expenses constituted 13% and 19% of total revenues for the three months ended
March 31, 1996 and 1997, respectively.
Aurum's growth and future financial performance will depend in part upon
its ability to enhance existing applications, develop and introduce new
applications that keep pace with technological advances, meet changing customer
requirements, respond to competitive products and achieve market acceptance. As
a result, Aurum expects that it will continue to commit substantial resources to
product development in the future. To date, Aurum's development efforts have not
resulted in any capitalized software development costs.
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Aurum works closely with its customers and prospects to determine their
requirements and to design enhancements and new products to meet their needs.
Aurum's current development initiatives include feature and function enhancement
of existing products, the development of new complementary products and the
development of integrated packages of its products tailored to the requirements
of certain market segments. Aurum plans to enhance its current product line,
including new Internet/Intranet capabilities as well as support for additional
hardware and relational database platforms. There can be no assurance, however,
that such enhancements will result in increased sales or market acceptance of
Aurum's products.
The client/server and Internet application software market is subject to
rapid technological change, changing customer needs, frequent new product
introductions and evolving industry standards that may render existing products
and services obsolete. As a result, Aurum's position in its existing markets or
other markets that it may enter could be eroded rapidly by product advancements.
The life cycles of Aurum's products are difficult to estimate. Aurum's product
development efforts are expected to require, from time to time, substantial
investments by Aurum in product development and testing. There can be no
assurance that Aurum will have sufficient resources to make the necessary
investments. Aurum has in the past experienced development delays, and there can
be no assurance that Aurum will not experience delays in the future. There can
be no assurance that Aurum will be successful in developing and marketing
enhancements to its products that respond to technological developments,
evolving industry standards or changing customer requirements, or that Aurum
will not experience difficulties that could delay or prevent the successful
development, introduction and sale of such enhancements or that such
enhancements will adequately meet the requirements of the marketplace and
achieve any significant degree of market acceptance. If release dates of any
future product enhancements or new products are delayed or if these products or
enhancements fail to achieve market acceptance when released, Aurum's business,
operating results and financial condition could be materially and adversely
affected.
Software products as complex as those offered by Aurum frequently contain
errors or failures, especially when first introduced or when new versions or
enhancements are released. Although Aurum conducts extensive product testing
during product development, Aurum has at times been forced to delay commercial
release of software until problems were corrected and, in some cases, has
provided enhancements to correct errors in released software. Aurum could, in
the future, lose revenues as a result of software errors or defects. There can
be no assurance that, despite testing by Aurum and by current and potential
customers, errors will not be found in software or releases after commencement
of commercial shipments, resulting in loss or delay of revenue or delay in
market acceptance, diversion of development resources, damage to Aurum's
reputation, or increased service and warranty costs, any of which could have a
material adverse effect upon Aurum's business, operating results and financial
condition.
CONSULTING SERVICES, TRAINING AND SUPPORT
Aurum devotes substantial resources to providing technical support to its
customers, including business consulting, requirements definition, installation,
consulting, training and customer support. Aurum has developed a comprehensive
methodology for implementation of its sales and marketing applications. This
methodology is used by its own consulting organization and is also available for
license by its systems integration partners. Systems integration partners
include Cambridge Technology Partners, Deloitte & Touche LLP, GE Information
Services, Inc., IBM, KPMG Peat Marwick LLP and Technology Solutions Corporation.
As of March 31, 1997, Aurum employed 69 full time employees in its consulting
services, training and customer support organization. Aurum provides the
following services:
Consulting Services. Aurum provides a range of professional services for
its customers including business consulting, project management, requirements
definition, installation and implementation, consulting, and roll out and
deployment. Consulting services costs are based on a time and materials basis
and are charged separately from the software license and maintenance agreement.
Aurum has an active certification program in place for training and
supporting large systems integration partners. Aurum expects that over time, the
large systems integrators will perform more of the consulting
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associated with the implementation of Aurum's products as they complete more
engagements and increase the number of experienced consultants that have been
trained and certified on Aurum's technology.
Support. Aurum's customer service organization provides post-sales support,
including information and assistance on installation, operation and
administration of Aurum's products. Aurum offers telephone support during
business hours and 24-hour on-call support. Initial product license fees do not
cover software maintenance. Customers are entitled to receive software updates,
maintenance releases and technical support for an annual license fee which is a
percentage of Aurum's list price for the software licenses.
Training. Aurum offers end user and technical training programs for its
customers and partners. Aurum also offers customized training courses to meet
the specific needs of its customers. Fees are based on a per class basis, per
student basis or on a train the trainer basis. Aurum offers training at customer
sites as well as at its offices in Santa Clara, California. In addition,
customers may choose to receive training from selected systems integration
partners.
COMPETITION
The market for Aurum's client/server applications is highly competitive,
fragmented and subject to rapid technological change and frequent new product
introductions and enhancements. Aurum has a large number of competitors which
range from internally developed custom application development efforts to
packaged application vendors. Aurum offers a suite of applications which can be
used as part of an integrated customer management application suite or can be
used on a stand-alone basis. Aurum competes with packaged application vendors
that provide tactical departmental solutions in specific market segments as well
as with competitors that provide a broader suite of integrated customer
management applications. Many of these competitors have longer operating
histories, significantly greater financial, technical, product development,
marketing and other resources, greater name recognition or a larger installed
base of customers than Aurum. As a result, these competitors may be able to
respond more quickly to new or emerging technologies and to changes in customer
requirements or to devote greater resources to the development, promotion and
sale of their products than can Aurum.
Aurum's principal competitors in the sales force automation market include
Brock Control Systems, Inc., Clarify Inc., Onyx Software Corporation, SalesBook
Systems, SalesKit Software Corporation, SaleSoft, Inc., Saratoga Systems, Inc.
and Siebel Systems, Inc. Aurum also depends for the marketing and implementation
of its products upon a number of third party systems integrators, including
Cambridge Technology Partners, Deloitte & Touche LLP, GE Information Services,
Inc., IBM and KPMG Peat Marwick LLP. Many of these firms also have established
relationships with Aurum's competitors. There can be no assurance that these
third parties, many of which have significantly greater financial resources than
Aurum, will not in the future compete directly with Aurum or otherwise
discontinue their support of Aurum's products. Aurum also faces competition from
customer support application vendors which are attempting to expand from their
customer support market into the sales automation area either through internal
product development or through acquisitions. These customer support competitors
include Astea International, Inc., Clarify Inc., Scopus Technology, Inc. and The
Vantive Corporation. Over time, Aurum expects large enterprise software vendors
such as Baan, Oracle Corporation and SAP AG to extend their enterprise
application suites by offering sales force automation, telemarketing and
customer support, with the appropriate integration to leading financial, order
entry and manufacturing applications. In addition, because the barriers to entry
in the software market are relatively low, additional competitors may emerge as
the sales and marketing software market continues to develop and expand. It is
also possible that acquisitions of competitors by large software companies or
alliances among competitors could occur. Aurum expects that significant
consolidation in its industry will occur over the next few years and increased
competition from new entrants or through strategic acquisitions or alliances
could result in price erosion, reduced gross margins or loss of market share,
any of which could have a material adverse effect on Aurum's business, operating
results and financial condition.
Aurum believes that it competes favorably in its marketplace based upon its
breadth and depth of application functionality, its architecture and database
synchronization technology, the scalability of its technology to handle users on
a global basis, its Internet and Intranet capabilities, the ease of adapting its
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applications with its object oriented rapid application development tools and
its ability to get large customers into production quickly through its own
consulting services organization as well as through its partnerships with large
systems integrators. Although Aurum believes that it currently competes
favorably with respect to such factors, there can be no assurance that Aurum
will be able to compete successfully against current and future competitors,
especially those with greater financial, marketing, service, support, technical
and other resources than Aurum, or that competitive pressures will not
materially and adversely affect Aurum's business, operating results and
financial condition.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
Aurum relies primarily on a combination of copyright and trademark laws,
trade secrets, confidentiality procedures and contractual provisions to protect
its proprietary rights. Aurum seeks to protect its software, documentation and
other written materials under trade secret and copyright laws, which afford only
limited protection. Aurum submitted a patent application for its dbSync
technology in August 1996, and such application is still pending. There can be
no assurance that any patent covering Aurum's inventions will issue or that any
patent, if issued, will provide sufficiently broad protection or will prove
enforceable in actions against alleged infringers. Despite precautions taken by
Aurum, it may be possible for unauthorized third parties to copy aspects of its
products or future products or to obtain and use information that Aurum regards
as proprietary. In particular, Aurum provides its licensees with access to its
data model and other proprietary information underlying its licensed
applications. Aurum makes source code available for certain of Aurum's products
and occasionally enters into source code escrow agreements with certain
customers for the balance of the source code. There can be no assurance that
Aurum's means of protecting its proprietary rights will be adequate or that
Aurum's competitors will not independently develop similar or superior
technology or design around any patents owned by Aurum. Litigation may be
necessary in the future to enforce Aurum's intellectual property rights, to
protect Aurum's trade secrets or to determine the validity and scope of the
proprietary rights of others. Such litigation could result in substantial costs
and diversion of resources and could have a material adverse effect on Aurum's
business, operating results and financial condition.
Policing unauthorized use of Aurum's products is difficult and, while Aurum
is unable to determine the extent to which piracy of its software products
exists, software piracy can be expected to be a persistent problem. In addition,
the laws of some foreign countries do not protect Aurum's proprietary rights to
the same extent as do the laws of the United States. Aurum is not aware that any
of its product offerings infringe the proprietary rights of third parties. There
can be no assurance, however, that third parties will not claim infringement by
Aurum with respect to current or future products. Aurum expects that software
product developers will increasingly be subject to infringement claims as the
number of products and competitors in Aurum's industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or require Aurum to enter into royalty
or licensing agreements. Such royalty or licensing agreements, if required, may
not be available on terms acceptable to Aurum or at all, which could have a
material adverse effect on Aurum's business, operating results and financial
condition.
Aurum also relies on certain technology which it licenses from third
parties, including software which is integrated with internally developed
software and used in Aurum's products to perform key business functions. Among
the principal developers of these licensed technologies are Business Objects,
Inc., which licenses an On-Line Analytical Processing ("OLAP") tool that enables
the analysis of sales and customer data at both the server and client sites of a
user's network; Centura Corporation, which licenses a SQL-based laptop database
that is used principally in Aurum's SalesTrak product; and First Floor Software,
Inc., which licenses an intelligent agent that monitors changes in sales and
customer data accessed through the World Wide Web. Aurum's license agreements
with Business Objects, Centura and First Floor expire in March 2000, December
1997 and June 1997, respectively. A renewed license agreement with First Floor
is currently being negotiated, although there can be no assurance that this
agreement or any of the other above-mentioned agreements will be renewed
following expiration. Because Aurum's products incorporate software developed
and maintained by third parties, Aurum is to a certain extent dependent upon
such third parties' ability to maintain or enhance their current products, to
develop new products on a timely and cost-effective basis and to
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respond to emerging industry standards and other technological changes. In the
event that Aurum's agreements with its third-party vendors should fail to be
renewed or the products licensed from such vendors should fail to address the
requirements of Aurum's software products, Aurum would be required to find
alternative software products or technologies of equal performance or
functionality. There can be no assurance that Aurum would be able to replace
such functionality provided by the thirdparty software currently offered in
conjunction with Aurum's products in the event that such software becomes
obsolete or incompatible with future versions of Aurum's products or is
otherwise not adequately maintained or updated. The absence of or any
significant delay in the replacement of that functionality could have a material
adverse effect on Aurum's business, operating results and financial condition.
EMPLOYEES
As of March 31, 1997, Aurum had a total of 186 full time employees, all of
whom were based in the United States, except one in the United Kingdom engaged
in sales. Of the total, 60 were engaged in sales and marketing, 69 in consulting
services, training and support, 40 in engineering and 17 in administration and
finance. Aurum's future performance depends in significant part on the continued
service of its key technical and senior management personnel and on its
continuing ability to identify, attract and retain highly qualified technical,
sales and management personnel. Competition for such personnel is intense and
there can be no assurance that Aurum will be able to retain its key technical
and senior management personnel or that it will be able to identify, attract and
retain qualified technical, sales and management personnel in the future. None
of Aurum's employees is represented by a labor union. Aurum has not experienced
any work stoppages and considers its relations with its employees to be good.
PROPERTIES
Aurum's principal administrative, sales, marketing and support functions
are located at its leased headquarters facility in Santa Clara, California.
Aurum currently occupies 18,000 square feet of space at this facility, and the
lease will expire in July 1997. In addition, Aurum also leases 10,225 square
feet at a nearby facility, which houses Aurum's research and development staff.
The lease for this facility expires in November 1999. Aurum also leases domestic
sales and support offices in the metropolitan areas of Atlanta, Chicago, Dallas
and Seattle and in Salem, New Hampshire. In addition, Aurum's subsidiary in the
United Kingdom, which Aurum acquired in March 1997, leases space for a sales and
support office in Cambridgeshire, England.
In January 1997, Aurum signed a lease for 38,288 square feet of space in
Santa Clara, California. Aurum intends to relocate its headquarters staff to
this new facility in July 1997, upon the expiration of its existing lease. The
lease for Aurum's new headquarters facility expires in February 2003.
LEGAL PROCEEDINGS
From time to time, Aurum is party to various legal proceedings or claims,
either asserted or unasserted, which arise in the ordinary course of business.
Management has reviewed pending legal matters and believes that the resolution
of such matters will not have a significant adverse effect on Aurum's financial
condition or results of operations.
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AURUM MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical results or anticipated results, including those set
forth under "Risk Factors" in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this Proxy
Statement/Prospectus. The following discussion and analysis should be read in
conjunction with "Summary Historical and Unaudited Pro Forma Combined Condensed
Financial Information" and Aurum's Financial Statements and Notes thereto
included elsewhere in this Proxy Statement/Prospectus.
OVERVIEW
Aurum, which commenced operations in 1991, develops application software
for automating enterprise-wide sales, marketing and customer support functions
of businesses. From its inception through 1991, Aurum was engaged principally in
research and development and in developing custom software products. Aurum
commenced commercial shipments of its TeleTrak and SupportTrak software products
in 1992 and delivered consulting services for implementation of its products.
Aurum's SalesTrak software product began commercial shipment in September 1994.
Since the introduction of SalesTrak, Aurum's total revenues have grown
rapidly, increasing from $5.9 million in 1994 to $10.5 million in 1995 and $27.6
million in 1996. License revenues have increased from $3.4 million in 1994 to
$5.9 million in 1995 and $16.4 million in 1996, while service revenues grew from
$2.6 million in 1994 to $4.5 million in 1995 and $11.1 million in 1996. Service
revenues include revenues from consulting services. Aurum realized operating
losses from 1992 through 1995 and achieved limited profitability in 1996. The
losses from 1992 through 1994 primarily reflect Aurum's investment in research
and development, in particular the transition of its products from an early
character-based technology to a Windows user interface-based technology. In
addition, in 1993 and 1994, Aurum made a substantial investment in the
development of its SalesTrak software product and database synchronization
technology. The losses in 1995 primarily reflect Aurum's continued investment in
research and development of its software and an increased investment in sales
and marketing to increase revenues and expand market share.
Aurum has experienced significant fluctuations in its gross margins due
principally to changes in the mix of license and service revenues and in the
costs associated with each type of revenue. Aurum's margins have been favorably
impacted in part by an improvement in the mix of license revenues to service
revenues, and in more recent periods by the reduced cost of license revenues due
to the reduction in the sales of third party database applications and the
reduced cost of service revenues resulting from Aurum's decreased use of outside
contractors. Aurum's gross margins may continue to vary significantly in the
future.
Aurum derives revenues principally from licensing its software and
providing technical product support and consulting services to its customers.
License revenues for Aurum's products consist of server fees for one or more
servers and software license fees based on the number of named users. Aurum also
derives license revenues from sublicensing third party software products.
License revenues are recognized upon execution of a license agreement and
delivery of software if there are no significant post-delivery vendor
obligations and collection of the receivable is deemed probable. If significant
post-delivery obligations exist or if a product is subject to customer
acceptance, revenues are deferred until no significant obligations remain or
acceptance has occurred. Revenues from services consist primarily of consulting
services, including implementation and adaptation of licensed software and
training, maintenance and support. Consulting and training revenues are
generally recognized as services are performed, except for revenues from certain
fixed-price contracts or milestone deliverables, which are recognized on a
percentage-of-completion basis or upon milestone delivery. Maintenance revenues
are recognized ratably over the term of the maintenance period, which is
typically one year. For all periods presented, Aurum has recognized revenue in
accordance with the Statement of Position 91-1 on "Software Revenue Recognition"
dated December 12, 1991, issued by the American Institute of Certified Public
Accountants.
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Based on sales, operating and other data through June 30, 1997, Aurum
believes that total revenues for the three months ended June 30, 1997 were $11.5
million, with net income and net income per share of $502,000 and $0.04 per
share, respectively, for such period. The increase in total revenues from $9.3
million for the three months ended March 31, 1997 was due primarily to increased
license revenues. The increase in net income from $467,000 for the three months
ended March 31, 1997 to $502,000 was due primarily to increased revenues, offset
by increased expenses incurred in connection with evaluating and planning the
Merger.
The following table sets forth for the periods indicated the percentage of
total revenues represented by Aurum's statement of operations:
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
--------------------------- ------------------
1996 1995 1994 1997 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Licenses................................... 60.0% 56.6% 56.8% 65.0% 58.8%
Services................................... 40.0 43.4 43.2 35.0 41.2
----- ----- ----- ----- -----
Total revenues..................... 100.0 100.0 100.0 100.0 100.0
Cost of Revenues:
Licenses................................... 5.0 9.3 6.2 4.7 8.3
Services................................... 34.8 37.4 43.7 27.7 40.7
----- ----- ----- ----- -----
Total cost of revenues............. 39.8 46.7 49.9 32.4 49.0
----- ----- ----- ----- -----
Gross profit................................. 60.2 53.3 50.1 67.6 51.0
----- ----- ----- ----- -----
Operating expenses:
Sales and marketing........................ 40.5 63.3 54.8 38.2 45.1
Research and development................... 13.4 21.8 38.0 18.6 12.8
General and administrative................. 6.0 9.8 30.1 8.3 6.4
----- ----- ----- ----- -----
Total operating expenses........... 59.9 94.9 122.9 65.1 64.3
----- ----- ----- ----- -----
Income (loss) from operations................ 0.3 (41.6) (72.8) 2.5 (13.3)
Other income, (expense) net.................. 1.6 0.6 0.1 5.4 0.2
Interest expense............................. (0.8) (1.5) (1.5) (0.3) (0.5)
----- ----- ----- ----- -----
Income (loss) before taxes................... 1.1 (42.5) (74.2) 7.6 (13.6)
Provision for income taxes................... 0.1 -- -- 2.6 --
----- ----- ----- ----- -----
Net income (loss)............................ 1.0% (42.5)% (74.2)% 5.0% (13.6)%
===== ===== ===== ===== =====
</TABLE>
RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE
MONTHS ENDED MARCH 31, 1996
Revenues
Total revenues increased 91% from $4.9 million for the three months ended
March 31,1996 to $9.3 million for the three months ended March 31, 1997. The
increase was due to significant growth in license revenues and growth in service
revenues.
Licenses. License revenues increased 111% from $2.9 million for the three
months ended March 31, 1996 to $6.1 million for the three months ended March 31,
1997. As a percentage of total revenues, license revenues increased to 65% in
the first quarter of 1997 from 59% in the first quarter of 1996. The increases
in license revenues in absolute dollars and as a percentage of total revenues
were due to increased market acceptance of Aurum's Windows-based products,
expansion of Aurum's product line, and the expansion of Aurum's direct sales
force from 28 employees at March 31, 1996 to 51 at March 31, 1997.
Services. Service revenues increased 63% from $2.0 million for the three
months ended March 31, 1996 to $3.3 million for the three months ended March 31,
1997. As a percentage of total revenues, service revenues
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decreased slightly from 41% to 35% for the three month periods ended March 31,
1996 and 1997, respectively. The dollar increase in service revenues was
primarily due to increased demand for consulting and systems integration
services arising from a larger installed customer base. The decrease as a
percentage of total revenues was attributable to the higher growth rate of
license revenues relative to service revenues. Aurum continues its strategy of
using third-party integration partners, which is intended to allow Aurum more
time to focus on license sales, which have higher margins.
Costs of Revenues
Cost of Licenses. Cost of licenses consists primarily of license fees and
royalties paid to third party software providers and, to a lesser extent,
product media, product duplication and shipping. Cost of license revenues
increased from $407,000 for the three months ended March 31, 1996 to $440,000
for the three months ended March 31, 1997. As a percentage of total revenues,
cost of licenses decreased from 8% for the three months ended March 31, 1996 to
5% for the three months ended March 31, 1997. As a percentage of total license
revenues, cost of licenses also decreased from 14% for the three months ended
March 31, 1996 to 7% for the three months ended March 31, 1997. The decrease in
cost of licenses as a percentage of total revenues and total license revenues
was attributable primarily to the significant period-to-period growth in license
revenues and, with respect to cost of licenses as a percentage of total
revenues, also to growth in total services revenues. In addition, relative to
the growth in total license revenues, cost of license revenues did not increase
substantially in dollar terms and decreased as a percentage of total revenues
and total license revenues due to the reduction in sales of third party database
applications and higher volume pricing discounts from third party software
providers.
Cost of Services. Cost of services consists primarily of personnel-related
costs incurred in providing consulting services, training and maintenance to
customers. Costs of services increased from $2.0 million for the three months
ended March 31,1996 to $2.6 million for the three months ended March 31, 1997.
As a percentage of total revenues, cost of services decreased from 41% for the
three months ended March 31, 1996 to 28% for the three months ended March 31,
1997. As a percentage of total service revenues, cost of services also decreased
from 99% for the three months ended March 31, 1996 to 79% for the three months
ended March 31, 1997. The decrease in cost of services as a percentage of total
revenues was due to a higher revenue base and as a percentage of total service
revenues to economies of scale and a higher service revenue base. In addition,
cost of services for the three months ended March 31, 1996 reflects the costs
associated with the implementation of a Consulting Development Program. Aurum
did not have such a program during the three months ended March 31, 1997.
Operating Expenses
Sales and Marketing. Sales and marketing expenses include salaries,
commissions, advertising, direct mail, seminars, public relations, trade shows,
travel and other related selling and marketing expenses. Sales and marketing
expenses increased from $2.2 million for the three months ended March 31, 1996
to $3.6 million for the three months ended March 31, 1997. Sales and marketing
expenses constituted 45% and 38% of total revenues for the three months ended
March 31, 1996 and 1997, respectively. The dollar increase in sales and
marketing expenses reflected the expansion of Aurum's direct sales force and
increased expenses associated with a higher level of marketing activity by
Aurum. The decrease in sales and marketing expense as a percent of total
revenues was due primarily to a higher revenue base and economies of scale.
Research and Development. Research and development expenses relate
primarily to engineering personnel. Costs related to research and development of
products are charged to research and development expenses as incurred. Research
and development expenses increased from $626,000 for the three months ended
March 31, 1996 to $1.7 million for the three months ended March 31, 1997.
Research and development expenses constituted 13% and 19% of total revenues for
the three months ended March 31, 1996 and 1997, respectively. Both the dollar
increase and the increase in research and development expense as a percentage of
total revenues were due primarily to increased investment in new product
development accompanied by an increase in personnel.
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General and Administrative. General and administrative expenses include
personnel costs for administration, finance, human resources and general
management in addition to legal and accounting expenses and other professional
services. General and administrative expenses increased from $313,000 for the
three months ended March 31, 1996 to $778,000 for the three months ended March
31, 1997. General and administrative expenses constituted 6% and 8% of total
revenues for the three months ended March 31, 1996 and 1997, respectively. The
dollar increase in general and administrative expenses and the increase as a
percentage of total revenues were attributable primarily to increased expenses
associated with becoming a publicly traded company in October 1996.
Other Income. Other income, net, consists primarily of interest income
offset by expenses relating to sales taxes and other fees and licenses. Other
income increased from $12,000 for the three months ended March 31, 1996 to
$505,000 for the three months ended March 31, 1997. Other income constituted
less than 1% and 5% of the total revenues for the three months ended March 31,
1996 and 1997, respectively. The dollar increase in other income and the
percentage increase as a percentage of total revenues were attributable to
interest income of $527,000 arising from investment of the proceeds of Aurum's
initial public offering in short-term highly liquid investments.
Provision for Income Taxes. Income taxes have been provided for at an
effective rate of approximately 34% which consists primarily of federal and
state taxes. Aurum accounts for income taxes under the liability method. Aurum
has established a valuation allowance against its deferred tax assets due to the
uncertainty surrounding the realization of such assets. Management evaluates, on
a quarterly basis, the recoverability of the deferred tax assets and the level
of the valuation allowance. The ultimate realization of these deferred tax
assets is dependent on Aurum's ability to generate taxable income in the future.
RESULTS OF OPERATIONS -- COMPARISON OF 1994, 1995 AND 1996
Revenues
Aurum's revenues are derived primarily from fees for software licenses and
to a lesser extent from services. Total revenues were $5.9 million, $10.5
million and $27.6 million in 1994, 1995 and 1996, respectively, representing
year-to-year increases of 77% between 1994 and 1995 and 163% between 1995 and
1996. Aurum believes that the substantial revenue increases from 1994 through
1996 reflect increasing market acceptance of its software products, particularly
SalesTrak, which began commercial shipment in late 1994. Since the beginning of
1995, a majority of Aurum's license and service revenues have come from
SalesTrak. There can be no assurances that Aurum will be able to maintain the
rates of revenue growth that it has experienced in recent periods.
Licenses. License revenues were $3.4 million, $5.9 million and $16.4
million in 1994, 1995 and 1996, respectively, representing 57%, 57% and 60% of
total revenues in the respective periods. The increase in license fees in each
period was due to increased market acceptance of Aurum's Windows-based products,
the introduction of SalesTrak and the expansion of Aurum's direct sales force.
Services. Service revenues were $2.6 million, $4.5 million and $11.1
million in 1994, 1995 and 1996, respectively, representing 43%, 43% and 40% of
total revenues in the respective periods. The dollar increase in service
revenues is primarily the result of an increase in demand for consulting and
systems integration services and, to a lesser extent, from an increase in
maintenance revenues from a larger installed base. The 3% decrease from 1995 to
1996 reflects Aurum's strategy to use third-party integration partners, allowing
Aurum to focus on higher margin license sales.
Cost of Revenues
Cost of Licenses. Cost of licenses consists primarily of license fees and
royalties paid to third party software providers and, to a lesser extent,
product media, product duplication and shipping. Cost of licenses was $365,000,
$979,000 and $1.4 million in 1994, 1995 and 1996, respectively, representing
11%, 17% and 8% of related license revenues and 6%, 9% and 5% of total revenues
for each year, respectively. The increase in the dollar amount of the cost of
licenses in each successive year reflects the higher volume of applications sold
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<PAGE> 81
each year. Cost of licenses increased as a percentage of related revenues from
1994 to 1995 due to higher third party database sales which have a lower product
margin than Aurum's applications. Cost of licenses decreased as a percentage of
related revenues from 1995 to 1996 due primarily to the reduction in the sales
of third party database applications and higher volume pricing discounts from
third party software providers.
Cost of Services. Cost of services consists primarily of personnel-related
costs incurred in providing consulting services, training and maintenance to
customers. Cost of services was $2.6 million, $3.9 million and $9.6 million in
1994, 1995 and 1996, respectively, representing 101%, 86% and 86% of related
service revenues and 44%, 37% and 35% of total revenues for each year,
respectively. The increase in the dollar amount of cost of services in each
successive year reflects the higher volumes of services and maintenance provided
each year. Cost of services decreased as a percentage of related service
revenues from 1994 to 1996 due to economies of scale and a higher revenue base.
Operating Expenses
Sales and Marketing. Sales and marketing expenses include salaries,
commissions, advertising, direct mail, seminars, public relations, trade shows,
travel and other related selling and marketing expenses. Sales and marketing
expenses were $3.2 million, $6.6 million and $11.2 million in 1994, 1995 and
1996, respectively, representing 55%, 63% and 41% of total revenues for each
year, respectively. The dollar increase in sales and marketing expenses reflects
the expansion of Aurum's direct sales force and an associated increase in
marketing expenses over each of the respective years. The increase in sales and
marketing expenses as a percentage of total revenues from 1994 to 1995 was
principally due to a significant increase in the number of sales and marketing
personnel in 1995. The decline in sales and marketing expenses as a percentage
of total revenues from 1995 to 1996 was due to the increase in Aurum's total
revenues and economies of scale.
Research and Development. Research and development expenses relate
primarily to engineering personnel. Costs related to research and development of
products are charged to research and development expenses as incurred. Research
and development expenses were $2.2 million, $2.3 million and $3.7 million in
1994, 1995 and 1996, respectively, representing 38%, 22% and 13% of total
revenues for each year, respectively. The dollar increase in research and
development expenses from 1995 to 1996 is attributable to an increase in
research and development personnel and related expenses. Research and
development expenses have decreased as a percentage of total revenues in each
period from 1994 to 1996 as Aurum's total revenues have increased at a faster
rate.
General and Administrative. General and administrative expenses include
personnel costs for administration, finance, human resources and general
management in addition to legal and accounting expenses and other professional
services. General and administrative expenses were $1.8 million, $1.0 million
and $1.7 million in 1994, 1995 and 1996, respectively, representing 30%, 10% and
6% of total revenues for each year, respectively. The dollar decrease in general
and administrative expenses from 1994 to 1995 was primarily due to increased
economies of scale and improved operational efficiencies resulting principally
from better receivables collections and the reallocation of certain corporate
overhead expenses to other operating departments within Aurum. The dollar
increase from 1995 to 1996 was due primarily to expansion of Aurum's general and
administrative staff and associated expenses necessary to manage and support
Aurum's growth, including personnel expansion and increased expenses associated
with becoming a publicly traded company. General and administrative expenses
have decreased as a percentage of total revenues from 1994 to 1996 primarily due
to increasing revenues over the relevant periods and economies of scale.
Provision for Income Taxes. Provision for income taxes in 1996 represents
federal alternative minimum and state minimum taxes. There was no income tax
provision from 1994 to 1995 due to operating losses in those periods. As of
December 31, 1996, Aurum, had for federal and state purposes, net operating loss
carry-forwards of approximately $9.9 million and $4.0 million, respectively, and
research and development credits of $270,000 and $220,000, respectively. These
federal and state carryforwards and research and development credits expire in
the years 2007 through 2010 and 1997 through 2000, respectively. Utilization of
the net operating losses and credits may be subject to a substantial annual
limitation due to ownership change limitations provided by the Internal Revenue
Code of 1986 and similar state provisions. The annual limitation
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<PAGE> 82
may result in the expiration of the net operating losses and credits before
utilization. See Note 10 of Notes to Financial Statements.
IMPACT OF INFLATION
The effect of inflation on Aurum's financial position has not been
significant to date.
LIQUIDITY AND CAPITAL RESOURCES
From inception until its initial public offering in October 1996, which
resulted in net proceeds of $41.9 million, Aurum financed its operations and met
its capital expenditure requirements primarily through private placements of
equity securities, capital lease lines and bank borrowings.
Aurum's operating activities used cash of $4.2 million, $4.1 million and
$4.6 million in 1994, 1995 and 1996, respectively. Accounts receivable increased
$8.6 million from 1995 to 1996 due primarily to increased sales volume. Accrued
compensation and other liabilities increased from $2.2 million from 1995 to 1996
due primarily to increases in bonuses, commissions and other
compensation-related expenses attributable to an increase in headcount and
revenues.
Investing activities consisted primarily of purchases of property and
equipment. Aurum used approximately $427,000, $933,000 and $2.6 million, in
1994, 1995 and 1996, respectively for personal computers and for furniture and
other office equipment. Aurum expects that the rate of purchases of property and
equipment will increase in the future as a function of replacement cycles and as
Aurum's employee base grows. As of December 31, 1996, Aurum's principal
commitments consisted primarily of lease lines of credit for equipment and
software purchases and leases for office facilities. See Notes 5 and 6 of Notes
to Financial Statements.
Financing activities provided net cash of $2.8 million, $5.4 million and
$43.2 million in 1994, 1995 and 1996, respectively, due to $2.5 million, $6.0
million and $1.5 million in net proceeds from the issuance of convertible
Preferred Stock in 1994, 1995 and 1996, respectively, and $41.9 million in net
proceeds from the issuance of Common Stock in November 1996 in connection with
Aurum's initial public offering. Borrowings under the bank line of credit
contributed $950,000 and $2.5 million in cash in 1994 and 1996, respectively,
but were offset by repayment of the same credit line in amounts of $350,000,
$600,000 and $2.5 million in 1994, 1995 and 1996, respectively. Aurum received
$456,000 in 1995 and $2.0 million in 1996 from equipment lease lines, which were
offset by $224,000, $431,000 and $1.6 million in 1994, 1995 and 1996,
respectively, due to the retirement of lease obligations.
Aurum's operating activities used net cash of $195,000 and generated net
cash of $4.4 million for the three months ended March 31, 1996 and 1997,
respectively. Investing activities used net cash of $511,000 and $1.0 million
for the three months ended March 31, 1996 and 1997, respectively, primarily for
the acquisition of property and equipment and, during the three months ended
March 31, 1997, for the acquisition of Aurum U.K. and advances to Aurum U.K.
during such period. Financing activities provided net cash of $1.3 million and
used net cash of $204,000 for the three months ended March 31, 1996 and 1997,
respectively. Net cash provided in the three month period ended March 31, 1996
was primarily due to proceeds from the sale of preferred stock. Net cash used in
the three month period ended March 31, 1997 was primarily for repayments of
notes payable and capital lease obligations.
At March 31, 1997, Aurum had $42.1 million in cash and cash equivalents and
$43.5 million of working capital. Aurum also has available a $3.0 million bank
line of credit, which is collateralized by the assets of Aurum and requires that
certain financial covenants be maintained. The line of credit also contains a
restrictive covenant that limits Aurum's ability to pay cash dividends or make
stock repurchases in excess of $350,000 without the prior written consent of the
lender. The line of credit expires on July 14, 1997 and bears interest at the
lender's prime rate. As of March 31, 1997, there were no amounts outstanding
under the line of credit agreement.
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<PAGE> 83
Aurum believes that existing cash balances, cash available under its line
of credit and cash from operations will be sufficient to meet its working
capital and capital expenditure requirements for at least the next 12 months.
Although operating activities may provide cash in certain periods, to the extent
that Aurum experiences growth in the future, Aurum anticipates that its
operating and investing activities may use cash. Consequently, any such growth
may require Aurum to obtain additional equity or debt financing. There can be no
assurances that any necessary additional financing will be available to Aurum on
commercially reasonable terms, if at all.
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<PAGE> 84
AURUM MANAGEMENT
DIRECTORS AND OFFICERS
The following table sets forth information as of June 30, 1997 regarding
the directors and executive officers of Aurum who will become officers of Aurum
upon consummation of the Merger, along with information regarding the current
executive officers of Aurum. Each of the current officers and employees of Aurum
will be employed in the Aurum division of Baan following the Merger.
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION WITH AURUM
- ---------------------- --- ------------------------------------------------------
<S> <C> <C>
Mary E. Coleman 42 President, Chief Executive Officer and Director
David D. Buchanan 44 Executive Vice President and Director
Susan K. Buchanan 45 Executive Vice President
Timothy E. Campbell 35 Vice President, Client Services
Christopher L. Dier 44 Vice President, Finance, Chief Financial Officer and
Secretary
Mark Hamilton 39 Vice President, Marketing
Tuoc V. Luong 35 Vice President, Engineering
James W. Thanos 48 Vice President, Worldwide Operations
</TABLE>
Mary E. Coleman has served as Aurum's President and Chief Executive Officer
and as a Director of Aurum since November 1994. From May 1993 to November 1994,
Ms. Coleman served as Aurum's Vice President of Marketing and from January 1994
to September 1994 as Vice President of Engineering. From March 1992 until April
1993, she served as Vice President of Marketing for Radius, Inc., a manufacturer
of peripherals for Apple Macintosh computers. From October 1990 until March
1992, Ms. Coleman was Vice President of Marketing at McData Corporation, a data
center network switch supplier.
David D. Buchanan, a co-founder of Aurum, has served as Executive Vice
President and as a Director of Aurum since January 1993. From January 1992 until
January 1993, Mr. Buchanan served as Chairman of Aurum's Board of Directors.
From 1984 until founding Aurum in 1991, Mr. Buchanan served in various
management positions at Ungerman-Bass Networks, Inc. and Proteon, Inc., both
networking companies. Mr. Buchanan is married to Susan K. Buchanan, an Executive
Vice President of Aurum.
Susan K. Buchanan, a co-founder of Aurum, has served as Executive Vice
President since January 1993. From January 1992 until January 1993, she served
as a director of Aurum and from January 1992 until June 1992 as Aurum's Chief
Financial Officer and Secretary. From October 1986 until October 1991, she
served as a district sales manager for Unify Corporation, a supplier of
application development products for client/server environments. Ms. Buchanan is
married to David D. Buchanan, an Executive Vice President and Director of Aurum.
Timothy E. Campbell has served as Aurum's Vice President of Client Services
since September 1995. From January 1988 to September 1995, Mr. Campbell served
in engineering, consulting and management roles at Electronic Data Systems
Corporation, a provider of information services.
Christopher L. Dier has served as Aurum's Vice President, Finance, Chief
Financial Officer and Secretary since July 1996. From 1990 to July 1996, Mr.
Dier served as Chief Financial Officer of VERITAS Software Corporation, a
storage management software company.
Mark Hamilton has served as Aurum's Vice President, Marketing since April
1997. From October 1995 until April 1997, Mr. Hamilton served as Director,
Marketing Communications, for Siebel Systems, Inc., a sales force automation
software company. From April 1991 to October 1995, Mr. Hamilton served in
various marketing positions at Frame Technology Corporation, most recently as
Director of Strategic Marketing Programs.
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<PAGE> 85
Tuoc V. Luong has served as Aurum's Vice President of Engineering since
January 1996. From March 1992 to January 1996, Mr. Luong served as a Vice
President of Borland International Inc., a manufacturer of systems and
applications software products, where he was responsible for development of
Borland's Delphi client/server software product line. From February 1990 to
February 1992, Mr. Luong served as Director of Advanced Technology at Pyramid
Technology Corp., a manufacturer of open systems servers.
James W. Thanos has served as Aurum's Vice President of Worldwide
Operations since January 1995. From May 1994 to December 1994, Mr. Thanos served
as Vice President of Sales for Digital Tools, Inc., a provider of project
management software. From January 1993 to April 1994, Mr. Thanos served as Vice
President of Sales for Harvest Software, Inc., a facsimile forms company. From
December 1988 to January 1993, Mr. Thanos served as Vice President of Worldwide
Operations at Metaphor Computer Systems, Inc., a provider of decision support
software.
EXECUTIVE COMPENSATION
The following table summarizes the total compensation awarded to, earned
by, or paid for services rendered to Aurum in all capacities during each of the
fiscal years ended December 31, 1995 and 1996, respectively, by Aurum's Chief
Executive Officer and the four other most highly compensated executive officers
and one other person who would have been one of the most highly compensated
executive officers had such person been serving as an executive officer at the
end of 1996 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION(1) SECURITIES
--------------------- UNDERLYING
SALARY BONUS OPTIONS
NAME AND PRINCIPAL POSITION FISCAL YEAR ($) ($) (#)
- --------------------------------------- ----------- -------- -------- ------------
<S> <C> <C> <C> <C>
Mary E. Coleman 1996 $202,706 $ 75,000(5) 148,578
President and Chief Executive Officer 1995 174,996 47,665(5) 309,469
Susan K. Buchanan 1996 96,000 318,384(6) --
Executive Vice President 1995 96,000 219,379(6) 174,091
James W. Thanos 1996 152,167 132,932(7) 30,947
Vice President, Worldwide Operations 1995 130,000 98,693(7) 123,788
Tuoc V. Luong(2) 1996 161,325 45,826(8) 156,530
Vice President, Engineering 1995 -- -- --
Charles J. Donchess(3) 1996 129,609 52,150 --
Former Vice President, Marketing 1995 94,052 24,973(9) 92,841
Timothy E. Campbell(4) 1996 112,496 43,102(10) 42,500
Vice President, Client Services 1995 25,385 -- 50,000
</TABLE>
- ---------------
(1) Other than salary and bonus described herein, Aurum did not pay the persons
named in the Summary Compensation Table any compensation in excess of 10%
of such executive officer's salary and bonus.
(2) Mr. Luong became Aurum's Vice President, Engineering in January 1996.
(3) Mr. Donchess resigned as the Company's Vice President, Marketing effective
in December 1996.
(4) Mr. Campbell became Aurum's Vice President, Client Services in September
1995.
(5) Bonus compensation for fiscal 1996 includes $28,125 earned in fiscal 1996
but paid in fiscal 1997. Bonus compensation for fiscal 1995 includes
$10,625 earned in fiscal 1995 but paid in fiscal 1996.
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<PAGE> 86
(6) All bonus compensation consists of sales commissions. Includes for fiscal
1996 $131,538 earned in fiscal 1996 but paid in fiscal 1997. Includes for
fiscal 1995 $32,911 earned in fiscal 1995 but paid in fiscal 1996.
(7) Bonus compensation for fiscal 1996 includes $51,932 earned in fiscal 1996
but paid in fiscal 1997. Bonus compensation for fiscal 1995 includes
$22,500 earned in fiscal 1995 but paid in fiscal 1996.
(8) Includes $37,500 of deferred compensation.
(9) Includes $15,859 earned in fiscal 1995 but paid in fiscal 1996.
(10) Includes $8,406 earned in fiscal 1996 but paid in fiscal 1997.
STOCK OPTION GRANTS
The following table provides information relating to stock options awarded
to each of the Named Executive Officers during the fiscal year ended December
31, 1996. All such options were awarded under Aurum's 1995 Stock Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM(1)
OPTIONS TO EMPLOYEES PRICE PER EXPIRATION ---------------------
NAME GRANTED IN FISCAL 1996 SHARE(2)(3) DATE 5%($) 10%($)
- ---------------------------- ---------- ---------------- ----------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Mary E. Coleman............. 98,578 8.5% $0.32 2/02/06 $ 19,838 $ 50,275
50,000 4.3% 6.00 6/06/06 188,668 478,123
Susan K. Buchanan........... -- -- -- -- -- --
James W. Thanos............. 30,947 2.7% 0.32 2/02/06 6,228 15,783
Tuoc V. Luong............... 156,530 13.6% 0.32 2/02/06 31,501 79,830
Charles J. Donchess(4)...... 43,750 3.8% 0.32 2/02/06 3,302 8,367
13,410 1.2% 6.00 6/06/06 50,601 128,233
Timothy E. Campbell......... 10,000 0.9% 0.32 2/02/06 2,012 5,100
12,500 1.1% 6.00 6/06/06 47,167 119,531
20,000 1.8% 9.00 10/15/06 113,201 286,874
</TABLE>
- ---------------
(1) Potential realizable value is based on the assumption that the Common Stock
of Aurum appreciates at the annual rate shown (compounded annually) from the
date of grant until the expiration of the ten year option term. These rates
of annual stock price appreciation are mandated by the Securities and
Exchange Commission and do not represent Aurum's estimate or projection of
future Common Stock prices.
(2) Options were granted under Aurum's 1995 Stock Plan at an exercise price per
share equal to the fair market value of Aurum's Common Stock on the date of
grant. Twenty five percent (25%) of the shares issuable upon exercise of
options granted under Aurum's 1995 Stock Plan become vested on the first
anniversary of the date of grant and vest at the rate of 1/48th of the
shares for each month thereafter.
(3) Exercise price may be paid in cash, check, promissory note, by delivery of
already-owned shares of Aurum's Common Stock subject to certain conditions,
or pursuant to a cashless exercise procedure under which the optionee
provides irrevocable instructions to a brokerage firm to sell the purchased
shares and to remit to Aurum, out of the sale proceeds, an amount equal to
the exercise price plus all applicable withholding taxes.
(4) Mr. Donchess resigned as Aurum's Vice President, Marketing effective in
December 1996. All options granted to Mr. Donchess during fiscal 1996 were
unvested and terminated on the effective date of his resignation.
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<PAGE> 87
OPTION EXERCISES AND FISCAL 1996 YEAR-END VALUES
The following table sets forth certain information regarding the exercise
of stock options by Aurum's Chief Executive Officer and each of Aurum's five
most highly compensated executive officers who served as officers of Aurum
during the fiscal year ended December 31, 1996 (the "Named Executive Officers")
during the fiscal year ended December 31, 1996 and stock options held as of
December 31, 1996 by the Named Executive Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED VALUE DECEMBER 31, 1996(2) AT FISCAL YEAR-END($)(1)
ON EXERCISE REALIZED ----------------------------- -----------------------------
NAME (#)(2) ($)(2)(3) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mary E. Coleman.. 148,578 $ -- $ -- $ -- $ -- $ --
Susan K. 174,091 -- -- --
Buchanan....... 34,818
James W. Thanos.. 154,655 24,758 -- -- -- --
Tuoc V. Luong.... 156,630 -- -- -- -- --
Charles J. 32,881 -- -- -- --
Donchess(4).... 867,401
Timothy E. 50,000 32,500 -- 496,563 --
Campbell....... --
</TABLE>
- ---------------
(1) Amounts reflecting gains on outstanding stock options are based on the
closing price of Aurum's Common Stock on December 31, 1996 of 23.125.
(2) Options granted under Aurum's 1995 Stock Plan as in effect prior to the
effectiveness of the registration statement covering Aurum's initial public
offering were exercisable immediately upon grant and prior to full vesting,
subject to the optionee's entering a restricted stock purchase agreement
with Aurum with respect to any unvested shares. Under such agreement, the
optionee grants Aurum an option to repurchase any unvested shares at their
original purchase price in the event the optionee's employment or consulting
relationship with Aurum should terminate. The 1995 Stock Plan was amended in
connection with the initial public offering such that subsequent grants do
not include an early exercise provision.
(3) Based on the fair market value of Aurum's Common Stock on the date of
exercise minus the exercise price. For options exercised prior to Aurum's
initial public offering in October 1996, fair market value was determined in
good faith by Aurum's Board of Directors. For options exercised after
October 1996, fair market value was determined based on the closing price of
Aurum's Common Stock on the Nasdaq National Market.
(4) Mr. Donchess resigned as Aurum's Vice President, Marketing effective in
December 1996. In connection with his resignation, Mr. Donchess exercised
vested options to acquire 32,881 shares of Common Stock at an exercise price
of $0.12 per share. The fair market value of Aurum's Common Stock on the
date of exercise was $26.50. All unvested options held by Mr. Donchess
terminated in connection with his resignation, and Mr. Donchess held no
outstanding options at December 31, 1996.
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<PAGE> 88
AURUM SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Aurum's Common Stock as of June 30, 1997 by (i) each person or
entity who is known by Aurum to own beneficially 5% or more of Aurum's
outstanding Common Stock; (ii) each current director of Aurum; (iii) the Named
Executive Officers; and (iv) all directors and current executive officers of
Aurum as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(2)
DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL ----------------------
STOCKHOLDERS (1) NUMBER PERCENT
------------------------------------------------------ --------- --------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS:
Morgan Stanley Venture Partners II, L.P. (3).......... 2,275,593 19.5%
1221 Avenue of the Americas
New York, New York 10004
Vertex Management, Inc. (4)........................... 1,323,895 11.3%
Three Lagoon Drive, Suite 220
Redwood City, California 94065
Amerindo Investment Advisors Inc. (5)................. 952,000 8.2%
One Embarcadero Center, Suite 2300
San Francisco, California 94111
BankAmerica Corporation (6)........................... 949,366 8.1%
555 California Street
San Francisco, California 94104
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
David D. Buchanan (7)................................. 638,467 5.5%
Susan K. Buchanan (8)................................. 638,467 5.5%
Timothy E. Campbell (9)............................... 84,337 *
Mary E. Coleman (10).................................. 459,759 4.0%
Charles J. Donchess (11).............................. 32,881 *
Mark Hamilton (12).................................... -- --
Tuoc V. Luong (13).................................... 157,992 1.4%
James W. Thanos (14).................................. 156,572 1.3%
Mark Leslie (15)...................................... 29,043 *
Robert J. Loarie (16)................................. 2,275,593 19.5%
Robert M. Obuch (17).................................. 949,366 8.1%
Jeffrey T. Webber (18)................................ 23,627 *
Charles C. Wu (19).................................... 1,325,770 11.4%
All current executive officers and directors as a
group (12 persons)(20).............................. 6,366,466 54.6%
</TABLE>
- ---------------
* Less than 1%.
(1) The persons named in the table above have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them, subject to community property laws, where applicable, and to the
information contained in the footnotes to this table. Unless otherwise
indicated, the address for each listed stockholder is c/o Aurum Software,
Inc., 3385 Scott Boulevard, Santa Clara, California 95054.
(2) Applicable percentage ownership is based on 11,667,626 shares of Common
Stock outstanding as of June 30, 1997 and, in the case of officers and
directors, applicable options. Shares of Common Stock subject to options
that are exercisable within 60 days of June 30, 1997 are deemed to be
beneficially owned by the person holding such options for the purpose of
computing the percentage ownership of such person but are not treated as
outstanding for the purpose of computing any other person's percentage
ownership.
(3) Based on a filing with the Securities and Exchange Commission dated
February 14, 1997, indicating beneficial ownership as of December 31, 1996.
Represents shares held by Morgan Stanley Venture
79
<PAGE> 89
Capital Fund II, L.P., Morgan Stanley Capital Investors, L.P., and Morgan
Stanley Venture Capital Fund II, C.V. (collectively, the "Morgan Funds").
(4) Based on a filing with the Securities and Exchange Commission dated
February 19, 1997, indicating beneficial ownership as of December 31, 1996.
Represents shares held by Vertex Investments (II) Ltd. ("Vertex II") and
Vertex Investments Pte. Ltd. ("Vertex Pte."), each of which are affiliated
with Vertex Management, Inc.
(5) Based on a filing with the Securities and Exchange Commission dated
February 21, 1997, indicating beneficial ownership as of February 14, 1997.
(6) Based on a filing with the Securities and Exchange Commission dated
February 11, 1997, indicating beneficial ownership as of December 31, 1996.
Represents shares held by BankAmerica Ventures ("BA Ventures"), a venture
capital investment affiliate of BankAmerica Corporation, and shares held by
BA Ventures Partners I ("BA Partners"), an investment general partnership
comprised of certain employees of BA Ventures.
(7) Includes 174,091 shares of Common Stock held by Mr. Buchanan individually
and 464,376 shares of Common Stock held by The Buchanan Family 1991 Trust,
for which Mr. Buchanan serves as co-trustee. Excludes 174,091 shares held
by Mr. Buchanan's wife as separate property and for which Mr. Buchanan
disclaims beneficial ownership.
(8) Includes 174,091 shares of Common Stock held by Ms. Buchanan individually
and 464,376 shares of Common Stock held by The Buchanan Family 1991 Trust,
for which Ms. Buchanan serves as co-trustee. Excludes 174,091 shares held
by Ms. Buchanan's husband as separate property and for which Ms. Buchanan
disclaims beneficial ownership.
(9) Includes 32,500 shares of Common Stock issuable upon exercise of
outstanding options, of which no shares were vested as of June 30, 1997.
Such options may be exercised in full prior to complete vesting subject to
Mr. Campbell's entering a restricted stock purchase agreement granting
Aurum an option to repurchase such shares at their original purchase price
in the event of a termination of Mr. Campbell's employment with Aurum. Also
includes 28,750 unvested shares of Common Stock subject to Aurum's
repurchase option as of June 30, 1997 in the event of a termination of Mr.
Campbell's employment with Aurum.
(10) Includes 185,240 unvested shares of Common Stock subject to Aurum's
repurchase option as of June 30, 1997 in the event of a termination of Ms.
Coleman's employment with Aurum.
(11) Mr. Donchess resigned as an executive officer of Aurum effective in
December 1997.
(12) Mr. Hamilton became the Company's Vice President, Marketing in April 1997.
(13) Includes 101,092 unvested shares of Common Stock subject to Aurum's
repurchase option as of June 30, 1997 in the event of a termination of Mr.
Luong's employment with Aurum.
(14) Includes 68,985 unvested shares of Common Stock subject to Aurum's
repurchase option as of June 30, 1997 in the event of a termination of Mr.
Thanos' employment with Aurum.
(15) Includes 18,750 shares of Common Stock issuable upon exercise of an
outstanding option, of which 5,469 shares were vested as of June 30, 1997.
Mr. Leslie's option may be exercised in full prior to complete vesting
subject to his entering a restricted stock purchase agreement granting
Aurum an option to repurchase such shares at their original purchase price
in the event of a termination of Mr. Leslie's membership on Aurum's Board
of Directors.
(16) Represents shares held by the Morgan Funds. Mr. Loarie is a director of
Aurum, a principal of Morgan Stanley & Co. Incorporated, a general partner
of Morgan Stanley Venture Partners II, L.P., and a Vice President and a
director of its general partner. Mr. Loarie disclaims beneficial ownership
of all such shares except to the extent of his pecuniary interest therein.
(17) Represents shares held by BA Ventures and shares held by BA Partners. Mr.
Obuch is a Principal of BA Ventures, a general partner of BA Partners, and
a director of Aurum. Mr. Obuch disclaims beneficial ownership of all shares
held by BA Ventures and all shares held by BA Partners except to the extent
of his proportionate general partnership interest in BA Partners.
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(18) Includes 13,281 unvested shares of Common Stock as of June 30, 1997 subject
to Aurum's repurchase option in the event of a termination of Mr. Webber's
membership on Aurum's Board of Directors.
(19) Includes shares held by Vertex II and shares held by Vertex Pte. Vertex II
and Vertex Pte. are investment affiliates of Vertex Management, Inc., a
venture capital investment firm. Mr. Wu is a Vice President of Vertex
Management, Inc. and a director of Aurum. Mr. Wu disclaims beneficial
ownership of all such shares except to the extent of his pecuniary interest
therein.
(20) Includes 116,474 shares immediately issuable upon exercise of outstanding
options under Aurum's 1995 Stock Plan, of which 111,005 shares were not
vested as of June 30, 1997. Includes 397,348 unvested shares that were
subject to repurchase options in favor of Aurum as of June 30, 1997.
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CERTAIN TRANSACTIONS OF AURUM
Aurum's 1995 Stock Plan, as in effect prior to certain amendments effective
upon the completion of Aurum's initial public offering in October 1996,
permitted holders of outstanding options to exercise such options prior to
complete vesting, subject to their entering into a restricted stock purchase
agreement granting Aurum an option to repurchase any unvested shares at their
original purchase price in the event of a termination of such optionee's
employment or consulting relationship with Aurum. Effective with the initial
public offering, the 1995 Stock Plan was amended such that subsequent option
grants will not contain an early exercise feature.
In September 1995, February 1996, and July 1996, Aurum loaned Mary E.
Coleman, Aurum's President and Chief Executive Officer, an aggregate amount of
$368,691 in connection with the purchase of Common Stock under the 1995 Stock
Plan, evidenced by three promissory notes. Each of the notes bears interest at
the rate of 8% per annum. At December 31, 1996, the outstanding principal
amounts of the three notes were $37,136, $31,555, and $300,000, respectively.
Such notes become due and payable in September 2000, February 2001, and July
2001, respectively. In the event that Ms. Coleman ceases to be employed by Aurum
prior to maturity of the notes, such notes shall, at the option of Aurum, become
immediately due and payable.
In July 1996 and August 1996, Aurum loaned to Christopher L. Dier, Aurum's
Vice President, Finance and Chief Financial Officer, an aggregate amount of
$157,500 in connection with the purchase of Common Stock under the 1995 Stock
Plan, evidenced by two promissory notes. Both notes bear interest at the rate of
8% per annum. At December 31, 1996, the outstanding principal amounts of the two
notes were $120,000 and $37,500, respectively, and they become due and payable
in July 2000 and August 2000, respectively. In the event that Mr. Dier ceases to
be employed by Aurum prior to maturity of the notes, such notes shall, at the
option of Aurum, become immediately due and payable.
In September 1996, Aurum loaned to Jeffrey T. Webber, a member of Aurum's
Board of Directors, an aggregate amount of $112,500 in connection with the
purchase of Common Stock under the 1995 Stock Plan, evidenced by a promissory
note. The note bears interest at the rate of 8% per annum. At December 31, 1996,
the outstanding principal amount of such note was $112,500, and it becomes due
and payable in September 2000. In the event that Mr. Webber ceases to be a
member of Aurum's Board of Directors prior to maturity of the note, such note
shall, at the option of Aurum, become immediately due and payable.
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DESCRIPTION OF AURUM CAPITAL STOCK
As of June 30, 1997 the authorized capital stock of Aurum consisted of
25,000,000 shares of Aurum Common Stock, $0.001 par value, and 5,000,000 shares
of undesignated Preferred Stock, $0.001 par value, of which 11,667,626 shares of
Aurum Common Stock were issued and outstanding and no shares of Preferred Stock
were issued and outstanding.
The following description of Aurum's capital stock does not purport to be
complete and is subject to and qualified in its entirety by Aurum's Restated
Certificate of Incorporation and Bylaws, which are included as exhibits to the
Registration Statement of which this Prospectus forms a part, and by the
provisions of applicable Delaware law.
The Restated Certificate of Incorporation and Bylaws contain certain
provisions that are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors and which may have the
effect of delaying, deferring or preventing a future takeover or change in
control of Aurum unless such takeover or change in control is approved by the
Board of Directors.
AURUM COMMON STOCK
Holders of Aurum Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Holders of Aurum Common Stock do
not have cumulative voting rights, and, therefore, holders of a majority of the
shares voting for the election of directors can elect all of the directors. In
such event, the holders of the remaining shares will not be able to elect any
directors.
Holders of Aurum Common Stock are entitled to receive such dividends as may
be declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the terms of any existing or future agreements
between Aurum and its debtholders. Aurum has never declared or paid cash
dividends on its capital stock, expects to retain future earnings, if any, for
use in the operation and expansion of its business, and does not anticipate
paying any cash dividends in the foreseeable future. In addition, Aurum's bank
line of credit agreement contains a restrictive covenant that limits Aurum's
ability to pay cash dividends or make stock repurchases without the prior
written consent of the lender. See "Dividend Policy." In the event of the
liquidation, dissolution or winding up of Aurum, the holders of Aurum Common
Stock are entitled to share ratably in all assets legally available for
distribution after payment of all debts and other liabilities and subject to the
prior rights of any holders of Preferred Stock then outstanding.
PREFERRED STOCK
Aurum is authorized to issue 5,000,000 shares of undesignated Preferred
Stock. The Board of Directors has the authority to issue the Preferred Stock in
one or more series and to fix the price, rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting a series, or the designation
of such series, without any further vote or action by Aurum's stockholders. The
issuance of Preferred Stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of delaying, deferring or preventing a change in control of Aurum without
further action by the stockholders and may adversely affect the market price of,
and the voting and other rights of, the holders of Aurum Common Stock. The
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Aurum Common Stock, including the loss
of voting control to others. Aurum has no current plans to issue any shares of
Preferred Stock.
ANTITAKEOVER EFFECTS OF PROVISIONS OF CERTIFICATE OF INCORPORATION AND BYLAWS
Aurum's Certificate of Incorporation provides that all stockholder actions
must be effected at a duly called annual or special meeting and may not be
effected by written consent. The Certificate of Incorporation eliminates the
right of Aurum's stockholders to vote cumulatively in the election of directors
(except to the extent that cumulative voting may be required by the California
corporate law). Stockholders entitled to vote in the election of directors are
able to cast one vote per share, regardless of the number of directors to be
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elected. Aurum's Bylaws provide that, except as otherwise required by law,
special meetings of the stockholders can only be called pursuant to a resolution
adopted by a majority of the Board of Directors, by the chief executive officer
of Aurum, or by stockholders holding shares in the aggregate entitled to cast
not less than 10% of the votes at such meeting. In addition, Aurum's Bylaws
establish an advance notice procedure for stockholder proposals to be brought
before an annual meeting of stockholders, including proposed nominations of
persons for election to the Board. Stockholders at an annual meeting may only
consider proposals or nominations specified in the notice of meeting or brought
before the meeting by or at the direction of the Board of Directors or by a
stockholder who was a stockholder of record on the record date for the meeting,
who is entitled to vote at the meeting and who has delivered timely written
notice in proper form to Aurum's Secretary of the stockholder's intention to
bring such business before the meeting.
The foregoing provisions of Aurum's Certificate of Incorporation and Bylaws
are intended to enhance the likelihood of continuity and stability in the
composition of the Board of Directors and in the policies formulated by the
Board of Directors and to discourage certain types of transactions which may
involve an actual or threatened change of control of Aurum. Such provisions are
designed to reduce the vulnerability of Aurum to an unsolicited acquisition
proposal and, accordingly, could discourage potential acquisition proposals and
could delay or prevent a change in control of Aurum. Such provisions are also
intended to discourage certain tactics that may be used in proxy fights but
could, however, have the effect of discouraging others from making tender offers
for Aurum's shares and, consequently, may also inhibit fluctuations in the
market price of Aurum's shares that could result from actual or rumored takeover
attempts. These provisions may also have the effect of preventing changes in the
management of Aurum.
EFFECT OF DELAWARE ANTITAKEOVER STATUTE
Aurum is subject to Section 203 of the DGCL (the "Antitakeover Law"), which
regulates corporate acquisitions. The Antitakeover Law prevents certain Delaware
corporations, including those whose securities are listed for trading on the
Nasdaq National Market, from engaging, under certain circumstances, in a
"business combination" with any "interested stockholder" for three years
following the date that such stockholder became an interested stockholder. For
purposes of the Antitakeover Law, a "business combination" includes, among other
things, a merger or consolidation involving Aurum and the interested stockholder
and the sale of more than ten percent (10%) of Aurum's assets. In general, the
Antitakeover Law defines an "interested stockholder" as any entity or person
beneficially owning 15% or more of the outstanding voting stock of Aurum and any
entity or person affiliated with or controlling or controlled by such entity or
person. A Delaware corporation may "opt out" of the Antitakeover Law with an
express provision in its original certificate of incorporation or an express
provision in its certificate of incorporation or bylaws resulting from
amendments approved by the holders of at least a majority of Aurum's outstanding
voting shares. Aurum has not "opted out" of the provisions of the Antitakeover
Law.
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BAAN BUSINESS
Baan is a leading provider of business management software for an open
systems, client/server computing environment. Companies of all sizes around the
world use Baan's software to control and automate business processes, ranging
from accounting, order management, and inventory procurement, to manufacturing
and finished-goods delivery. Baan's software is targeted to companies needing to
respond quickly to today's competitive global marketplace.
Baan's products are targeted at organizations focused on increasing their
market advantage by continually improving business processes. While its products
have the functional depth for many market segments, Baan has optimized its
products, services, and marketing efforts for key players and their entire
supply/demand chain in four industries: automotive; electronics; process; and
project-based industries, including heavy equipment manufacturing, project
services, and aerospace and defense. Baan selected these markets based on three
factors: well defined supply and demand chains; a focus on industry best
practices; and market dynamics that require continuous assessment and
re-assessment of business processes and the underlying information technology
(IT) infrastructure. Baan actively works with industry leaders in each market
sector to help insure that Baan offers a highly competitive product which
closely meets that industry's unique requirements.
The cornerstone of Baan's strategy is to deliver scalable, flexible
solutions, which can be rapidly implemented and deliver a clear return on
investment. To do this, Baan focuses on intuitive, graphical business modeling
as a starting point for software implementation. As a result, Baan's software
typically can be configured and implemented in as short a time period as three
to twelve months, which Baan believes provides it with a competitive advantage.
In addition, ongoing adjustments can be made to the system in response to
changing market demands and changes in production and operational processes -- a
capability which Baan calls "Dynamic Enterprise Modeling." According to leading
market analysts such as Aberdeen Group, Advanced Manufacturing Research,
Forrester Research, Gartner Group, and Patricia Seybold Group, rapid
implementation and capabilities for ongoing system re-configuration are critical
differentiators for Baan's market space.
In addition, Baan's software is flexible and can be successfully used in a
variety of business, computing, and manufacturing environments. It offers
functionality for a broad range of manufacturing practices: from make-to-stock
to engineer-to-order manufacturing; single or multi-site environments located in
one or multiple countries; support for an individual assembler or an entire
supply chain; and large or small computing environments running on a broad range
of platforms.
Supported by a decentralized research and development organization, Baan
has adopted a strategy of periodically reinventing its products -- rather than
increasing the complexity of its software by adding layers of code as upgrades
are developed. Baan believes this enables the consistent delivery of
state-of-the-art solutions meeting the requirements of the "extended
enterprise." Baan commenced shipment of its first information systems in The
Netherlands in 1982, and since that time has introduced several new generations
of products. Today, Baan is shipping BAAN IV, consisting of Baan Applications,
Orgware and Baan Tools.
- Baan Applications includes more than 100 integrated software modules for
seven broad areas: manufacturing, constraint planning, distribution and
transportation, finance, service management, project management, and
process manufacturing.
- Orgware is a set of tools, templates, and methodologies for business
modeling and rapid software implementation. Orgware is the linchpin in
Baan's vision for delivering Dynamic Enterprise Modeling, which the
Company believes to be a key competitive differentiator.
- Baan Tools is a fourth generation language (4GL) software development
toolset used by Baan, its implementation providers, and end user
customers to develop and modify Baan Applications.
Over the past several years, Baan has significantly expanded its sales and
service presence in North American, Latin American and certain European and Far
Eastern markets. Baan's net revenues have grown from $122.9 million in 1994 to
$388.0 million in 1996. Baan's overall number of employees has more than doubled
from 943 persons at December 31, 1994 to 2,679 at March 31, 1997.
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Baan manages its business operations through corporate headquarters in
Putten, The Netherlands and Menlo Park, California, as well as through regional
sales and operational offices. Products are sold and supported through both
direct and indirect channels in 59 countries. To augment its own offerings and
infrastructure, Baan has partnered with leading technology and service
providers. This includes implementation and value-added resale partners, such as
Compuware Corporation, Origin International, IBM Global Services, and KPMG Peat
Marwick, and technology partnerships with Digital Equipment Corporation, IBM,
Compaq Computer Corporation, Hewlett-Packard Company, Informix Software Inc.,
Intel Corporation, Microsoft Corporation, and Sun Microsystems, Inc. In 1996,
Baan acquired Berclain Group Inc. ("Berclain"), a provider of manufacturing
synchronization and scheduling software used to synchronize manufacturing across
the supply chain, and Antalys which provides software that enables a company's
sales force to accurately and rapidly configure and price products and services.
Baan has licensed more than 3,500 system installations to date to more than
2,200 customers worldwide within its targeted markets. Customers include Asea
Brown Boveri Group, The Boeing Company, British Aerospace Limited, Ford Motor
Company, Fujitsu-ICL Systems, Inc., George Weston Foods Ltd., Hitachi Ltd., Levi
Strauss Europe, Mercedes Benz US International, Inc., Northern Telecom Limited,
Noranda Aluminum, Inc., Solectron Corporation, Oki Electric Industry Co. Ltd.,
Philips Medical Systems Nederland B.V., and Snap-on Incorporated.
Baan Company N.V. is a Netherlands holding company with its statutory seat
at Barneveld, The Netherlands, and conducts business through its domestic and
international subsidiaries. Baan's business was founded in 1978 and Baan Holding
B.V., the predecessor of Baan Company N.V., was incorporated in 1983. References
in this Proxy Statement/Prospectus to "Baan," unless the context otherwise
requires, relate to Baan Company N.V., its predecessor, Baan Holding B.V. and
its subsidiaries. Baan's headquarters are located at Vanenburgerallee 13, 3882
RH Putten, The Netherlands, telephone number (31) 341-375555, and at 4600
Bohannon Drive, Menlo Park, California 94025, telephone number (1) 415-462-4949.
For a further discussion of Baan's business please refer to the Baan documents
incorporated by reference to this Registration Statement. See "Incorporation of
Certain Documents by Reference."
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DESCRIPTION OF BAAN CAPITAL STOCK
GENERAL
Set forth below is a summary of certain information concerning Baan's share
capital, and a brief description of certain provisions contained in the Articles
of Association of Baan. The summaries and descriptions below do not purport to
be complete statements of these provisions and are qualified in their entirety
by reference to the Articles of Association of Baan.
The authorized share capital of Baan consists of 350,000,000 Common Shares
(with a nominal value of NLG 0.01 each). The Baan Common Shares held by a
shareholder may be in bearer form ("Bearer Shares") or registered form
("Registered Shares"), at the request of the shareholder. The Baan Common Shares
issued to the Aurum stockholders in the Merger will be Registered Shares.
BAAN COMMON SHARES
On May 31, 1997, there were approximately 91,350,460 Baan Common Shares
outstanding. Each shareholder is entitled to one vote for each Common Share held
on every matter submitted to a vote of shareholders. The shareholders, at a
general meeting of shareholders, may decide upon a distribution of Baan's annual
profits to all shareholders out of nonreserved profits insofar as permitted by
Netherlands law. In the event of the dissolution of Baan, holders of Baan Common
Shares are entitled to receive, on a pro rata basis, all remaining liquidation
proceeds of Baan available for distribution to the holders of Baan Common
Shares. See "Comparison of Rights of Shareholders of Baan and Stockholders of
Aurum -- Voting Rights, Dividends."
SUMMARY OF CERTAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION AND OTHER MATTERS
General Meetings of Shareholders
Under Netherlands law, a company must hold at least one annual general
meeting, to be held not later than six months after the end of the financial
year. Pursuant to the Baan Articles of Association, general meetings may also be
held as often as the Baan Management Board deems necessary. In addition, under
Netherlands law and the Baan Articles of Association, shareholders representing
at least one-tenth of the issued share capital may be authorized by the
President of the District Court with competent jurisdiction to convene a general
meeting of shareholders. The Articles of Association of Baan specify the places
where general meetings of shareholders may be held, all of which are located in
The Netherlands. There are no laws currently in effect in The Netherlands or
provisions in the Articles of Association of Baan limiting the rights of
non-resident or foreign investors to hold or vote Baan Common Shares.
On May 20, 1997, Baan held its 1997 annual general meeting of shareholders.
The Baan 1997 annual general meeting of shareholders (i) approved the Annual
Report of the Board of Managing Directors for the year ended December 31, 1996;
(ii) adopted the Company's Statutory Annual Accounts for the year ended December
31, 1996; (iii) approved the addition of the Company's net income for the year
ended December 31, 1996 to the Company's retained earnings; (iv) amended Article
37 of the Company's Articles of Association so as to extend the list of places
and municipalities where a shareholders meeting may be held; (v) (re)appointed
members of the Board of Managing Directors and the Board of Supervisory
Directors; (vi) ratified the amendment to the Company's 1993 Stock Option Plan
to increase the number of shares authorized for issuance thereunder; (vii)
renewed the power of the Board of Managing Directors to issue shares; (viii)
renewed the power of the Board of Managing Directors to exclude or limit
preemptive rights; and (ix) renewed the authorization of the Board of Managing
Directors to have the Company acquire shares in its own capital.
Election and Tenure of Managing Directors and Supervisory Directors; Power to
Represent and Bind Baan
Baan has a Management Board and a Supervisory Board. The Management Board
is entrusted with the day-to-day management of Baan. The Supervisory Board
supervises the Management Board and the general affairs and business of Baan,
and advises the Management Board. The number of Managing Directors and
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Supervisory Directors is determined from time to time by the shareholders.
Vacancies which exist in the Management Board or Supervisory Board are filled by
resolution of the general meeting of shareholders, generally at the first
general meeting after such vacancy occurs or is created, provided that once Baan
becomes subject to the "large company regime" applicable to large publicly
traded Netherlands corporations, which is expected to occur in 1998, vacancies
in the Supervisory Board will be filled by the Supervisory Board and members of
the Management Board will be appointed by the Supervisory Board. At such time as
Baan becomes subject to the large company regime under Netherlands law, it will
be required to have at least three Supervisory Directors. Managing Directors and
Supervisory Directors serve until the expiration of their respective terms of
office or their resignation, death or removal by the general meeting of
shareholders. At such time as Baan becomes subject to the large company regime,
the Supervisory Board will have the power to remove Supervisory Directors and to
remove Managing Directors upon completion of a hearing of the general meeting of
shareholders. In addition, individual Supervisory Directors may be removed in
certain circumstances by the Business Chamber of the Appellate Court of
Amsterdam upon application made by Baan (as represented by its Supervisory
Board), a person designated by the general meeting of shareholders, or a person
designated by the Works Council. Members of Baan's Supervisory Board and
Management Board will stand for re-election at each annual general meeting of
shareholders, provided that once Baan has become subject to the large company
regime, members of the Management Board shall be appointed by the Supervisory
Board, and Baan expects that at that time it will adopt staggered three-year
terms for each of the Supervisory Directors, who will thereafter be appointed by
the Supervisory Board. Because Netherlands law permits perpetual terms for
managing directors and because approximately 43% of Baan's outstanding Baan
Common Shares are owned by Baan Investment B.V., as of March 31, 1997, Jan Baan
and J.G. Paul Baan, as the managing directors of Baan Investment B.V. and
directors of the Share Administration Foundation that has the power to vote all
shares of Baan Investment B.V., have the effective power to change or make
perpetual the terms of office of members of Baan's Management and Supervisory
Boards. See "Comparison of Rights of Shareholders of Baan and Stockholders of
Aurum -- Election of Directors, Filling of Vacancies."
Adoption of Statutory Annual Accounts; Dividends
Within five months after the close of Baan's fiscal year (except where this
period is extended up to a maximum of six months by the general meeting of
shareholders on account of special circumstances), the Management Board is
required to submit to the general meeting of shareholders its annual report with
respect to such fiscal year and Baan's statutory annual accounts for such year,
accompanied by a report of an independent auditor on such statutory annual
accounts. The statutory annual accounts are submitted by the Management Board to
the general meeting of shareholders for adoption by the general meeting of
shareholders at the annual general meeting, which must be held no later than six
months after the close of Baan's fiscal year. Under the Articles of Association,
the unconditional adoption of the statutory annual accounts constitutes a
discharge of the Management Board and the Supervisory Board from liability for
the performance of their respective duties as disclosed in such statutory annual
accounts. Once Baan is subject to the large company regime, the Supervisory
Board shall have the authority to adopt the statutory annual accounts and the
general meeting of shareholders shall have the authority to approve such adopted
statutory annual accounts.
Under Baan's Articles of Association, the Management Board, subject to the
approval of the Supervisory Board, may set aside as reserves a part or all of
the annual profits of Baan. The amount reserved is not available for the
distribution of dividends. At any general meeting of shareholders, the
shareholders are entitled to decide upon a distribution of Baan's profits to all
shareholders out of nonreserved profits insofar as permitted by law. In
addition, subject to statutory provisions, the Management Board may, upon the
approval of the Supervisory Board, distribute one or more interim dividends on
the Baan Common Shares before the annual financial statements for any fiscal
year have been adopted at a general meeting of shareholders. At the general
meeting of shareholders, the general meeting of shareholders may also make
available to the shareholders existing reserves which are distributable in
accordance with Netherlands law upon the proposal thereto by the Management
Board, which is subject to approval by the Supervisory Board. Dividends may be
paid either in cash or in kind. The right of any shareholder to receive cash
dividends and distributions shall be terminated if such dividends or
distributions are not claimed within five years and one day following the date
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on which they were made available. Baan's ability to declare and pay cash
dividends is currently restricted under Baan's long-term debt obligations. There
are no laws currently in force in The Netherlands or provisions of Baan's
Articles of Association restricting payment of dividends to holders of Baan
Common Shares not resident in The Netherlands. See "Comparison of Rights of
Shareholders of Baan and Stockholders of Aurum -- Dividends."
Preemptive Rights
Under the Articles of Association, the holders of Baan Common Shares have
preemptive rights with regard to any issue of shares for cash pro rata in
proportion to the aggregate amount of the Baan Common Shares held by them. The
holders of Baan Common Shares have no preemptive rights to subscribe for Baan
Common Shares issued for non-cash consideration, including Baan Common Shares
issued as consideration for an acquisition (such as the Merger), or for Baan
Common Shares issued to employees of Baan or of a group company of Baan.
Preemptive rights may, subject to certain conditions contained in Netherlands
law and Baan's Articles of Association, be limited or excluded by the general
meeting of shareholders. The Baan general meeting of shareholders has conferred
to the Management Board the authority, subject to approval by the Supervisory
Board, to limit or exclude preemptive rights with respect to each issuance of
Baan Common Shares through April 30, 2002. Under Netherlands law, such power may
be conferred for a maximum of five years and may from time to time be extended
but never for a period longer than five years. See "Comparison of Rights of
Shareholders of Baan and Stockholders of Aurum -- Preemptive Rights."
Acquisition by Baan of its own Shares
Subject to certain restrictions imposed by Netherlands law and contained in
Baan's Articles of Association, the shareholders have delegated to the
Management Board the authority, subject to approval of the Supervisory Board, to
cause Baan to acquire its own fully-paid shares through September 30, 1998.
Under Netherlands law and the Baan Articles of Association such authorization
may be delegated for a maximum period of eighteen months and may from time to
time be extended, but never for a period longer than eighteen months. No such
authorization shall be required insofar as Baan acquires shares in its own
capital for the purpose of transferring the same to employees of Baan or of a
group company under a scheme applicable to such employees, provided that such
shares are officially listed on an exchange. See "Comparison of Rights of
Shareholders of Baan and Stockholders of Aurum -- Right of Purchase."
Issuance of Additional Shares
Baan's authorized but unissued shares may be issued at such time, and on
such conditions, as may be authorized by the shareholders (or by another
corporate body if authorized by the shareholders). The general meeting of
shareholders has delegated to the Management Board the authority, upon approval
of the Supervisory Board, to issue Common Shares of Baan through April 30, 2002.
SHARE CERTIFICATES AND TRANSFER
The Baan Common Shares are issuable in registered form or bearer form as
the holder may elect. Registered Shares may consist of either Baan Common Shares
registered with Baan's transfer agent and registrar in New York, New York ("New
York Registered Shares"), Morgan Guaranty Trust Company of New York (the "New
York Transfer Agent") or Baan Common Shares registered at Baan's offices in
Barneveld, The Netherlands (the "Barneveld Register"). New York Registered
Shares may be evidenced by certificates printed in the English language and are
registered in book-entry form, while Baan Common Shares registered in the
Barneveld Register are registered in book-entry form. Bearer Shares are
represented by certificates printed in the Dutch language with a dividend sheet
attached ("CF-certificates"). CF-certificates must remain deposited with an
authorized custodian and may only be transferred through the book-entry transfer
systems maintained by NECIGEF (Nederlands Centraal lnstituut voor Giraal
Effectenverkeer, the Netherlands Central Institute for Giro Securities), Cedel
Bank, S.A. or Euroclear.
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The transfer of Registered Shares requires an instrument intended for such
purpose and, except when Baan itself is a party to such legal act, the written
acknowledgment of the transfer by Baan or, in the case of the New York
Registered Shares, the New York Transfer Agent (in the name of Baan), and
submission of the share certificates, if any, to Baan or (in the name of Baan)
to the New York Transfer Agent.
The Baan Common Shares are listed on the Nasdaq National Market and on the
Amsterdam Stock Exchange. Only New York Registered Shares may be traded on the
Nasdaq National Market and only Bearer Shares may be traded on the Amsterdam
Stock Exchange.
Bearer Shares may be converted into Registered Shares at the request of the
holder and vice versa. A holder may convert Bearer Shares to New York Registered
Shares by providing a written request for such exchange and surrendering the
Bearer Shares at the principal office of ABN AMRO Bank N.V., Herengracht 595,
1017 CE Amsterdam, The Netherlands, the Dutch exchange agent (the "CF Agent").
The CF Agent will instruct the New York Transfer Agent to issue New York
Registered Shares and to deliver the corresponding share certificates.
Similarly, a holder may convert New York Registered Shares to Bearer Shares by
presenting a written request for such exchange and surrendering the New York
Registered Shares to the New York Transfer Agent. The New York Transfer Agent
will then instruct the CF Agent in The Netherlands to issue and deliver Bearer
Shares for the same number of shares. Bearer Shares and New York Registered
Shares registered with the New York Transfer Agent and Registrar may upon
cancellation also be exchanged into Baan Common Shares in registered form
registered upon the Barneveld Register and vice versa. Share certificates for
New York Registered Shares may be exchanged at the office of the New York
Transfer Agent for certificates of other authorized denominations. A fee will be
charged to shareholders for the exchange of New York Registered Shares for
Bearer Shares or Baan Common Shares of the Barneveld Register (and for each
other such conversion).
Bearer Shares have been accepted for clearance through Cedel Bank, S.A. and
Euroclear, (Common Code 5740223 and ISIN NLOOOO 336337). The Fonds Code on the
Amsterdam Stock Exchange is 33633.
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COMPARISON OF RIGHTS OF SHAREHOLDERS OF BAAN AND
STOCKHOLDERS OF AURUM
As a result of the Merger, stockholders of Aurum will become shareholders
of Baan, a Netherlands company, and their rights will be governed by Netherlands
law and the Articles of Association of Baan which differ in certain material
respects from the Restated Certificate of Incorporation of Aurum (the "Aurum
Certificate") and the Aurum by-laws (the "Aurum By-laws"). The following is a
summary of certain material differences between the rights of holders of Aurum
Common Stock and holders of Baan Common Shares that may affect the interests of
Aurum stockholders. These differences arise from differences between the DGCL
and the Netherlands Civil Code as well as from differences between the governing
documents. This Summary is not, and does not purport to be, complete and does
not purport to identify all differences that may, under given situations, be
material to Aurum stockholders. This summary is qualified in its entirety by
reference to the DGCL and the corporate laws of The Netherlands and the
governing instruments of Aurum and Baan. This summary should be read in
conjunction with "Description of Capital Stock of Baan."
VOTING RIGHTS
Under the DGCL, each stockholder is entitled to one vote per share of
stock, unless the certificate of incorporation provides otherwise. In addition,
the certificate of incorporation may provide for cumulative voting at all
elections of directors of the corporation. Either the certificate of
incorporation or the by-laws may specify the number of shares and/or the amount
of other securities that must be represented at a meeting in order to constitute
a quorum, but in no event will a quorum consist of less than one-third of the
shares entitled to vote at a meeting.
The Aurum Bylaws provide for one vote per share of Aurum Common Stock.
Under the Aurum By-laws, the presence in person, or by properly executed proxy,
of holders of a majority of the outstanding shares of the stock issued and
outstanding and entitled to vote at the meeting is required to constitute a
quorum at stockholder meetings of Aurum. The Aurum Certificate does not provide
for cumulative voting.
Under Netherlands law, each shareholder is entitled to one vote per share,
unless the articles of association of the company provide otherwise. All
shareholder resolutions are taken by a majority of the votes cast, unless the
law or the articles of association prescribe otherwise. The validity of
shareholder decisions is not dependent on a quorum, unless the law or the
articles of association stipulate otherwise. Baan will mail notices to the
holders of Registered Shares at least 15 days before any general meeting of
shareholders and will publish notices convening any general meeting in a
national daily newspaper in The Netherlands, in the Official Amsterdam Stock
Exchange Price List, and abroad in at least one daily newspaper in each country
in which the Baan Common Shares have been admitted for official quotation at
Baan's request. In order to attend, address the meeting and vote at a general
meeting of shareholders, the holders of Registered Shares must notify Baan in
writing of their intention to attend the meeting and holders of Bearer Shares
must deposit their Bearer Shares at one of the banks or other institutions
specified in the published notice. Shareholders and other persons entitled to
attend and vote at a general meeting of shareholders may be represented by proxy
with written authority.
The Articles of Association of Baan provide for one vote per Baan Common
Share. Generally, all resolutions may be adopted by a majority of the total
votes cast at a general meeting of Baan shareholders, unless Netherlands law
requires a qualified majority, and there are no quorum requirements. However, if
less than half of the issued share capital is represented during a Baan general
meeting, resolutions by such general meeting to authorize the Baan Management
Board to limit or exclude the shareholders' right of pre-emption or to reduce
capital, require a majority of two-thirds of the votes cast at such general
meeting.
Upon completion of the Merger, the percentage ownership of Baan by each
former Aurum stockholder will be substantially less than such stockholder's
current percentage ownership of Aurum. Accordingly, former Aurum stockholders
will have a significantly smaller voting influence over the affairs of Baan than
they currently enjoy over the affairs of Aurum.
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AMENDMENT OF CHARTER DOCUMENTS
Under the DGCL, amendments to a corporation's certificate of incorporation
require a resolution of the board of directors, followed by a majority vote of
the holders of the outstanding stock entitled to vote on such amendment and, in
certain circumstances, of the majority vote of the holders of the outstanding
stock of each class entitled to vote on such amendment as a class, unless a
greater number or proportion is specified in the certificate of incorporation or
by other provisions of the DGCL. Under the DGCL, the bylaws may be amended only
by the stockholders, unless the company's certificate of incorporation also
confers the power to amend the bylaws on the directors.
The Aurum Certificate reserves the right to alter, amend, change or repeal
any provision of the Aurum Certificate in the manner prescribed by the DGCL. The
Aurum Board of Directors is expressly authorized to make, alter, amend, or
repeal the Aurum By-laws.
Under Netherlands law, shareholders of a Netherlands company may resolve to
amend the company's articles of association, although a statement of
no-objection must be obtained from the Netherlands Ministry of Justice for any
such amendment.
Under Baan's Articles of Association, the general meeting of shareholders
may pass a resolution for an amendment to the Baan Articles of Association, or
the dissolution of Baan, only upon a proposal of the Baan Management Board which
proposal requires the approval of the Baan Supervisory Board, and it must be
approved by a majority of the votes cast at the meeting.
APPRAISAL RIGHTS
The DGCL provides for appraisal rights in connection with certain mergers
and consolidations. Appraisal rights are not available for any shares of stock
of the constituent corporation surviving the merger if the merger did not
require for its approval the vote of the holders of the surviving corporation.
In addition, unless otherwise provided in the charter, no appraisal rights are
available to holders of shares of any class of stock which, as of the record
date, is either: (a) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. (the "NASD") or (b) held of
record by more than 2,000 holders, unless such holders are required by the terms
of the merger to accept anything other than: (i) shares of stock of the
surviving corporation; (ii) shares of stock of another corporation which are or
will be so listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the NASD or held of
record by more than 2,000 holders; (iii) cash in lieu of fractional shares of
such stock; or (iv) any combination thereof. The Aurum Certificate has no
provision relating to appraisal rights.
Netherlands law does not recognize the concept of appraisal or dissenters'
rights and, accordingly, holders of shares in a Netherlands company have no
appraisal rights.
PREEMPTIVE RIGHTS
Under the DGCL, stockholders have no preemptive rights to subscribe to
additional issues of stock or to any security convertible into such stock
unless, and except to the extent that, such rights are expressly provided for in
the certificate of incorporation. The Aurum Certificate does not provide for
preemptive rights.
Under Netherlands law, holders of common shares in a Netherlands company
have preemptive rights with respect to newly issued common shares in proportion
to the aggregate nominal value of their shareholdings (with the exception of
shares to be issued to employees of the company or of a group company or, unless
the articles of association provide otherwise, shares issued against payment
other than in cash). Unless the articles of association state otherwise, holders
of preferred shares have no preemptive rights. If the general meeting has used
the authority to appoint another corporate body authorized to issue shares, that
body may also be authorized to exclusively resolve to limit and to exclude the
preemptive rights provided that such body was granted with such authority at the
appointment. Preemptive rights in respect of newly issued common shares may be
excluded by approval of the shareholders at the general meeting of shareholders.
In addition, under Netherlands law preemptive rights may be limited or excluded
by a resolution of the
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management board, upon approval by the supervisory board, if the general meeting
of shareholders, or the articles of association upon amendment to that effect,
have conferred such power on the management board. Such power may be conferred
for a maximum period of five years and may from time to time be extended, but
never for a period longer than five years. At the Annual General Meeting of
Shareholders of Baan, held on May 20, 1997, the shareholders of Baan renewed the
power of the Baan Management Board of Directors upon approval by the Supervisory
Board, to exclude or limit preemptive rights up to and including April 30, 2002.
The holders of Baan Common Shares have no preemptive rights to subscribe for
Baan Common Shares issued for non-cash consideration (including the Baan Common
Shares issued in the Merger in exchange for the outstanding shares of Aurum
Common Stock).
ACTION BY WRITTEN CONSENT OF SHAREHOLDERS
The DGCL provides that, unless otherwise provided in a corporation's
certificate of incorporation, any action that may be taken at a meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if the holders of outstanding stock having no less than the minimum number
of votes that would be necessary to authorize such action at a meeting, consent
in writing. The Aurum By-laws provide that any action required or permitted to
be taken by Aurum stockholders must be effected at a duly called annual or
special meeting of the stockholders of Aurum and may not be effected by any
consent in writing by such stockholders.
Under Netherlands law, resolutions may be adopted by shareholders in
writing without holding a meeting of shareholders, provided the articles of
association expressly so allow and provided no Bearer Shares are issued. As
Baan's Articles of Association do not contain such express provision and Baan
has issued Bearer Shares, shareholders of Baan may not adopt resolutions outside
a meeting of shareholders.
SHAREHOLDERS' MEETINGS
Under the DGCL, an annual meeting of stockholders must be held for the
election of directors on a date and at a time designated by or in the manner
provided in the by-laws. Any other proper business may be transacted at the
annual meeting. The Aurum By-laws provide that the Board shall fix the date,
time and place of the meeting.
Under Netherlands law, a company must hold at least one annual general
meeting, to be held not later than six months after the end of the financial
year. Pursuant to the Baan Articles of Association, general meetings may also be
held as often as the Baan Management Board deems necessary. In addition, under
Netherlands law and the Baan Articles of Association, shareholders representing
at least one-tenth of the issued share capital may be authorized by the
President of the District Court with competent jurisdiction to convene a general
meeting of shareholders. The Articles of Association of Baan specify the places
where general meetings of shareholders may be held, all of which are located in
The Netherlands. There are no laws currently in effect in The Netherlands or
provisions in the Articles of Association of Baan limiting the rights of
non-resident or foreign investors to hold or vote Baan Common Shares.
ELECTION OF DIRECTORS
Under the DGCL, the board of directors of a corporation must consist of one
or more members. The number of directors must be fixed by, or in the manner
provided in, the by-laws, unless the certificate of incorporation fixes the
number of directors. Each director shall hold office until his or her successor
is elected and qualified or until his or her earlier resignation or removal. The
directors are elected at the annual meeting of stockholders. The directors may
be divided into one, two or three classes. The Aurum By-laws provide that the
number of directors shall be eight.
Baan has a management board and a supervisory board (respectively, the
"Management Board" and the "Supervisory Board"). The Management Board is
entrusted with the day-to-day management of Baan. The Supervisory Board
supervises the Management Board and the general affairs and business of Baan,
and advises the Management Board. The number of managing directors and
supervisory directors is determined from time to time by the shareholders.
Vacancies which exist in the Baan Management Board or Baan Supervisory
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Board are filled by resolution of the general meeting of shareholders, generally
at the first general meeting after such vacancy occurs or is created, provided
that when Baan becomes subject to the "large Netherlands company regime", which
is expected to occur in 1998, vacancies in the Baan Supervisory Board will be
filled by the Baan Supervisory Board and members of the Baan Management Board
will be appointed by the Baan Supervisory Board. At such time as Baan becomes
subject to the so-called large company regime under Netherlands law, it will be
required to have at least three supervisory directors.
Under Netherlands law, the management board of a company must consist of at
least one member, members of the management board and supervisory board are
appointed for an indefinite period of time, and their appointment is not
staggered. However, under Netherlands law, members of the supervisory board of a
company subject to the "large Netherlands company regime" are appointed for a
period of four years unless the articles of association provide for a shorter
period, and may be reelected. Each supervisory director is required to resign on
the date of the annual general meeting of shareholders in the year in which such
director attains the age of 72. A Netherlands company may provide in its
articles of association that the appointment and resignation of members of the
management board and the supervisory board will be staggered.
The Articles of Association of Baan provide that the Baan Supervisory Board
will consist of one or more natural persons and specify that the Baan Management
Board will consist of one or more members. Under Baan's Articles of Association,
the Baan general meeting of shareholders appoints the members of the Baan
Management Board for a limited or unlimited period of time, and may grant
managing directors the titles of "Chief Executive Officer", President and such
other titles as it may deem appropriate. The Baan Supervisory Board members also
are appointed by the Baan general meeting of shareholders for a period of time
not exceeding 3 years.
REMOVAL OF DIRECTORS
Under the DGCL, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors, except (a) if the certificate of
incorporation provides otherwise, in the case of a corporation whose board is
classified, stockholders may effect such removal only for cause, or (b) in the
case of a corporation having cumulative voting, if less than the entire board is
to be removed, no director may be removed without cause if the votes cast
against his removal would be sufficient to elect him if then cumulatively voted
at an election of the entire board of directors, or, if there are classes of
directors, at an election of the class of directors of which he is a part.
The Aurum By-laws provide that any one or more of the directors of Aurum
may be removed at any time, with or without cause, by the vote of the holders of
a majority of the voting power of all of the then-outstanding shares of stock of
Aurum entitled to vote generally in the election of directors, voting as a
single class. If at any time a class or series of Aurum shares is entitled to
elect a director, a majority of the voting power of the outstanding shares of
that class of stock of Aurum is entitled to remove such director.
Under Netherlands law and Baan's Articles of Association, the Baan general
meeting has the authority to suspend or remove members of the Baan Management
Board at any time. Baan's Articles of Association provide that a member of the
Baan Management Board can be suspended by the Baan Supervisory Board. Such
suspension may at any time be discontinued by the general meeting of
shareholders. Removal without cause is possible but may be contrary to the
principles of reasonableness and fairness which are imposed under Netherlands
law. Any removal without cause therefore could result in the liability of the
Company for damages. However, unless the procedure by which the member of the
Baan Managing Board was removed is flawed, a removal is irrevocable. Members of
the Baan Supervisory Board may be suspended or removed by the general meeting of
shareholders. Under Netherlands law, the supervisory board of a company subject
to the "large Netherlands company regime" has the authority to remove members of
the management board upon completion of a hearing of the general meeting of
shareholders.
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FILLING OF VACANCIES
The DGCL provides that vacancies and newly-created directorships may be
filled by a majority of the directors then in office (even though less than a
quorum) unless (i) otherwise provided in the certificate of incorporation or
by-laws of the corporation or (ii) the certificate of incorporation directs that
a particular class of stock is to elect such director, in which case any other
directors elected by such class, or a sole remaining director elected by such
class, shall fill such vacancy.
Under Netherlands law and Baan's Articles of Association, a decision to
appoint a new member of the Management Board must be taken by the general
meeting of shareholders. However, under Netherlands law, members of the
management board of a company subject to the "large Netherlands company regime"
are appointed by the supervisory board, subject to prior notification of the
general meeting of shareholders.
Under Baan's Articles of Association, a decision to appoint a new member of
the Supervisory Board must be taken by the general meeting of shareholders.
However, under Netherlands law, members of the supervisory board of a company
subject to the "large Netherlands company regime" are appointed by the
supervisory board. The general meeting of shareholders is notified of an
existing vacancy in the supervisory board and has the authority to make a
non-binding recommendation to the supervisory board. The supervisory board is
authorized to appoint a person that is not recommended by the general meeting of
shareholders, unless the general meeting of shareholders formally objects to
such an appointment. Upon request of a representative of the supervisory board,
the Company Chamber ("Ondernemingskamer") of the Amsterdam Court of Appeals may
determine that the objection of the general meeting of shareholders is not
justified.
SHAREHOLDER NOMINATIONS
The Aurum By-laws provide that stockholders may nominate individuals for
election to the board of directors at a meeting of Aurum stockholders entitled
to vote for the election of directors. In order to nominate an individual, a
stockholder must deliver written notice to the Secretary of Aurum not less than
90 days prior to the meeting; provided, however, that in the event that less
than 100 days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder, to be timely, must be
so received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. The written notice must set forth (a) as to each person
whom the stockholder proposes to nominate for election or re-election as a
director, (i) the name, age, business address and residence address of such
person, and (ii) any other information relating to such person that is required
to be disclosed in solicitations of proxies for election of directors, or is
otherwise required (including without limitation such person's written consent
to being named in the proxy statement as a nominee and to serving as a director,
if elected) and (b) as to the stockholder giving the notice of the nomination
(i) the stockholder's name and address, (ii) a representation by the stockholder
that he is a holder of record of stock of Aurum entitled to vote at such meeting
and, if applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice, and (iii) if applicable,
a description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder. If the chairman of the meeting determines that a nomination was not
made in accordance with the prescribed procedures, the chairman must so declare
to the meeting and the defective nomination will be disregarded.
Baan's Articles of Association provide that when the appointment of a
member of the Supervisory Board is proposed by the Supervisory Board, the
proposal must state the candidate's age, profession, the number of shares he
holds in Baan's share capital and the offices he holds or has held, insofar as
the latter are of importance to the performance of duties as a member of the
Supervisory Board. The proposal for the appointment must also list the grounds
for the proposal.
DIVIDENDS
Under the DGCL, a Delaware corporation may pay dividends out of its surplus
(the excess of net assets over capital), or in case there is no surplus, out of
its net profits for the fiscal year in which the dividend is
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declared and/or the preceding fiscal year (provided that the amount of the
capital of the corporation is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets). In determining the amount of
surplus of a Delaware corporation, the assets of the corporation, including
stock of subsidiaries owned by the corporation, must be valued at their fair
market value as determined by the board of directors, without regard to their
historical book value.
Netherlands law provides that dividends may only be distributed after
adoption of the Company's annual accounts by its shareholders. Moreover,
dividends may be distributed only to the extent that net assets exceed the sum
of the amount of issued and paid-up capital and reserves which must be
maintained under the law or the articles of association. Interim dividends may
be declared as provided for in the articles of association and may be
distributed to the extent that net assets exceed the amount of the issued and
paid-up capital plus required legal reserves. Under Netherlands law, the
articles of association may prescribe that the management board and/or the
supervisory board decide what portion of the profits are to be held as reserves.
Baan's Articles of Association provide that the Baan Management Board,
after receiving approval of the Baan Supervisory Board, may determine what
portion of the profits are to be held as reserves. The remainder of the profits
can be distributed to the shareholders, as determined by the general meeting of
shareholders and subject to the following requirements: (i) dividends may be
distributed only up to an amount which does not exceed the amount of the
distributable part of the shareholders's equity, (ii) dividends may only be
distributed after adoption of the annual accounts from which it appears that
payment of the dividends is permissible, and (iii) in anticipation of final
dividends, the Baan Management Board, after receiving approval by the Baan
Supervisory Board, may resolve to pay an interim dividend. Upon proposal of the
Baan Management Board, after receiving approval of the Baan Supervisory Board,
the general meeting may resolve to make distributions to the charge of any
reserve which need not be maintained by virtue of Netherlands law, and/or to
make distributions not in cash but in shares in Baan.
Under Netherlands law, the supervisory board of a company subject to the
"large Netherlands company regime" adopts the annual accounts, subject to the
subsequent approval or rejection by the general meeting of shareholders. If the
general meeting of shareholders rejects the annual accounts, no dividends may be
distributed.
RIGHTS OF PURCHASE
Under the DGCL, a corporation may redeem or repurchase its own shares,
except that a corporation cannot generally make such a purchase or redemption if
it would cause impairment of its capital.
Netherlands law and the Articles of Association of Baan provide that Baan
may not subscribe for newly issued shares in its own capital. Baan may, subject
to certain restrictions, purchase fully paid-up shares in its own capital,
provided (i) the distributable part of the shareholders' equity is at least
equal to the acquisition price, and (ii) the nominal value of the shares
acquired by the Company (or its subsidiaries) does not exceed 10% of the nominal
value of the then outstanding issued share capital. In addition, Baan may
acquire its own fully paid-up shares provided no valuable consideration is
given.
LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The DGCL permits a corporation to include in its certificate of
incorporation a provision eliminating or limiting a director's personal
liability to the corporation or its stockholders for monetary damages for
breaches of fiduciary duty. However, the DGCL expressly provides that the
liability of a director may not be eliminated or limited for (i) breaches of a
director's duty of loyalty to the corporation or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) the unlawful purchase or redemption of stock or unlawful
payment of dividends or (iv) any transaction from which the director derived an
improper personal benefit. The DGCL further provides that no such provision
shall eliminate or limit the liability of a director for any act or omission
occurring prior to the date when such provision becomes effective. The Aurum
Certificate contains a provision eliminating director liability to the extent
permitted by the DGCL.
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Generally, the DGCL permits a corporation to indemnify certain persons made
a party to any action, suit or proceeding by reason of the fact that such person
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise provided that such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation. To the extent that person has been successful
in any such matter, that person shall be indemnified against expenses actually
and reasonably incurred by him. In the case of an action by or in the right of
the corporation, no indemnification may be made in respect of any matter as to
which that person was adjudged liable to the corporation unless and only to the
extent that the Delaware Court of Chancery or the court in which the action was
brought determines that despite the adjudication of liability that person is
fairly and reasonably entitled to indemnity for proper expenses. The bylaws of
Aurum require Aurum to indemnify its directors, officers and employees to the
maximum extent permitted by law.
The concept of indemnification of directors of a company for liabilities
arising from their actions as members of the management or supervisory boards
is, in principle and with the exception of ultra vires circumstances, accepted
in The Netherlands and sometimes is provided for in a company's articles of
association. Although neither the laws of The Netherlands nor Baan's Articles of
Association contain any provisions in this respect, Baan has contractually
agreed to indemnify members of the Baan Management and Supervisory Boards and
officers of Baan.
SPECIAL MEETINGS
Under the DGCL, a special meeting of stockholders may be called by the
board of directors or by any other person authorized in the certificate of
incorporation or the by-laws. The DGCL does not provide stockholders with an
automatic right to call special meetings of stockholders. The Aurum By-laws
provide that a special meeting of stockholders may be called by (i) the board of
directors, (ii) the chairman of the board of directors, (iii) the president,
(iv) the chief executive officer, or (v) one or more stockholders holding shares
in the aggregate entitled to cast not less than 10% of the votes at that
meeting.
Under Netherlands law, special general meetings of shareholders may be
convened by the management board or the supervisory board, but the articles of
association may also vest this power in other persons. In addition, one or more
shareholders, who own together at least 10% -- or such lesser amount as is
provided by the articles of association -- of the issued capital, can be
authorized by the President of the District Court with competent jurisdiction to
call a special general meeting of shareholders.
Pursuant to Baan's Articles of Association, special general meetings of
shareholders may be held whenever the Baan Management Board calls such meetings,
subject to the specific requirements under Netherlands law. In addition, one or
more shareholders, who own together at least 10% of the issued capital, can be
authorized by the President of the District Court with competent jurisdiction to
call a special general meeting of shareholders.
SHAREHOLDER VOTES ON CERTAIN REORGANIZATIONS
Under the DGCL, the vote of a majority of the outstanding shares of capital
stock entitled to vote thereon generally is necessary to approve a merger, such
as the Merger, or a consolidation. The DGCL permits a corporation to include in
its certificate of incorporation a provision requiring for any corporate action
the vote of a larger portion of the stock or of any class or series thereof than
would otherwise be required.
Under the DGCL, no vote of the stockholders of a surviving corporation to a
merger is needed, unless required by the certificate of incorporation, if (i)
the agreement of merger does not amend in any respect the certificate of
incorporation of the surviving corporation, (ii) the shares of stock of the
surviving corporation are not changed in the merger and (iii) the number of
shares of common stock of the surviving corporation into which any other shares,
securities or obligations to be issued in the merger may be converted does not
exceed 20% of the surviving corporation's common shares outstanding immediately
prior to the effective date of the merger. In addition, stockholders may not be
entitled to vote in certain mergers with other corporations that own 90% or more
of the outstanding shares of each class of stock of such corporation.
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Baan's Articles of Association do not expressly require the approval of the
general meeting of shareholders of reorganizations or mergers in which Baan
would not be the surviving entity, but by virtue of the application of
Netherlands statutory law, a merger or reorganization involving Baan and in
which Baan would not be the surviving entity is subject to the approval of the
Baan general meeting of shareholders by a majority of the votes cast at such
meeting.
CERTAIN PROVISIONS RELATING TO BUSINESS COMBINATIONS
The DGCL generally prevents a corporation from entering into certain
business combinations (which includes a merger of or sale of more than 10% of
the Corporation's assets) with an "interested stockholder" (defined generally to
include any person or entity that is the beneficial owner of at least 15% of a
corporation's outstanding voting stock or certain of its affiliates within a
three year period immediately prior to the time that such stockholder became an
"interested stockholder"), unless (i) the business combination or the
transaction which resulted in the stockholder becoming an "interested
stockholder" is approved by the board of directors of the corporation, prior to
such time as the stockholder became an "interested stockholder", (ii) the
interested stockholder acquired at least 85% of the corporation's voting stock
in the same transaction in which it became an "interested stockholder" or (iii)
at or subsequent to such time in which the stockholder became an "interested
stockholder", 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 a vote of 66 2/3% of the outstanding voting stock not owned by the
interested stockholder.
Neither Netherlands law nor Baan's Articles of Association specifically
prevent business combinations with interested shareholders. However, certain
general principles of Netherlands law may restrict business combinations under
certain circumstances.
RIGHTS OF INSPECTION
Under the DGCL, any stockholder may inspect, for a purpose reasonably
related to such person's interest as a stockholder, the corporation's stock
ledger, a list of its stockholders and its other books and records during the
corporation's usual hours for business.
Under Netherlands law, the annual accounts of a company are submitted to
the general meeting of shareholders for their adoption. Prior to such meeting of
shareholders, the annual accounts of a company are available for inspection by
the shareholders at the offices of the company. Under Netherlands law, the
shareholders' register is available for inspection by the shareholders. The
register for holders of Registered Shares traded on Nasdaq is available for
inspection at the office of Baan's New York Transfer Agent. The register for
holders of Registered Shares other than New York Registered Shares is available
for inspection at Baan's offices in Barneveld. Pursuant to Netherlands law and
to Baan's Articles of Association, the members of the Baan Supervisory Board are
authorized to inspect the books and records of Baan, and they are permitted
access to the buildings and premises of Baan.
SHAREHOLDER SUITS
Under the DGCL, a stockholder may bring a derivative action on behalf of
the corporation to enforce the rights of the corporation. An individual also may
commence a class action suit on behalf of himself and other similarly situated
stockholders where the requirements for maintaining a class action under
Delaware law have been met. A person may institute and maintain such a suit only
if such person was a stockholder at the time of the transaction which is the
subject of the suit or his or her stock thereafter desolved upon him or her by
operation of law. Additionally, under Delaware case law, the plaintiff generally
must be a stockholder not only at the time of the transaction which is the
subject of the suit, but also through the duration of the derivative suit.
Delaware law also requires that the derivative plaintiff make a demand on the
directors of the corporation to assert the corporate claim before the suit may
be prosecuted by the derivative plaintiff, unless such demand would be futile.
Netherlands law does not provide for derivative suits or class action
suits. Please note that Netherlands law provides for the possibility that legal
proceedings are instituted by a group combining interested parties
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<PAGE> 108
("belangengroeperingen"). Such proceedings can not entirely be compared with
derivative or class action suits.
SHAREHOLDER PROPOSALS
The Aurum By-laws provide that stockholder proposals of business may be
made at an annual meeting pursuant to the notice of meeting, by or at the
direction of the board of directors or by a stockholder. To bring a proposal of
business before an annual meeting, the stockholder must give notice in writing
to the Secretary of Aurum not less than 90 days prior to the meeting; provided,
however, that in the event that less than 100 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the tenth day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made. The written
notice must contain (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address of the stockholder proposing
such business, and (c) a representation that the stockholder is a holder of
record of stock of Aurum entitled to vote at such meeting. The chairman of an
annual meeting may refuse to acknowledge a proposal of any business not made in
compliance with the foregoing procedure.
The Baan Articles of Association have no specific provision on shareholder
proposals.
CONFLICT-OF-INTEREST TRANSACTIONS
The DGCL generally permits transactions involving a Delaware corporation
and an interested director of that corporation if (a) the material facts as to
his relationship or interest are disclosed and a majority of disinterested
directors consents, (b) the material facts are disclosed as to his relationship
or interest and a majority of shares entitled to vote thereon consents or (c)
the transaction is fair to the corporation at the time it is authorized by the
board of directors, a committee of the board of directors or the stockholders.
Under Netherlands law, unless the articles of association of a company
provide otherwise, the corporation will be represented by the supervisory board
in case of a conflict of interest between the corporation and one or more of its
management board members. The Articles of Association of Baan provide that if a
member of the Baan Management Board, acting in his personal capacity, enters
into an agreement with Baan or initiates litigation against Baan, Baan may be
represented in that matter either by one of the other members of the Baan
Management Board or by a member of the Baan Supervisory Board designated by the
Baan Supervisory Board, unless the Baan general meeting designates a person for
that purpose or unless the Netherlands law provides otherwise for such
designation.
FINANCIAL INFORMATION AVAILABLE TO SHAREHOLDERS
Baan and Aurum are each required to file periodic reports with the SEC
containing certain financial information. Aurum files annual reports on Form
10-K which contain audited financial statements prepared in accordance with U.S.
generally accepted accounting principles ("U.S. GAAP") and quarterly reports on
Form 10-Q which contain quarterly financial statements prepared in accordance
with U.S. GAAP. Baan files annual reports on Form 20-F which contain annual
financial statements prepared in accordance with U.S. GAAP and periodic reports
on Form 6-K which contain quarterly financial statements prepared in accordance
with U.S. GAAP.
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TAXATION
The following is a summary of certain Netherlands and U.S. federal income
tax consequences relating to an investment in Baan's Common Shares. This summary
does not deal with all possible tax consequences relating to an investment in
Baan's Common Shares. In particular, the discussion does not address the tax
consequences under state, local and other (e.g., non-U.S. or non-Netherlands)
tax laws, nor does it address special circumstances that may apply to any
individual investor. Accordingly, each prospective investor should consult its
tax advisor regarding the tax consequences to it of an investment in the Baan
Common Shares. The following discussion is based upon the analysis of the Code,
the Regulations thereunder, current case law, and published rulings, both for
U.S. and Netherlands purposes.
The anticipated tax consequences are subject to change, and such change may
be retroactively effective. If so, the following summary may be affected and may
not be relied upon. Further, any variation or differences from the facts or
representations recited herein, for any reason, might affect the following
discussion, perhaps in an adverse manner, and make them inapplicable. In
addition, the U.S. counsel and the Netherlands tax advisor to Baan both have
undertaken no obligation to update this discussion for changes in facts or laws
occurring subsequent to the date thereof.
The summary represents solely the views of the U.S. and Netherlands tax
advisors to Baan as to the interpretation of existing law and, accordingly, no
assurance can be given that the tax authorities or courts in the U.S. or The
Netherlands will agree with the summary hereafter.
NETHERLANDS TAXATION
The following is a summary of Netherlands tax consequences to an owner of
Baan Common Shares who is not, or is not deemed to be, a resident of The
Netherlands for purposes of the relevant tax codes (a "non-resident
Shareholder"). The summary does not address taxes imposed by The Netherlands and
its political subdivisions, other than the dividend withholding tax, individual
income tax, corporate income tax, net wealth tax, and gift and inheritance tax.
NETHERLANDS DIVIDEND WITHHOLDING TAX
Baan does not expect to pay dividends in the foreseeable future. To the
extent that dividends are distributed by Baan, such dividends would be subject
under Netherlands tax law to withholding tax at a rate of 25%. Dividends include
dividends in cash or in kind, constructive dividends and liquidation proceeds in
excess of, for Netherlands tax purposes, recognized paid-in capital. Stock
dividends are also subject to withholding tax unless distributed out of Baan's
paid-in share premium as recognized for Netherlands tax purposes.
A non-resident shareholder can be eligible for a reduction or a refund of
Netherlands dividend withholding tax under a tax convention which is in effect
between the country of residence of the non-resident shareholder and The
Netherlands. The Netherlands has concluded such conventions with, among others,
the United States and all members of the European Union except Portugal. Under
most of these conventions, Netherlands dividend withholding tax is reduced to a
rate of 15% or less unless the recipient shareholder has a permanent
establishment in The Netherlands to which the Baan Common Shares are
attributable.
No withholding tax applies on the sale or disposition of Baan Common Shares
to persons other than Baan and affiliates of Baan.
INCOME TAX AND CAPITAL GAINS
A Shareholder will not be subject to Netherlands income tax with respect to
dividends distributed by Baan on the Baan Common Shares or with respect to
capital gains derived from the sale or disposal of Baan Common Shares in Baan,
provided that:
(i) such holder is neither resident nor deemed to be resident in The
Netherlands;
(ii) such holder does not have an enterprise or an interest in an
enterprise that is, in whole or in part, carried on through a permanent
establishment or a permanent representative in The Netherlands and to
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<PAGE> 110
which enterprise or part of an enterprise, as the case may be, the Baan
Common Shares are attributable; and
(iii) such holder does not have a substantial interest or a deemed
substantial interest in the share capital of Baan or, if such holder does
have such an interest, it forms part of the assets of an enterprise.
As of January 1, 1997, a holder of Baan Common Shares will generally not
have a substantial interest if he, his spouse, certain other relatives
(including foster children) or certain persons sharing his household, do not
hold, alone or together, whether directly or indirectly, the ownership of, or
certain other rights over, shares representing five per cent or more of the
total issued and outstanding capital (or the issued and outstanding capital of
any class of shares) of Baan. A deemed substantial interest is present if (part
of) a substantial interest has been disposed of, or is deemed to have been
disposed of, on a non-recognition basis.
NET WEALTH TAX
A Shareholder will not be subject to Netherlands net wealth tax in respect
of the Baan Common Shares provided that such Shareholder is not an individual
or, if he is an individual, the conditions described in clauses (i) and (ii) of
the proviso under "Income Tax and Capital Gains" are satisfied.
NETHERLANDS GIFT AND INHERITANCE TAX.
A gift or inheritance of Baan Common Shares from a non-resident Shareholder
will not be subject to Netherlands gift and inheritance tax, provided that: (i)
the non-resident Shareholder does not carry on business in the Netherlands
through a permanent establishment or a permanent representative to which or to
whom the Baan Common Shares are attributable; (ii) the non-resident Shareholder
has not been a resident of the Netherlands at any time during the ten years
preceding the time of the gift or death or, in the event he or she has been a
resident of the Netherlands in that period, the non-resident Shareholder is not
a Netherlands citizen at the time of the gift or death; and (iii) for purposes
of the tax on gifts, the non-resident Shareholder has not been a resident of the
Netherlands at any time during the twelve months preceding the time of the gift.
U.S. FEDERAL INCOME TAXATION
For purposes of this summary, a "U.S. Shareholder" is any Shareholder that
is (i) a citizen or resident of the United States, (ii) a corporation,
partnership, or other entity created or organized in or under the laws of the
United States (or any State thereof, including the District of Columbia), or
(iii) an estate or trust the income of which is subject to United States federal
income taxation regardless of its source. A "Non-U.S. Shareholder" is any
Shareholder that is not a U.S. Shareholder.
TAXATION OF DIVIDENDS
The gross amount (before reduction for withholding taxes) of a distribution
with respect to the Baan Common Shares will be a dividend to a U.S. Shareholder,
taxable as ordinary income, to the extent of Baan's current or accumulated
earnings or profits (as determined under U.S. federal income tax principles).
Distributions paid by Baan in excess of current or accumulated earnings and
profits will be treated as a tax-free return of capital to the extent of the
U.S. Shareholder's adjusted tax basis in his or her Baan Common Shares, and
thereafter as a gain from the sale or exchange of a capital asset. These
dividends are generally not eligible for the dividends-received deduction
otherwise allowed to U.S. corporate shareholders on dividends from U.S. domestic
corporations. The amount of any distribution paid in guilders will be equal to
the U.S. dollar value of the guilders on the date of receipt, regardless of
whether the U.S. Shareholder converts the payment into U.S. dollars. Gain or
loss, if any, recognized by a U.S. Shareholder on the sale or disposition of
guilders will be U.S. source ordinary income or loss. A U.S. Shareholder may
elect annually either to deduct The Netherlands withholding tax (see
"Netherlands Taxation") against its income or take the withholding taxes as a
credit against its U.S. tax liability, subject to U.S. foreign tax credit
limitation rules. Dividend income will be income from sources outside the United
States for foreign tax credit limitation purposes. Dividend income generally
will be either "passive" income or "financial services" income, depending on the
particular U.S. Shareholder's circumstances.
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<PAGE> 111
Payments of dividends on the Baan Common Shares to a Non-U.S. Shareholder
generally will not be subject to U.S. federal income tax unless such income is
effectively connected with the conduct by such Non-U.S. Shareholder of a trade
or business in the United States.
DISPOSITIONS OF BAAN COMMON SHARES
A U.S. Shareholder will recognize gain or loss for U.S. federal income tax
purposes upon the sale or other disposition of Baan Common Shares in an amount
equal to the difference between the amount realized and the U.S. Shareholder's
tax basis in the Baan Common Shares. Such gain or loss will be capital gain or
loss and will be long-term capital gain or loss if the Baan Common Shares have
been held (or deemed held) for more than one year.
Gain realized by a Non-U.S. Shareholder upon the sale or other disposition
of Baan Common Shares generally will not be subject to U.S. federal income tax
unless (i) the gain is effectively connected with the conduct by such Non-U.S.
Shareholder of a trade or business in the United States or (ii) the Shareholder
is an individual who was present in the United States for at least 183 days in
the taxable year for such sale, exchange or retirement and certain other
conditions are met.
PASSIVE FOREIGN INVESTMENT COMPANIES
Baan may be classified as a "passive foreign investment company" ("PFIC")
for United States federal income tax purposes if certain tests are met. Baan
will be a PFIC with respect to a U.S. Shareholder if for any taxable year in
which the U.S. Shareholder held Baan's Shares, either (i) 75% or more of the
gross income of Baan for the taxable year is passive income; or (ii) the average
value during the taxable year of its passive assets (i.e., assets that produce
passive income or which are held for the production of passive income) is at
least 50% of the average fair market value of all of Baan's assets for such
year. Passive income generally includes dividends, interest, royalties, rents
(other than rents and royalties derived in the active conduct of a trade or
business and not derived from a related person), annuities, and gains from
assets which would produce such income other than sales of inventory. For the
purpose of the PFIC tests, if a foreign corporation owns directly or indirectly
at least 25% by value of the stock of another corporation, the foreign
corporation is treated as owning its proportionate share of the assets of the
other corporation, and as if it had received directly its proportionate share of
the income of such other corporation. The effect of this special provision with
respect to Baan and its direct and indirect ownership of its subsidiaries is
that Baan, for purposes of the income and assets tests described above, will be
treated as owning directly its proportionate share of the assets of the
subsidiaries and of receiving directly its proportionate share of each of those
companies' income, if any, so long as Baan owns, directly or indirectly, at
least 25% by value of the particular company's stock. Active business income of
Baan's subsidiaries will be treated as active business income of Baan, rather
than as passive income.
If Baan were to be classified as a PFIC, a U.S. Shareholder would be
subject to various adverse U.S. tax consequences. Such adverse consequences
include an interest charge on taxes deemed deferred by them on receipt of
certain "excess" dividend distributions by Baan to the U.S. Shareholder and on
realization of gain on disposition of any of the U.S. Shareholder's Company
stock (all of which distributions and gains would be taxable as ordinary income
at the highest marginal rate). However, the foregoing interest charge could be
avoided if a U.S. Shareholder were to make a qualified electing fund ("QEF")
election and Baan were to agree to comply with certain reporting requirements.
If a QEF election were made, the U.S. Shareholder would be currently taxable on
the U.S. Shareholder's pro rata share of Baan's ordinary earnings and profits
and long-term capital gains for each year (at ordinary income or capital gains
rates, respectively), even if no dividend distributions were received. Based on
the nature of Baan's expected income and assets, management does not expect that
Baan should be classified as a PFIC in the foreseeable future.
FOREIGN PERSONAL HOLDING COMPANIES
Baan or any of its non-U.S. subsidiaries may be classified as a "foreign
personal holding company" ("FPHC") if in any taxable year five or fewer
individuals who are U.S. citizens or residents own (directly or constructively
through certain attribution rules) more than 50% of Baan's stock (a "U.S.
group") and more
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than 60% of the gross income of Baan or the subsidiary consists of passive
income for purposes of the FPHC rules. Because substantially all of Baan's
income is likely to consist of dividends from subsidiaries, which generally is
passive income for purposes of the FPHC rules, it is likely to meet the income
test. Similarly, if more than 60% of the gross income of a non-U.S. subsidiary
of Baan were to consist of dividends, interest, royalties (other than active
business computer software royalties) or other types of passive income, the
subsidiary would meet the FPHC income test.
If Baan or any of its subsidiaries is or becomes an FPHC, each U.S.
Shareholder of Baan (including a U.S. corporation) who held stock in Baan on the
last day of the taxable year of Baan, or, if earlier, the last day of its
taxable year on which a U.S. group existed with respect to Baan would be
required to include in gross income as a dividend such shareholder's pro rata
portion of the undistributed income of Baan or the subsidiary, even if no cash
dividend were actually paid. In such case, if Baan were the FPHC, a U.S.
Shareholder would be entitled to increase its tax basis in the shares of Baan by
the amount of a deemed dividend from Baan. If a subsidiary of Baan were the
FPHC, a U.S. Shareholder in Baan should be afforded similar relief, although the
law is unclear as to the form of the relief.
If either Jan Baan or J.G. Paul Baan were to become a U.S. citizen or
resident, or marry a U.S. citizen or resident, a U.S. group might then exist
based upon the shares considered owned by him (or such U.S. citizen or resident
spouse). Moreover, if a member of either Jan or J.G. Paul Baan's family were to
own one or more shares in Baan and become a U.S. citizen or resident, shares
owned by such Baan brother could be considered owned by such family member so as
to create a U.S. group. Although Baan believes that at the present time no U.S.
group exists, Baan can give no assurances regarding future ownership of Company
shares by members of the Baan family, or future changes in citizenship or
residence of Baan family members which could result in the creation of a U.S.
group and thus cause Baan to be treated as an FPHC. Moreover, Baan can give no
assurance that it will have timely knowledge of the formation of a U.S. group.
In this regard, Baan does not assume any obligation to make timely disclosure
with respect to such status.
If Baan becomes an FPHC, a U.S. person who acquires shares from a decedent
would be denied the step-up of tax basis of such shares to fair market value or
the decedent's basis.
As noted above, certain U.S. tax consequences depend on the composition of
the income of Baan and its subsidiaries. The tax law is not entirely clear as to
the proper classification of all relevant types of income which Baan and its
subsidiaries may realize. Accordingly, there can be no assurance that
management's expectations described in the preceding section will be fulfilled.
STATE AND LOCAL TAXES
State and local treatment may differ from federal income tax treatment.
Each U.S. Shareholder should seek tax advice with respect to applicable state
and local taxes.
LEGAL MATTERS
The validity of the Baan Common Shares, and certain legal matters in
connection with the Merger will be passed upon for Baan by Wilson Sonsini
Goodrich & Rosati, Professional Corporation, Palo Alto, California. The validity
of the Baan Common Shares offered hereby and certain matters of Netherlands laws
will be passed upon for Baan by De Brauw Blackstone Westbroek, Amsterdam, The
Netherlands. Certain legal matters in connection with the Merger will be passed
upon for Aurum by Fenwick & West LLP, Palo Alto, California.
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EXPERTS
The consolidated financial statements of Baan Company N.V. at December 31,
1996 and 1995 and for each of the three years in the period ended December 31,
1996, which have been incorporated by reference in the Proxy Statement/
Prospectus, have been audited by Moret Ernst & Young Accountants, independent
auditors, as set forth in their report incorporated by reference herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The balance sheets of Aurum Software, Inc. as of December 31, 1996 and 1995
and the statements of operations, stockholders' equity (deficit) and cash flows
for each of the three years in the period ended December 31, 1996, included in
this prospectus, have been included herein in reliance on the report of Coopers
& Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
Representatives of Coopers & Lybrand L.L.P. will be present at the Aurum
Special Meeting to answer questions of Aurum stockholders.
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AURUM SOFTWARE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Audited Financial Statements as of December 31, 1996 and 1995 and for each of the
three years in the period ending December 31, 1996:
Report of Independent Accountants................................................... F-2
Balance Sheets...................................................................... F-3
Statements of Operations............................................................ F-4
Statements of Stockholders' Equity (Deficit)........................................ F-5
Statements of Cash Flows............................................................ F-6
Notes to Audited Financial Statements............................................... F-7
Unaudited Condensed Financial Statements as of March 31, 1997 and for the three month
periods ending March 31, 1997 and 1996:
Condensed Balance Sheets............................................................ F-16
Condensed Statements of Operations.................................................. F-17
Condensed Statements of Cash Flows.................................................. F-18
Notes to Unaudited Condensed Financial Statements................................... F-19
</TABLE>
F-1
<PAGE> 115
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Aurum Software, Inc.
Santa Clara, California
We have audited the accompanying balance sheets of Aurum Software, Inc. as
of December 31, 1996 and 1995, and the related statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Aurum Software, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Jose, California
January 28, 1997, except
for Note 12 as to which
the date is March 18, 1997
F-2
<PAGE> 116
AURUM SOFTWARE, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................ $ 38,955 $ 2,795
Accounts receivable, net of allowance for doubtful accounts of $317
and $340 at December 31, 1996 and 1995, respectively.............. 13,329 4,702
Prepaid expenses and other current assets............................ 893 438
-------- --------
Total current assets.............................................. 53,177 7,935
Property and equipment, net............................................ 2,899 1,559
Other assets........................................................... 205 301
-------- --------
Total assets................................................. $ 56,281 $ 9,795
======== ========
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable........................................................ $ 186 $ 217
Current portion of capital lease obligations......................... 464 304
Accounts payable..................................................... 1,303 1,191
Accrued compensation................................................. 2,285 898
Other accrued liabilities............................................ 1,584 817
Deferred revenue..................................................... 2,999 2,303
-------- --------
Total current liabilities......................................... 8,821 5,730
Notes payable, less current portion.................................... 37 121
Capital lease obligations, less current portion........................ 414 116
-------- --------
Total liabilities............................................ 9,272 5,967
-------- --------
Commitments and contingencies (Note 6)
Mandatorily redeemable convertible preferred stock, no par value:
Authorized: 24,000,000 shares Issued and outstanding: 21,901,892
shares in 1995.................................................. 17,356
--------
(Liquidation value: $17,504 in 1995)
Stockholders' equity (deficit):
Preferred stock; $0.001 par value:
Authorized: 5,000,000 shares;
Issued and Outstanding: None......................................
Common stock; $0.001 par value in 1996 and no par value in 1995:
Authorized: 25,000,000 shares;
Issued and outstanding: 11,568,146 shares in 1996 and 2,526,159
shares in 1995.................................................. 12 236
Additional paid-in capital........................................ 61,561
Notes receivable from stockholders................................... (1,117) (38)
Accumulated deficit.................................................. (13,447) (13,726)
-------- --------
Total stockholders' equity (deficit).............................. 47,009 (13,528)
-------- --------
Total liabilities, mandatorily redeemable convertible
preferred stock and stockholders' equity (deficit)......... $ 56,281 $ 9,795
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 117
AURUM SOFTWARE, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Revenues:
Licenses..................................................... $16,430 $ 5,928 $ 3,356
Services..................................................... 11,154 4,547 2,556
------- ------- ------
Total revenues....................................... 27,584 10,475 5,912
------- ------- ------
Cost of revenues:
Licenses..................................................... 1,368 979 365
Services..................................................... 9,594 3,919 2,586
------- ------- ------
Total cost of revenues............................... 10,962 4,898 2,951
------- ------- ------
Gross profit................................................... 16,622 5,577 2,961
------- ------- ------
Operating expenses:
Sales and marketing.......................................... 11,171 6,626 3,240
Research and development..................................... 3,707 2,286 2,246
General and administrative................................... 1,662 1,023 1,780
------- ------- ------
Total operating expenses............................. 16,540 9,935 7,266
------- ------- ------
Income (loss) from operations.................................. 82 (4,358) (4,305)
Other income, net.............................................. 435 63 5
Interest expense............................................... (213) (157) (88)
------- ------- ------
Income (loss) before provision for income taxes...... 304 (4,452) (4,388)
Provision for income taxes..................................... (25)
-------
Net income (loss).................................... $ 279 $(4,452) $(4,388)
======= ======= ======
Net income (loss) per share.................................... $ 0.03 $ (1.44) $ (2.18)
======= ======= ======
Shares used in per share calculation........................... 9,948 3,092 2,010
======= ======= ======
Pro forma net loss per share................................... $ (0.66)
=======
Pro forma shares used in per share calculation................. 6,712
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 118
AURUM SOFTWARE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE NOTES
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE STOCKHOLDERS
---------------------- --------------------- PAID-IN FROM ACCUMULATED EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS DEFICIT (DEFICIT)
----------- -------- ---------- -------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1993.................. 946,919 $ 228 $ (48) $ (4,886) $ (4,706)
Issuance of common
stock under stock
purchase plan....... 2,688 4 4
Issuance of common
stock under
incentive stock
option plan......... 297
Repurchase of common
stock............... (118,766) (37) (37)
Payments and
cancellation of
notes receivable
from stockholders... 47 47
Net loss.............. (4,388) (4,388)
------- -------
Balances, December 31,
1994.................. 831,138 195 (1) (9,274) (9,080)
Exercise of warrants
by preferred
investors........... 1,382,280 5 5
Issuance of common
stock under
incentive stock
options plan for
cash and notes
receivable.......... 317,954 38 (37) 1
Repurchase of common
stock............... (5,213) (2) (2)
Net loss.............. (4,452) (4,452)
------- --------- ------- ------- ------- -------- ------- -------
Balances, December 31,
1995.................. 2,526,159 236 (38) (13,726) (13,528)
Repurchase of common
stock............. (54,738) (118) (118)
Issuance of common
stock under
incentive stock
option plan for
cash, notes
receivable and
services.......... 1,227,870 1,121 (1,079) 42
Issuance of common
stock under stock
purchase clause... 12,502 75 75
Reclass due to
elimination of
mandatory
redemption
provisions related
to convertible
preferred stock... 21,905,398 $ 18,356 18,356
Conversion of
convertible
preferred stock... (21,905,398) (18,356) 4,958,853 18,356
Issuance of common
stock............. 2,897,500 41,903 41,903
Reincorporation into
Delaware
corporation....... (61,561) $ 61,561
Net income.......... 279 279
------- --------- ------- ------- ------- -------- ------- --------
Balances, December 31,
1996.................. 11,568,146 $ 12 $ 61,561 $ (1,117) $ (13,447) $ 47,009
======= ========= ========== ======== ======== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 119
AURUM SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................................... $ 279 $ (4,452) $ (4,388)
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Depreciation and amortization........................................ 1,243 589 518
Provision for doubtful accounts...................................... 125 87
Write-off of intangibles............................................. 220
Changes in operating assets and liabilities:
Accounts receivable................................................ (8,627) (3,453) (1,050)
Prepaid expenses and other current assets.......................... (451) (10) (52)
Other assets....................................................... (29) (130) (4)
Accounts payable................................................... 112 692 77
Accrued compensation and other accrued liabilities................. 2,162 795 236
Deferred revenue................................................... 696 1,475 380
--------- --------- ---------
Net cash used in operating activities.............................. (4,615) (4,149) (4,196)
--------- --------- ---------
Cash flows from investing activities:
Sales of short-term investments......................................... 2,889
Acquisition of property and equipment................................... (2,583) (933) (427)
Decrease (increase) in restricted cash.................................. 128 (44) (104)
--------- --------- ---------
Net cash provided by (used in) investing activities................ (2,455) (977) 2,358
--------- --------- ---------
Cash flows from financing activities:
Proceeds from borrowings under line of credit........................... 2,500 950
Repayments of borrowings under line of credit........................... (2,500) (600) (350)
Proceeds from issuance of mandatorily redeemable convertible preferred
stock, net of issuance costs......................................... 1,486 5,975 2,456
Proceeds from issuance of common stock.................................. 42,005 6
Repurchase of mandatorily redeemable convertible preferred and common
stock................................................................ (604) (2)
Proceeds from repayment of notes receivable from stockholders........... 10
Repayments of note payables and capital lease obligations............... (1,641) (431) (224)
Proceeds from notes payable and sales and leasebacks of property and
equipment............................................................ 1,984 456
--------- --------- ---------
Net cash provided by financing activities............................ 43,230 5,404 2,842
--------- --------- ---------
Net increase in cash and cash equivalents................................. 36,160 278 1,004
Cash and cash equivalents at beginning of year............................ 2,795 2,517 1,513
--------- --------- ---------
Cash and cash equivalents at end of year.................................. $ 38,955 $ 2,795 $ 2,517
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for:
Interest............................................................. $ 212 $ 157 $ 88
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of notes receivable from stockholders in exchange for common
stock................................................................ $ 1,079 $ 37
Cancellation of note receivable from stockholder........................ $ 37
Property and equipment acquired under capital lease obligations......... $ 58 $ 394
Property and equipment purchased included in accounts payable........... $ 434 $ 15
Common stock issued in consideration for services performed............. $ 15 $ 4
Issuance of mandatorily redeemable convertible preferred stock in
exchange for technology.............................................. $ 79
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 120
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS OF THE COMPANY:
Aurum Software, Inc. (the "Company") is a provider of enterprise-wide sales
and marketing information software. The Company develops, markets and supports
the Aurum Customer Enterprise suite of applications which helps automate the
field sales, telemarketing, telesales and customer support functions of a
business. The Company's products are based on advanced client/server and
Internet/Intranet technologies and are designed to address the sales and
marketing requirements of businesses ranging from medium-sized enterprises to
large multinational corporations. The Company sells its products in North
America primarily through its direct sales force and sells its products outside
of North America primarily through key distribution organizations and, in
selected countries, through direct sales personnel. In addition, the Company
provides an array of services to its customers, including business consulting,
requirements definition, installation, consulting, training and customer
support. The Company is headquartered in Santa Clara, California, with sales
offices nationwide.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition:
Revenues consist of license revenues and service revenues. License revenues
are recognized upon execution of a license agreement and delivery of software if
there are no significant post-delivery vendor obligations and if collection of
the receivable is deemed probable. If significant post-delivery obligations
exist or if a product is subject to customer acceptance, revenues are deferred
until no significant obligations remain or acceptance has occurred. Upon
recognition of license revenues, the Company accrues for the cost of warranty
and insignificant vendor obligations. Revenues from services consist of fees
from consulting services, including implementation and customization of licensed
software, training and maintenance support. Consulting and training revenues are
generally recognized as services are performed, except for revenues from certain
fixed price contracts or milestone deliverables, which are recognized on a
percentage-of-completion basis or upon milestone delivery. Maintenance support
revenues are recognized ratably over the term of the support period, which is
typically one year.
Engineering and Support:
Costs related to the conceptual formulation and design of software products
are charged to operations as incurred. Software development costs are
capitalized beginning when a product's technological feasibility has been
established and ending when a product is available for general release to
customers. The Company has not capitalized any software development costs since
such costs have not been significant.
Cash and Cash Equivalents:
The Company considers all highly liquid investments with an original or
remaining maturity of three months or less at the time of purchase to be cash
equivalents.
F-7
<PAGE> 121
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Fair Value of Financial Instruments:
The carrying value of certain of the Company's financial instruments
including cash and cash equivalents, accounts receivable, accounts payable and
other accrued liabilities approximates fair value due to their short maturities.
Based on borrowing rates currently available to the Company for loans with
similar terms, the carrying value of its notes payable, capital lease
obligations and borrowings under the Company's line of credit approximates fair
value.
Property and Equipment:
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is provided on a straight-line basis over the
estimated useful lives of the assets which is generally three years.
Amortization of equipment under capital leases is computed using the
straight-line method over the shorter of the remaining lease term or the
estimated useful life of the related asset.
Stock Based Compensation:
The Company accounts for stock based compensation using the intrinsic value
method prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
the grant over the amount an employee must pay to acquire the stock. The Company
has adopted the disclosure-only provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation."
Net Income (Loss) Per Share:
Net income (loss) per share, on a historical basis, is computed using the
weighted average number of common and dilutive common equivalent shares
outstanding during the period. Dilutive common equivalent shares consist of
mandatorily redeemable convertible preferred stock and common stock issuable
upon exercise of stock options (using the treasury stock method). Pursuant to
the Securities and Exchange Commission Staff Accounting Bulletins, common and
common equivalent shares issued at prices below the public offering price during
the 12 months immediately preceding the offering date have been included in the
calculation as if they were outstanding for all periods presented (using the
treasury stock method and the anticipated initial public offering price). The
1995 pro forma net loss per share presentation assumes the common shares
issuable upon conversion of the outstanding convertible preferred stock have
been outstanding during such period.
Income Taxes:
The Company accounts for income taxes under the liability method. Under the
liability method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. The Company is required to adjust
its deferred tax liabilities in the period when tax rates or the provisions of
the income tax laws change. Valuation allowances are established when necessary
to reduce deferred tax assets to the amounts expected to be realized.
Recent Pronouncements:
During February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" (SFAS 128), which specifies the
computation, presentation and disclosure requirements for Earnings Per Share.
SFAS 128 will become effective for the Company's 1997 fiscal year. The impact of
adopting SFAS 128 on the Company's financial statements has not yet been
determined.
F-8
<PAGE> 122
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. BUSINESS RISKS AND CREDIT CONCENTRATION
A majority of the Company's revenues have been attributed to SalesTrak,
which is typically the first of the Company's software products to be deployed
with the greatest number of users and which often serves as a foundation for
other applications. Any factor adversely affecting the pricing of or demand for
the SalesTrak product could have a material adverse affect on the Company's
business, financial condition or results of operations.
The Company incorporates into its products certain software and other
technologies licensed to it by third-party developers. In the event that
products licensed from the third-party vendors should fail to address the
requirements of the Company's software products, the Company would be required
to find alternative software products or technologies of equal performance or
functionality. The absence of or any significant delay in the replacement of
that functionality could have a material adverse affect on the Company's
business, financial condition, or results of operations.
As of December 31, 1996 and 1995, the Company's cash and cash equivalents
were deposited with principally three financial institutions in the form of
demand deposit, commercial paper and money market accounts.
The Company markets and sells its products to a broad geographic and
demographic base of customers and generally does not require collateral. At
December 31, 1996, one customer accounted for 10% of accounts receivable. At
December 31, 1995, two customers accounted for 16.9% and 12.5% of accounts
receivable.
4. PROPERTY AND EQUIPMENT
Property and equipment, consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
------- -------
<S> <C> <C>
Computer equipment..................................... $ 5,242 $ 2,750
Furniture and fixtures................................. 291 219
Leasehold improvements................................. 51 32
------- ------
5,584 3,001
Less accumulated depreciation and amortization......... (2,685) (1,442)
------- ------
$ 2,899 $ 1,559
======= ======
</TABLE>
At December 31, 1996 and 1995, computer equipment in the amount of
$2,385,000 and $1,114,000, respectively, with $1,484,000 and $687,000,
respectively, of accumulated depreciation were capitalized under equipment lease
arrangements. These assets are pledged as collateral under the lease
arrangements.
5. NOTES PAYABLE, CAPITAL LEASE OBLIGATIONS AND LINE OF CREDIT:
Notes Payable:
The Company has outstanding a note payable with a leasing company which
bears interest at 10% and expires on February 15, 1998, at which time the
remaining balance is due. The note is collateralized by an irrevocable letter of
credit. At December 31, 1996 and 1995, $42,000 and $75,000, respectively, were
outstanding under this note.
In addition, the Company has outstanding two notes payable which bear
interest at 15% and are due on March 15, 1998 and July 16, 1997, respectively.
At December 31, 1996 and 1995, $181,000 and $263,000, respectively, were
outstanding under these notes.
F-9
<PAGE> 123
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes the scheduled maturities of notes payable
(in thousands):
<TABLE>
<S> <C>
1997................................................ $205
1998................................................ 38
----
243
Less amount representing interest................... 20
----
Present value of future minimum payments............ 223
Less current portion................................ (186)
----
Long term portion of notes payable.................. $ 37
====
</TABLE>
Capital Lease Obligations:
The Company leases equipment under capital lease agreements. Future minimum
lease payments on these capital lease obligations are as follows (in thousands):
<TABLE>
<S> <C>
1997................................................ $535
1998................................................ 363
1999................................................ 82
----
Minimum lease payments.............................. 980
Less amount representing interest................... (102)
----
Present value of minimum lease payments............. 878
Less current portion................................ (464)
----
Long-term portion of capital leases................. $414
====
</TABLE>
During fiscal year 1996 and 1995, the Company sold certain equipment at
cost less accumulated depreciation of $961,000 and $132,000, respectively, and
leased back such equipment. No gain or loss was recognized on the sale.
Line of Credit:
At December 31, 1996, the Company had a line of credit agreement with a
bank which provides the Company the ability to borrow a maximum of $3.0 million.
The line of credit which is collateralized by the assets of the Company matures
on July 14, 1997 and requires the Company to maintain certain financial
covenants, including among others, specified levels of net worth, annual
profitability and financial ratios. The line of credit agreement also contains a
restrictive covenant which limits the Company's ability to pay cash dividends or
make stock repurchases without the bank's consent. Borrowings under the line of
credit bear interest at a rate equal to one percent above the lender's prime
rate. At December 31, 1996, the Company did not have any outstanding borrowings
under the line of credit. In addition, the Company entered into a Loan
Modification Agreement in March 1997. See Note 12 of Notes to Financial
Statements.
F-10
<PAGE> 124
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES:
Operating Leases:
The Company leases its facilities under noncancelable operating leases and
subleases which expire in 1997, 1998 and 1999.
Future annual minimum lease payments under the lease agreements at December
31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997................................................ $380
1998................................................ 285
1999................................................ 202
----
$867
====
</TABLE>
Rent expense for 1996, 1995 and 1994, amounted to $416,000, $237,000 and
$315,000, respectively.
In January 1997, the Company entered into a lease agreement commencing on
June 1, 1997 and terminating on February 28, 2003 for a 38,288 square foot
facility. Future minimum lease payments under the lease agreement are $437,000,
$1.0 million, $1.1 million, $1.1 million, $1.1 million and $1.5 million in
fiscal 1997, 1998, 1999, 2000, 2001 and thereafter, respectively. The Company
expects to move its principal administrative, sales, marketing and support
functions to the new headquarters location in July 1997.
Contingencies:
The Company is engaged in certain legal and administrative proceedings
incidental to its normal business activities. While it is not possible to
determine the ultimate outcome of these actions at this time, management
believes that any liabilities resulting from such proceedings, or claims which
are pending or known to be threatened, will not have a material adverse effect
on the Company's financial position or results of operations.
7. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
In September 1996, the mandatory redemption provisions related to
convertible preferred stock were eliminated. In connection with the Company's
initial public offering (Note 8), all outstanding convertible preferred stock
was converted into shares of common stock based on the applicable conversion
rate.
8. STOCKHOLDERS' EQUITY (DEFICIT):
Initial Public Offering and Reincorporation:
The Company reincorporated from California into Delaware effective in
October 1996. In connection with the reincorporation, the Company's outstanding
common stock was exchanged in the ratio of four shares of the California
corporation common stock for one share of the Delaware corporation common stock.
All references to number of shares and to per share information in the financial
statements have been adjusted to reflect the exchange ratio on a retroactive
basis.
In November 1996, the Company issued 2,897,500 shares of its common stock
in an initial public offering in which an additional 150,000 shares of common
stock were sold by existing stockholders.
Common Stock:
At December 31, 1996, 207 shares of common stock issued under the Company's
1992 Restricted Stock Purchase Plan were subject to repurchase by the Company.
F-11
<PAGE> 125
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Stock Option Plans:
1995 STOCK OPTION PLAN
The Board of Directors has reserved 2,777,590 shares of common stock as of
December 31, 1996 under its 1995 Stock Option Plan (the "1995 Plan") for
issuance to employees, consultants and directors of the Company.
The 1995 Plan provides for grants of incentive stock options to employees
(including officers and employee directors) and nonstatutory stock options to
employees (including officers and employee directors) and consultants of the
Company. The 1995 Plan is administered by the Board of Directors or by a
committee appointed by the Board which identifies optionees and determines the
terms of options granted, including the exercise price, number of shares subject
to the option and the exercisability thereof.
The terms of options granted under the 1995 Plan generally may not exceed
ten years. The term of all incentive stock options granted to an optionee who,
at the time of grant, owns stock representing more than 10% of the voting power
of all classes of stock of the Company or a parent or subsidiary of the Company
(a "Ten Percent Stockholder"), may not exceed five years, however. Generally,
options granted under the 1995 Plan vest starting one year after the date of
grant, with 25% of the shares subject to the option vesting at that time and an
additional 1/48th of such shares vesting each month thereafter. Holders of
options granted under the 1995 Plan prior to October 29, 1996 may exercise their
options prior to complete vesting of shares, subject to such holder's entering a
restricted stock purchase agreement granting the Company an option to
repurchase, in the event of a termination of the optionee's employment or
consulting relationship, any unvested shares at a price per share equal to the
original exercise price per share for the option. The 1995 Plan was amended in
October 1996 to eliminate the exercise of unvested options going forward. The
exercise price of incentive stock options granted under the 1995 Plan must be at
least equal to the fair market value of the shares on the date of grant. The
exercise price of nonstatutory stock options granted under the 1995 Plan is
determined by the Board of Directors. The exercise price of any incentive stock
option granted to a Ten Percent Stockholder must equal at least 110% of the fair
market value of the Common Stock on the date of grant. To the extent incentive
stock options granted to a participant, when aggregated with all other incentive
stock options granted to such participant, have an aggregate fair market value
in excess of $100,000 first becoming exercisable in any calendar year, such
options would be treated as nonstatutory stock options.
1996 DIRECTOR OPTION PLAN
In September 1996, the stockholders approved the 1996 Director Option Plan
(the "Director Plan"). A total of 150,000 shares of common stock has been
reserved for issuance under the Director Plan. The option grants under the
Director Plan are automatic and non-discretionary, and the exercise price of the
option is 100% of the fair market value of the common stock on the grant date.
The Director Plan provides for the automatic grant of options to purchase 18,750
shares of common stock to each non-employee director of the Company (an "Outside
Director") at the first meeting of the Board of Directors following the annual
meeting of stockholders in each year beginning with the 1997 Annual Meeting of
Stockholders, if on such date, such Outside Director has served on the Board of
Directors for at least six months. The term of such options is ten years.
Options granted to Outside Directors become exercisable at a rate of 1/48th of
the shares subject to such additional options on the monthly anniversary of the
date of grant, subject to the Outside Director's continuous service on the Board
of Directors. The Director Plan will terminate in 2006 unless sooner terminated
by the Board of Directors.
F-12
<PAGE> 126
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Activity under the 1995 Plan is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES ----------------------------------------------
AVAILABLE NUMBER OF AGGREGATE
FOR GRANT SHARES EXERCISE PRICE PRICE
---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Shares authorized at inception of
1995 Stock Plan................. 1,208,921
Options granted................. (1,242,782) 1,242,782 $0.12 - $0.32 $ 166,650
Options exercised............... (317,954) $ 0.12 (38,154)
Options canceled................ 97,441 (97,441) $ 0.12 (11,693)
---------- ---------- -----------
Balances, December 31, 1995....... 63,580 827,387 $0.12 - $0.32 116,803
Increase in shares authorized... 3,110,775
Common stock granted............ (1,149,168) 1,149,168 $0.32 - $35.375 5,938,690
Options exercised............... (1,227,871) $0.12 - $9.00 (1,120,742)
Options cancelled............... 161,878 (161,878) $0.12 - $6.00 (176,364)
Repurchased unvested shares..... 3,719
----------
Balances, December 31, 1996....... 2,190,784 586,806 $0.12 - $35.375 $ 4,758,387
========== ========== ===========
</TABLE>
As of December 31, 1996, 50,531 outstanding options upon exercise would not
be subject to the Company's right of repurchase. In addition, as of December 31,
1996, 767,810 shares exercised under the Plan are subject to repurchase.
Had compensation cost for the 1995 Plan been determined based on the fair
value at the grant date for awards in 1996 and 1995 consistent with the
provisions of SFAS No. 123, the Company's net income (loss) and net income
(loss) per share for the years ended December 31, 1996 and 1995 would have been
changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
------ -------
<S> <C> <C>
Net income (loss) -- as reported.......................... $ 279 $(4,452)
====== =======
Net loss -- pro forma..................................... $ (38) $(4,466)
====== =======
Net income (loss) per share -- as reported................ $(0.03) $ (1.44)
====== =======
Net loss per share -- pro forma........................... $(0.01) $ (1.44)
====== =======
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes Option pricing model, with the following weighted average
assumptions by subgroup:
<TABLE>
<CAPTION>
GROUP A GROUP B GROUP C
------- ------------- -------
<S> <C> <C> <C>
Risk-free interest rate......... 5.76% 5.36% - 6.36% 5.71%
Expected life................... 2.50 2.75 3.25
Expected dividends.............. 0 0 0
Volatility...................... 0% 0%-70.1% 70.1%
</TABLE>
The weighted average expected life was calculated based on the vesting
period and the exercise behavior of each subgroup. Group A represents higher
paid employees who exercise prior to the vesting period to take advantage of tax
laws. Group B represents lower paid employees who have held their stock options,
but who are expected to exercise subsequent to the initial public offering and
prior to vesting years two through four. Group C represents employees who were
granted options subsequent to the initial public offering. The risk-free
interest rate was calculated in accordance with the grant date and expected life
calculated for each
F-13
<PAGE> 127
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
subgroup. Volatility was set at zero until the Company's initial filing of a
registration statement at which time volatility was calculated based on the
volatility of selected peers of the Company.
The options outstanding and currently exercisable by exercise price at
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------------- OPTIONS CURRENTLY EXERCISABLE
WEIGHTED AVERAGE ------------------------------
NUMBER OF REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ---------------------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$ 0.12-$ 0.12............... 38,750 8.46 $ 0.12 38,015 $ 0.12
$ 0.32-$ 0.32............... 84,119 9.00 $ 0.32 84,119 $ 0.32
$ 1.20-$ 1.20............... 33,750 9.13 $ 1.20 33,750 $ 1.20
$ 6.00-$ 9.00............... 361,138 9.59 $ 6.98 361,138 $ 6.98
$15.00-$16.00............... 13,625 9.82 $15.15 13,625 $15.15
$35.38-$35.38............... 55,424 9.92 $35.38 0 $ 0.00
-------- ----- ------- -------- -------
$ 0.12-$35.38............... 586,806 9.44 $ 8.11 530,647 $ 5.27
</TABLE>
1996 EMPLOYEE STOCK PURCHASE PLAN:
In October 1996, the stockholders approved the 1996 Employee Stock Purchase
Plan (the "Purchase Plan"). A total of 300,000 shares are reserved for issuance
under the Purchase Plan. The Purchase Plan permits eligible employees to
purchase common stock through payroll deductions, subject to certain
limitations. The price at which stock is purchased under the Purchase Plan is
equal to 85% of the fair market value of the common stock on the first day of
the applicable offering period or the last day of the applicable offering
period, whichever is lower.
9. EMPLOYEE BENEFIT PLAN:
The Company has a 401(k) Profit Sharing Plan (the Plan), which covers
substantially all employees. Each eligible employee may elect to contribute to
the Plan, through payroll deductions up to 20% of their compensation, subject to
current statutory limits. The Company, at the discretion of the Board of
Directors, may make matching contributions to the Plan, but has not done so
during the years ended December 31, 1996 or 1995.
10. INCOME TAXES:
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets are presented below (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-------------------
1996 1995
------- -------
<S> <C> <C>
Depreciation and accrued liabilities..................... $ 1,172 $ 323
Capitalized research and development costs............... 487 1,718
Net operating loss carryforward.......................... 3,132 3,024
Research and development credit carryforward............. 522 366
Valuation allowance...................................... (5,313) (5,431)
-------- --------
Net deferred tax asset................................... $ -- $ --
======== ========
</TABLE>
The Company has established a valuation allowance against its deferred tax
assets due to the uncertainty surrounding the realization of such assets.
Management evaluates on a quarterly basis the recoverability of the
F-14
<PAGE> 128
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
deferred tax assets and the level of the valuation allowance. At such time as it
is determined that it is more likely than not that deferred tax assets are
realizable the valuation allowance will be reduced.
The Company's effective tax rate differs from the statutory federal income
tax rate as shown in the following schedule:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income tax (benefit) provision at statutory rate......... 34% (34)% (34)%
Net operating loss not benefited......................... 34 34
Net operating loss utilized.............................. (34)%
Alternative minimum tax.................................. 8.2 % -- --
--- --- ---
Effective tax rate....................................... 8.2 % -- % -- %
=== === ===
</TABLE>
As of December 31, 1996, the Company had approximately $9.9 million and
$4.0 million of net operating loss carryforwards for federal and state purposes,
respectively, and $270,000 and $220,000 of research and development credits for
federal and state purposes, respectively. These federal and state carryforwards
and research and development credits expire in the years 2007 through 2010, and
1997 through 2000, respectively. Utilization of the net operating losses and
credits is subject to an annual limitation of $950,000 due to ownership change.
11. MAJOR CUSTOMERS:
No single customer accounted for 10% or more of the Company's revenues in
fiscal year 1996 and 1994. One customer accounted for 11% of revenues in fiscal
1995.
12. SUBSEQUENT EVENTS:
In March 1997, the Company signed a share purchase agreement (the
"Agreement") with Aurum Software U.K. Limited, a corporation organized under the
laws of England, to acquire all the outstanding capital stock of Aurum Software
U.K. Limited from such company's existing shareholders.
Prior to entering into the Agreement, Aurum Software U.K. has acted as a
distributor of the Company's software products in the United Kingdom and Europe
and will continue to do so subsequent to the purchase. The purchase will be
accounted for under the purchase method of accounting.
In addition, the Company entered into a Loan Modification Agreement in
March 1997 with its bank relating to its $3.0 million line of credit which, in
addition to other modifications related to financial covenants and other
financial reporting requirements, reduced the applicable interest rate to the
bank's prime rate.
F-15
<PAGE> 129
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AURUM SOFTWARE, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................... $ 42,085 $ 38,955
Accounts receivable, net.......................................... 10,735 13,329
Prepaid expenses and other current assets......................... 1,313 893
------- --------
Total current assets...................................... 54,133 53,177
Property and equipment, net......................................... 3,666 2,899
Other assets........................................................ 691 205
------- --------
Total assets.............................................. $ 58,490 $ 56,281
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and capital lease obligations, current portion...... $ 565 $ 650
Accounts payable and accrued compensation......................... 3,500 3,588
Other accrued liabilities......................................... 2,593 1,584
Deferred revenue.................................................. 4,024 2,999
------- --------
Total current liabilities................................. 10,682 8,821
Notes payable and capital lease obligations, less current portion... 336 451
------- --------
Total liabilities......................................... 11,018 9,272
------- --------
Stockholders' equity:
Preferred stock, $0.001 par value, authorized: 5,000,000 shares;
Issued and Outstanding: None...................................
Common stock, $0.001 par value, authorized: 25,000,000 shares;
Issued and outstanding: 11,572,021 shares (11,568,146 shares in
1996).......................................................... 12 12
Additional paid-in capital................................... 61,565 61,561
Notes receivable from stockholders................................ (1,125) (1,117)
Accumulated deficit............................................... (12,980) (13,447)
------- --------
Total stockholders' equity................................ 47,472 47,009
------- --------
Total liabilities and stockholders' equity................ $ 58,490 $ 56,281
======= ========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
F-16
<PAGE> 130
AURUM SOFTWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------
1997 1996
------ ------
<S> <C> <C>
Revenues:
Licenses.............................................................. $6,072 $2,871
Services.............................................................. 3,273 2,012
------ ------
Total revenues................................................... 9,345 4,883
------ ------
Cost of revenues:
Licenses.............................................................. 440 407
Services.............................................................. 2,587 1,986
------ ------
Total cost of revenues........................................... 3,027 2,393
------ ------
Gross profit............................................................... 6,318 2,490
------ ------
Operating expenses:
Sales and marketing................................................... 3,568 2,201
Research and development.............................................. 1,738 626
General and administrative............................................ 778 313
------ ------
Total operating expenses......................................... 6,084 3,140
------ ------
Income (loss) from operations.............................................. 234 (650)
Other income, net.......................................................... 505 12
Interest expense........................................................... (32) (25)
------ ------
Income (loss) before provision for income taxes.................. 707 (663)
Provision for income taxes................................................. 240
------ ------
Net income (loss)................................................ $ 467 $ (663)
====== ======
Net income (loss) per share................................................ $ 0.04 $(0.17)
====== ======
Shares used in per share calculation....................................... 11,969 3,959
====== ======
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
F-17
<PAGE> 131
AURUM SOFTWARE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
------- ------
<S> <C> <C>
Net cash provided by (used in) operating activities...................... $ 4,359 $ (195)
------- ------
Cash flows from investing activities:
Acquisition of property and equipment.................................. (491) (511)
Net cash used in acquisition of Aurum U.K. and advance to Aurum U.K.... (534)
------- ------
Net cash used in investing activities.......................... (1,025) (511)
Cash flows from financing activities:
Proceeds from issuance of mandatorily redeemable convertible preferred
stock, net of issuance costs........................................ 1,489
Proceeds from issuance of common stock................................. 8
Repurchase of mandatorily redeemable convertible preferred and common
stock............................................................... (6) (604)
Repayments of notes payable and capital lease obligations.............. (198) (160)
Proceeds from notes payable and sales and leasebacks of property and
equipment........................................................... 609
------- ------
Net cash provided by (used in) financing activities............ (204) 1,342
------- ------
Net increase in cash and cash equivalents................................ 3,130 636
Cash and cash equivalents, beginning..................................... 38,955 2,795
------- ------
Cash and cash equivalents, ending........................................ $42,085 $3,431
======= ======
Supplemental disclosure of noncash investing and financing activities:
Property and equipment purchased included in accounts payable.......... $ (684)
=======
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
F-18
<PAGE> 132
AURUM SOFTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared on
substantially the same basis as the audited financial statements and in the
opinion of management include all adjustments, consisting only of normal
recurring adjustments, necessary for their fair presentation. The interim
results presented are not necessarily indicative of results for any subsequent
quarter or for the year ending December 31, 1997.
For information regarding the Company's significant accounting policies and
other financial and operating information, see the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Form 10-K.
2. ACQUISITION
In March 1997, the Company signed a share purchase agreement (the
"Agreement") with Aurum Software U.K. Limited, a corporation organized under the
laws of England ("Aurum U.K."), to acquire all the outstanding share capital of
Aurum U.K. from such company's existing shareholders.
Prior to entering into the Agreement, Aurum U.K. had acted as a distributor
of the Company's software products in the United Kingdom and Europe and will
continue to do so subsequent to the purchase. At March 31, 1997, $534,000, which
consisted of the purchase price paid for the shares of Aurum U.K. (less $16,000
retained by the Company to be paid to the prior majority shareholder of Aurum
U.K. in 90 days, subject to certain contingencies), and an advance to Aurum
U.K., was recorded in Other Assets. The purchase will be accounted for under the
purchase method of accounting and did not have a material effect on the
Company's operations.
3. LINE OF CREDIT
In March 1997, the Company entered into a Loan Modification with its bank
relating to its $3.0 million line of credit which, in addition to other
modifications related to financial covenants and other financial reporting
requirements, reduced the applicable interest rate to the bank's prime rate. At
March 31, 1997, the Company did not have any outstanding borrowings under the
line of credit.
4. SUBSEQUENT EVENT
On May 13, 1997, the Company entered an Agreement and Plan of Merger
pursuant to which it agreed to be acquired by Baan Company N.V. ("Baan") in a
stock-for-stock exchange with the Company's stockholders. Under the terms of
such agreement, the Company's stockholders will receive 0.3559322034 Baan Common
Shares for each outstanding share of the Company's Common Stock. The applicable
exchange ratio is subject to adjustment based on the average closing sale price
of Baan Common Shares during the 10 trading days prior to the effectiveness of
the merger. Subject to regulatory approval and approval by the Company's
stockholders, the merger is expected to close in the third quarter of 1997.
F-19
<PAGE> 133
AURUM SOFTWARE, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE
BEGINNING OF CHARGES TO BALANCE END
PERIOD EXPENSES DEDUCTIONS OTHER (1) OF PERIOD
------------ ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996 $340 $ $ 53 $ 30 $ 317
Allowance for doubtful
accounts......................
Year ended December 31, 1995 $319 $125 $104 $ $ 340
Allowance for doubtful
accounts......................
Year ended December 31, 1994
Allowance for doubtful $250 $ 87 $ 18 $ $ 319
accounts......................
</TABLE>
- ---------------
(1) Represents collection of accounts previously written off
S-1
<PAGE> 134
INDEPENDENT ACCOUNTANTS' REPORT ON SCHEDULE
Our report on the financial statements of Aurum Software, Inc. is included
on page F-2 of this Form F-4. In connection with our audits of such financial
statements, we have also audited the related financial statement schedule listed
in the index on page iv of this Form F-4.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
San Jose, California
January 28, 1997
S-2
<PAGE> 135
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY
AND
AMONG
BAAN COMPANY N.V.
GREEN SOFTWARE ACQUISITION CORPORATION
AND
AURUM SOFTWARE, INC.
DATED AS OF MAY 13, 1997
<PAGE> 136
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE MERGER................................................................... A-5
1.1 The Merger................................................................... A-5
1.2 Effective Time; Closing...................................................... A-5
1.3 Effect of the Merger......................................................... A-6
1.4 Certificate of Incorporation; Bylaws......................................... A-6
1.5 Directors and Officers....................................................... A-6
1.6 Effect on Capital Stock...................................................... A-6
1.7 Unvested Aurum Common Stock.................................................. A-7
1.8 Surrender of Certificates.................................................... A-7
1.9 No Further Ownership Rights in Aurum Common Stock............................ A-9
1.10 Lost, Stolen or Destroyed Certificates....................................... A-9
1.11 Tax and Accounting Consequences.............................................. A-9
1.12 Taking of Necessary Action; Further Action................................... A-9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF AURUM..................................... A-9
2.1 Organization of Aurum........................................................ A-9
2.2 Aurum Capital Structure...................................................... A-10
2.3 Obligations With Respect to Capital Stock.................................... A-10
2.4 Authority.................................................................... A-11
2.5 SEC Filings; Aurum Financial Statements...................................... A-12
2.6 Absence of Certain Changes or Events......................................... A-12
2.7 Tax.......................................................................... A-13
2.8 Title to Properties; Absence of Liens and Encumbrances....................... A-13
2.9 Intellectual Property........................................................ A-13
2.10 Compliance; Permits; Restrictions............................................ A-14
2.11 Litigation................................................................... A-15
2.12 Brokers' and Finders' Fees................................................... A-15
2.13 Employee Benefit Plans....................................................... A-15
2.14 Employees; Labor Matters..................................................... A-16
2.15 Environmental Matters........................................................ A-16
2.16 Agreements, Contracts and Commitments........................................ A-16
2.17 Pooling of Interests......................................................... A-17
2.18 Statements; Proxy Statement/Prospectus....................................... A-17
2.19 Board Approval............................................................... A-18
2.20 Fairness Opinion............................................................. A-18
2.21 Section 203 of the Delaware General Corporation Law Not Applicable........... A-18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BAAN AND MERGER SUB...................... A-18
3.1 Organization of Baan and Merger Sub.......................................... A-18
3.2 Baan and Merger Sub Capital Structure........................................ A-18
3.3 Authority.................................................................... A-19
3.4 SEC Filings; Baan Financial Statements....................................... A-19
3.5 Absence of Certain Changes or Events......................................... A-20
3.6 Statements; Proxy Statement/Prospectus....................................... A-20
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME......................................... A-20
4.1 Conduct of Business by Aurum and Baan........................................ A-20
</TABLE>
A-2
<PAGE> 137
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
4.2 Certain Actions by Aurum..................................................... A-20
4.3 Baan Acquisitions............................................................ A-22
4.4 No HSR Violation............................................................. A-22
ARTICLE V ADDITIONAL AGREEMENTS........................................................ A-22
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings; Board
Recommendations.............................................................. A-22
5.2 Meeting of Stockholders...................................................... A-23
5.3 Confidentiality; Access to Information....................................... A-23
5.4 No Solicitation.............................................................. A-23
5.5 Public Disclosure............................................................ A-24
5.6 Legal Requirements........................................................... A-25
5.7 Third Party Consents......................................................... A-25
5.8 Notification of Certain Matters.............................................. A-25
5.9 Best Efforts and Further Assurances.......................................... A-25
5.10 Stock Options and Employee Stock Purchase Plan............................... A-25
5.11 Form S-8..................................................................... A-26
5.12 Indemnification.............................................................. A-26
5.13 NMS and Amsterdam Exchanges Listing.......................................... A-27
5.14 Aurum Affiliate Agreement.................................................... A-27
5.15 Regulatory Filings; Reasonable Efforts....................................... A-27
5.16 Tax-Free Reorganization...................................................... A-27
5.17 Aurum Rights Plan............................................................ A-27
5.18 Comfort Letter............................................................... A-27
5.19 Employee Benefit Schedules................................................... A-27
5.20 Employee Matters............................................................. A-28
ARTICLE VI CONDITIONS TO THE MERGER.................................................... A-28
6.1 Conditions to Obligations of Each Party to Effect the Merger................. A-28
6.2 Additional Conditions to Obligations of Aurum................................ A-29
6.3 Additional Conditions to the Obligations of Baan and Merger Sub.............. A-29
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.......................................... A-30
7.1 Termination.................................................................. A-30
7.2 Notice of Termination; Effect of Termination................................. A-31
7.3 Fees and Expenses............................................................ A-31
7.4 Amendment.................................................................... A-31
7.5 Extension; Waiver............................................................ A-31
ARTICLE VIII GENERAL PROVISIONS........................................................ A-32
8.1 Non-Survival of Representations and Warranties............................... A-32
8.2 Notices...................................................................... A-32
8.3 Interpretation; Knowledge.................................................... A-33
8.4 Counterparts................................................................. A-33
8.5 Entire Agreement; Third Party Beneficiaries.................................. A-33
8.6 Severability................................................................. A-33
8.7 Other Remedies; Specific Performance......................................... A-33
8.8 Governing Law................................................................ A-34
8.9 Rules of Construction........................................................ A-34
8.10 Assignment................................................................... A-34
8.11 WAIVER OF JURY TRIAL......................................................... A-35
</TABLE>
A-3
<PAGE> 138
INDEX OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Aurum Software Voting Agreement
Exhibit B Form of Aurum Software Stock Option Agreement
Exhibit C Form of Aurum Software Affiliate Agreement
Exhibit D-1 Form of Employment Agreement
Exhibit D-2 Form of Non-Competition Agreement
</TABLE>
A-4
<PAGE> 139
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made and
entered into as of May 13, 1997, among Baan Company, N.V. a corporation
organized under the laws of The Netherlands ("BAAN"), Green Software Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of Baan
("MERGER SUB"), and Aurum Software, Inc., a Delaware corporation ("AURUM").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2 below), Baan and Aurum intend to enter into a business
combination transaction.
B. The Board of Directors of Aurum has unanimously (i) determined that the
Merger (as defined in Section 1.1) is consistent with and in furtherance of the
long-term business strategy of Aurum and fair to, and in the best interests of,
Aurum and its stockholders, (ii) approved this Agreement, the Merger and the
other transactions contemplated by this Agreement and (iii) determined to
recommend that the stockholders of Aurum adopt and approve this Agreement and
approve the Merger.
C. Concurrently with the execution of this Agreement, and as a condition
and inducement to Baan's willingness to enter into this Agreement, certain
affiliates of Aurum specified on Schedule I to the form of Voting Agreement
attached hereto as Exhibit A shall enter into Voting Agreements in substantially
such form (the "AURUM VOTING AGREEMENTS").
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to Baan's willingness to enter into this Agreement, Aurum shall
execute and deliver a Stock Option Agreement in favor of Baan in substantially
the form attached hereto as Exhibit B (the "AURUM STOCK OPTION AGREEMENT"). The
Board of Directors of Aurum has approved the Aurum Stock Option Agreement.
E. Concurrently with the execution of this Agreement, and as a condition
and inducement to Baan's willingness to enter into this Agreement, certain
officers of Aurum shall execute and deliver Employment and NonCompetition
Agreements in favor of Aurum following the Merger.
F. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
G. It is also intended by the parties hereto that the Merger shall qualify
for accounting treatment as a pooling of interests.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law"),
Merger Sub shall be merged with and into Aurum (the "MERGER"), the separate
corporate existence of Merger Sub shall cease and Aurum shall continue as the
surviving corporation. Aurum as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "SURVIVING CORPORATION."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "CERTIFICATE OF
MERGER") (the time of such filing (or such later time as may be agreed in
writing by the parties and specified in the Certificate of Merger) being the
"EFFECTIVE TIME") as soon as practicable on or after the Closing Date (as
A-5
<PAGE> 140
herein defined). Unless the context otherwise requires, the term "AGREEMENT" as
used herein refers collectively to this Agreement and Plan of Reorganization and
the Certificate of Merger. The closing of the Merger (the "CLOSING") shall take
place at the offices of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, at a time and date to be specified by the parties, which shall be
no later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI, or at such other time, date and location as
the parties hereto agree in writing (the "CLOSING DATE").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of Delaware
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of Aurum and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Aurum and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation; provided, however, that at the Effective Time the
Certificate of Incorporation of the Surviving Corporation shall be amended so
that the name of the Surviving Corporation shall be the name of Aurum prior to
the Merger.
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Aurum immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, Aurum or the holders of
any of the following securities:
(a) Transfer of Aurum Common Stock. (i) Each share of Common Stock,
$.001 par value, of Aurum (the "AURUM COMMON STOCK") issued and outstanding
immediately prior to the Effective Time, (other than any shares of Aurum Common
Stock to be transferred to Baan pursuant to Section 1.6(b)) will be
automatically assigned and transferred to Baan at the Effective Time without any
further action required on the part of Aurum or the individual shareholders of
Aurum or Baan, and in exchange therefor the holders of such shares of Aurum
Common Stock will be entitled to receive (subject to Sections 1.6(e) and (f)) a
number of Baan Common Shares (the "BAAN COMMON SHARES") equal to the Exchange
Ratio (as defined herein) upon surrender of the certificate representing such
share of Aurum Common Stock in the manner provided in Section 1.8. The "EXCHANGE
RATIO" is equal to a fraction the numerator of which is $21.00 (appropriately
adjusted for any Aurum Recapitalization, as defined herein) and the denominator
of which is $59.00 (appropriately adjusted for any Baan Recapitalization, as
defined herein), subject to adjustment as provided in paragraphs (ii), (iii) and
(iv) below. Notwithstanding any failure of any holder of Aurum Common Stock to
surrender the certificate representing such shares for exchange in the manner
provided in Section 1.8, immediately following the Effective Time Aurum shall be
entitled to effect a transfer to Baan, on the books, records and stock ledger of
Aurum, of all shares of Common Stock of Aurum issued and outstanding immediately
prior to the Effective Time, and in connection therewith to cancel on such
books, records and ledger all certificates theretofore representing such shares
and to issue a new certificate or certificates therefor in the name of and to
Baan.
(ii) Notwithstanding the foregoing, if the average closing price per
share of the Baan Common Shares on the Nasdaq National Market over the ten
consecutive trading days ending on the trading day immediately preceding the
Closing Date (the "BAAN STOCK VALUE") is less than $50.00 and more than $40.00
per share (in each case, as appropriately adjusted for any Baan
Recapitalization) the Exchange Ratio shall be equal to the product of (i) a
fraction, the numerator of which is $21.00 (appropriately adjusted for any Aurum
Recapitalization) and the denominator of which is $59.00 (appropriately adjusted
for any Baan Recapitaliza-
A-6
<PAGE> 141
tion) and (ii) a fraction, the numerator of which is $50.00 (appropriately
adjusted for any Baan Recapitalization) and the denominator of which shall be
the Baan Stock Value.
(iii) Further notwithstanding the foregoing, if the Baan Stock Value
(calculated with reference to the scheduled Closing Date) is $40.00 or less per
share (appropriately adjusted for any Baan Recapitalization), the Exchange Ratio
shall be equal to 0.4449152542 (appropriately adjusted for any Aurum
Recapitalization or Baan Recapitalization).
(iv) A "AURUM RECAPITALIZATION" shall mean any stock split, reverse
stock split, stock dividend (including any dividend or distribution of
securities convertible into Aurum Common Stock), reorganization,
recapitalization or other like change with respect to Aurum Common Stock
occurring after the date hereof and prior to the Effective Time. A "BAAN
RECAPITALIZATION" shall mean any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
Baan Common Shares), reorganization, recapitalization or other like change with
respect to Baan Common Shares occurring after the date hereof and prior to the
Effective Time.
(b) Transfer of Baan-Owned Stock. Each share of Aurum Common Stock held
by Aurum or owned by Merger Sub, Baan or any direct or indirect wholly owned
subsidiary of Aurum or of Baan immediately prior to the Effective Time shall be
transferred to Baan.
(c) Stock Options. At the Effective Time, all options to purchase Aurum
Common Stock then outstanding under Aurum's 1995 Stock Option Plan, and 1996
Director Stock Option Plan (collectively, the "AURUM STOCK OPTION PLANS") shall
be assumed by Baan in accordance with Section 5.10 hereof or at Baan's
discretion otherwise substituted in a manner consistent with applicable laws. At
the Effective Time, in accordance with the terms of Aurum's Employee Stock
Purchase Plan (the "AURUM EMPLOYEE STOCK PURCHASE PLAN"), all rights to purchase
shares of Aurum Common Stock under the Aurum Employee Stock Purchase Plan shall
be treated as set forth in Section 18 of the Aurum Employee Stock Purchase Plan.
(d) Capital Stock of Merger Sub. Pursuant to the Merger, each share of
Common Stock, $0.001, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of Common
Stock of the Surviving Corporation. Each stock certificate of Merger Sub
evidencing ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
(e) Fractional Shares. No fraction of a share of Baan Common Shares will
be issued by virtue of the Merger, but in lieu thereof each holder of shares of
Aurum Common Stock who would otherwise be entitled to a fraction of a share of
Baan Common Shares (after aggregating all fractional shares of Baan Common
Shares to be received by such holder) shall receive from Baan an amount of cash
(rounded to the nearest whole cent) equal to the product of (i) such fraction,
multiplied by (ii) the average closing price of one share of Baan Common Shares
for the five (5) most recent days that Baan Common Shares has traded ending on
the trading day immediately prior to the Effective Time, as reported on the
Nasdaq National Market.
1.7 Unvested Aurum Common Stock. To the extent that shares of Aurum Common
Stock issued prior to the Merger are subject to vesting arrangements under which
shares that are unvested as of a date of termination of employment would be
subject to repurchase by Aurum, Baan shall issue Baan Common Shares, which upon
issuance, will be subject to equivalent contractual vesting and repurchase
provisions on the same schedules and subject to the same terms, shares to be
repurchased and the repurchase price thereof shall be adjusted as provided in
Section 1.6(c).
1.8 Surrender of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Baan shall select a
bank or trust company in New York with assets of not less than $500 million to
act as the exchange agent (the "EXCHANGE AGENT") in the Merger.
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(b) Baan to Provide Common Stock. Promptly after the Effective Time,
Baan shall make available to the Exchange Agent for the benefit of the Aurum
shareholders the aggregate number of Baan Common Shares issuable pursuant to
Section 1.6 in exchange for outstanding shares of Aurum Common Stock, and cash
in an amount sufficient for payment in lieu of fractional shares pursuant to
Section 1.6(f) and any dividends or distributions to which holders of shares of
Aurum Common Stock may be entitled pursuant to Section 1.8(d).
(c) Exchange Procedures. Promptly after the Effective Time, Baan shall
cause the Exchange Agent to mail to each holder of record (as of the Effective
Time) of a certificate or certificates (the "Certificates"), which immediately
prior to the Effective Time represented outstanding shares of Aurum Common Stock
which, pursuant to the Merger, were exchanged for Baan Common Shares pursuant to
Section 1.6, cash in lieu of any fractional shares pursuant to Section 1.6(f)
and any dividends or other distributions pursuant to Section 1.8(d), (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Baan may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Baan Common Shares, cash in lieu of any fractional shares
pursuant to Section 1.6(f) and any dividends or other distributions pursuant to
Section 1.8(d). Upon surrender of Certificates for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Baan, together
with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, the holders of such Certificates shall
be entitled to receive in exchange therefor certificates representing the number
of whole shares of Baan Common Shares, payment in lieu of fractional shares
which such holders have the right to receive pursuant to Section 1.6(f) and any
dividends or distributions payable pursuant to Section 1.8(d), and the
Certificates so surrendered shall forthwith be transferred to Baan. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Aurum Common Stock, will be deemed from and after the
Effective Time, for all corporate purposes to represent solely (i) the right to
receive upon the surrender thereof the number of full shares of Baan Common
Shares for which such shares of Aurum Common Stock shall have been so exchanged
and (ii) the right to receive an amount in cash in lieu of the issuance of any
fractional shares in accordance with Section 1.6(f) and any dividends or
distributions payable pursuant to Section 1.8(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Baan Common Shares with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificate with respect to the
shares of Baan Common Shares represented thereby until the holder of record of
such Certificate shall surrender such Certificate pursuant to Section 1.8(c).
Subject to applicable law, following surrender of any such Certificate, the
Exchange Agent shall deliver to the record holder thereof, without interest, a
certificate representing whole shares of Baan Common Shares issued in exchange
therefor along with payment in lieu of fractional shares pursuant to Section
1.6(f) hereof and the amount of any such dividends or other distributions with a
record date after the Effective Time payable with respect to each whole share of
Baan Common Shares represented by such Certificate.
(e) Transfers of Ownership. If Certificates for shares of Baan Common
Shares are to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the persons requesting such
exchange will have paid to Baan or any agent designated by it any transfer or
other taxes required by reason of the issuance of certificates for shares of
Baan Common Shares in any name other than that of the registered holder of the
Certificate so surrendered, or established to the satisfaction of Baan or any
agent designated by it that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.8, neither the Exchange Agent, Baan, the Surviving Corporation nor any
party hereto shall be liable to a holder of shares of Baan Common Shares or
Aurum Common Stock for any amount properly paid to a public official pursuant to
any applicable abandoned property, escheat or similar law.
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1.9 No Further Ownership Rights in Aurum Common Stock. All shares of Baan
Common Shares to be issued pursuant to the Merger in exchange of shares of Aurum
Common Stock in accordance with the terms hereof (including any cash paid in
respect thereof pursuant to Section 1.6(f) and 1.8(d)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Aurum Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Aurum Common Stock which
were outstanding immediately prior to the Effective Time. If after the Effective
Time Certificates are presented to the Surviving Corporation for any reason,
they shall be transferred to Baan.
1.10 Lost, Stolen or Destroyed Certificates. In the event any certificate
evidencing shares of Aurum Common Stock shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed certificate, upon the making of an affidavit of that fact by the
holder thereof, such shares of Baan Common Shares, cash for fractional shares,
if any, as may be required pursuant to Section 1.6(f) and any dividends or
distributions payable pursuant to Section 1.8(d); provided, however, that Baan
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificate to deliver a
bond in such sum as it may reasonably direct as indemnity against any claim that
may be made against Baan, Aurum or the Exchange Agent with respect to the
Certificate alleged to have been lost, stolen or destroyed.
1.11 Tax and Accounting Consequences.
(a) It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code. The
parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax
Regulations.
(b) It is intended by the parties hereto that the Merger shall qualify
for accounting treatment as a pooling of interests.
1.12 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Aurum and Merger Sub, the officers and directors of Aurum and
Merger Sub are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF AURUM
Aurum represents and warrants to Baan and Merger Sub, subject to the
exceptions specifically disclosed in writing in the disclosure letter
(referencing specific representations) supplied by Aurum to Baan dated as of the
date hereof and certified by a duly authorized officer of Aurum (the "AURUM
SCHEDULES"), as follows:
2.1 Organization of Aurum.
(a) Aurum and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation; has the corporate power and authority to own, lease and operate
its assets and property and to carry on its business as now being conducted and
as proposed to be conducted; and is duly qualified or licensed to do business
and is in good standing in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except where the failure to be so
qualified would not have a Material Adverse Effect (as defined below) on Aurum.
(b) Aurum has delivered to Baan a true and complete list of all of
Aurum's subsidiaries, indicating the jurisdiction of incorporation of each
subsidiary and Aurum's equity interest therein. All of the outstanding shares of
capital stock of each subsidiary of Aurum is owned by Aurum, and no third party
has any option, warrant or other right to acquire any shares of capital stock of
any such subsidiary.
(c) Aurum has delivered or made available to Baan a true and correct
copy of the Certificate of Incorporation and Bylaws of Aurum and similar
governing instruments of each of its subsidiaries, each as
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amended to date, and each such instrument is in full force and effect. Neither
Aurum nor any of its subsidiaries is in violation of any of the provisions of
its Certificate of Incorporation or Bylaws or equivalent governing instruments.
(d) When used in connection with Aurum, the term "MATERIAL ADVERSE
EFFECT" means, for purposes of this Agreement, any change, event or effect that
is or reasonably likely could be materially adverse to the current or continuing
business, assets (including intangible assets), financial condition or results
of operations of Aurum and its subsidiaries taken as a whole; provided, however,
that, from and after the date of the public announcement of this Agreement, the
cancellation, termination or nonrenewal of arrangements with Aurum by suppliers,
distributors or customers of Aurum or the loss of key employees (other than
those key employees who have entered into signed employment agreements with Baan
as of the date of this Agreement or pursuant to Section 6.3(d)), or the
termination of negotiations or delays in ordering by prospective customers of
Aurum, and in each such case the resultant financial effects shall not be taken
into account in determining whether there shall have occurred a "Material
Adverse Effect" on or with respect to Aurum and its subsidiaries taken as a
whole to the extent (but only to the extent) such supplier, distributor,
customer, prospective customer or employee circumstances may reasonably be
attributed to the adverse reaction by suppliers, distributors, customers or
employees to the transactions contemplated by this Agreement (including the
adverse or potentially adverse impact on suppliers, distributors, customers,
prospective customers or employees that may result from uncertainties that may
be perceived as a result of such transactions).
2.2 Aurum Capital Structure. The authorized capital stock of Aurum
consists of 25,000,000 shares of Common Stock, $.001 par value, of which there
were approximately 11,665,801 shares issued and outstanding as of May 12, 1997
and 5,000,000 shares of Preferred Stock, $.001 par value, of which no shares are
issued or outstanding. All outstanding shares of Aurum Common Stock are duly
authorized, validly issued, fully paid and nonassessable and are not subject to
preemptive rights created by statute, the Certificate of Incorporation or Bylaws
of Aurum or any agreement or document to which Aurum is a party or by which it
is bound. All outstanding shares of Aurum Common Stock were issued in compliance
with all applicable federal and state securities laws, except any noncompliance
which would not have a Material Adverse Effect on Aurum. As of April 30, 1997,
Aurum had reserved an aggregate of 1,432,821 shares of Aurum Common Stock, net
of exercises, for issuance to employees, consultants and non-employee directors
pursuant to the Aurum Stock Option Plans. Aurum will update the Aurum Schedules
to reflect outstanding shares and options as of the Effective Time. As of April
30, 1997, there were options outstanding to purchase an aggregate of 1,314,663
shares of Common Stock, issued to employees, consultants and non-employee
directors pursuant to the Aurum Stock Option Plans. Since April 30, 1997, all
option grants have been made consistent with past practices and in accordance
with the Aurum Stock Option Plan and Aurum's option grant guidelines. Aurum will
update the Aurum Schedules to reflect outstanding shares and options as of the
Effective Time. All shares of Aurum Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable. The Aurum Schedules list as of
April 30, 1997, the name of the holder of such option, the exercise price of
such option, the number of shares as to which such option will have vested at
such date, the vesting schedule for such option and whether the exercisability
of such option will be accelerated in any way by the transactions contemplated
by this Agreement, and indicate the extent of acceleration, if any. As of April
30, 1997, there were 136 participants in the Aurum 1996 Employee Stock Purchase
Plan.
2.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 2.2, there are no equity securities, partnership interests or similar
ownership interests of any class of Aurum, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except for securities Aurum owns, directly or indirectly through
one or more subsidiaries, there are no equity securities, partnership interests
or similar ownership interests of any class of any subsidiary of Aurum, or any
security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in Section 2.2, there
are no options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Aurum or any of its subsidiaries is a party
or by which it is bound
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obligating Aurum or any of its subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or
cause the repurchase, redemption or acquisition, of any shares of capital stock,
partnership interests or similar ownership interests of Aurum or any of its
subsidiaries or obligating Aurum or any of its subsidiaries to grant, extend,
accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement. There are no registration rights
and, to the knowledge of Aurum, with the exception of the Aurum Voting
Agreements to be entered into hereunder, there are no voting trusts, proxies or
other agreements or understandings with respect to any equity security of any
class of Aurum or with respect to any equity security, partnership interest or
similar ownership interest of any class of any of its subsidiaries. Stockholders
of Aurum are not entitled to dissenters rights under applicable state law.
2.4 Authority.
(a) Aurum has all requisite corporate power and authority to enter into
this Agreement and the Aurum Stock Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, and the
execution and delivery of the Aurum Stock Option Agreement and the consummation
of the transactions contemplated thereby, have been duly authorized by all
necessary corporate action on the part of Aurum, subject only to the approval
and adoption of this Agreement and the approval of the Merger by Aurum's
stockholders and the filing and recordation of the Certificate of Merger
pursuant to Delaware Law. A vote of the holders of at least a majority of the
outstanding shares of the Aurum Common Stock is necessary and sufficient for
Aurum's stockholders to approve and adopt this Agreement and approve the Merger.
This Agreement and the Aurum Stock Option Agreement have been duly executed and
delivered by Aurum and, assuming the due authorization, execution and delivery
by Baan and, if applicable, Merger Sub, constitute valid and binding obligations
of Aurum, enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. The execution and delivery of this Agreement and the Aurum
Stock Option Agreement by Aurum do not, and the performance of this Agreement
and the Aurum Stock Option Agreement by Aurum will not, (i) conflict with or
violate the Certificate of Incorporation or Bylaws of Aurum or the equivalent
organizational documents of any of its subsidiaries, (ii) subject to obtaining
the approval and adoption of this Agreement and the approval of the Merger by
Aurum's stockholders as contemplated by Section 5.2 and compliance with the
requirements set forth in Section 2.4(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Aurum or any of
its subsidiaries or by which its or any of their respective properties is bound
or affected, or (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or impair Aurum's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Aurum or any of its subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Aurum or any of its
subsidiaries is a party or by which Aurum or any of its subsidiaries or its or
any of their respective properties are bound or affected, except with respect to
clause (iii) for any such conflicts, violations, defaults or other occurrences
that would not have a Material Adverse Effect on Aurum. The Aurum Schedules list
all material consents, waivers and approvals under any of Aurum's or any of its
subsidiaries' agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("GOVERNMENTAL ENTITY"), is required by or with respect to Aurum in connection
with the execution and delivery of this Agreement and the Aurum Stock Option
Agreement or the consummation of the Merger, except for (i) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which
Aurum is qualified to do business, (ii) the filing of the Proxy Statement (as
defined in Section 2.19) with the Securities and Exchange Commission ("SEC") in
accordance with the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT") and any clearance thereof by the SEC, (iii) such consents, approvals,
orders, authorizations,
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registrations, declarations and filings as may be required under
applicable federal, foreign state securities (or related) laws and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), and the securities or antitrust laws of any foreign country, and (iv)
such other consents, authorizations, filings, approvals and registrations which
if not obtained or made would not be material to Aurum or Baan or have a
material adverse effect on the ability of the parties to consummate the Merger.
2.5 SEC Filings; Aurum Financial Statements.
(a) Aurum has filed all forms, reports and documents required to be
filed with the SEC since October 28, 1996 and has made available to Baan such
forms, reports and documents in the form filed with the SEC. All such required
forms, reports and documents (including those that Aurum may file subsequent to
the date hereof) are referred to herein as the "AURUM SEC REPORTS." As of their
respective dates, or in the case of registrations statements, as of their
effective dates, the Aurum SEC Reports (i) were prepared in accordance with and
complied with the requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Aurum SEC Reports and (ii)
did not at the time they were filed or, in the case of registrations statements,
become effective (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of Aurum's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Aurum SEC Reports (the "AURUM
FINANCIALS"), including any Aurum SEC Report filed after the date hereof until
the Closing, (x) complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, (y) was prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto) and (z) fairly presented the consolidated financial position
of Aurum and its subsidiaries as at the respective dates thereof and the
consolidated results of Aurum's operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments. The balance sheet of Aurum
contained in Aurum SEC Reports as of December 31, 1996 is hereinafter referred
to as the "AURUM BALANCE SHEET." Neither Aurum nor any of its subsidiaries has
any liabilities (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to the
consolidated financial statements prepared in accordance with GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Aurum and its subsidiaries taken as a
whole, except liabilities (i) provided for in the Aurum Balance Sheet or the
Aurum Financials and the footnotes thereto, or (ii) incurred since the date of
the Aurum Balance Sheet in the ordinary course of business consistent with past
practices and in an aggregate amount not in excess of $5,000,000.
(c) Aurum has heretofore furnished to Baan a complete and correct copy
of any amendments or modifications, which have not yet been filed with the SEC
but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Aurum with the SEC pursuant to
the Securities Act or the Exchange Act.
2.6 Absence of Certain Changes or Events. Since the date of the Aurum
Balance Sheet, Aurum has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any Material
Adverse Effect to Aurum; (ii) any acquisition, sale or transfer of any material
asset of Aurum or any of its subsidiaries other than in the ordinary course of
business and consistent with past practice; (iii) any material change in
accounting methods or practices (including any change in depreciation or
amortization policies or rates) by Aurum or any material revaluation by Aurum of
any of its or any of its subsidiaries' assets, except as required by concurrent
changes in GAAP; (iv) any declaration, setting aside, or payment of a dividend
or other distribution with respect to the shares of Aurum, or any direct or
indirect redemption, purchase or other acquisition by Aurum of any of its shares
of capital stock, except for the repurchase at cost of unvested shares held by
Aurum employees on the termination of their employment; (v) any material
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contract entered into by Aurum or any of its subsidiaries, other than in the
ordinary course of business and as provided to Baan, or any material amendment
or termination of, or default under, any material contract to which Aurum or any
of its subsidiaries is a party or by which it is bound which would result in a
Material Adverse Effect on Aurum; or (vi) any negotiation or agreement by Aurum
or any of its subsidiaries to do any of the things described in the preceding
clauses (i) through (v) (other than negotiations with Baan and its
representatives regarding the transactions contemplated by this Agreement).
2.7 Taxes.
Aurum and each of its subsidiaries, and any consolidated, combined,
unitary or aggregate group for Tax (as defined below) purposes of which Aurum or
any of its subsidiaries is or has been a member, has timely filed all Returns
(as defined below) required to be filed by it (other than those that are not,
individually or in the aggregate, material), has paid all Taxes shown thereon to
be due and has provided adequate accruals in all material respects in accordance
with GAAP in its financial statements for any Taxes that have not been paid,
whether or not shown as being due on any returns. In addition, (i) no material
claim for unpaid Taxes has become a lien against the property of Aurum or any of
its subsidiaries or is being asserted against Aurum or any of its subsidiaries,
(ii) no audit of any Tax Return of Aurum or any of its subsidiaries is being
conducted by a Tax authority (A) as of the date of this Agreement and (B) which,
as of the Closing Date, has had and could reasonably be expected to have a
Material Adverse Effect on Aurum and its subsidiaries, (iii) no extension of the
statute of limitations on the assessment of any Taxes has been granted by Aurum
or any of its subsidiaries and is currently in effect (A) as of the date of this
Agreement and (B) which, as of the Closing Date, has had and could reasonably be
expected to have a Material Adverse Effect on Aurum and its subsidiaries and
(iv) there is no agreement, contract or arrangement to which Aurum or any of its
subsidiaries is a party that may result in the payment of any amount that would
not be deductible pursuant to Sections 280G, 162 or 404 of the Code. As used
herein, "TAXES" shall mean all taxes of any kind, including, without limitation,
those on or measured by or referred to as income, gross receipts, sales, use, ad
valorem, franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property or windfall profits
taxes, customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority, domestic or foreign.
As used herein, "RETURN" shall mean any return, report or statement required to
be filed with any governmental authority with respect to Taxes.
2.8 Title to Properties; Absence of Liens and Encumbrances.
(a) The Aurum Schedules list the real property owned by Aurum. The Aurum
Schedules list each real property lease with annual lease payments of $100,000
or more to which Aurum is a party and each amendment thereto. All such current
leases are in full force and effect, are valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default) that would give rise to a claim in an amount
greater than $100,000.
(b) Aurum has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("LIENS"), except as reflected in
the Aurum Financials, the Aurum SEC Reports or in the Aurum Schedules and except
for liens for taxes not yet due and payable or liens imposed by law and incurred
in the ordinary course of business for obligations not yet due to carriers,
warehousemen, laborers, materials men and the like and such imperfections of
title and encumbrances, if any, which are not material in character, amount or
extent, and which do not materially detract from the value, or materially
interfere with the present use, of the property subject thereto or affected
thereby.
2.9 Intellectual Property.
(a) Aurum (including, for all purposes under this Section 2.9, all of
Aurum's subsidiaries) owns, or has a valid and perpetual license under, all
patents, trademarks, trade names, service marks, copyrights, any applications
for all of the foregoing, trade secrets and know-how that are required for the
conduct of business
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of Aurum (including, without limitation, the development, production and
marketing of Aurum's products) as currently conducted (the "AURUM IP RIGHTS"),
with sufficient rights for the conduct of Aurum's business as currently
conducted.
(b) Schedule 2.9(b) of the Aurum Schedules sets forth a complete list of
all patents, registered copyrights, registered trademarks, trade names and
service marks and any applications for all of the foregoing, included in Aurum
IP Rights, and specifies, where applicable, the jurisdictions in which each such
Aurum IP Right has been issued or registered or in which an application for such
issuance and registration has been filed, including the respective registration
or application numbers and the names of all registered owners. Schedule 2.9(b)
of Aurum Schedules sets forth the list of all material licenses, sublicenses and
other agreements to which Aurum is a party (with subsidiaries clearly
identified) and pursuant to which Aurum or any other person is licensed or
otherwise has rights under any Aurum IP Right (excluding object code licenses
granted by Aurum to end-users in the ordinary course of business that permit use
of software products without a right to modify, distribute or sublicense the
same ("END-USER LICENSES") and excluding standard licenses granted to Aurum by
software vendors covering software which is broadly distributed by such
licensors). The execution and delivery of this Agreement by Aurum, and the
consummation of the transactions contemplated hereby, will neither cause Aurum
to be in material violation or default under any such license, sublicense or
other agreement, nor entitle any other party to any such license, sublicense or
agreement to terminate or modify such license, sublicense or agreement. Except
as set forth in Schedule 2.9(a) or 2.9(b) of the Aurum Schedules, Aurum (i) is
the sole and exclusive owner of, with all right, title and interest in and to
(free and clear of any liens or encumbrances), Aurum IP Rights, or (ii) is a
licensee under or otherwise possesses legally enforceable rights under the Aurum
IP Rights under valid and binding agreements listed in Schedule 2.9(b) of the
Aurum Schedules or excluded therefrom as permitted by this Section 2.9.
(c) No claims against Aurum, or to Aurum's knowledge, its licensors or
licensees with respect to Aurum IP Rights have been asserted or are, to Aurum's
knowledge, threatened by any person, nor to Aurum's knowledge, are there any
valid grounds for any claims, (i) to the effect that the manufacture, sale, use,
offer for sale, importation, reproduction, distribution or preparation of
derivative works of any of the products of Aurum infringes on any copyright,
patent issued at least 60 days prior to the date hereof, trademark, service
mark, trade secret or other proprietary right, (ii) against the manufacture,
sale, use, offer for sale, importation, reproduction, distribution or
preparation of derivative works by Aurum of any computer software programs and
applications and tangible or intangible proprietary information or material used
in Aurum's business as currently conducted or as currently proposed to be
conducted by Aurum, or (iii) challenging the ownership by Aurum, or the validity
or effectiveness of any, of Aurum IP Rights. To Aurum's knowledge, there is no
material unauthorized use, infringement or misappropriation under any Aurum IP
Rights by any third party, including any employee or former employee of Aurum.
To the knowledge of Aurum, no Aurum IP Right or product of Aurum is subject to
any outstanding decree, order, judgment, or stipulation restricting in any
manner the licensing thereof by or to Aurum. It is Aurum's policy to have each
employee, consultant or contractor of Aurum execute a proprietary information
and confidentiality agreement substantially in the form of Aurum's standard
forms of such agreement, and substantially all of Aurum's employees, consultants
and contractors have executed such an agreement. All computer software included
in Aurum's products (i) has been either created by employees of Aurum within the
scope of their employment or otherwise on a work-for-hire basis or by
consultants or contractors who have created such software themselves and have
assigned all right, title and interest they have in such software to Aurum or
(ii) is licensed to Aurum pursuant to valid and binding agreements.
(d) Aurum has taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and its proprietary
rights in, all Aurum IP Rights and the intellectual property rights of third
parties entrusted to them.
2.10 Compliance; Permits; Restrictions.
(a) Except as disclosed in the Aurum SEC Reports filed prior to the date
hereof, neither Aurum nor any of its subsidiaries is, in any material respect,
in conflict with, or in default or violation of (i) to the knowledge of Aurum,
any law, rule, regulation, order, judgment or decree applicable to Aurum or any
of its
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subsidiaries or by which Aurum or any of its subsidiaries or any of
their respective properties is bound or affected, or (ii) any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Aurum or any of its
subsidiaries is a party or by which Aurum or any of its subsidiaries or its or
any of their respective properties is bound or affected. Except as disclosed in
the Aurum SEC Reports filed prior to the date hereof, to the knowledge of Aurum,
no investigation or review by any Governmental Entity is pending or threatened
against Aurum or any of its subsidiaries, nor has any Governmental Entity
indicated an intention to conduct the same, which investigation or review is
reasonably likely to have a Material Adverse Effect on Aurum. There is no
material agreement, judgment, injunction, order or decree binding upon Aurum or
any of its subsidiaries which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of Aurum or
any of its subsidiaries, any acquisition of material property by Aurum or any of
its subsidiaries or the conduct of business by Aurum as currently conducted.
(b) Aurum and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities that are material
to the operation of the business of Aurum (collectively, the "AURUM PERMITS").
Aurum and its subsidiaries are in compliance in all material respects with the
terms of the Aurum Permits.
2.11 Litigation. Except as disclosed in the Aurum SEC Reports filed prior
to the date hereof, there is no action, suit, proceeding, claim, arbitration or
investigation pending, or as to which Aurum or any of its subsidiaries has
received any notice of assertion nor, to Aurum's knowledge, is there a
threatened action, suit, proceeding, claim, arbitration or investigation against
Aurum or any of its subsidiaries which is reasonably likely to have a Material
Adverse Effect on Aurum. Aurum is not aware of any basis for any action, suit,
proceeding, claim, arbitration or proceeding of the type described in the
preceding sentence, and Aurum has no knowledge of any unasserted claim, the
assertion of which is likely, and which, if asserted, will seek damages, an
injunction or other legal, equitable, monetary or nonmonetary relief, which
claim individually or collectively with other such unasserted claims if granted
would have a Material Adverse Effect on Aurum. To Aurum's knowledge, no
Governmental Entity has at any time challenged or questioned in writing the
legal right of Aurum to develop, offer or sell any of its products in the
present manner or style thereof.
2.12 Brokers' and Finders' Fees. Except for fees payable to Cowen &
Company pursuant to an engagement letter dated May 6, 1997, a copy of which has
been provided to Baan, Aurum has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.13 Employee Benefit Plans.
(a) With respect to each material employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee benefit
plan" as defined in Section 3(3) of ERISA) maintained or contributed to by Aurum
or any trade or business which is under common control with Aurum within the
meaning of Section 414 of the Code (the "AURUM EMPLOYEE PLANS"), Aurum has made
available or will make available by May 31, 1997 to Baan a true and complete
copy of, to the extent applicable, (i) such Aurum Employee Plan, (ii) the most
recent annual report (Form 5500), (iii) each trust agreement related to such
Aurum Employee Plan, (iv) the most recent summary plan description for each
Aurum Employee Plan for which such a description is required, (v) the most
recent actuarial report relating to any Aurum Employee Plan subject to Title IV
of ERISA and (vi) the most recent IRS determination letter issued with respect
to any Aurum Employee Plan.
(b) Each Aurum Employee Plan which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination from the IRS
covering the provisions of the Tax Reform Act of 1986 stating that such Aurum
Employee Plan is so qualified and nothing has occurred since the date of such
letter that could reasonably be expected to affect the qualified status of such
plan. Each Aurum Employee Plan has been operated in all material respects in
accordance with its terms and the requirements of applicable law. Neither Aurum
nor any ERISA Affiliate of Aurum has incurred or is reasonably expected to incur
any material liability under Title IV of ERISA in connection with any Aurum
Employee Plan.
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2.14 Employees; Labor Matters. Between January 1, 1996 and the date of
this Agreement, to Aurum's knowledge, no employee of Aurum (i) has violated any
employment contract, patent disclosure agreement or non competition agreement
between such employee and any former employer of such employee due to such
employee being employed by Aurum and disclosing to Aurum trade secrets or
proprietary information of such employer or (ii) has given notice to Aurum, nor
is Aurum otherwise aware that any employee intends to terminate his or her
employment with Aurum except for terminations of a nature and number that are
consistent with Aurum's prior experience. To Aurum's knowledge, there are no
activities or proceedings of any labor union to organize any employees of Aurum
or any of its subsidiaries and there are no strikes, or material slowdowns, work
stoppages or lockouts, or threats thereof by or with respect to any employees of
Aurum or any of its subsidiaries. Aurum is not, and has never been, a party to
any collective bargaining agreement. Aurum and its subsidiaries are, and since
January 1, 1996, Aurum and its subsidiaries have been in compliance in all
material respects with all applicable laws regarding employment practices, terms
and conditions of employment, and wages and hours (including, without
limitation, ERISA, WARN or any similar state or local law).
2.15 Environmental Matters.
(a) Hazardous Material. Except as would not reasonably be likely to
result in a material liability to Aurum, no underground storage tanks and no
amount of any substance that has been designated by any Governmental Entity or
by applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without limitation,
PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws, (a
"HAZARDOUS MATERIAL"), but excluding office and janitorial supplies, are
present, as a result of the actions of Aurum or any of its subsidiaries or, to
Aurum's knowledge, as a result of any actions of any third party or otherwise,
in, on or under any property, including the land and the improvements, ground
water and surface water thereof, that Aurum or any of its subsidiaries has at
any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not reasonably be
likely to result in a material liability to Aurum, neither Aurum nor any of its
subsidiaries has transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to Hazardous Materials in violation of any
law in effect on or before the Closing Date, nor has Aurum or any of its
subsidiaries disposed of, transported, sold, used, released, exposed its
employees or others to or manufactured any product containing a Hazardous
Material (collectively "HAZARDOUS MATERIALS ACTIVITIES") in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) Permits. Aurum and its subsidiaries currently hold all environmental
approvals, permits, licenses, clearances and consents (the "AURUM ENVIRONMENTAL
PERMITS") necessary for the conduct of Aurum's and its subsidiaries' Hazardous
Material Activities and other businesses of Aurum and its subsidiaries as such
activities and businesses are currently being conducted.
(d) Environmental Liabilities. No material action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to Aurum's knowledge, threatened concerning any Aurum Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of Aurum or any
of its subsidiaries. Aurum is not aware of any fact or circumstance which could
involve Aurum or any of its subsidiaries in any material environmental
litigation or impose upon Aurum any material environmental liability.
2.16 Agreements, Contracts and Commitments. Except as set forth in the
Aurum Schedules, neither Aurum nor any of its subsidiaries is a party to or is
bound by:
(a) any employment or consulting agreement, contract or commitment with
any officer or director level employee or member of Aurum's Board of Directors,
other than those that are terminable by Aurum or
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any of its subsidiaries on no more than thirty days notice without
liability or financial obligation, except to the extent general principles of
wrongful termination law may limit Aurum's or any of its subsidiaries' ability
to terminate employees at will;
(b) any agreement or plan, including without limitation any stock option
plan, stock appreciation right plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification or guaranty not entered into in the
ordinary course of business other than indemnification agreements between Aurum
or any of its subsidiaries and any of its officers or directors;
(d) any agreement, contract or commitment containing any covenant
limiting the freedom of Aurum or any of its subsidiaries to engage in any line
of business or compete with any person or granting any exclusive distribution
rights;
(e) any agreement, contract or commitment currently in force relating to
the disposition or acquisition of assets not in the ordinary course of business
or any ownership interest in any corporation, partnership, joint venture or
other business enterprise;
(f) any material joint marketing or development agreement;
(g) any agreement, contract or commitment currently in force to provide
or receive source code for any product, service or technology; or
(h) any agreement, contract or commitment currently in force to license
any third party to manufacture or reproduce any Aurum product, service or
technology except as a distributor in the normal course of business.
Neither Aurum nor any of its subsidiaries, nor to Aurum's knowledge any
other party to a Aurum Contract (as defined below), has breached, violated or
defaulted under, or received notice that it has breached violated or defaulted
under, any of the material terms or conditions of any of the agreements,
contracts or commitments to which Aurum or any of its subsidiaries is a party or
by which it is bound of the type described in clauses (a) through (h) above (any
such agreement, contract or commitment, a "AURUM CONTRACT") in such a manner as
would permit any other party to cancel or terminate any such Aurum Contract, or
would permit any other party to seek damages, which would be reasonably likely
to cause a Material Adverse Effect on Aurum.
2.17 Pooling of Interests. To the knowledge of Aurum, based on
consultation with its independent accountants, neither Aurum nor any of its
directors, officers, affiliates or stockholders has taken any action which would
preclude Baan's ability to account for the Merger as a pooling of interests.
2.18 Statements; Proxy Statement/Prospectus. The information supplied by
Aurum for inclusion in the Registration Statement (as defined in Section 3.4(b))
shall not at the time the Registration Statement becomes effective under the
Securities Act contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not, in light of the circumstances under which they were
made, misleading. The information supplied by Aurum for inclusion in the proxy
statement/prospectus to be sent to the stockholders of Aurum in connection with
the meeting of Aurum's stockholders to consider the approval and adoption of
this Agreement and the approval of the Merger (the "AURUM STOCKHOLDERS'
MEETING") (such proxy statement/prospectus as amended or supplemented is
referred to herein as the "PROXY STATEMENT") shall not, on the date the Proxy
Statement is first mailed to Aurum's stockholders, at the time of the Aurum
Stockholders' Meeting or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Aurum
Stockholders' Meeting which has
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become false or misleading. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder. If at any time prior to the Effective Time any event
relating to Aurum or any of its affiliates, officers or directors should be
discovered by Aurum which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, Aurum shall
promptly inform Baan. Notwithstanding the foregoing, Aurum makes no
representation or warranty with respect to any information supplied by Baan or
Merger Sub which is contained in any of the foregoing documents.
2.19 Board Approval. The Board of Directors of Aurum has, as of the date
of this Agreement, unanimously determined (i) that the Merger is fair to, and in
the best interests of Aurum and its stockholders, and (ii) to recommend that the
stockholders of Aurum approve and adopt this Agreement and approve the Merger.
2.20 Fairness Opinion. Aurum's Board of Directors has received a written
opinion from Cowen & Company dated as of the date of the Agreement, to the
effect that as of such date, the Exchange Ratio is fair to Aurum's stockholders
from a financial point of view and has delivered to Baan a copy of such opinion.
2.21 Section 203 of the Delaware General Corporation Law Not
Applicable. The Board of Directors of Aurum has taken all actions so that the
restrictions contained in Section 203 of the Delaware General Corporation Law
applicable to a "business combination" (as defined in such Section 203) will not
apply to the execution, delivery or performance of this Agreement or the Stock
Option Agreement or to the consummation of the Merger or the other transactions
contemplated by this Agreement or the Stock Option Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BAAN AND MERGER SUB
Baan and Merger Sub represent and warrant to Aurum, subject to the
exceptions specifically disclosed in writing in the disclosure letter
(indicating the relevant Section of this Agreement) supplied by Baan to Aurum
dated as of the date hereof and certified by a duly authorized officer of Baan
(the "BAAN SCHEDULES"), as follows:
3.1 Organization of Baan and Merger Sub.
(a) Each of Baan and Merger Sub is a corporation duly organized,
validly existing and in good standing, or its equivalent if any, under the laws
of the jurisdiction of its incorporation; has the corporate power and authority
to own, lease and operate its assets and property and to carry on its business
as now being conducted and as proposed to be conducted; and is duly qualified or
licensed to do business and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except where the
failure to be so qualified would not have a Material Adverse Effect (as defined
below) on Baan.
(b) Baan has delivered or made available to Aurum a true and correct
copy of the constitutive documents of Baan and Merger Sub, each as amended to
date, and each such instrument is in full force and effect. Baan is not in
violation of any of the provisions of its constitutive documents.
(c) When used in connection with Baan, the term "MATERIAL ADVERSE
EFFECT" means, for purposes of this Agreement, any change, event or effect that
is materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of Baan and its subsidiaries taken
as a whole.
3.2 Baan and Merger Sub Capital Structure.
(a) The authorized capital stock of Baan consists of 350,000,000 Common
Shares, of which approximately 90,885,678 shares were issued and outstanding as
of March 31, 1997. The authorized capital stock of Merger Sub consists of 100
shares of Common Stock, $.01 par value, all of which, as of the date hereof, are
issued and outstanding and are held by Baan. Merger Sub was formed on May 7,
1997, for the purpose of consummating a merger and has no material assets or
liabilities except as necessary for such
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purpose. All outstanding Baan Common Shares are duly authorized, validly issued,
fully paid and nonassessable and have not been issued in violation of any
preemptive or other statutory right of shareholders.
(b) The shares of Baan Common Shares to be issued pursuant to the
Merger, when issued in accordance with the terms and provisions of this
Agreement, will be duly authorized, validly issued, fully paid and
non-assessable and will not be subject to any preemptive or other statutory
right of shareholders and will be issued in compliance with applicable U.S.
federal and state and Netherlands securities laws.
3.3 Authority.
(a) Each of Baan and Merger Sub has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Baan and Merger Sub, subject
only to the filing and recordation of the Certificate of Merger pursuant to
Delaware Law. This Agreement has been duly executed and delivered by each of
Baan and Merger Sub and, assuming the due authorization, execution and delivery
by Aurum, constitutes the valid and binding obligation of Baan and Merger Sub,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy and other similar laws and general principles of equity.
The execution and delivery of this Agreement by each of Baan and Merger Sub does
not, and the performance of this Agreement by each of Baan and Merger Sub will
not, (i) conflict with or violate the Articles of Association of Baan or the
Certificate of Incorporation or Bylaws of Merger Sub, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to Baan
or Merger Sub or by which any of their respective properties is bound or
affected or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair Baan's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Baan or Merger Sub pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Baan or Merger Sub is a
party or by which Baan or Merger Sub or any of their respective properties are
bound or affected.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to Baan or Merger Sub in connection with the execution and delivery of
this Agreement or the consummation of the Merger, except for (i) the filing of a
Form F-4 Registration Statement (the "REGISTRATION STATEMENT") with the SEC in
accordance with the Securities Act and the declaration of effectiveness of such
Registration Statement by the SEC, (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware, (iii) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws and the HSR
Act and the securities or antitrust laws of any foreign country (including, for
the avoidance of doubt, the rules and regulations of the Amsterdam Exchanges
N.V.), and (iv) such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not be material to Baan or
Aurum or have a material adverse effect on the ability of the parties to
consummate the Merger.
3.4 SEC Filings; Baan Financial Statements.
(a) Baan has filed all forms, reports and documents required to be filed
with the SEC since January 1, 1996, and has made available to Aurum such forms,
reports and documents in the form filed with the SEC. All such required forms,
reports and documents (including those that Baan may file subsequent to the date
hereof) are referred to herein as the "BAAN SEC REPORTS." As of their respective
dates, the Baan SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Baan SEC
Reports, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of Baan' subsidiaries is required to file any forms,
reports or other documents with the SEC.
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(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in Baan SEC Reports (the "BAAN
FINANCIALS"), including any Baan SEC Reports filed after the date hereof until
the Closing, (x) complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, (y) was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (z) fairly presented the consolidated financial
position of Baan and its subsidiaries as at the respective dates thereof and the
consolidated results of Baan' operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments. The balance sheet of Baan
contained in Baan SEC Reports as of March 31, 1997 is hereinafter referred to as
the "BAAN BALANCE SHEET."
3.5 Absence of Certain Changes or Events. Since the date of the Baan
Balance Sheet through the date of this Agreement, there has not been any
Material Adverse Effect on Baan.
3.6 Statements; Proxy Statement/Prospectus. The information supplied by
Baan for inclusion in the Registration Statement shall not at the time the
Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading. The information supplied by Baan for inclusion in the Proxy
Statement shall not, on the date the Proxy Statement is first mailed to Aurum's
stockholders, at the time of the Aurum Stockholders' Meeting or at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Aurum Stockholders' Meeting which has become false or
misleading. If at any time prior to the Effective Time, any event relating to
Baan or any of its affiliates, officers or directors should be discovered by
Baan which should be set forth in an amendment to the Registration Statement or
a supplement to the Proxy Statement, Baan shall promptly inform Aurum.
Notwithstanding the foregoing, Baan makes no representation or warranty with
respect to any information supplied by Aurum which is contained in any of the
foregoing documents.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Aurum and Baan. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Aurum (which for the
purposes of this Article 4 shall include Aurum and each of its subsidiaries) and
Baan agree, except (i) as otherwise contemplated by this Agreement, or (ii) to
the extent that the other party shall otherwise consent in writing, to carry on
its business in the usual, regular and ordinary course, in substantially the
same manner as heretofore conducted, to pay its debts and taxes when due subject
to good faith disputes over such debts or taxes, to pay or perform other
material obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to preserve intact its present
business organization, keep available the services of its present officers and
employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings. Baan agrees to cause its material subsidiaries to act in accordance
with the foregoing provisions.
4.2 Certain Actions by Aurum. In addition notwithstanding Section 4.1
above, without the prior consent of Baan, Aurum shall not do any of the
following, nor shall Aurum permit its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize cash
payments in exchange for any options granted under any of such plans;
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(b) Grant any severance or termination pay to any officer or employee
except payments in amounts consistent with policies and past practices or
pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to Baan, or adopt any new
severance plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Aurum IP Rights (other
than in the ordinary course of business and in the best interests of Aurum), or
enter into grants of future patent rights, other than licenses in the ordinary
course of business and consistent with past practice;
(d) Declare or pay any dividends on or make any other distributions
(whether in cash, stock, equity securities or property) in respect of any
capital stock or split, combine or reclassify any capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock;
(e) Repurchase or otherwise acquire, directly or indirectly, any shares
of capital stock, or any securities convertible into shares of capital stock, or
subscriptions, rights, warrants or options to acquire any shares of capital
stock or any securities convertible into shares of capital stock, or enter into
other agreements or commitments of any character obligating it to repurchase any
such shares, warrants, options or convertible securities, except for the
repurchase at cost of unvested shares held by Aurum employees on the termination
of their employment;
(f) Issue, deliver, sell, authorize or propose the issuance, delivery or
sale of, any shares of capital stock or any securities convertible into shares
of capital stock, or subscriptions, rights, warrants or options to acquire any
shares of capital stock or any securities convertible into shares of capital
stock, or enter into other agreements or commitments of any character obligating
it to issue any such shares or convertible securities, other than the issuance
of (i) shares of Aurum Common Stock pursuant to the exercise of stock options
therefor outstanding as of the date of this Agreement or granted pursuant to
clause (iv), (ii) shares of Aurum Common Stock issuable to participants in the
Aurum Employee Stock Purchase Plan, consistent with past practice, and the terms
thereof, (iii) shares of the Aurum Common Stock issuable pursuant to the Aurum
Stock Option Agreement, and (iv) options to purchase Aurum Common Stock granted
at fair market value, consistent with past practices and in accordance with the
Aurum Stock Option Plans and Aurum's option grant guidelines;
(g) Cause, permit or propose any amendments to any charter document or
Bylaw (or similar governing instruments of any subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a material portion of the assets of, or by
any other manner, any business or any corporation, partnership interest,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of Aurum or enter into any material joint
ventures, strategic partnerships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of Aurum, except in the ordinary course of business consistent with
past practice;
(j) Incur any indebtedness for borrowed money (other than ordinary
course trade payables or pursuant to existing credit facilities in the ordinary
course of business) or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire debt securities of Aurum or
guarantee any debt securities of others;
(k) Adopt or amend any employee benefit or employee stock purchase or
employee option plan, or enter into any employment contract, pay any special
bonus or special remuneration to any director or employee other than in the
ordinary course of business consistent with past practice, or increase the
salaries or wage rates of its officers or employees other than in the ordinary
course of business, consistent with past practice;
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(l) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
any such payment, discharge or satisfaction in the ordinary course of business;
(m) Make any grant of exclusive rights to any third party;
(n) Enter into any material partnership arrangements, joint development
agreements or strategic alliances, agreements to create standards or agreements
with "STANDARDS" bodies;
(o) Take any action that would be reasonably likely to interfere with
Baan's ability to account for the Merger as a pooling of interests whether or
not otherwise permitted by the provisions of this Article IV; or
(p) Agree in writing or otherwise to take any of the actions described
in Article 4 (a) through (o) above.
For purposes of the provisions of this Section 4.2, the prior consent of Baan
shall be deemed to have been received if, prior to the taking of any of the
foregoing actions, such action shall have been discussed with Amal Johnson,
Baan's Executive Vice President, and she shall have received such additional
information as she may have reasonably requested and, after such discussion and
receipt of any such additional information, she shall have not objected to the
taking of the proposed action.
4.3 Baan Acquisitions. During the period from the date of this Agreement
and until the earlier of the termination of this Agreement pursuant to its terms
or the Effective Time, Baan shall not acquire or agree to acquire by merging or
consolidating with, or by purchasing any equity interest in or a material
portion of the assets of, any direct competitor of Aurum in the United States if
such acquisition would have a reasonable likelihood of preventing or materially
delaying the consummation of the transactions contemplated hereby or would
result in a Material Adverse Effect on Aurum or Baan.
4.4 No HSR Violation. During the period from the date of this Agreement
and until the earlier of the termination of this Agreement pursuant to its terms
or the Effective Time, neither party is required to take any action pursuant to
Article IV that would cause a violation of HSR.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings;
Board Recommendations.
(a) As promptly as practicable after the execution of this Agreement,
Aurum and Baan will prepare and file with the SEC the Proxy Statement, and Baan
will prepare and file with the SEC the Registration Statement in which the Proxy
Statement will be included as a prospectus. Each of Aurum and Baan will respond
to any comments of the SEC, will use its respective reasonable best efforts to
have the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing and will cause the Proxy Statement to
be mailed to the Aurum stockholders at the earliest practicable time. As
promptly as practicable after the date of this Agreement, Aurum and Baan will
prepare and file any other filings required under the Exchange Act, the
Securities Act or any other U.S. federal, U.S. State or non-U.S. laws relating
to the Merger and the transactions contemplated by this Agreement (the "OTHER
FILINGS"). Each of Aurum and Baan will notify the other promptly upon the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff or any other government officials for amendments or supplements to
the Registration Statement, the Proxy Statement or any Other Filing or for
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Proxy Statement, the
Merger or any Other Filing. The Proxy Statement, the Registration Statement and
the Other Filings will comply in all material respects with all applicable
requirements of law and the rules and regulations promulgated thereunder.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Proxy Statement, the Registration Statement or any Other
Filing, Aurum or Baan, as the case may be, will promptly inform the other of
such occurrence
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and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to stockholders of Aurum, such amendment or
supplement.
(b) Subject to the provisions of Section 5.4(b), the Proxy Statement
will include the recommendation of the Board of Directors of Aurum in favor of
adoption and approval of this Agreement and approval of the Merger (except that
the Board of Directors of Aurum may withdraw, modify or refrain from making such
recommendation to the extent that the Board determines, in good faith, after
consultation with outside legal counsel, that compliance with the Board's
fiduciary duties under applicable law would require it to do so).
5.2 Meeting of Stockholders. Promptly after the date hereof, Aurum will
take all action necessary in accordance with the Delaware General Corporation
Law and its Certificate of Incorporation and Bylaws to convene the Aurum
Stockholders' Meeting to be held as promptly as practicable, and in any event
(to the extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the Registration Statement, for the purpose of
voting upon this Agreement and the Merger. Subject to the provisions of Section
5.4(b), Aurum will use its reasonable best efforts to solicit from its
stockholders proxies in favor of the adoption and approval of this Agreement and
the approval of the Merger and will take all other action necessary or advisable
to secure the vote or consent of its stockholders required by the rules of the
National Association of Securities Dealers, Inc. or Delaware Law to obtain such
approvals.
5.3 Confidentiality; Access to Information.
(a) The parties acknowledge that Aurum and Baan have previously executed
a Confidential Disclosure Agreement, dated as of May 8, 1997 (the
"CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms.
(b) Access to Information. Each of Aurum and Baan will afford the other
party and its accountants, counsel and other representatives reasonable access
during normal business hours to the properties, books, records and personnel of
such party during the period prior to the Effective Time to obtain all
information concerning the business, including the status of product development
efforts, properties, results of operations and personnel of such party, as the
other party may reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 5.3 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.4 No Solicitation.
(a) Subject to the provisions of Section 5.4(b), from and after the date
of this Agreement until the earlier of the Effective Time or termination of this
Agreement pursuant to its terms, Aurum and its subsidiaries will not, and will
instruct their respective directors, officers, employees, representatives,
investment bankers, agents and affiliates not to, directly or indirectly, (i)
solicit or knowingly encourage submission of, any Acquisition Proposal (as
defined below) by any person, entity or group (other than Baan and its
affiliates, agents and representatives), or (ii) participate in any discussions
or negotiations with, or disclose any non-public information concerning Aurum or
any of its subsidiaries to, or afford any access to the properties, books or
records of Aurum or any of its subsidiaries to, or otherwise assist or
facilitate, or enter into any agreement or understanding with, any person,
entity or group (other than Baan and its affiliates, agents and
representatives), in connection with any Acquisition Proposal with respect to
Aurum. For the purposes of this Agreement, an "ACQUISITION PROPOSAL" means any
proposal or offer relating to (i) any merger, consolidation, sale or license of
substantial assets or similar transactions involving Aurum or any of its
subsidiaries (other than sales or licenses of assets or inventory in the
ordinary course of business or as permitted under the terms of this Agreement),
(ii) sale by Aurum of any shares of capital stock of Aurum (including without
limitation by way of a tender offer or an exchange offer) except as may be
permitted pursuant to Article 4, (iii) the acquisition by any person of
beneficial ownership or a right to acquire beneficial ownership of, or the
formation of any "group" (as defined under Section 13(d) of the Exchange Act and
the rules and regulations thereunder) which beneficially owns, or has the right
to acquire beneficial ownership of, 10% or more of the then outstanding shares
of capital stock of Aurum (except for acquisitions for passive investment
purposes of not more than 15% of the then outstanding shares of capital stock of
Aurum only in circumstances where the
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person or group qualifies for and files a Schedule 13G with respect
thereto and does not become obligated to file a Schedule 13D); or (iv) any
public announcement of a proposal, plan or intention to do any of the foregoing
or any agreement to engage in any of the foregoing. Aurum will immediately cease
any and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. Aurum will (i) notify
Baan as promptly as practicable if it receives any proposal or written inquiry
or written request for information in connection with an Acquisition Proposal or
potential Acquisition Proposal and (ii) as promptly as practicable notify Baan
of the significant terms and conditions of any such Acquisition Proposal. In
addition, subject to the other provisions of this Section 5.4, from and after
the date of this Agreement until the earlier of the Effective Time and
termination of this Agreement pursuant to its terms, Aurum and its subsidiaries
will not, and will instruct their respective directors, officers, employees,
representatives, investment bankers, agents and affiliates not to, directly or
indirectly, make or authorize any public statement, recommendation or
solicitation in support of any Acquisition Proposal made by any person, entity
or group (other than Baan); provided, however, that nothing herein shall
prohibit Aurum's Board of Directors from taking and disclosing to Aurum's
stockholders a position with respect to a tender offer pursuant to Rules 14d-9
and 14e-2 promulgated under the Exchange Act.
(b) Notwithstanding the provisions of paragraph (a) above, prior to the
Effective Time, Aurum may, to the extent the Board of Directors of Aurum
determines, in good faith, after consultation with outside legal counsel, that
the Board's fiduciary duties under applicable law require it to do so,
participate in discussions or negotiations with, and, subject to the
requirements of paragraph (c), below, furnish information to any person, entity
or group after such person, entity or group has delivered to Aurum in writing,
an unsolicited bona fide Acquisition Proposal which the Board of Directors of
Aurum in its good faith reasonable judgment determines, after consultation with
its independent legal and financial advisors, would result in a transaction more
favorable than the Merger to the stockholders of Aurum (a "AURUM ALTERNATIVE
PROPOSAL"). In addition, notwithstanding the provisions of paragraph (a) above,
in connection with a possible Acquisition Proposal, Aurum may refer any third
party to this Section 5.4 or make a copy of this Section 5.4 available to a
third party. In the event Aurum receives a Aurum Alternative Proposal, nothing
contained in this Agreement (but subject to the terms hereof) will prevent the
Board of Directors of Aurum from recommending such Aurum Alternative Proposal to
its Stockholders, if the Board determines, in good faith, after consultation
with outside legal counsel, that such action is required by its fiduciary duties
under applicable law; in such case, the Board of Directors of Aurum may
withdraw, modify or refrain from making its recommendation set forth in Section
5.1(b), and, to the extent it does so, Aurum may refrain from soliciting proxies
to secure the vote of its stockholders as may be required by Section 5.2;
provided, however, that Aurum shall (i) provide at least forty-eight (48) hours
prior notice of any Aurum Board meeting at which it is reasonably expected to
contemplate a Alternative Proposal and (ii) not recommend to its stockholders a
Aurum Alternative Proposal for a period of not less than 5 business days after
Baan's receipt of a copy of such Aurum Alternative Proposal (or a description of
the significant terms and conditions thereof, if not in writing); and provided
further, that nothing contained in this Section shall limit Aurum's obligation
to hold and convene the Aurum Stockholders' Meeting (regardless of whether the
recommendation of the Board of Directors of Aurum shall have been withdrawn,
modified or not yet made) or to provide the Aurum stockholders with material
information relating to such meeting.
(c) Notwithstanding anything to the contrary in this Section 5.4, Aurum
will not provide any non-public information to a third party unless: (i) Aurum
provides such non-public information pursuant to a nondisclosure agreement with
terms regarding the protection of confidential information at least as
restrictive as such terms in the Confidentiality Agreement; (ii) such non-public
information has been previously delivered to Baan and (iii) Aurum advises Baan
in writing of such disclosure, including the party to whom disclosed.
5.5 Public Disclosure. Baan and Aurum will consult with each other, and to
the extent practicable, agree, before issuing any press release or otherwise
making any public statement with respect to the Merger, this Agreement or an
Acquisition Proposal and will not issue any such press release or make any such
public statement prior to such consultation, except as may be required by law or
any listing agreement with a national
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securities exchange or association or the rules and regulations of the Amsterdam
Exchanges N.V. The parties have agreed to the text of the joint press release
announcing the signing of this Agreement.
5.6 Legal Requirements. Each of Baan, Merger Sub and Aurum will take all
reasonable actions necessary or desirable to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of
the transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals by or filings with any
Governmental Entity, and prompt resolution of any litigation prompted hereby)
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such filings with or investigations by any
Governmental Entity, and any other such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement. Baan will use all reasonable
efforts to take such steps as may be necessary to comply with the securities and
blue sky laws of all jurisdictions which are applicable to the issuance of Baan
Common Shares pursuant hereto. Aurum will use its commercially reasonable
efforts to assist Baan as may be necessary to comply with the securities and
blue sky laws of all jurisdictions which are applicable in connection with the
issuance of Baan Common Shares pursuant hereto.
5.7 Third Party Consents. As soon as practicable following the date
hereof, Baan and Aurum will each use its commercially reasonable efforts to
obtain all material consents, waivers and approvals under any of its or its
subsidiaries' agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby.
5.8 Notification of Certain Matters. Baan and Merger Sub will give prompt
notice to Aurum, and Aurum will give prompt notice to Baan, of the occurrence,
or failure to occur, of any event, which occurrence or failure to occur would be
reasonably likely to cause (a) any representation or warranty contained in this
Agreement and made by it to be untrue or inaccurate in any material respect at
any time from the date of this Agreement to the Effective Time such that the
conditions set forth in Section 6.2(a) or 6.3(a), as the case may be, would not
be satisfied as a result thereof or (b) any material failure of Baan and Merger
Sub or Aurum, as the case may be, or of any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement. Notwithstanding the
above, the delivery of any notice pursuant to this section will not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
5.9 Best Efforts and Further Assurances. Subject to the respective rights
and obligations of Baan and Aurum under this Agreement, each of the parties to
this Agreement will use its reasonable best efforts to effectuate the Merger and
the other transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement; provided that neither
Baan nor Aurum nor any subsidiary or affiliate thereof will be required to agree
to any divestiture by itself or any of its affiliates of shares of capital stock
or of any business, assets or property, or the imposition of any material
limitation on the ability of any of them to conduct their businesses or to own
or exercise control of such assets, properties and stock. Subject to the
foregoing, each party hereto, at the reasonable request of another party hereto,
will execute and deliver such other instruments and do and perform such other
acts and things as may be necessary or desirable for effecting completely the
consummation of the transactions contemplated hereby.
5.10 Stock Options and Employee Stock Purchase Plan.
(a) At the Effective Time, each outstanding option to purchase shares of
Aurum Common Stock (each a "AURUM STOCK OPTION") under the Aurum Stock Option
Plans, whether or not exercisable, will be assumed or substituted in a manner
consistent with applicable laws by Baan. Each Aurum Stock Option so assumed or
substituted in a manner consistent with the applicable laws by Baan under this
Agreement will continue to have, and be subject to, the same terms and
conditions set forth in the applicable Aurum Stock Option Plan immediately prior
to the Effective Time (including, without limitation, any repurchase rights),
except that (i) each Aurum Stock Option will be exercisable (or will become
exercisable in accordance with its terms) for that number of whole shares of
Baan Common Shares equal to the product of the number of shares of Aurum Common
Stock that were issuable upon exercise of such Aurum Stock Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, rounded to the
nearest whole number of Baan Common Shares and (ii) the per share exercise price
for the Baan Common Shares issuable upon exercise of
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such assumed Aurum Stock Option will be equal to the quotient determined
by dividing the exercise price per share of Aurum Common Stock at which such
Aurum Stock Option was exercisable immediately prior to the Effective Time by
the Exchange Ratio, rounded up to the nearest whole cent. As soon as reasonably
practicable, after the Effective Time, Baan will issue to each holder of an
outstanding Aurum Stock Option a notice describing the foregoing assumption of
such Aurum Stock Option by Baan.
(b) It is intended that Aurum Stock Options assumed by Baan shall
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Code to the extent Aurum Stock Options qualified as incentive
stock options immediately prior to the Effective Time and the provisions of this
Section 5.10 shall be applied consistent with such intent.
(c) Baan will reserve a sufficient number of Baan Common Shares for
issuance under Section 5.10(a) and under Section 1.6(c) hereof.
(d) Subject to the foregoing provisions requiring Baan to assume each
outstanding Aurum Stock Option, it is understood and agreed that Baan shall not
be required to assume any Stock Option Plan if impracticable or legally
impossible for Baan to do so under the laws of the Netherlands.
5.11 Form S-8. Baan agrees to file a registration statement on Form S-8
for the Baan Common Shares issuable with respect to assumed Aurum Stock Options
promptly after the Closing Date and no later than five days after the Closing
Date.
5.12 Indemnification.
(a) From and after the Effective Time, Baan shall cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Aurum
pursuant to any indemnification agreements between Aurum and its directors and
officers existing prior to the date hereof whether or not such persons continue
in their position with the Surviving Corporation following the Effective Time.
The Certificate of Incorporation and By-laws of the Surviving Corporation will
contain provisions providing for indemnification and the limitation of liability
which are substantially equivalent to those set forth in Aurum's Certificate of
Incorporation and By-laws, which provisions will not be amended, repealed or
otherwise modified from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who, immediately prior to the
Effective Time, were directors, officers, employees or agents of Aurum, unless
such modification is required by law.
(b) After the Effective Time, the Surviving Corporation will to the
fullest extent permitted under applicable law, indemnify and hold harmless, each
present and former director or officer of Aurum or any Aurum subsidiary
(collectively, the "INDEMNIFIED PARTIES") against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal administrative or
investigative, to the extent arising out of or pertaining to any action or
omission in his or her capacity as a director or officer of Aurum or any Aurum
subsidiary arising out of or pertaining to the transactions contemplated by this
Agreement for a period of six years after the date hereof. In the event of any
such claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (a) any counsel retained for the defense of the
Indemnified Parties for any period after the Effective Time will be reasonably
satisfactory to the Indemnified Parties, (b) after the Effective Time, the
Surviving Corporation will pay the reasonable fees and expenses of such counsel
promptly after statements therefor are received, and (c) the Surviving
Corporation will cooperate in the defense of any such matter; provided, however,
that the Surviving Corporation will not be liable for any settlement effected
without its written consent (which consent will not be unreasonably withheld);
and provided, further, that, in the event that any claim or claims for
indemnification are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims will continue until the
disposition of any and all such claims. The Indemnified Parties as a group may
be defended by only one law firm (in addition to local counsel) with respect to
any single action unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two or
more Indemnified Parties.
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(c) Baan will or will cause the Surviving Corporation to maintain in
effect directors' and officers' liability insurance covering those persons who
are currently covered by Aurum's directors' and officers' liability insurance
policy, to the extent and in such amounts that Baan provides such coverage to
its directors and officers.
(d) The Surviving Corporation shall pay all expenses, including
attorneys' fees, that may be incurred by any Indemnified Parties in enforcing
the indemnity and other obligations provided for in this Section 5.12.
(e) This Section 5.12 will survive any termination of this Agreement and
the consummation of the Merger at the Effective Time, is intended to benefit
Aurum, the Surviving Corporation and the indemnified parties, and will be
binding on all successors and assigns of the Surviving Corporation.
5.13 NMS and Amsterdam Exchanges Listing. Baan agrees to authorize for
listing on the Nasdaq National Market and the Official Market of the Amsterdam
Exchanges N.V. the Baan Common Shares issuable, and those required to be
reserved for issuance, in connection with the Merger, upon official notice of
issuance.
5.14 Aurum Affiliate Agreement. Set forth on the Aurum Schedules is a list
of those persons who may be deemed to be, in Aurum's reasonable judgment,
affiliates of Aurum within the meaning of Rule 145 promulgated under the
Securities Act (each a "AURUM AFFILIATE"). Aurum will provide Baan with such
information and documents as Baan reasonably requests for purposes of reviewing
such list. Aurum will use its reasonable best efforts to deliver or cause to be
delivered to Baan, as promptly as practicable on or following the date hereof,
from each Aurum Affiliate an executed affiliate agreement in substantially the
form attached hereto as Exhibit C (the "AURUM AFFILIATE AGREEMENT"), each of
which will be in full force and effect as of the Effective Time. Baan will be
entitled to place appropriate legends on the certificates evidencing any Baan
Common Shares to be received by a Aurum Affiliate pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for the Baan Common Shares, consistent with the terms of the Aurum
Affiliate Agreement.
5.15 Regulatory Filings; Reasonable Efforts. As soon as may be reasonably
practicable, Aurum and Baan each shall file with the United States Federal Trade
Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") Notification and Report Forms relating to the
transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties. Aurum and Baan each shall promptly (a) supply the other with any
information which may be required in order to effectuate such filings and (b)
supply any additional information which reasonably may be required by the FTC,
the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties may reasonably deem appropriate.
5.16 Tax-Free Reorganization. No party shall take any action either prior
to or after the Effective Time that could reasonably be expected to cause the
merger to fail to qualify as a "reorganization" under Section 368(a) of the
Code.
5.17 Aurum Rights Plan. Prior to the Effective Time, without the prior
written consent of Baan, Aurum shall not adopt a shareholders rights plan.
5.18 Comfort Letter. Coopers & Lybrand L.L.P., certified public
accountants to Aurum, shall provide a letter reasonably acceptable to Baan,
relating to their review of the financial statements relating to Aurum contained
in or incorporated by reference in the Registration Statement.
5.19 Employee Benefit Schedules.
(a) On or before May 31, 1997, Aurum will provide to Baan, for inclusion
in the Aurum Schedules, an accurate and complete list of each Aurum Employee
Plan (as defined in Section 2.13) and any other plan, program, policy, practice,
contract, or agreement in effect as of the date of this Agreement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits of any kind,
whether formal or informal, written or otherwise, funded or unfunded
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and whether or not legally binding, which is being maintained or contributed to
by Aurum or any ERISA Affiliate (or which has been maintained or contributed to
and under which Aurum has, as of the date of this Agreement, material
obligations under) for the benefit of any current, former, or retired employee,
officer, or director of Aurum or any ERISA Affiliate.
(b) On or before May 31, 1997, Aurum will provide to Baan, for inclusion
in the Aurum Schedules, (i) correct and complete copies of all documents
embodying each Aurum Employee Plan including all amendments thereto; (ii) the
most recent annual actuarial valuations, if any, prepared for each Aurum
Employee Plan; (iii) the three most recent annual reports (Series 5500 and all
schedules thereto), if any, required under ERISA or the Code in connection with
each Aurum Employee Plan or related trust; (iv) if the Aurum Employee Plan is
funded, the most recent annual and periodic accounting of Aurum Employee Plan
assets; (v) the most recent summary plan description together with the most
recent summary of material modifications, if any, required under ERISA with
respect to each Aurum Employee Plan; (vi) all IRS determination letters and
rulings issued to Aurum relating to Aurum Employee Plans; (vii) all material
agreements and contracts relating to each Aurum Employee Plan, including but not
limited to, administration service agreements, group annuity contracts and group
insurance contracts; (viii) all material communications from Aurum to any
Employees relating to any amendments, terminations, establishments, increases or
decreases in benefits, acceleration of payments or vesting schedules or other
events with respect to any Aurum Employee Plan which would result in any
material liability to Aurum; and (ix) all registration statements and the most
recent prospectuses prepared in connection with each Aurum Employee Plan.
5.20 Employee Matters. Prior to the Effective Time, Baan and Aurum shall
mutually agree upon an integration plan relating to the Merger which shall
include, among other things, provisions relating to compensation, other equity
incentive and severance for employees of Aurum. The Surviving Corporation will
not substitute any employee's health, life or disability insurance coverage
without first obtaining a waiver by the substitute carrier of any preexisting
condition that such employee may have (but only to the extent that such
condition was not a preexisting condition under the previous health care, life
or disability coverage, as applicable).
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Aurum Stockholder Approval. This Agreement shall have been approved
and adopted, and the Merger shall have been duly approved, by the requisite vote
under applicable law, by the stockholders of Aurum.
(b) Registration Statement Effective; Proxy Statement. The SEC shall
have declared the Registration Statement effective. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose, and no similar proceeding in respect
of the Proxy Statement, shall have been initiated or threatened in writing by
the SEC.
(c) No Order; HSR Act. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby will have expired or terminated early.
(d) Tax Opinions. Baan and Aurum shall each have received written
opinions from their respective counsel, Wilson Sonsini Goodrich & Rosati,
Professional Corporation, and Fenwick & West LLP, in form and substance
reasonably satisfactory to them, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and such
opinions shall not have been
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withdrawn; provided, however, that if the counsel to either Baan or Aurum does
not render such opinion, this condition shall nonetheless be deemed to be
satisfied with respect to such party if counsel to the other party renders such
opinion to such party. The parties to this Agreement agree to make reasonable
representations as requested by such counsel for the purpose of rendering such
opinions.
(e) NMS Listing. The Baan Common Shares issuable to stockholders of
Aurum pursuant to this Agreement and such other shares required to be reserved
for issuance in connection with the Merger shall have been authorized for
listing on the Nasdaq National Market upon official notice of issuance.
6.2 Additional Conditions to Obligations of Aurum. The obligation of Aurum
to consummate and effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Aurum:
(a) Representations and Warranties. The representations and warranties
of Baan and Merger Sub contained in this Agreement shall be true and correct in
all material respects as of the date of this Agreement. In addition, the
representations and warranties of Baan and Merger Sub contained in this
Agreement shall be true and correct in all material respects on and as of the
Effective Time except for changes contemplated by this Agreement and except for
those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such particular
date), with the same force and effect as if made on and as of the Effective
Time, except in such cases (other than the representation in Section 3.2) where
the failure to be so true and correct would not have a Material Adverse Effect
on Baan. Aurum shall have received a certificate with respect to the foregoing
signed on behalf of Baan by an authorized officer of Baan;
(b) Agreements and Covenants. Baan and Merger Sub shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by them on or prior to the
Effective Time, and Aurum shall have received a certificate to such effect
signed on behalf of Baan by an authorized officer of Baan; and
(c) Material Adverse Effect. No Material Adverse Effect with respect to
Baan shall have occurred since the date of this Agreement.
6.3 Additional Conditions to the Obligations of Baan and Merger Sub. The
obligations of Baan and Merger Sub to consummate and effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, exclusively by
Baan:
(a) Representations and Warranties. The representations and warranties
of Aurum contained in this Agreement shall have been true and correct in all
material respects as of the date of this Agreement. The representations and
warranties of Aurum hereunder shall be deemed not to be true and correct in all
material respects on the date of this Agreement only if the aggregate amount of
losses or damages reasonably related to, arising out of or expected to arise out
of any breach of such representations and warranties are reasonably expected to
exceed $5,000,000 (it being understood that any losses or damages as a result of
the adverse or potentially adverse impact of the transactions contemplated
hereby on the relationship between Aurum and Beologics, or any uncertainties
created with Beologics as a result of the transactions contemplated hereby,
including without limitation any resultant writeoffs, shall not be measured
against such $5,000,000 threshold). In addition, the representations and
warranties of Aurum contained in this Agreement shall be true and correct in all
material respects on and as of the Effective Time except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such particular date), with the same force and
effect as if made on and as of the Effective Time, except in such cases (other
than the representations in Sections 2.2, 2.3 and 2.20) where the failure to be
so true and correct would not have a Material Adverse Effect on Aurum. Baan
shall have received a certificate with respect to the foregoing signed on behalf
of Aurum by the Chief Executive Officer and the Chief Financial Officer of
Aurum;
(b) Agreements and Covenants. Aurum shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or
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prior to the Effective Time, and the Baan shall have received a
certificate to such effect signed on behalf of Aurum by the President and the
Chief Financial Officer of Aurum; and (c) Material Adverse Effect. No Material
Adverse Effect with respect to Aurum shall have occurred since the date of this
Agreement.
(d) Employment and Noncompetition Agreements. Employment and
Noncompetition Agreements substantially in the forms attached hereto as Exhibit
D-1 and D-2 shall have been entered into by the individuals set forth on Exhibit
I thereto and such agreements shall be in full force and effect.
(e) Opinion of Accountants. Each of Baan and Aurum shall have received
letters from each of Moret Ernst & Young and Coopers & Lybrand L.L.P., each
dated within two (2) business days prior to the Effective Time, regarding those
firms' concurrence with Baan's managements' and Aurum's managements' conclusions
as to the appropriateness of pooling of interest accounting for the Merger under
Accounting Principles Board Opinion No. 16, if the Merger is consummated in
accordance with this Agreement.
(f) Consents. Aurum shall have obtained all material consents, waivers
and approvals required in connection with the consummation of the transactions
contemplated hereby under the agreements, contracts, licenses or leases set
forth on Schedule 6.3(f).
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of the Merger by
the stockholders of Aurum:
(a) by mutual written consent duly authorized by the Boards of Directors
of Baan and Aurum;
(b) by either Aurum or Baan if the Merger shall not have been
consummated by October 14, 1997 for any reason; provided, however, that (i) if
the failure of the Merger to occur prior to such date shall have resulted solely
from the failure to obtain any necessary governmental approval, clearance or
consent (including termination or waiver of all HSR waiting periods and
clearance of the Registration Statement by the SEC) such date for termination
shall be automatically extended to the date upon which such governmental
approval, clearance or consent is obtained (but not beyond December 13, 1997)
and (ii) the right to terminate this Agreement under this Section 7.1(b) shall
not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Merger to occur on or
before such date and such action or failure to act constitutes a breach of this
Agreement;
(c) by either Aurum or Baan if a Governmental Entity shall have issued
an order, decree or ruling or taken any other action (an "ORDER"), in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which order, decree or ruling is final and nonappealable;
(d) by either Aurum or Baan if the required approval of the stockholders
of Aurum contemplated by this Agreement shall not have been obtained by reason
of the failure to obtain the required vote at a meeting of Aurum stockholders
duly convened therefor or at any adjournment thereof (provided that the right to
terminate this Agreement under this Section 7.1(d) shall not be available to
Aurum where the failure to obtain Aurum stockholder approval shall have been
caused by the action or failure to act of Aurum in breach of this Agreement);
(e) by Baan, if the Board of Directors of Aurum accepts or recommends a
Aurum Alternative Proposal to the stockholders of Aurum, or if the Board of
Directors of Aurum shall have withheld, withdrawn or modified in a manner
adverse to Baan its recommendation in favor of adoption and approval of this
Agreement and approval of the Merger;
(f) by Aurum, upon a breach of any representation, warranty, covenant or
agreement on the part of Baan set forth in this Agreement, or if any
representation or warranty of Baan shall have become untrue, in either case such
that the conditions set forth in Section 6.2(a) or Section 6.2(b) would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, provided
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that if such inaccuracy in Baan's representations and warranties or
breach by Baan is curable by Baan through the exercise of its commercially
reasonable efforts, then Aurum may only terminate this Agreement under this
Section 7.1(f) if the breach is not cured within ten (10) days following the
date of written notice from Aurum of such breach, provided that Baan continues
to exercise such commercially reasonable efforts to cure such breach; or
(g) by Baan, upon a breach of any representation, warranty, covenant or
agreement on the part of Aurum set forth in this Agreement, or if any
representation or warranty of Aurum shall have become untrue, in either case
such that the conditions set forth in Section 6.3(a) or Section 6.3(b) would not
be satisfied as of the time of such breach or as of the time such representation
or warranty shall have become untrue, provided, that if such inaccuracy in
Aurum's representations and warranties or breach by Aurum is curable by Aurum
through the exercise of its commercially reasonable efforts, then Baan may only
terminate this Agreement under this Section 7.1(g) if the breach is not cured
within ten (10) days the date of written notice from Baan of such breach,
provided that Aurum continues to exercise such commercially reasonable efforts
to cure such breach.
7.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 7.2, Section 7.3 and Article 8 (miscellaneous), each of which
shall survive the termination of this Agreement, and (ii) nothing herein shall
relieve any party from liability for any breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement or the Stock Option Agreement, all of
which obligations shall survive termination of this Agreement in accordance with
their terms. A party seeking to terminate this Agreement based on a Material
Adverse Effect on the other party shall have the burden of proof to demonstrate
all elements of the Material Adverse Effect, on the terms set forth herein,
shall have occurred.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that Baan and Aurum shall
share equally all fees and expenses, other than attorneys' and accountants fees
and expenses, incurred in relation to the printing and filing of the Proxy
Statement (including any preliminary materials related thereto) and the
Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
(b) Aurum Payments. In the event that this Agreement is terminated
pursuant to either Section 7.1(d), 7.1(e) or 7.1(g), Aurum shall immediately pay
to Baan (by wire transfer or cashier's check) the sum of $2,500,000; provided
that such payment shall not be due if (i) in the case of termination under
Section 7.1(d), the failure to obtain the required stockholder approval is
primarily the result of a Material Adverse Effect on Baan or (ii) in the case of
termination under Section 7.1(e), Aurum accepts or recommends a Aurum
Alternative Proposal, or the Board of Directors of Aurum withholds, withdraws or
modifies its recommendation in favor of adoption and approval of this Agreement
and approval of the Merger, primarily as a result of a Material Adverse Effect
on Baan.
7.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of the parties hereto.
7.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
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such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
and warranties of Aurum, Baan and Merger Sub contained in this Agreement shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing, shall be effective when received, and shall in any event be deemed to
have been received (i) when delivered, if delivered personally or by commercial
delivery service, (ii) five (5) business days after deposit with U.S. Mail, if
mailed by registered or certified mail (return receipt requested), (iii) one (1)
business day after the business day of deposit in the United States with Federal
Express or similar overnight courier, for next day delivery (or, two (2)
business days after such deposit if deposited for second business day delivery),
if delivered by such means, or (iv) one (1) business day after delivery by
facsimile transmission with copy by U.S. Mail, if sent via facsimile plus mail
copy (with acknowledgment of complete transmission), to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) Baan Company N.V.
Zonneoordlaan 17
P.O. Box 250
6710 BG Ede
THE NETHERLANDS
Attention: General Counsel and Secretary of the Board
Telephone No.: 31-318-696606
Facsimile No.: 31-318-651751
with a copy to:
Amal Johnson
Baan U.S.A. Inc.
4600 Bohannon Drive
Suite 105
Menlo Park, CA 94025
and a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Mark Bertelsen, Esq.
Howard Zeprun, Esq.
Telephone No.: (415) 493-9300
Telecopy No.: (415) 493-6811
(a) if to Aurum to:
Aurum Software, Inc.
3385 Scott Boulevard
Santa Clara, California 95054-3115
Attention: Mary E. Coleman
Telephone No.: (408) 986-8100
Telecopy No.: (408) 654-3400
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with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94305
Attention: Jacqueline Daunt, Esq.
Telephone No.: (415) 494-0600
Telecopy No.: (415) 494-1417
8.3 Interpretation; Knowledge.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
The words "INCLUDE," "INCLUDES" and "INCLUDING" when used herein shall be deemed
in each case to be followed by the words "without limitation." The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. When reference is made herein to "the business of" an entity, such
reference shall be deemed to include the business of all direct and indirect
subsidiaries of such entity. Reference to the subsidiaries of an entity shall be
deemed to include all direct and indirect subsidiaries of such entity.
(b) As it relates to Aurum, the term "KNOWLEDGE" means, with respect to
any matter in question, that any of the Chief Executive Officer, Chief Financial
Officer, Controller or Chief Technology Officer, as have actual knowledge of
such matter; and (b) as it relates to Baan, the term "KNOWLEDGE" means, with
respect to any matter in question that any of the Chief Executive Officer, Chief
Financial Officer, General Counsel, Staff Counsel, Executive Vice President or
any manager who in the ordinary course of his duties, have knowledge of a
specific matter.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including Aurum Schedules (a) constitute
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, it being understood
that the Confidentiality Agreement shall continue in full force and effect until
the Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically provided in Sections 1.6(c), 5.10, 5.11, 5.12 and 5.13.
8.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and
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provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof;
provided that issues involving the corporate governance of any of the parties
hereto shall be governed by their respective jurisdictions of incorporation.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any state or federal court within the Northern District of California, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, other than issues involving the corporate
governance of any of the parties hereto, agrees that process may be served upon
them in any manner authorized by the laws of the State of California for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction and such process.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the of the other party. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
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8.11 WAIVER OF JURY TRIAL. EACH OF BAAN, AURUM AND MERGER SUB HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF BAAN, AURUM OR MERGER SUB IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
*****
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
BAAN COMPANY N.V.
By: /s/ AMAL M. JOHNSON
------------------------------------
Name: Amal M. Johnson
Title: Executive Vice President,
Baan Affiliates and Marketing
GREEN SOFTWARE ACQUISITION
CORPORATION
By: /s/ SUSANNE HEREFORD
------------------------------------
Name: Susanne Hereford
Title: Secretary
AURUM SOFTWARE, INC.
By: /s/ MARY COLEMAN
------------------------------------
Name: Mary Coleman
Title: President and Chief Executive
Officer
**** REORGANIZATION AGREEMENT ****
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APPENDIX B
(LOGO)
May 12, 1997
Board of Directors
Aurum Software, Inc.
3385 Scott Blvd.
Santa Clara, CA 95054
Ladies and Gentlemen:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the holders of the outstanding shares of
Common Stock, $0.001 par value, of Aurum Software, Inc. (the "Company"), of the
terms of the Transaction (as hereinafter defined) with Baan Company N.V.
("Baan"). For the purposes of this opinion, the "Transaction" means the
transaction described below pursuant the Reorganization Agreement among the
Company and Baan dated May 12, 1997 (the "Agreement").
As more specifically set forth in the Agreement, and subject to certain
terms and conditions thereof, the Company has agreed to be acquired through a
Reorganization of the Company with and into Baan (the "Reorganization"). In the
Reorganization:
(i) each then outstanding share of Aurum Common Stock, together with its
related common stock purchase right, will be converted into 0.3559
shares of common stock, NLG.02 par value, of Baan ("Baan Common
Stock");
(ii) if the per share stock price of Baan falls between $50.00 to and
including $40.00 the exchange ratio will adjust to effect a per share
value of Aurum of $17.80;
(iii) if the stock price of Baan falls below $40.00 then the exchange ratio
will remain fixed at 0.4449.
Consummation of the Reorganization on the foregoing terms will be subject
to the approval of the holders of shares of Company Common Stock.
In the ordinary course of its services, Cowen & Company ("Cowen") is
regularly engaged in the valuation and pricing of businesses and their
securities and in advising corporate securities issuers on related matters.
In arriving at our opinion, Cowen has, among other things:
(1) reviewed Aurum's financial statements for the fiscal years ended
December 31, 1995 and December 31, 1996, the financial statements for
the three month periods ended March 31, 1996 and March 31, 1997 and
certain publicly available filings with the Securities and Exchange
Commission;
(2) reviewed Baan's financial statements for the fiscal years ended
December 31, 1995 and December 31, 1996, the financial statements for
the three month periods ended March 31, 1996 and March 31, 1997 and
certain publicly available filings with the Securities and Exchange
Commission;
(3) reviewed a summary of the terms of the draft Agreement;
(4) held meetings and discussions with management and senior personnel of
the Company to discuss the business, operations, historical financial
results and future prospects of Aurum, and the combined company;
(5) conducted a conference call with senior management of Baan to discuss
the financial prospects of Baan;
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(6) reviewed First Call consensus earnings per share estimates of
financial institutions for Aurum and Baan; reviewed Cowen financial
projections of Aurum and Baan, including, among other things, sales,
net income, cash flow, and other data that we deemed relevant;
(7) analyzed the potential pro forma financial effects of the transaction
contemplated by the Agreement;
(8) reviewed the valuation of Aurum and Baan in comparison to other
similar publicly traded companies;
(9) compared the acquisition contemplated by the Agreement with the recent
acquisitions of other software companies, including a comparison of
the premiums paid in the acquisition contemplated by the Agreement
with the premiums paid in those similar transactions;
(10) reviewed the premiums implied by the Agreement in comparison with
premiums paid in other recent acquisitions of public software
companies;
(11) analyzed the financial projections of Aurum for the cash flows
generated by Aurum on a stand-alone basis to determine the present
value of the discounted cash flows;
(12) reviewed the historical prices and trading activity of the stock of
Aurum from October 29, 1996 to the date hereof and compared those
trading histories with those of other companies which we deemed
relevant;
(13) reviewed the historical trading ratios of Aurum and Baan stock and
compared it to the exchange ratios implied by the Agreement;
(14) conducted such other studies, analysis, inquiries and investigations
as we deemed appropriate.
Cowen was not requested to, and did not, solicit third party indications of
interest in acquiring all or substantially all of the stock or assets of the
Company.
On May 9th 1997, the closing price of the common stock of the Company in
the last transaction reported by NASDAQ was $16.50 per share.
In rendering our opinion, we relied upon the Company's management with
respect to the accuracy and completeness of the financial and other information
furnished to us as described above. With respect to all legal matters relating
to the Company, Baan and the Transaction, we have relied on the advice of legal
counsel to the Company. We have not assumed any responsibility for independent
verification of such information, including financial information, nor have we
made an independent evaluation or appraisal of any of the properties or assets
of the Company.
We have acted as financial advisor to the Board of Directors of the Company
in connection with the transaction contemplated by the Agreement and will
receive a fee for our services. In the past, Cowen and its affiliates have
provided financial advisory and financing services for the Company and have
received fees for the rendering of these services. In addition, in the ordinary
course of its business, Cowen trades the debt and equity securities of the
Company for its own account and for the accounts of its customers, and,
accordingly, it may at any time hold a long or short position in such
securities.
On the basis of our review and analysis, as described above, it is our
opinion as investment bankers that, as of the date hereof, the financial terms
of the Transaction are fair, from a financial point of view, to the stockholders
of the Company.
Very truly yours,
Cowen & Company
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APPENDIX C
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT dated as of May 13, 1997 (the "AGREEMENT") is
entered into by and between Aurum Software, Inc., a Delaware corporation
("TARGET"), and Baan Company N.V., a corporation incorporated in the Netherlands
("ACQUIROR"). Capitalized terms used in this Agreement but not defined herein
shall have the meanings ascribed thereto in the Merger Agreement (as defined
below).
RECITALS
WHEREAS, concurrently with the execution and delivery of this Agreement,
Target, Acquiror and Green Software Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of Acquiror ("Sub"), are entering into an
Agreement and Plan of Reorganization (the "MERGER AGREEMENT"), which provides
that, among other things, upon the terms and subject to the conditions thereof,
Target, Acquiror and Sub will enter into a business combination transaction (the
"MERGER"); and
WHEREAS, as a condition to Acquiror's willingness to enter into the Merger
Agreement, Acquiror has requested that Target agree, and Target has so agreed,
to grant to Acquiror an option to acquire shares of Target's Common Stock,
$0.001 par value, upon the terms and subject to the conditions set forth herein;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. Grant of Option
Target hereby grants to Acquiror an irrevocable option (the "OPTION") to
acquire up to a number of shares of the Common Stock, $0.001 par value, of
Target ("TARGET SHARES") equal to 19.9% of the issued and outstanding shares as
of the first date, if any, upon which an Exercise Event (as defined in Section
2(a) below) shall occur (the "OPTION SHARES"), in the manner set forth below (i)
by paying cash at a price of $21.00 per share (the "EXERCISE PRICE") and/or, at
Acquiror's election, (ii) by exchanging therefor shares of the Common Stock,
0.01 par value, of Acquiror ("ACQUIROR SHARES") at a rate (the "EXERCISE
RATIO"), for each Option Share, of a number of Acquiror Shares equal to the
Exercise Price divided by the average closing sale prices during the previous 30
trading days of Acquiror Shares on the Nasdaq National Market immediately
preceding the date of the Closing (as defined below) of the particular Option
exercise.
2. Exercise of Option; Maximum Proceeds
(a) For all purposes of this Agreement, an "EXERCISE EVENT" shall have
occurred upon the occurrence of both: (i) the individuals or entities entering
into Voting Agreements and providing the related proxies on the date hereof
having ceased to own, in the aggregate, at least a majority of the capital stock
of the Target or (ii) any of such Voting Agreements or the related proxies
having been declared invalid or unenforceable and (x) the earlier of the
consummation of, or the record date, if any, for a meeting of Target's
stockholders with regard to an Acquisition Proposal with respect to Target with
any party other than Acquiror (or an affiliate of Acquiror) if the Board of
Directors of Target shall have withheld, withdrawn, or modified in a manner
adverse to Acquiror its recommendation in favor of adoption and approval of the
Merger Agreement and approval of the Merger (and at that time there shall not
have occurred a Material Adverse Effect on Acquiror) after receipt of and in
connection with an Acquisition Proposal with respect to Target, (y) the
commencement of a tender or exchange offer for 20% or more of any class of
Target's capital stock (and/or during any time which such a tender or exchange
offer remains open or has been consummated), or (z) pursuant to a Termination
under Section 7.1(e) or (g) of the Merger Agreement.
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(b) Acquiror may deliver to Target a written notice (an "EXERCISE NOTICE")
specifying that it wishes to exercise and close a purchase of Option Shares at
any time within 30 days following the occurrence of an Exercise Event,
specifying the total number of Option Shares it wishes to acquire. Each closing
of a purchase of Option Shares (a "Closing") shall occur on the date and at a
time designated by the Acquiror in an Exercise Notice delivered at least five
(5) business days prior to the date of such Closing, which Closing shall be held
at the offices of counsel to Acquiror upon the occurrence of an Exercise Event
prior to the termination of the Option as may be designated by Acquiror in
writing. In the event that no Exercise Event shall occur prior to termination of
the Option, such Exercise Notice shall be void and of no further force and
effect.
(c) The Option shall terminate upon the earlier of (i) the Effective Time
and (ii) 12 months following the termination of the Merger Agreement pursuant to
Article VII thereof if an Exercise Event shall have occurred on or prior to the
date of such termination, and (iii) the date on which the Merger Agreement is
terminated pursuant to Article VII thereof if no Exercise Event shall have
occurred on or prior to such date; provided, however,that if the Option is
exercisable but cannot be exercised by reason of any applicable government order
or because the waiting period related to the issuance of the Option Shares under
the HSR Act shall not have expired or been terminated, then the Option shall not
terminate until the tenth business day after such impediment to exercise shall
have been removed or shall have become final and not subject to appeal.
Notwithstanding the foregoing, the Option may not be exercised if (i) Acquiror
shall have breached in any material respect any of its covenants or agreements
contained in the Merger Agreement or (ii) the representations and warranties of
Acquiror contained in the Merger Agreement shall not have been true and correct
in all material respects on and as of the date when made.
3. Conditions to Closing
The obligation of Target to issue Option Shares to Acquiror hereunder is
subject to the conditions that (a) any waiting period under the HSR Act
applicable to the issuance of the Option Shares hereunder shall have expired or
been terminated; (b) all material consents, approvals, orders or authorizations
of, or registrations, declarations or filings with, any Federal, state or local
administrative agency or commission or other Federal state or local governmental
authority or instrumentality, if any, required in connection with the issuance
of the Option Shares hereunder shall have been obtained or made, as the case may
be; and (c) no preliminary or permanent injunction or other order by any court
of competent jurisdiction prohibiting or otherwise restraining such issuance
shall be in effect. It is understood and agreed that at any time during which
Acquiror shall be entitled to deliver to Target an Exercise Notice, the parties
will use their respective best efforts to satisfy all conditions to Closing, so
that a Closing may take place as promptly as practicable, and in any event, upon
the occurrence of an Exercise Event.
4. Closing
At any Closing, (a) Target shall deliver to Acquiror a single certificate
in definitive form representing the number of Target Shares designated by
Acquiror in its Exercise Notice, such certificate to be registered in the name
of Acquiror and to bear the legend set forth in Section 10 hereof, against
delivery of (b) payment by Acquiror to Target of the aggregate purchase price
for the Target Shares so designated and being purchased by delivery of (i) a
certified check or bank check and/or, at Acquiror's election, (ii) a single
certificate in definitive form representing the number of Acquiror Shares being
issued by Acquiror in consideration therefor (based on the Exercise Ratio), such
certificate to be registered in the name of Target and to bear the legend set
forth in Section 10 hereof.
5. Representations and Warranties of Target
Target represents and warrants to Acquiror that (a) Target is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder; (b) the execution and
delivery of this Agreement by Target and consummation by Target of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Target and no other corporate proceedings on the
part of Target are necessary to authorize this Agreement or any of the
transactions
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contemplated hereby; (c) this Agreement has been duly executed and delivered by
Target and constitutes a legal, valid and binding obligation of Target and,
assuming this Agreement constitutes a legal, valid and binding obligation of
Acquiror, is enforceable against Target in accordance with its terms, except as
enforceability may be limited by bankruptcy and other laws affecting the rights
and remedies of creditors generally and general principles of equity; (d) except
for any filings required under the HSR Act, Target has taken all necessary
corporate and other action to authorize and reserve for issuance and to permit
it to issue upon exercise of the Option, and at all times from the date hereof
until the termination of the Option will have reserved for issuance, a
sufficient number of unissued Target Shares for Acquiror to exercise the Option
in full and will take all necessary corporate or other action to authorize and
reserve for issuance all additional Target Shares or other securities which may
be issuable pursuant to Section 9(a) upon exercise of the Option, all of which,
upon their issuance and delivery in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable; (e) upon delivery of the
Target Shares and any other securities to Acquiror upon exercise of the Option,
Acquiror will acquire such Target Shares or other securities free and clear of
all material claims, liens, charges, encumbrances and security interests of any
kind or nature whatsoever, excluding those imposed by Acquiror; (f) the
execution and delivery of this Agreement by Target do not, and the performance
of this Agreement by Target will not, (i) violate the Certificate of
Incorporation or Bylaws of Target, (ii) conflict with or violate any order
applicable to Target or any of its subsidiaries or by which they or any of their
property is bound or affected or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give rise to any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any property or assets of Target or any of its subsidiaries
pursuant to, any contract or agreement to which Target or any of its
subsidiaries is a party or by which Target or any of its subsidiaries or any of
their property is bound or affected, except, in the case of clauses (ii) and
(iii) above, for violations, conflicts, breaches, defaults, rights of
termination, amendment, acceleration or cancellation, liens or encumbrances
which would not, individually or in the aggregate, have a Material Adverse
Effect on Target; and (g) the execution and delivery of this Agreement by Target
does not, and the performance of this Agreement by Target will not, require any
consent, approval, authorization or permit of, or filing with, or notification
to, any Governmental Entity except pursuant to the HSR Act.
6. Representations and Warranties of Acquiror
Acquiror represents and warrants to Target that (a) Acquiror is a
corporation duly incorporated, validly existing and in good standing under the
laws of The Netherlands and has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder; (b) the execution and
delivery of this Agreement by Acquiror and the consummation by Acquiror of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Acquiror and no other corporate proceedings on
the part of Acquiror are necessary to authorize this Agreement or any of the
transactions contemplated hereby; (c) this Agreement has been duly executed and
delivered by Acquiror and constitutes a legal, valid and binding obligation of
Acquiror and, assuming this Agreement constitutes a legal, valid and binding
obligation of Target, is enforceable against Acquiror in accordance with its
terms, except as enforceability may be limited by bankruptcy and other laws
affecting the rights and remedies of creditors generally and general principles
of equity; and (d) except for any filings required under the HSR Act, Acquiror
has taken (or will in a timely manner take) all necessary corporate and other
action in connection with any exercise of the Option; (e) upon delivery of
Acquiror Shares to Target in consideration of any acquisition of Target Shares
pursuant hereto, Target will acquire such Acquiror Shares free and clear of all
material claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever, excluding those imposed by Target; (f) the execution and
delivery of this Agreement by Acquiror do not, and the performance of this
Agreement by Acquiror will not, (i) violate the Articles of Association of
Acquiror, (ii) conflict with or violate any order applicable to Acquiror or any
of its subsidiaries or by which they or any of their property is bound or
affected or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give rise to any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or encumbrance on any of the property or
assets of Acquiror or any of its subsidiaries pursuant to, any contract or
agreement to which
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Acquiror or any of its subsidiaries is a party or by which Acquiror or any of
its subsidiaries or any of their property is bound or affected, except, in the
case of clauses (ii) and (iii) above, for violations, conflicts, breaches,
defaults, rights of termination, amendment, acceleration or cancellation, liens
or encumbrances which would not, individually or in the aggregate, have a
Material Adverse Effect on Acquiror; (g) the execution and delivery of this
Agreement by Acquiror does not, and the performance of this Agreement by
Acquiror will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity except pursuant to the
HSR Act; and (h) any Target Shares acquired upon exercise of the Option will not
be acquired by Acquiror with a view to the public distribution thereof and
Acquiror will not sell or otherwise dispose of such shares in violation of
applicable law or this Agreement.
7. Certain Rights
(a) Acquiror Put. If Acquiror shall have exercised the Option, Acquiror may
thereafter deliver to Target a written notice (a "PUT NOTICE"), at any time
during which Acquiror may exercise the Option, specifying that it wishes to sell
(as specified in such Put Notice) all or a portion of the Option Shares acquired
as a result of such exercise at the price, and in the form, set forth in
paragraph (b) below. At any time after delivery of a Put Notice, unless such Put
Notice is withdrawn by Acquiror, the closing of the Put (the "PUT CLOSING")
shall take place at the principal offices of Target on the date specified in the
Put Notice (which shall be at least 5 days after the date of such Put Notice).
(b) Payment and Redelivery of Cash or Acquiror Shares. At the Put Closing,
(i) Acquiror shall surrender to Target the certificates evidencing the Option
Shares to be purchased by Target at such Put Closing and (ii) Target shall
deliver to Acquiror a proportionate amount of the aggregate consideration paid
by Acquiror in connection with any exercise of the Option. In addition, the
consideration to be paid by Target to Acquiror at any Put Closing shall be in
the form that is proportionate to the form previously paid by Acquiror to
Target. By way of example only, if (x) one third of the aggregate Option Shares
shall have been acquired for cash and two-thirds shall have been acquired for
Acquiror Shares, then (y) the consideration to be paid by Target to Acquiror at
such Put Closing shall consist of one-third cash and two-thirds Acquiror Shares.
Any cash payment required to be made by Target to Acquiror shall be paid a
certified check or bank check. In connection with any Acquiror Shares returned
to Acquiror at a Put Closing, Target shall represent and warrant that such
shares are then free and clear of all claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever, other than those imposed by
Acquiror.
(c) Effect of Certain Actions. The amount of Option Shares and Acquiror
Shares delivered or required to be delivered hereunder shall reflect
appropriately the effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into Acquiror
Common Shares or Target Common Stock), reorganization, recapitalization or other
like change with respect to Acquiror Common Shares or Target Common Stock
occurring after the date of Closing and prior to the date of the Put Closing.
(d) Restrictions on Transfer. Until the termination of the Option, Target
shall not sell, transfer or otherwise dispose of any Acquiror Shares acquired by
it pursuant to this Agreement.
8. Registration Rights
(a) Following the termination of the Merger Agreement, Acquiror may by
written notice (a "REGISTRATION NOTICE") to Target request Target to register
under the Securities Act, in accordance with Target's existing Amended and
Restated Registration Rights Agreement, dated August 22, 1995 (the "REGISTRATION
RIGHTS AGREEMENT"), all or any part of the shares acquired by Acquiror pursuant
to this Agreement (the "REGISTRABLE SECURITIES") in order to permit the sale or
other disposition of such shares pursuant to a bona fide firm commitment
underwritten public offering in which the Acquiror and the underwriters shall
effect as wide a distribution of such Registrable Securities as is reasonably
practicable; provided, however, that any such Registration Notice must relate to
a number of shares equal to at least 2% of the outstanding shares of Common
Stock of the Target on a fully diluted basis and that any rights to require
registration hereunder shall terminate with respect to any shares that may be
sold pursuant to Rule 144(k) under the Securities Act.
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(b) The registration rights set forth in this Section 8 are subject to the
condition that Acquiror shall provide Target with such information with respect
to Acquiror's Registrable Securities, the plan for distribution thereof, and
such other information with respect to such Acquiror, in the reasonable judgment
of counsel for Target, is necessary to enable Acquiror to include in a
registration statement all material facts required to be disclosed with respect
to a registration thereunder.
(c) A registration effected under this Section 8 shall be effected at
Target's expense, except for underwriting discounts and commissions and the fees
and expenses of counsel to Acquiror, and Target shall provide to the
underwriters such documentation (including certificates, opinions of counsel and
"comfort" letters from auditors) as are customary in connection with
underwritten public offerings and as such underwriters may reasonably require.
In connection with any registration, Target shall agree to enter into an
underwriting agreement reasonably acceptable to each such party, in form and
substance customary for transactions of this type with the underwriters
participating in such offering.
(d) Indemnification
(i) Target will indemnify Acquiror, each of its directors and officers and
each person who controls Acquiror within the meaning of Section 15 of the
Securities Act, and each underwriter of Target's securities, with respect to any
registration, qualification or compliance which has been effected pursuant to
this Agreement, in accordance with the terms and conditions of Target's existing
Registration Rights Agreement and Acquiror will indemnify Target in accordance
with the terms and conditions of Target's existing Registration Rights
Agreement; provided, however that such terms and conditions may not be modified,
altered, or amended without Acquiror's consent.
9. Adjustment Upon Changes in Capitalization; Rights Plans
(a) In the event of any change in the Target Shares by reason of stock
dividends, stock splits, reverse stock splits, mergers (other than the Merger),
recapitalizations, combinations, exchanges of shares and the like, the type and
number of shares or securities subject to the Option, the Exercise Ratio and the
Exercise Price shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction so that Acquiror shall
receive, upon exercise of the Option, the number and class of shares or other
securities or property that Acquiror would have received in respect of the
Target Shares if the Option had been exercised immediately prior to such event
or the record date therefor, as applicable.
(b) At any time during which the Option is exercisable, and at any time
after the Option is exercised (in whole or in part, if at all), Target shall not
adopt a stockholders rights plan (a so-called "poison pill") that contains
provisions for the distribution of rights thereunder as a result of Acquiror
being the beneficial owner of shares of the first party by virtue of the Option
being exercisable or having been exercised (or as a result of such other party
beneficially owning shares issuable in respect of any Option Shares). It is
understood, however, that following termination (if any) of the Merger
Agreement, a party may adopt a stockholders rights plan, that contains
provisions for the distribution of rights thereunder as a result of the other
party being the beneficial owner of shares of the first party in addition to
those that may be beneficially owned by virtue of the Option being exercisable
or having been exercised (or as a result of such other party beneficially owning
shares issuable in respect of any Option Shares).
10. Restrictive Legends
Each certificate representing Option Shares issued to Acquiror hereunder,
and each certificate representing Acquiror Shares delivered to Target at a
Closing, shall include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE STOCK OPTION
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AGREEMENT DATED AS OF MAY 13, 1997, A COPY OF WHICH MAY BE OBTAINED FROM
ACQUIROR.
11. Listing and HSR Filing
Target, upon the request of Acquiror, shall promptly file an application to
list the Target Shares to be acquired upon exercise of the Option for quotation
on the Nasdaq National Market and shall use its best efforts to obtain approval
of such listing as soon as practicable. Promptly after the date hereof, each of
the parties hereto shall promptly file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice all required
premerger notification and report forms and other documents and exhibits
required to be filed under the HSR Act to permit the acquisition of the Target
Shares subject to the Option at the earliest possible date.
12. Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective successors and
permitted assigns any rights or remedies of any nature whatsoever by reason of
this Agreement. Any shares sold by a party in compliance with the provisions of
Section 8 shall, upon consummation of such sale, be free of the restrictions
imposed with respect to such shares by this Agreement and any transferee of such
shares shall not be entitled to the rights of such party. Certificates
representing shares sold in a registered public offering pursuant to Section 8
shall not be required to bear the legend set forth in Section 10.
13. Specific Performance
The parties recognize and agree that if for any reason any of the
provisions of this Agreement are not performed in accordance with their specific
terms or are otherwise breached, immediate and irreparable harm or injury would
be caused for which money damages would not be an adequate remedy. Accordingly,
each party agrees that in addition to other remedies the other party shall be
entitled to an injunction restraining any violation or threatened violation of
the provisions of this Agreement. In the event that any action shall be brought
in equity to enforce the provisions of the Agreement, neither party will allege,
and each party hereby waives the defense, that there is an adequate remedy at
law.
14. Entire Agreement
This Agreement and the Merger Agreement (including the appendices thereto)
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
15. Further Assurances
Each party will execute and deliver all such further documents and
instruments and take all such further action as may be necessary in order to
consummate the transactions contemplated hereby.
16. Validity
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of the other provisions of this
Agreement, which shall remain in full force and effect. In the event any
Governmental Entity of competent jurisdiction holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith and shall execute and deliver an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision.
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17. Notices
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service,
or sent via telecopy (receipt confirmed) to the parties at the following
addresses or telecopy numbers (or at such other address or telecopy numbers for
a party as shall be specified by like notice):
(a) if to Target, to:
Aurum Software, Inc.
3385 Scott Boulevard
Santa Clara, California 95054
Attn: President and Chief Executive Officer
with a copy to:
Fenwick & West LLP
Two Palo Alto Square, Suite 700
Palo Alto, California 94306
Attn: Jacqueline Daunt, Esq.
(b) if to Acquiror, to:
Baan Company N.V.
Baron van Nagellstraat 89
3771 LK Barneveld
P. O. Box 143
3770 AC Barneveld
The Netherlands
Attn: President and Chief Executive Officer
with a copy to each of:
Amal Johnson
Managing Director
Baan USA Inc.
4600 Bohannon Drive #105
Menlo Park, CA 94025
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attn: Mark A. Bertelsen, Esq.
Howard S. Zeprun, Esq.
18. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to agreements made and to be performed
entirely within such State.
19. Counterparts
This Agreement may be executed in two counterparts, each of which shall be
deemed to be an original, but both of which, taken together, shall constitute
one and the same instrument.
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20. Expenses
Except as otherwise expressly provided herein or in the Merger Agreement,
all costs and expenses incurred in connection with the transactions contemplated
by this Agreement shall be paid by the party incurring such expenses.
21. Amendments; Waiver
This Agreement may be amended by the parties hereto and the terms and
conditions hereof may be waived only by an instrument in writing signed on
behalf of each of the parties hereto, or, in the case of a waiver, by an
instrument signed on behalf of the party waiving compliance.
22. Assignment
Neither of the parties hereto may sell, transfer, assign or otherwise
dispose of any of its rights or obligations under this Agreement or the Option
created hereunder to any other person, without the express written consent of
the other party, except that the rights and obligations hereunder shall inure to
the benefit of and be binding upon any successor of a party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
ACQUIROR:
BAAN COMPANY N.V.
By: /s/ Amal M. Johnson
Name: Amal M. Johnson
Title: Executive Vice President
TARGET:
AURUM SOFTWARE, INC.
By: /s/ Mary E. Coleman
Name: Mary E. Coleman
Title: President and Chief Executive
Officer
***STOCK OPTION AGREEMENT***
(Target option to Acquiror)
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Exhibit 99.1
REVOCABLE PROXY
AURUM SOFTWARE, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Aurum Software, Inc., a Delaware
corporation ("Aurum"), hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders and Proxy Statement/Prospectus, each dated July 28,
1997, and hereby appoints Ms. Mary Coleman and Mr. Christopher Dier, and each of
them, with full power of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the Special Meeting of Stockholders
of Aurum to be held August 26, 1997 at 9:00 a.m., local time, at Aurum's
principal executive offices at 2350 Mission College Boulevard, Suite 1300, Santa
Clara, California 95054 and at any adjournments or postponements thereof, and to
vote shares of the Aurum common stock which the undersigned would be entitled to
vote, if then and there personally present, on the matters set forth on the
reverse side hereof:
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENVELOPE PROVIDED.
(SEE REVERSE SIDE)
<PAGE> 181
THE AURUM BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL
1 TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF REORGANIZATION, DATED AS OF MAY
13, 1997 (THE "MERGER AGREEMENT"), BY AND AMONG AURUM, BAAN COMPANY N.V., A
NETHERLANDS COMPANY ("BAAN"), AND GREEN SOFTWARE ACQUISITION CORPORATION, A
NEWLY-FORMED WHOLLY-OWNED SUBSIDIARY OF BAAN UNDER THE LAWS OF DELAWARE ("MERGER
SUB"), AND THE TRANSACTIONS CONTEMPLATED THEREUNDER, INCLUDING A MERGER PURSUANT
TO WHICH MERGER SUB WOULD BE MERGED WITH AND INTO AURUM, WITH AURUM BEING THE
SURVIVING CORPORATION (THE "MERGER") AND AURUM THEREBY BECOMING A WHOLLY-OWNED
SUBSIDIARY OF BAAN.
1. To approve and adopt the Merger Agreement and the transactions
contemplated thereunder, including the Merger.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Upon such other business as may properly come before the Aurum Special
Meeting or any adjournments or postponements thereof, as determined by a
majority of Aurum's Board of Directors.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED,
WILL BE VOTED FOR THE PROPOSAL LISTED, AND AS SAID PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING, INCLUDING, AMONG OTHER
THINGS, CONSIDERATION OF ANY MOTION MADE FOR ADJOURNMENT OF THE MEETING
(INCLUDING, WITHOUT LIMITATION, FOR PURPOSES OF SOLICITING ADDITIONAL VOTES TO
APPROVE THE MERGER AGREEMENT AND THE MERGER).
The undersigned stockholder may revoke this proxy at any time before it
is voted by filing with the Secretary of Aurum either an instrument revoking the
proxy or a duly executed proxy bearing a later date, or by attending the Aurum
Special Meeting and voting in person.
PLEASE DATE AND SIGN EXACTLY AS NAME APPEARS ON SHARE CERTIFICATES.
________________________________________
Signature(s) of Stockholder or
Authorized Representative
Date:___________________________________
Each executor, administrator, trustee,
guardian, attorney-in-fact and other
fiduciary should sign and indicate his
or her full title. When shares have been
issued in the name of two or more
persons, all should sign. If a
corporation, please sign in corporate
name by President or other authorized
officer. If a partnership, please sign
in partnership name by authorized
person.
