Crystal Decisions, Inc. Amendment No. 1 to S-1

If the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), please check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o


(1)	Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.


(2)	Previously paid.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

This is an initial public offering of shares of common stock of Crystal Decisions, Inc. Crystal Decisions is offering of the shares to be sold in the offering. New SAC, a selling stockholder which owns a substantial majority of the common stock, is offering an additional shares. Crystal Decisions will not receive any of the proceeds from the sales of the shares being sold by New SAC.

Prior to this offering, there has been no public market for the common stock. It is currently estimated that the initial public offering price per share will be between $ and $ . Application has been made for the quotation of the common stock on the Nasdaq National Market under the symbol “CRSX”.

See “Risk Factors” on page 7 to read about factors you should consider before buying shares of the common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

To the extent that the underwriters sell more than shares of the common stock, the underwriters have the option to purchase up to an additional shares from New SAC at the initial public offering price less the underwriting discount.

The underwriters expect to deliver the shares against payment in New York, New York on , 2003.

You should read the following summary, together with the more detailed information regarding our company, especially the “Risk Factors” section, and our consolidated financial statements and notes to those statements appearing elsewhere in this prospectus, before deciding to invest in shares of our common stock.

We provide business intelligence software and services that enable the effective use and management of information within and among organizations. We develop, market and support products that allow organizations of all sizes to access data from disparate systems, create useful, interactive information from that data through analysis and reporting and reliably deliver that information to the users that need it. Our products are designed to meet the needs of a wide range of end users, from non-technical users to sophisticated analysts and application developers. In addition, our products can be used to deliver reports to customers and suppliers of the organizations that use our products. Our products can serve as an information infrastructure that empowers users to extract more value from data that has already been captured by existing information technology systems in order to improve decision-making, lower overall information technology costs and enhance competitiveness.

Organizations have spent billions of dollars implementing software systems to efficiently capture, organize, store and protect data that measures their performance including sales, expenses, inventory management and employee data. However, these software systems were not primarily designed to facilitate easy access, viewing, manipulation and broad dissemination of data. As a result, there is a basic need to access, analyze, understand and deliver information more effectively within and among organizations. A broad category of software known as business intelligence has been developed to help organizations address this need. In 2003, International Data Corporation, or IDC, estimated that the market for business intelligence software would be $4.5 billion in 2007.

Our business is driven by a primary guiding principle: we want to help organizations bring together their people and information to improve decision-making and performance. Our products focus first on solving the most common business intelligence need, information reporting and delivery. We have designed our products to serve as a core reporting and analysis infrastructure for organizations’ data systems and applications without requiring extensive re-engineering or creation of additional systems that may not work with existing applications, platforms and databases.

Our products include tools for data access, report design and integration, as well as analytics, application templates and the infrastructure needed to manage and deliver the organizations’ data effectively. Crystal Reports provides query, report design, application development and report publishing functions. Crystal Analysis includes functions for user ad hoc analysis, analytic reporting, analytic application development and online analytical processing for multi-dimensional data. Crystal Enterprise is our infrastructure product that integrates our other products and fosters efficient management and delivery of report information. Crystal Applications are templates providing reports, user interface components and data models to

Our products are used by organizations of all sizes across almost all segments of the economy. As of March 28, 2003, we had delivered more than 14 million product licenses and had registered users in more than 170 countries. As a result, we have a diverse customer base that includes software developers, approximately 350 independent software vendors and numerous well established companies, such as Aetna Life Insurance Company, Automatic Data Processing, Inc., Citigroup Inc., The Coca-Cola Company, J.P. Morgan Chase Bank, Kraft Foods, Inc. and Northrop Grumman Corporation.

Our goal is to become the leading global provider of business intelligence software and services through a focus on information reporting, analysis and delivery. To achieve this goal, we are pursuing the following strategies:


	•	capitalizing on our broad installed base of products to drive wider enterprise adoption; and

For the fiscal year ended June 28, 2002, we had total revenues of $217.2 million and net income of $13.0 million. For the nine months ended March 28, 2003, we had total revenues of $209.3 million and net income of $23.5 million. As of March 28, 2003, we had retained earnings of $30.0 million.

In 1984, Crystal Computer Services incorporated and began providing software and services. Crystal Computer Services was acquired by Seagate Software Holdings, Inc. in 1994. Seagate Software Holdings was a subsidiary of Seagate Technology, Inc., or Old Seagate, throughout these transactions. In June 1999, Seagate Software Holdings sold the shares of certain of its subsidiaries and the assets of its network storage and management group business to VERITAS Software Corporation for approximately 128 million shares of VERITAS’ common stock. In November 1999, Seagate Software Holdings contributed to us the stock of its subsidiaries and a substantial majority of its assets, other than the shares of VERITAS common stock. We are the successor to Seagate Software Holdings’ business intelligence software business.

In a series of transactions that took place in November 2000, New SAC purchased the operating business of Old Seagate, including the business intelligence software business that we now operate. New SAC was formed for the purpose of completing these transactions and its principal stockholders include affiliates of Silver Lake Partners, Texas Pacific Group, August Capital, J.P. Morgan Partners, LLC, investment partnerships of which the general partner, managing general partner or investment manager is affiliated with Goldman, Sachs & Co. and the former officers and employees of Old Seagate. Old Seagate’s disc drive business was continued by Seagate Technology, of which New SAC is the majority shareholder, and other direct and indirect subsidiaries of New SAC acquired Old Seagate’s removable tape storage, investment and other businesses. The November 2000 transaction is described more fully under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Change in Control of Crystal Decisions”.

As part of the November 2000 transaction, Seagate Software (Cayman) Holdings acquired 37,500,500 shares, or 99.7%, of our common stock outstanding on that date under the terms of a stock purchase agreement with Old Seagate and Seagate Software Holdings. Seagate Software (Cayman) Holdings was a wholly owned subsidiary of New SAC. Prior to this offering, Seagate Software (Cayman) Holdings will merge with and into one of our wholly owned subsidiaries and New SAC will become the direct holder of 37,500,500 shares of our common stock.

We expect that after the completion of this offering, New SAC will continue to own a substantial majority of our outstanding common stock. Affiliates of Goldman, Sachs & Co. owned approximately 2.19% of New SAC as of March 28, 2003 and had no control over the operations of New SAC.

In the November 2000 transaction, New SAC purchased all of the operating assets of Old Seagate, including 99.7% of our outstanding common stock at that time, for cash and borrowings of $1.84 billion, including transaction costs of $25 million. Based on the purchase price accounting for the November 2000 transaction, $41.5 million was allocated to the shares of our common stock on November 22, 2000, for an implicit allocated per share purchase price of $1.11. The purchase price and the implicit allocated per share purchase price does not include a subsequent $9.1 million reduction in the allocated purchase price on June 28, 2002, resulting from the release of a tax valuation allowance pushed down to our financial statements from New SAC. At the assumed initial public offering price of $ per share, the aggregate value of the shares of our common stock held by New SAC prior to the offering would be approximately $ .

We changed our name to Crystal Decisions, Inc. in March 2001. Our principal executive offices are located at 895 Emerson Street, Palo Alto, California 94301. Our telephone number is (650) 838-7410. You can access our web site at www.crystaldecisions.com. Information contained on our web site is not a part of this prospectus. In this prospectus, references to “Crystal Decisions”, “Crystal”, “we”, “us” and “our” refer to Crystal Decisions, Inc., a Delaware corporation.

We currently have several registered trademarks or applications pending for registration, including Crystal Decisions, Crystal Enterprise, Crystal Reports and Crystal Analysis. Our unregistered trademarks include our logo, Crystal Applications and Crystal Care. Other service marks, trademarks and trade names referred to in this prospectus are the property of their respective owners.

The number of shares of common stock to be outstanding after this offering is based on 38,012,579 shares outstanding as of March 28, 2003 and excludes:


	•	8,739,582 shares of common stock issuable upon exercise of options outstanding at a weighted average exercise price of $9.02 per share as of March 28, 2003;


	•	options to purchase 294,036 shares of common stock granted at a per share exercise price of $16.00 in May 2003 and options to purchase 125,000 shares of our common stock that will be granted at the closing of this offering at the then current fair market value; and



	•	a total of 4,303,418 shares of common stock available for future issuance under our various stock plans, excluding the annual increases in the number of shares authorized under each of our stock plans beginning July 3, 2004. See “Executive Compensation — Incentive Plans” for a description of how these annual increases are determined.


	•	gives effect to a one for two reverse split of our common stock to be completed prior to this offering; and

	•	assumes no exercise by the underwriters of their option to purchase additional shares of our common stock from New SAC in this offering.

The following table sets forth a summary of our financial data for the periods presented. This summary financial data should be read together with “Selected Financial Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes contained elsewhere in this prospectus.


(1)	We report our financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. Fiscal year 1998 was 53 weeks. All other fiscal years were 52 weeks.

(2)	Fiscal 1998, fiscal 1999 and fiscal 2000 are presented as if we existed as a separate entity during those periods.

(3)	The net losses included unusual items of $86.7 million in fiscal 1999, $242.6 million in fiscal 2000 and $1.9 million in fiscal 2001. The unusual item in fiscal 1999 related to an exchange of shares between Old Seagate and some of our former employees in June 1999. The net losses included restructuring charges of $1.3 million in fiscal 2000 and $573,000 in fiscal 2001. These unusual items and restructuring charges are described in more detail in the notes to our financial statements and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations”.

(4)	On November 22, 2000, we became a majority owned subsidiary of New SAC. The purchase price under this transaction was allocated to our assets and liabilities based on their relative fair values on that date.


	•	on an actual basis; and

	•	on an as adjusted basis to reflect our receipt of the estimated net proceeds from the sale of shares of common stock by us in this offering at an assumed initial public offering price of $ per share, after deducting the underwriting discount and estimated offering expenses payable by us.

Any investment in our common stock involves a high degree of risk. You should consider the risks described below carefully and all of the information contained in this prospectus before deciding whether to purchase our common stock. If any of the following risks actually occurs, our business, financial condition and results of operations may suffer significantly. As a result, the trading price of our common stock could decline, and you may lose all or part of your investment in our common stock.

We experience quarterly fluctuations in our results of operations due to a number of factors, including changes in demand for our products and changes in the mix of our revenues, and the unpredictability of our quarterly results may cause our stock price to decline.

Our revenues have been and in the future may continue to be subject to significant quarterly fluctuations as a result of a number of factors including:


	•	the size and timing of orders from and delivery of products to major customers;

	•	the mix of products and services of, and the amount of customization required for, our customer orders, which may delay the timing of our recognition of revenues;

	•	delay in customer purchasing decisions due to anticipated product upgrades or new products;

	•	smaller than anticipated increases in revenues from the introduction of new products;

	•	general weakening of the economy resulting in a decrease in the overall demand for computer software and services;

	•	effect of competitors on our market, including Microsoft Corporation’s recent announcement that it intends to release a competing reporting product;

	•	seasonal factors, potentially resulting in slower sales in our first and third fiscal quarters; and

	•	disruption and delay of business due to man-made or natural disasters, including health concerns such as Severe Acute Respiratory Syndrome, or SARS.

In addition, our expenses have been and, in the future, may continue to be subject to significant quarterly fluctuations as a result of a number of factors including:


	•	the impact of changes in foreign exchange rates on our expenses and the cost of our products;

	•	the degree of utilization of our consulting personnel and third party consulting services;

	•	the timing and amount of our capital expenditures;

	•	the cost of improving or maintaining our systems;

	•	the use of outside professional services, such as for internal improvement initiatives, litigation and expansion into new foreign markets;

	•	timing of product development and new product initiatives;

	•	accruals for any litigation settlement amounts; and

	•	the timing of recruiting and relocation costs, especially those for senior officers.

Fluctuations in our revenues and expenses may cause our quarterly results to be unpredictable, which may cause our stock price to decline.

We cannot assure you that we will sustain or increase our profitability. If we fail to do so, our stock price may decline.

While we achieved profitability in fiscal 2002, we cannot assure you that we will be able to sustain or increase profitability on a quarterly or annual basis. We incurred net losses of $221.2 million for fiscal 2000 and net losses of $11.5 million for fiscal 2001. However, we achieved net income of $13.0 million for fiscal 2002 and net income of $23.5 million for the nine months ended March 28, 2003. We expect our operating expenses to increase as our business grows and we anticipate that we will continue to make investments in our business. Therefore, our results of operations will be harmed if our revenues do not increase at a rate equal to or greater than increases in our expenses or are insufficient for us to sustain profitability. If we do not remain profitable, our stock price may decline.

Our sales forecasts are only estimates and if we overestimate revenues, we may be unable to reduce our expenses to avoid or minimize a negative impact on our quarterly results of operations.

Our revenues, particularly our licensing revenues which represent a majority of our revenues, are difficult to forecast and are likely to fluctuate significantly from quarter to quarter. Our licensing revenues represented 58% of our total revenues in fiscal 2000, 64% of our total revenues in fiscal 2001, 64% of our total revenues in fiscal 2002 and 65% of total revenues in the nine months ended March 28, 2003. While analysis of anticipated sales trends provides us with guidance in business planning and budgeting, our estimates may not correlate with actual revenues in a particular quarter or over a longer period of time. Variations in the rate and timing of conversion of our sales prospects into actual licensing revenues could cause us to plan or budget inaccurately and those variations could adversely affect our financial results. In particular, delays, reductions in amount or cancellation of customers’ purchases would adversely affect the overall level and timing of our revenues, and our business, results of operations and financial condition could be harmed.

In addition, because our costs are relatively fixed in the short term, we may be unable to reduce our expenses to avoid or minimize the negative impact on our quarterly results of operations if anticipated revenues are not realized. As a result, our quarterly results of operations could be worse than anticipated, which could adversely affect our stock price.

We have a long sales cycle for large-scale deployments of our products, which could make it difficult for us to plan our expenses and forecast our revenues.

Although we are not currently dependent on large-scale deployments of our products for a substantial portion of our revenues, we expect large-scale deployments to increase in number in the future. To date, potential customers who are contemplating significant deployments of our products have typically invested substantial time, money and other resources and involved many people in the decision to license our software products. As a result, we may experience a six to 12 month delay between the first contact with a potential customer and the placement of an order while the potential customer completes a product evaluation and seeks internal approval for the purchase. During this long sales cycle, events may occur that could affect the size, timing or completion of the order. For example, the potential customer’s budget and purchasing priorities may change, the economy may experience a further downturn or new competing technology may enter the marketplace. We may lose significant sales or experience reduced sales as the result of our long sales cycle, which would reduce our revenues.

We use our distributors and other resellers to market and distribute our products and, if we fail to maintain and expand these sales channels, we may not be able to maintain or increase our revenues.

Sales to a small number of distributors and other resellers generate a significant amount of our revenues. Our indirect sales accounted for 40% of our total revenues in fiscal 2000, 37% of our total revenues in fiscal 2001, 33% of our total revenues in fiscal 2002 and 33% of our total revenues in the nine months ended March 28, 2003. Our sales to Ingram Micro, Inc., a distributor, accounted for 20% of our total revenues in fiscal 2000, 16% of our total revenues in fiscal 2001, 10% of our total revenues in fiscal 2002 and less than 10% of our total revenues in the nine months ended March 28, 2003. If Ingram Micro or our other distributors were to materially reduce their purchases from us, our business, financial condition and results of operations would suffer unless we substantially increase sales to other distributors or other resellers or through other sales channels.

Our distributors and other resellers decide whether to include our products among those that they sell and generally carry and sell product lines that are competitive with ours. Because distributors and other resellers are generally not required to make a specified level of purchases from us, we cannot be sure that they will prioritize selling our products. Thus, our relationships with these distributors and other resellers depend upon our continued cooperation. We rely on our distributors and other resellers to sell our products, report the results of these sales to us and to provide services to certain of the end user customers of our products. If the distributors and other resellers do not sell our products, report sales accurately and in a timely manner and adequately service those end user customers, our revenues and the adoption rates of our products could be harmed.

We derive substantially all of our revenues from our Crystal Reports and Crystal Enterprise products and related services. Revenues from these product lines account for, and are expected to continue to account for, substantially all of our revenues for the foreseeable future. We may not be able to replace revenues from these products and services if they were to decline. Accordingly, our future results of operations will depend on maintaining and increasing customer purchases of these products and services and maintaining or increasing the average selling prices of these products.

Because we have substantial research and development and sales facilities in Canada and England, we pay a substantial portion of our expenses in the Canadian dollar and the British pound but receive a substantial majority of our revenues in U.S. dollars. For example, approximately 75% of our revenues were denominated in U.S. dollars, 10% in British pounds and less than 5% in Canadian dollars for the nine months ended March 28, 2003. Approximately 35% of our total expenses were denominated in U.S. dollars, 15% in British pounds and 40% in Canadian dollars in the nine months ended March 28, 2003. These percentages fluctuate with exchange rates, business operating changes and cash flow versus expense patterns. Even a relatively minor change in exchange rates could have a material impact on our expenses and results of operations. For example, we had foreign exchange gains of $36,000 in the three months ended March 29, 2002 and foreign exchange losses of $801,000 in the three months ended March 28, 2003. For the nine months ended March 28, 2003, a 10% increase in the exchange rate of the Canadian dollar relative to the U.S. dollar would have increased our revenues by less than 1% but would have increased our expenses by approximately 4%. We recently implemented a partial hedging strategy for these exposures. Although we recently began

Large, enterprise-wide deployments of our products require greater technical stability, performance and support than we have typically had to provide in the past. We may have difficulty managing the timeliness of these deployments and our internal allocation of personnel and resources. Any difficulty could cause us to lose existing customers, face potential customer disputes or limit the number of new customers who purchase our products, which could cause a decline in or delay in recognition of revenues or rate of growth, and could cause us to increase our research and development and technical support costs, either of which could impact our profitability.

Our products are used in combination with various operating systems. Our future success depends on our ability to continue to support widely-used operating systems. Our applications run primarily on the Microsoft operating systems. Therefore, our ability to increase sales currently depends on the continued acceptance of Microsoft’s operating system products. In addition, we have increased our product development efforts for the Unix platform. We also expect to develop additional versions of our products for HP-UX, Linux and other non-Microsoft-based operating systems. If we are unable to develop and market products that support non-Microsoft platforms on a timely and cost-effective basis, our sales will decrease and our results of operations will be harmed.

We have strategic relationships with Microsoft and SAP that enable us to bundle our products with those of Microsoft and SAP, and we are also developing certain utilities and products to be a part of Microsoft’s and SAP’s products. We have limited control, if any, as to whether these companies will devote adequate resources to promoting and selling our products. If either Microsoft or SAP reduces its efforts on our behalf or discontinues its relationship with us and instead develops a relationship with one of our competitors or designs its own competing business intelligence software, our revenues and operating results may be reduced.

We depend on our direct sales force for a majority of our sales and have made significant expenditures in recent years to expand our sales force. Our future success will depend in part upon the expansion and productivity of our sales personnel. We continue to experience voluntary and involuntary attrition in our direct sales force and need to hire replacements. As a result, our ability to continue to attract, integrate, train, motivate and retain new sales personnel will also affect our success. We face intense competition for sales personnel in the software industry, and we cannot be sure that we will be successful in hiring and retaining these personnel in accordance with our plans. We cannot assure you that sales force turnover will not be significant in the future. Even if we hire and train a sufficient number of sales personnel, we cannot be sure that we will generate enough additional revenues to exceed the cost of the new personnel.

Software products as complex as those we offer frequently contain undetected errors, defects, failures or viruses especially when first introduced or when new versions or enhancements are released or are configured to individual customer systems. Despite product testing, our products, or third party products that we incorporate into ours, may contain undetected errors, defects or viruses that could:


	•	require us to make extensive changes to our products which could increase our research and development expenses;

	•	expose us to claims for damages;

	•	require us to incur additional technical support costs;

	•	cause a negative customer reaction that could reduce future sales;

	•	generate negative publicity regarding us and our products; or

	•	result in customers’ delaying their purchase until the errors or defects have been remedied.

Any of these occurrences could have a material adverse effect upon our business, results of operations or financial condition.

Our market is still emerging, and our success depends upon its growth. Our potential customers may:


	•	not fully value the benefits of using business intelligence products;

	•	not achieve favorable results using business intelligence products;

	•	experience technical difficulty in implementing business intelligence products; or

	•	use alternative methods to solve the problems addressed by business intelligence software.

These factors may cause the market for business intelligence software not to grow as quickly or become as large as we anticipate, which may reduce the growth of our revenues.

We have experienced, and expect to continue to experience, intense competition from a number of business intelligence software companies. We compete principally with vendors of integrated query, reporting, analysis and information delivery software such as Actuate Corporation, Brio Software, Inc., Business Objects SA, Cognos Incorporated, Hummingbird Ltd., Information Builders, Inc. and MicroStrategy Incorporated. Our competitors may announce new products, services or enhancements that better meet the needs of customers or changing industry standards. Increased competition may cause price reductions and reduce gross margins and loss of market share, any of which could have a material adverse effect on our business, results of operations and financial condition.

Additionally, we face competition from many companies with whom we have strategic relationships, including Baan Company N.V., Hyperion Solutions Corporation, International Business Machines Corporation, Lawson Software, Inc., Microsoft, PeopleSoft, Inc. and SAP, all of whom offer business intelligence products that compete with ours. For example, in February 2003, Microsoft announced that it intends to extend its SQL Server business intelligence platform to include reporting capabilities which may compete with both our Crystal Reports and Crystal Enterprise products. Microsoft has announced that it anticipates releasing a beta test version of this software in the first half of calendar 2003. These companies could bundle their business intelligence software with their other products at little or no cost, giving them a potential competitive advantage over us. Some of the companies that bundle our products with theirs could elect not to do so in the future, which could have a material adverse effect on our business, results of operations and financial condition. These other companies could also invest additional resources in existing products or develop and market additional business intelligence products that compete directly with ours, which could harm our business, results of operations and financial condition.

If one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely affect our ability to compete effectively. Our competitors may also establish or strengthen cooperative relationships with our current or future distributors, resellers, original equipment manufacturers or other parties with whom we have relationships, thereby limiting our ability to sell through these channels and reducing promotion of our products. Disruptions in our business caused by these events could reduce our revenues.

Some of our competitors have significantly greater financial, technical, sales and marketing resources and greater name recognition than we do. These competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements or devote greater resources to the development, promotion, sale and support of their products. In addition, some of our competitors may be more successful than we are in attracting and retaining customers. This competition could harm our ability to sell products and services, which may lead to lower prices for our products, reduced revenues and reduced gross margins.

We cannot predict what impact the current economic slowdown will have on the business intelligence software market or our business, but it may result in fewer purchases of licenses of our software, extended sales cycles, downward pricing pressures or lengthening of payment terms. Our customers may also discontinue their annual renewals of our maintenance and technical support services due to shrinking budgets. If our customers reduce, delay or cancel purchases of our products and services, our results of operations will be harmed.

The markets for our products are characterized by rapidly changing technology, changing customer needs, evolving industry standards and frequent new product introductions and enhancements. The emergence of new industry standards in related fields may adversely affect

the demand for our products. This could happen, for example, if new standards and technologies emerged that were incompatible with customer deployments of our applications. We cannot assure you that we will succeed in developing and marketing product enhancements or new products that respond to technological change, new industry standards, changed customer requirements or competitive products on a timely and cost-effective basis. Additionally, even if we are able to develop new products and product enhancements, we cannot assure you that they will achieve market acceptance.

Business intelligence software is inherently complex, and it generally takes a long time to develop and test major new products and product enhancements. Our future success will depend on our ability to design, develop, test and support new software products and enhancements on a timely and cost-effective basis. If we are unable to identify a shift in market demand quickly enough, we may not be able to develop products to meet the new demand in a timely manner, or at all. Our failure to respond successfully to changing market conditions could have a negative effect on our business, results of operations and financial condition.

If we fail to protect our intellectual property rights, our customers or competitors might be able to use our technologies to develop their own products, which could weaken our competitive position or reduce our revenues.

Our success is heavily dependent on our proprietary technology, primarily software. It is difficult to protect and enforce our intellectual property rights and protect third parties from infringing on our products for a number of reasons, including:


	•	applicable laws and our contracts and procedures provide only limited protection to our intellectual property rights;

	•	third parties may develop similar technology independently;

	•	policing unauthorized copying or use of our products is difficult and expensive;

	•	software piracy is a persistent problem in the software industry and for us;

	•	our patents may be challenged, invalidated or circumvented, and, therefore, the rights granted under these patents might not provide us with competitive advantages; and

	•	our shrink-wrap licenses may be unenforceable under the laws of certain jurisdictions.

In addition, the laws of many countries do not protect our proprietary rights to as great an extent as those of the United States. We believe that effective protection of intellectual property rights is unavailable or limited in certain foreign countries, creating an increased risk of potential loss of proprietary information due to piracy and misappropriation. For example, we recently began to conduct business in the People’s Republic of China and intend to outsource some of our operations to India where we believe there is an increased risk that we may not be able to enforce our contractual and intellectual property rights. If we fail to protect our intellectual property rights, our business may be harmed.

Our results of operations may decline, if we were subject to a protracted infringement claim or one that results in a significant damage award.

From time to time, companies in our industry receive claims that their products or business infringe the intellectual property of third parties. Our competitors or other third parties may


	•	require costly litigation to resolve;

	•	absorb significant management time;

	•	cause us to enter into unfavorable royalty or license agreements;

	•	cause us to cease selling our products;

	•	require us to indemnify our customers, distributors, original equipment manufacturers or other resellers; or

	•	require us to expend additional development resources to redesign our products.

We may also be required to indemnify customers, distributors, original equipment manufacturers and other resellers for third-party products that are incorporated in our products and that infringe the intellectual property rights of others. Although many of these third parties are obligated to indemnify us if their products infringe the rights of others, the indemnification may not be adequate.

In addition, from time to time there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products. We use a limited amount of open source software in our products and may use more open source software in the future. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software. Any of this litigation could be costly for us to defend, have a negative effect on our results of operations and financial condition or require us to devote additional research and development resources to change our products.

The inability to obtain third-party licenses required to develop our products could require us to obtain substitute technology of inferior quality or performance standards or at a greater cost, which could reduce our revenues or increase our cost of revenues.

We license certain technologies from third parties to be used in our products, generally on a nonexclusive basis. For example, we have obtained rights from third parties that allow us to market software tool kits that are designed specifically to assist our products to be compatible with products made by the third parties. If these agreements are terminated or are not renewed, then we may lose the right to distribute the tool kits or otherwise use them. In addition, the termination of third party licenses or the failure of third party licensors adequately to maintain or update their products could delay our ability to deliver some of our products while we seek to implement alternative technology. Alternative technology may be of inferior quality or performance standards or may not be available on commercially reasonable terms or at all. If we are unable to obtain necessary or desirable third party technology licenses, our revenues could be reduced, our cost of revenues could increase and our business could suffer.

We are in the process of implementing an enterprise resource planning system, which may result in a short-term increase in our operating expenses and capital expenditures, particularly if the implementation takes longer than we expect.

In May 2002, we began to implement a global enterprise resource planning system in North America and the Asia Pacific region. The implementation of an enterprise resource planning

system is a complex and labor-intensive process that requires the investment of a substantial amount of time, money and other resources. We have experienced significant difficulties in this implementation. The implementation process to date has involved greater than anticipated expenditures of technical, financial and management resources. While we initially anticipated that the remaining regional implementation would be completed by the end of fiscal 2003, we now believe that implementation may not be completed until the end of calendar 2003. Further difficulties may delay completion of the implementation even longer. We also anticipate that we will need to expend greater time, money and resources than we originally expected. If we continue to experience further difficulties in the implementation, this could:


	•	result in significant and unexpected increases in our operating expenses;

	•	complicate and prolong our internal data gathering and analysis processes;

	•	require us to restructure or develop our internal processes to adapt to the new system;

	•	result in extended work hours for our employees and the temporary use of outside resources, with a resulting increase in expenses, to resolve any software configuration issues or to process transactions manually until issues are resolved;

	•	result in the loss of management focus as attention paid to implementation is diverted from other issues; and

	•	cause disruption of our operations if the transition to the new enterprise resource planning system creates new or unexpected difficulties or if this system does not perform as expected.

In order to operate our business successfully as it grows, we need to improve our internal systems, processes and controls. In order to achieve this, we are increasingly relying on technical systems such as sales prospects management systems, technical support systems, scheduling systems and order entry systems. If we have difficulty providing and managing our internal systems, processes and controls, these difficulties could disrupt existing customer relationships, causing us to lose customers, limit us to smaller deployments of our products or increase our technical support costs.

We have significant international operations including development facilities, sales personnel and customer support operations. Our primary product development facilities are located in Vancouver, Canada and Ipswich, England. We derived 29% of our total revenues in fiscal 2000, 26% in fiscal 2001, 26% in fiscal 2002 and 27% in the nine months ended March 28, 2003 from sales outside of North America. Our international operations are subject to certain inherent risks including:


	•	exchange rate fluctuations and the impact on pricing of our products and our expenses;

	•	increases in tariffs, duties, price controls, restrictions on foreign currencies or trade barriers imposed by foreign countries such as import and export restrictions;

	•	technical difficulties associated with product localization;

	•	lack of experience in certain geographic markets;

	•	longer payment cycles for sales in certain foreign countries;


	•	seasonal reductions in business activity in the summer months in Europe and certain other countries;

	•	the significant presence of some of our competitors in some international markets;

	•	potentially adverse tax consequences;

	•	management, staffing, legal and other costs of operating an enterprise spread over various countries;

	•	political instability in the countries where we are doing business; and

	•	fears concerning SARS or other travel or health risks that may adversely affect our ability to sell our products and services in any country in which the business sales culture encourages face-to-face interactions.

These factors could have an adverse effect on our business, results of operations and financial condition.

In addition, we intend to continue to invest resources to expand our sales and support operations into strategic international locations such as the People’s Republic of China. If the revenues generated by these operations are not adequate to offset the expense of establishing these foreign operations, our business, results of operations and financial condition could be materially harmed.

Our future performance depends to a significant degree upon the continued service of the key members of our management as well as our marketing, sales and product development personnel. We do not maintain key man insurance on any of our officers or key employees. We do not have employment agreements with any of our officers or key employees that require them to continue to provide services to us or prevent them from joining our competitors. Additionally, replacement of any officer or key employee is subject to the inherent risk of integration. For example, in October 2002, we announced the appointment of Jonathan J. Judge as our president and chief executive officer. The loss of one or more of our key personnel and the uncertainty created by turnover of our key personnel could have a material adverse effect on our business, results of operations and financial condition.

We have sought to control our expenses in part by locating our facilities in lower cost communities with large populations of highly skilled workers, such as Vancouver, Canada. We cannot be certain that we will be able to continue to recruit employees with the desired skills from these communities and retain them at a lower cost than we would incur elsewhere.

In October 2002, we executed an agreement with Comerica Bank-California for a $15.0 million revolving line of credit. As of March 28, 2003 and the date of this prospectus, we did not have any outstanding borrowings under the revolving line. Subject to limited exceptions, we are restricted in our ability to pay dividends by the covenants contained in our revolving loan agreement with Comerica. We are permitted to repurchase stock and/or pay cash dividends in an aggregate amount not to exceed $2.0 million during the term of the agreement, provided that we are not in default under the agreement and that a default would not occur immediately after payment of the dividend. We may be unable to repurchase stock or pay dividends in excess of those amounts if Comerica does not agree.

The terms of the revolving line also require us, among other things, to maintain several quarterly financial covenants relating to liquidity, minimum tangible net worth and quarterly free cash flow. We are restricted from selling, leasing or otherwise disposing of any part of our business or property under most circumstances. In addition, the agreement places restrictions on entering into arrangements that will result in a change of control and restricts our ability to incur specified forms of indebtedness. We are also restricted from making some types of distributions or investments. We are also required to maintain at least an aggregate of $10 million in investment accounts with Comerica and some of its affiliates. We may not be able to engage in these types of transactions, such as the sale of debt securities, unless we obtain Comerica’s consent. A potential acquirer, lender or other strategic party may be reluctant to enter into an arrangement with us that contemplates any of these transactions unless we obtain Comerica’s consent. If we are unable to obtain consent or cannot obtain consent in a timely manner, the other party may not elect to proceed with a transaction that we believe to be in our stockholders best interests.

Our license agreements with our customers typically contain provisions designed to limit our exposure to potential product liability claims. Existing or future United States federal or state laws, foreign laws or unfavorable judicial decisions may make these provisions ineffective. Because our products are used with enterprise software systems and databases, our liability could be substantial if we receive an unfavorable judgment. In addition, our insurance against product liability may not be adequate to cover a potential claim.

In November 1997, Vedatech commenced an action in the Chancery Division of the High Court of Justice in the United Kingdom against Crystal Decisions (UK) Limited, our wholly owned subsidiary. The liability phase of the trial was completed in March 2002, and we prevailed on all claims except for a quantum meruit claim. The court ordered the parties to mediate the amount of that claim and we came to a mediated settlement with Vedatech in August 2002. The mediated settlement was not material to our operations and contained no continuing obligations. In September 2002, however, we received notice that Vedatech is seeking to set aside the settlement. In April 2003, we filed an action in the High Court of Justice seeking a declaration that the mediated settlement agreement is valid and binding. Although we believe that Vedatech’s basis for seeking to set aside our mediated settlement is meritless, the outcome cannot be determined at this time. If our mediated settlement were to be set aside, a negative outcome could adversely affect our business, results of operations and financial condition.

In addition to the foregoing, we are subject to other litigation in the ordinary course of our business. While we believe that the ultimate outcome of these matters will not have a material adverse effect on us, the outcome of these matters is not determinable and negative outcomes may adversely affect our business, results of operations and financial condition.

In connection with these transactions, New SAC and certain of its affiliates, including us, agreed to indemnify VERITAS, Old Seagate and some of their affiliates for substantially all liabilities arising in connection with our operating assets. Although we have agreed with Seagate Technology and several of its affiliates on a methodology to allocate liability, our liability, like Seagate Technology’s, is not capped. As a result, we continue to face possible liability for actions, events or circumstances arising or occurring both before and after the November 2000 transactions. Some areas of potential liability include:


	•	tax liabilities;

	•	obligations under federal, state and foreign pension and retirement benefit laws; and

	•	existing and future litigation.

In the event that our indemnity obligations are triggered, we could experience a material adverse effect on our business and financial condition.

Many of our directors own interests in our majority stockholder, New SAC, and some of them hold shares and options to purchase the capital stock of Seagate Technology. Ownership of New SAC or Seagate Technology could create, or appear to create, potential conflicts of interest when our directors are faced with decisions that could have different implications for us and for New SAC or its other affiliates.

Some of our directors also serve on the boards of directors of New SAC, Certance Holdings, a removable tape storage company and an affiliate of New SAC, and Seagate Technology. Several of our directors also serve as officers of those entities, as well as other affiliates of New SAC. We expect that some of our directors will continue to spend a substantial portion of their time on the affairs of New SAC and Seagate Technology, for which those entities may pay our directors director fees or other compensation. In view of these overlapping relationships, conflicts of interest may exist or arise with respect to existing and future business dealings, including the relative commitment of time and energy by our directors to us and New SAC and Seagate Technology, potential acquisitions of businesses or properties and other business opportunities, the issuance of additional capital stock, the election of new or additional directors or the payment of dividends by us. We cannot assure you that any conflicts of interest will be resolved in our favor.

After the closing of this offering, we expect New SAC to own approximately % of our outstanding common stock. In addition, the shareholders of New SAC are parties to a shareholders agreement governing the ownership of New SAC’s stock, and the shareholders of New SAC, New SAC and we are parties to a stockholders agreement governing their ownership of our stock. These arrangements result in New SAC and the New SAC shareholders acting

together with respect to matters submitted to our stockholders and, among other things, give New SAC, Silver Lake Partners and Texas Pacific Group the right to appoint four of our nine directors and the right to nominate an additional four directors through their membership on our nominating and corporate governance committee. Through its influence on our board of directors and as a majority stockholder, New SAC has the ability to determine the direction of our business, our operating budget, whether to pursue possible acquisitions, whether to pursue a sale of our company and other matters, including all matters submitted to our stockholders. New SAC and the shareholders of New SAC may continue to retain control of a majority of our common stock for the foreseeable future and may decide not to enter into a transaction in which you would receive consideration for your common shares that is much higher than the cost to you or the then-current market price of those shares. In addition, New SAC and New SAC’s shareholders could elect to sell a controlling interest in us and you may not have a right to participate in the sale. Any decision regarding their ownership of us that New SAC and its shareholders may make at some future time will be in their absolute discretion.

We have applied to have our shares quoted on the Nasdaq National Market when this offering occurs. Unlike other companies whose stock is quoted on the Nasdaq National Market, if a majority of a company’s outstanding common stock is held by one stockholder, that majority-owned company is required to comply with only some of the corporate governance rules. For example, although we will be required to have an audit committee comprised of independent members, we will not be required to have a majority of independent directors. Because we will only be required to comply with a limited number of the Nasdaq National Market’s corporate governance rules, you may not receive the perceived benefits of our status as a company whose stock is quoted on the Nasdaq National Market.

The securities markets have experienced significant market price and volume fluctuations in the past and the market prices of the securities of technology companies have been especially volatile. This volatility, as well as general economic, market or political conditions, could reduce the market price of our common stock in spite of our results of operations, business performance or financial condition. The market price of our stock also might decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us. In addition, our results of operations could be below the expectations of public market analysts and investors and, in response, the market price of our common stock could decrease significantly. Investors may be unable to resell their shares of our common stock at or above the offering price.

Our management could spend the proceeds from this offering in ways with which our stockholders may not agree or that do not yield a favorable return. We plan to use the proceeds from this offering for working capital, general corporate purposes and capital expenditures. We may also use the proceeds for future strategic acquisitions but do not have any acquisitions planned or negotiated. Until we need to use the proceeds of this offering, we plan to invest the

After our 2003 annual meeting of stockholders, our board of directors will have the authority to issue up to 10,000,000 shares of preferred stock. The board of directors can fix the price, rights, preferences, privileges and restrictions of the preferred stock without any further vote or action by our stockholders. The issuance of shares of preferred stock may delay or prevent a change in control transaction. As a result, the market price of our common stock and the voting and other rights of our stockholders may be adversely affected. The issuance of preferred stock may result in the loss of voting control to other stockholders. We have no current plans to issue any shares of preferred stock.


	•	the elimination of the right of stockholders to act by written consent;


	•	the elimination of the right of stockholders to call a special meeting of stockholders;



	•	a requirement of advance notice to nominate directors or submit proposals for consideration at stockholder meetings; and



	•	a requirement to obtain the approval of 66 2/3% of our stockholders to change these protective provisions.

These provisions could discourage potential acquisition proposals and could delay or prevent a change in control transaction, even if the acquisition or change in control transaction would benefit our stockholders. These provisions could also have the effect of discouraging others from making tender offers for our common stock. As a result, these provisions may prevent the market price of our common stock from increasing substantially in response to takeover attempts. These provisions may also prevent changes in our management.

Upon completion of this offering, we will be subject to the antitakeover provisions of the Delaware General Corporation Law, which regulate corporate acquisitions. Delaware law will prevent us from engaging under certain circumstances in a business combination with any interested stockholder for three years following the date that the interested stockholder became an interested stockholder unless our board of directors or a supermajority of our uninterested stockholders approve. For purposes of Delaware law, a business combination includes a merger or consolidation involving us and the interested stockholder and the sale of more than 10% of our assets. In general, Delaware law defines an interested stockholder as any holder beneficially owning 15% or more of the outstanding voting stock of a corporation and any entity or person affiliated with or controlling or controlled by the holder. Under Delaware law, a corporation may opt out of these antitakeover provisions. We do not intend to opt out of the antitakeover provisions of Delaware law.

If you purchase shares of our common stock in this offering, you will experience immediate and substantial dilution of $ per share in net tangible book value based on our book value as of March 28, 2003. Assuming the exercise in full of all outstanding options, as adjusted net tangible book value at March 28, 2003 would be $ per share, representing an immediate increase in the net tangible book value of $ per share to our existing stockholders and an

Prior to this offering, you could not buy or sell our common stock publicly. An active public market for our common stock may not develop or be sustained after this offering, and the market price might fall below the initial public offering price. The initial public offering price may bear no relationship to the price at which our common stock will trade upon completion of this offering. The initial public offering price will be determined based on negotiations between us and the representatives of the underwriters, based on factors that may not be indicative of future market performance.

Our current stockholders hold a substantial number of shares, which they will be able to sell in the public market in the near future. If our existing stockholders sell, or are perceived to be prepared to sell, a substantial number of shares of our common stock in the public market following this offering, the market price of our common stock could fall. In addition, the sale of these shares could impair our ability to raise capital through the sale of additional shares of stock.

After this offering, we will have outstanding shares of common stock. This includes shares that we and New SAC are selling in the offering, which may be resold immediately in the public market. The remaining shares will become eligible for resale in the public market as shown in the table below.

After the offering, New SAC and New SAC’s stockholders will have rights, subject to specified conditions, to require us to file registration statements covering our shares owned by them or to include shares owned by them in registration statements that we may file. Although New SAC entered into an agreement with us that would limit the distribution of our shares held by New SAC for an additional 18 months after this offering, the agreement permits a distribution with the consent of Stephen J. Luczo and representatives of Silver Lake Partners and Texas Pacific Group. As a result, the remaining shares held by New SAC may be available for sale in the public market during the 18 months after this offering.

This prospectus, including the sections entitled “Prospectus Summary”, “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business”, contains forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements. These risks and other factors include those listed under “Risk Factors” and elsewhere in this prospectus. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined under “Risk Factors”. These factors may cause our actual results to differ materially from any forward-looking statement.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this prospectus to conform our prior statements to actual results.

We estimate that the net proceeds from the sale of shares of common stock by us in this offering will be approximately $ based on an assumed initial public offering price of $ per share and after deducting the underwriting discount and estimated offering expenses payable by us. We will not receive any proceeds from the sale of our shares by New SAC in this offering or if the underwriters exercise their option to purchase additional shares from New SAC.

The principal purposes of this offering are to create a public market for our common stock and attract and retain qualified employees by providing them with equity incentives. We anticipate that we will use the proceeds of this offering for general corporate purposes, including working capital, capital expenditures of approximately $22.0 million in fiscal 2004 and potential acquisitions of complementary businesses, products and technologies. The amounts that we actually expend for working capital purposes will vary significantly depending on a number of factors, including future growth in revenues, if any, and the amount of cash we generate from operations. The amount we spend on capital expenditures will vary significantly depending on a number of factors including the timing of our facilities expansion, our information technology and telecommunications systems upgrades and build outs and our completion of our enterprise resource planning system implementation. In addition, we may use a portion of the net proceeds for further development of our product lines through acquisitions of products, technologies and businesses. However, we currently have no acquisitions planned or negotiated. Pending these uses, we intend to invest the net proceeds in interest-bearing, investment-grade securities.

We have never declared or paid any dividends on our capital stock. We currently expect to retain any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Subject to limited exceptions, we are restricted in our ability to pay dividends by the covenants contained in our revolving loan agreement with Comerica. We are permitted to repurchase stock and/or pay cash dividends in an aggregate amount not to exceed $2.0 million during the term of the agreement, provided that we are not in default under the agreement and that a default would not occur immediately after payment of the dividend.

The following table sets forth our capitalization as of March 28, 2003. Our capitalization is presented:


	•	on an actual basis;

	•	on an as adjusted basis to reflect our receipt of the estimated net proceeds from the sale of shares of common stock by us in this offering at an assumed initial public offering price of $ per share, after deducting the underwriting discount and estimated offering expenses payable by us.

In addition to the shares of common stock to be outstanding after the offering, we may issue additional shares of common stock including:


	•	8,739,582 shares of common stock issuable upon exercise of options outstanding at a weighted average exercise price of $9.02 per share as of March 28, 2003;


	•	options to purchase 294,036 shares of common stock granted at a per share exercise price of $16.00 in May 2003 and options to purchase 125,000 shares of our common stock that will be granted at the closing of this offering at the then current fair market value; and



	•	a total of 4,303,418 shares of common stock available for future issuance under our various stock plans, excluding the annual increases in the number of shares authorized under each of our stock plans beginning July 3, 2004. See “Executive Compensation — Incentive Plans” for a description of how these annual increases are determined.

Options to purchase 53,225 shares of our common stock at a weighted average exercise price per share of $8.00 will become fully vested and exercisable at the time the registration statement we have filed in connection with this offering is declared effective by the Securities and Exchange Commission. We expect to record a non-cash dividend upon vesting of these options when our offering occurs, because the options were granted to employees of Old Seagate.

You should read this table together with the sections of this prospectus entitled “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with our financial statements and related notes beginning on page F-1.

Our net tangible book value as of March 28, 2003 was approximately $65.6 million, or approximately $1.73 per share. Net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of common stock outstanding. Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the net tangible book value per share of common stock immediately after the completion of this offering. After giving effect to the sale of the shares of common stock offered by us at an assumed initial public offering price of $ per share, and after deducting the underwriting discount and estimated offering expenses payable by us, our net tangible book value as of March 28, 2003 would have been approximately $ million, or $ per share of common stock. This represents an immediate increase in net tangible book value of $ per share to existing stockholders and an immediate dilution of $ per share to new investors of common stock. The following table illustrates this dilution on a per share basis:

The following table summarizes after giving effect to the offering, based on an assumed initial public offering price of $ per share, as of March 28, 2003, the differences between the existing stockholders and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid. At the time of the November 2000 transaction, the shareholders of New SAC paid total cash and borrowings of $1.84 billion, including $916 million in cash for their shares of New SAC. Based on the purchase price accounting for the November 2000 transaction, $41.5 million was allocated to the shares of our common stock. This allocation corresponds to a purchase price of approximately $1.11 per share of our common stock on November 22, 2000. The allocated purchase price of $41.5 million and the implicit purchase price per share of $1.11 does not include a subsequent $9.1 million reduction in the allocated purchase price on June 28, 2002 resulting from the release of a tax valuation allowance pushed down to our financial statements from New SAC.

The foregoing discussion and tables are based upon the number of shares issued and outstanding on March 28, 2003 and assume no exercise of options outstanding as of March 28, 2003. As of that date, there were 8,739,582 shares of our common stock issuable upon exercise of options outstanding at a weighted average exercise price of $9.02 per share. Assuming the exercise in full of all the outstanding options, as adjusted net tangible book value at March 28, 2003 would be $ per share, representing an immediate increase in the net tangible book value of $ per share to our existing stockholders and an immediate decrease in the net tangible book value of $ per share to purchasers of our common shares in this offering.

The selected financial data set forth below should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. We have derived the statement of operations data for the fiscal years ended June 30, 2000, June 29, 2001 and June 28, 2002 and the nine months ended March 28, 2003 and the balance sheet data as of June 29, 2001, June 28, 2002 and March 28, 2003 from the audited financial statements included elsewhere in this prospectus. The statement of operations data for the fiscal years ended July 3, 1998 and July 2, 1999 and the balance sheet data as of July 3, 1998, July 2, 1999 and June 30, 2000 were derived from the audited financial statements that are not included in this prospectus. The statement of operations data for the nine months ended March 29, 2002 were derived from the unaudited financial statements included elsewhere in this prospectus. Historical results are not necessarily indicative of results to be expected for future periods and interim results are not necessarily indicative of results for entire fiscal years.

The following information should be read together with the audited consolidated and combined financial statements and the notes thereto and other information included elsewhere in this prospectus.

We provide business intelligence software and services that enable the effective use and management of information within and among organizations. Our revenues are derived primarily from licensing fees for software products and, to a lesser extent, fees for services relating to these products, including maintenance, technical support, training and consulting. We sell our software products through two channels: directly to end user customers through our sales force and indirectly through resellers, original equipment manufacturers, systems integrators and distributors, including independent software vendors. Original equipment manufacturers, which are independent software vendors and hardware vendors, generally integrate our products with theirs or resell them with their products. Our other indirect vendors resell our software products to end user customers.

We operate and report financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. Accordingly, fiscal 2000 ended on June 30, 2000, fiscal 2001 ended on June 29, 2001, fiscal 2002 ended on June 28, 2002 and fiscal 2003 ended on June 27, 2003. Fiscal 2000, 2001, 2002 and 2003 were each comprised of 52 weeks. The nine month periods ended March 29, 2002 and March 28, 2003 were each comprised of 39 weeks.

Licensing revenues. We generate licensing revenues from the sale of licenses to use our software products. We price our products on a per user, processor or concurrent user basis. We generally do not sell licenses for our products on a time or subscription basis.

We currently operate with virtually no order backlog because our software products are typically delivered shortly after orders are received. Licensing revenues in any quarter are substantially dependent on orders booked and delivered in that quarter. Historically, we have recognized a substantial portion of our revenues in the last month of a quarter. As we sell more large-scale deployments of our products, orders may become larger and the impact of the longer sales cycle of these deployments may make our revenues harder to predict.

Maintenance, support and services revenues. Our maintenance revenues are derived from selling rights to existing customers to receive product upgrades, when and if we make them available. Our maintenance agreements generally have a term of one year. Customers may renew their maintenance agreements for additional consecutive periods.

Our technical support revenues are derived from fees charged to customers for post-sales efforts. We sell technical support services under several different programs generally on a 12-month basis, on a fee for use, fixed price or a per incident basis.

Our professional services organization generates revenues for training and consulting to plan and execute the deployment of our products and accelerate end user adoption. In addition, we provide training to our customers’ employees to enhance their ability to utilize fully the features and functionality of the product purchased. We provide training and consulting services related to the use of our products and receive project- or time-based fees as a result.

Our cost of licensing revenues consists primarily of materials, product packaging, distribution costs, related fulfillment personnel and third-party royalties. Our cost of maintenance, support and services revenues consists primarily of personnel and related overhead costs for technical support, training, consulting and the cost of materials delivered with product upgrades and enhancements. Prior to the end of fiscal 2002, our total cost of revenues also included the amortization of the fair value of developed technologies on our balance sheet that arose as the result of certain transactions described further under “Change in Control of Crystal Decisions” and “Other Significant Transactions Impacting Our Financial Reporting”.

Sales and marketing expenses include salaries, benefits, commissions and bonuses earned by sales and marketing personnel, advertising, product promotional campaigns, promotional materials, travel, facilities and other overhead costs. Research and development expenses are expensed as incurred and consist primarily of personnel and related costs associated with development of new products, the enhancement and localization of existing products, quality assurance and testing, as well as facilities and other overhead costs. General and administrative expenses consist primarily of personnel costs for finance, legal and human resources, as well as other administrative costs.

In May 2003, we agreed to pledge $1.0 million to the Community Foundation of Silicon Valley. We also agreed to match employee contributions to the Community Foundation of Silicon Valley up to 1% of our income before interest, taxes and amortization for the prior fiscal year. The maximum amount of our matching contribution in fiscal 2003 would be approximately $220,000. The Community Foundation of Silicon Valley is an independent, public benefit organization that provides grants to charitable groups in areas such as education, arts and cultural participation and neighborhoods and civic engagement. The Community Foundation of Silicon Valley also works with independent, public benefit organizations to provide grants that are used in communities outside of the San Francisco bay area. The Community Foundation of Silicon Valley awards grants equal to at least 5% of its endowment annually.

We conduct the majority of our business and collect the majority of our revenues in U.S. dollars, which is the currency in which we report our financial results. We also earn approximately 25% of our revenues in currencies other than the U.S. dollar including the Euro, the British pound and the Canadian dollar. Our total revenues are affected by changes in these foreign exchange rates relative to the U.S. dollar.

We incur a significant portion of our expenses in Canadian dollars. Our total expenses fluctuate according to the changes in the exchange rate of the Canadian dollar relative to the U.S. dollar. With the exception of our Canadian dollar expenses, the impact of fluctuations in foreign exchange rates on our net operating income is nominal as our foreign denominated expenses are substantially offset by our foreign denominated revenues. For the nine months ended March 28, 2003, a 10% increase in the exchange rate for the Canadian dollar would have increased our revenues by less than 1% but would have increased our expenses by approximately 4%. We recently implemented a partial hedging strategy for these exposures. We anticipate that we will also experience substantial foreign exchange expense in the quarter ended June 27, 2003 and potentially for future quarters due to the strengthening of the Canadian dollar relative to the U.S. dollar.

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States and form the basis for the following discussion and analysis of critical accounting policies and estimates. We make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities during the course of preparing these financial statements. On a regular basis, we evaluate our estimates and assumptions including those related to the recognition of revenues, allowance for doubtful accounts, contingent liabilities and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. These estimates form the basis of our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates.

The following critical accounting policies reflect the more significant estimates and assumptions we have used in the preparation of our financial statements:

We follow specific and detailed guidelines in measuring revenues; however, certain judgments and estimates affect the application of the policy. Revenues in any given period are difficult to predict and any shortfall in revenues or delay in recognizing revenues could cause our results of operations to vary significantly from quarter to quarter.

We sell licenses for software products separately or with services as part of a bundled arrangement. We sell maintenance and technical support contracts with licenses in a bundled arrangement or separately as a contract renewal. We provide training and consulting services as part of a bundled arrangement or separately based on a project or time and materials basis.

For each sales transaction, we determine whether evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collection is probable. If any of these criteria are not met, we defer recognition of revenues until such time as all of the criteria are met.

In bundled software arrangements that include rights to multiple software products and/or services, we recognize revenues using the residual method as prescribed by the Statement of Position 98-9 “Modification of SOP No. 97-2 Software Revenue Recognition with Respect to Certain Transactions”. Under the residual method, revenues are allocated to the undelivered elements based on vendor specific objective evidence of fair value of the undelivered elements and the residual amount of revenues are allocated to the delivered elements. Vendor specific objective evidence of the fair value of maintenance and technical support contracts is based on renewal rates as determined by the prices paid by our customers when maintenance is sold separately. Vendor specific objective evidence of fair value of training and consulting services is based upon daily rates as determined by the prices paid by our customers when these services are sold separately.

For all bundled arrangements, we assess whether the service elements of the arrangement are essential to the functionality of the other elements of the arrangement. When services are considered essential or the arrangement involves customization or modification of the software, both the license and service revenues under the arrangement are recognized under the percentage of completion method of contract accounting, based on cost of labor inputs. We accrue expected losses, if any, with respect to consulting services once they become known.

For those arrangements for which we have concluded that the service elements are not essential to the other elements of the arrangement, we use vendor specific objective evidence of fair value for the service elements to account for the arrangement using the residual method, regardless of any separate prices stated within the contract for each element. We recognize revenues allocable to maintenance and technical support contracts ratably over the term of the

For sales to distributors and resellers, we recognize revenues upon the delivery of our products to these parties. We reserve an amount equal to our estimate of all products held by such parties which are subject to rights of return and resale contingencies. We consider several factors in determining these estimates including historical experience, level of inventory in the distribution channels, nature of the product, fixed or determinable fees and payment terms. We reduce our revenues and the related receivables by this estimate.

For sales to original equipment manufacturers, we recognize revenues when the original equipment manufacturer reports sales that have occurred to an end user customer, provided that collection is probable. Some original equipment manufacturer arrangements include the payment of an upfront arrangement fee which is deferred and recognized either ratably over the contractual period or when the original equipment manufacturer reports sales that have occurred to an end user customer, in accordance with the contractual terms. If we determine, through royalty audits or other means, that an original equipment manufacturer did not report revenues accurately, we attempt to reconcile the discrepancies and, if appropriate, record additional revenues upon resolution.

Deferred revenues represent amounts under license and service arrangements for which the earnings process has not been completed. These amounts relate primarily to provision of maintenance and technical support services with future deliverables and arrangements where specified customer acceptance has not yet occurred. Deferred revenues classified as long-term in nature represent revenues that will not be realized for more than 12 months after the date of the balance sheet.

The allowance for doubtful accounts, which is netted against our accounts receivable on our balance sheets, totaled $1.8 million as of June 29, 2001, $2.1 million as of June 28, 2002 and $2.4 million as of March 28, 2003. The allowance for doubtful accounts represents estimated losses resulting from the inability of our customers to make required payments. We base our estimates on specific identification of probable bad debts based on collection efforts, aging of accounts receivable, our historical experience including bad write-offs and other factors. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, we may be required to record additional allowances. If the data we use to calculate the allowance does not reflect the future ability to collect outstanding receivables, we may be required to record additional allowances and the future results of our operations could be materially impacted. Our bad debt expenses are reflected in general and administrative expenses.

We evaluate contingent liabilities including threatened or pending litigation in accordance with Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies”. We assess the likelihood of any adverse judgments or outcomes to a potential claim or legal proceeding, as well as potential ranges of probable losses, when the outcome of the claims or proceedings are probable and reasonably estimable. A determination of the amount of accrued liabilities required, if any, for these contingencies is made after analysis of each matter. Because of uncertainties related to these matters, we base our estimates on the information available at the time. As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise our estimates. Any revisions in the estimates

We are subject to income taxes in both the United States and numerous foreign jurisdictions and we use estimates in determining our worldwide provision for income taxes. This process involves estimating actual current tax liabilities together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities which are recorded on the balance sheet. Our deferred tax assets consist primarily of net operating losses carried forward. We assess the likelihood that deferred tax assets will be recovered from future taxable income, and, a valuation allowance is recognized if it is more likely than not that some portion of the deferred tax assets will not be recognized. We provided a full valuation allowance against all of our deferred tax assets as of June 29, 2001 and June 28, 2002. During the nine months ended March 28, 2003, we released a portion of our valuation allowance against our deferred tax assets and have recorded current and long-term deferred tax assets at March 28, 2003. To the extent we establish any valuation allowance against our deferred tax assets or change this valuation allowance in a period, we reflect the impact in the provision for (benefit from) income taxes in our statements of operations. Although we believe that our tax estimates are reasonable, the ultimate tax determination involves significant judgment that could become subject to audit by tax authorities in the ordinary course of business.

We measure compensation expense for the majority of our stock option plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees” and related interpretations. The fair market value of our common stock on the date of grant is determined by the compensation committee of our board of directors. Because there has been no public market for our stock, the compensation committee determined the fair value of our common stock by considering a number of factors, including, but not limited to, independent valuations, our current financial performance and prospects for future growth and profitability, the status of product releases and product integration, the absence of a resale market for our common stock, the control position held by New SAC and comparisons to certain of our key valuation metrics with similar metrics for comparable publicly traded companies, including measures of market capitalization based on revenue multiples, price-to-earnings ratios and operating margins.

We have elected not to apply fair value-based accounting provided under SFAS No. 123 “Accounting for Stock-Based Compensation” because it requires the use of option valuation models, which in our opinion, do not provide a reliable measure of the fair value of our employee stock options.

As required by SFAS 123, as modified by SFAS No. 148 “Accounting for Stock Based Compensation — Transition and Disclosure — an Amendment of FASB Statement No. 123,” we provide pro forma disclosure of the effect of using the fair value-based method of measuring compensation expense. For purposes of the pro forma disclosure, we estimate the fair value of stock options issued to employees using the Black-Scholes option valuation model. This model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected life of options and our expected stock price volatility. Therefore, the estimated fair value of our employee stock options could vary significantly as a result of changes in the assumptions used.

We became an indirect subsidiary of New SAC on November 22, 2000 when New SAC indirectly acquired 37,500,500 shares, or 99.7% of our common stock outstanding on that date, under the terms of a stock purchase agreement with Old Seagate and Seagate Software Holdings. In the acquisition, New SAC purchased all of the operating assets of Old Seagate and its consolidated subsidiaries for cash and borrowings of $1.84 billion, including transaction costs of $25 million. This included Old Seagate’s rigid disc drive, storage area network, removable tape storage solutions businesses and operations, our common stock, and certain cash balances, but excluded the approximately 128 million shares of VERITAS common stock then held by Seagate Software Holdings and certain of Old Seagate’s equity investments.

The November 2000 transaction resulted in a change in control of our company. Under rules and regulations of the Securities and Exchange Commission, because more than 95% of our company was acquired and a change of control occurred, we restated all our assets and liabilities in our financial statements as of November 22, 2000 on a push down accounting basis, which involved the application of the purchase method of accounting to the financial statements of our company in the business combination. Push down accounting had a significant impact on our financial statements because the long-lived tangible and intangible assets and liabilities were measured at allocated fair values at the date of the transaction.

The table below lists the net purchase price allocation to our company of the tangible and intangible assets acquired by New SAC.

The purchase price paid by New SAC under the stock purchase agreement was fixed and no contingencies were identified that would have resulted in a change in the overall purchase price. However, in allocating the purchase price, New SAC recorded a full valuation allowance against deferred tax assets in accordance with Statement of Financial Accounting Standards No. 109 “Accounting for Income Taxes”, or SFAS 109. The deferred tax assets subject to this valuation allowance were based on the excess of tax bases over the fair values of acquired property, plant and equipment and liabilities assumed, for which New SAC expected to receive tax deductions in U.S. federal and state returns in future periods based on their ability to generate taxable income in the United States.

As of June 28, 2002, we reduced to zero the net carrying values of the intangible assets pushed down to our financial statements in connection with the November 2000 transaction. The reduction in our recorded intangible assets resulted from an allocation of the tax benefits recognized by Old Seagate in its U.S. income tax returns attributable to acquisition related deferred tax assets in accordance with SFAS 109. There was no impact on our valuation allowance. Our share of the reduction in intangibles was allocated as follows:


	•	Revenues. Deferred revenues were reduced by $1.3 million and revenues were reduced on a declining basis during the 12 months following the November 2000 transaction. Consequently, revenues were lower by $1.2 million for fiscal 2001 and $128,000 for fiscal 2002 than they would have been had the push down adjustments not occurred. There was no impact during the nine months ended March 28, 2003.

	•	Depreciation. Our long-lived tangible assets were reduced by $4.3 million on November 22, 2000. Consequently, we recorded $1.5 million less depreciation expense for each of fiscal 2001 and fiscal 2002 and $678,000 less for the nine months ended March 28, 2003 than we would have recorded had the push down adjustments not been made.

	•	Amortization. We recorded additional amortization expense of $3.3 million for fiscal 2001 and $5.6 million for fiscal 2002 from recording the incremental fair value of intangible assets pushed down to our financial statements on November 22, 2000.

	•	In-process research and development. We wrote off in-process research and development of $7.1 million as an expense in fiscal 2001. We did not have any similar expenses in fiscal 2002 or the nine months ended March 28, 2003.

	•	Elimination of intangible assets, net of deferred tax liability. We reduced intangible assets, net of deferred tax liability, by $9.1 million to zero at June 28, 2002.

While we have adopted SFAS No. 142 “Goodwill and Other Intangible Assets” at the beginning of fiscal 2003, the non-amortization provisions and the impairment tests will not be applicable until such time as we have recorded goodwill and other intangible assets on our balance sheet.

In August 1999, our company was formed to acquire Seagate Software Holdings’ business intelligence software business. Seagate Software Holdings’ assets consisted of the assets of the business intelligence software business and its investment in the common stock of VERITAS.

In an October 1999 reorganization, Seagate Software Holdings became a wholly owned subsidiary of Old Seagate. All outstanding options to purchase Seagate Software Holdings common stock were accelerated immediately prior to the transaction. Seagate Software Holdings’

Old Seagate accounted for the exchange of shares of its common stock for Seagate Software Holdings’ common stock outstanding and options vested more than six months held by employees and all stock held by former employees and consultants as the acquisition of a minority interest under purchase accounting. The fair value of the shares of Old Seagate issued was $19.4 million and was recorded as the purchase price of this minority interest and was allocated to all the identifiable tangible and intangible assets and liabilities of Seagate Software Holdings. Old Seagate accounted for the exchange of shares of its common stock for stock options in Seagate Software Holdings held by employees and stock held and vested by employees less than six months as the settlement of an earlier stock award. During fiscal 2000, Old Seagate recorded compensation expense of $283.6 million, plus $2.1 million of employer portion of payroll taxes related to the purchase of the minority interest in Seagate Software Holdings.

Our statement of operations for fiscal 2000 included an allocation of compensation expense arising from the October 1999 exchange of shares of $239.6 million of the total compensation expense of $283.6 million. Compensation expense was allocated to us on the basis of employees specifically identified with our business and for those employees that performed services for us, on the basis of time estimates. We recorded the offsetting entry as a capital contribution from Old Seagate on our statement of stockholders’ equity. The $2.1 million of employer portion of payroll taxes paid related to our employees and, therefore, we recorded that amount as an expense for fiscal 2000. In addition, we incurred $877,000 of legal and accounting costs in fiscal 2000 in connection with the October 1999 transaction.

Our financial statements for fiscal 2000 also included an allocation of $1.2 million of the $19.4 million purchase price allocation. The allocation was based on the fair value of our assets relative to the fair value of Seagate Software Holdings. We considered a number of factors in determining our estimated fair value including historical and projected revenues, earnings and cash flows, as well as other factors and our consultations with financial advisors. The allocation of the purchase price to our intangible assets as at October 20, 1999 was as follows (in thousands):

The following table sets forth certain statements of operations data expressed as a percentage of total revenues for the periods indicated. In view of our significant growth in recent years and as a result of the application of pushdown accounting to our financial statements, we believe that fiscal year-to-year comparisons of our financial results are not necessarily meaningful and you should not rely upon them as an indication of future performance.

The following table sets forth information regarding the composition of our revenues and fiscal period-to-period changes (dollars in thousands):

The majority of our revenues were derived from licensing fees for our products and we anticipate that licensing fees will continue to represent the majority of our revenues for the foreseeable future. Our revenues have increased as a result of the continued delivery of new products, better sales training, the increased size and productivity of our sales force and our targeted marketing campaigns. Additionally, we continued to add new customers with our

During the nine months ended March 29, 2002, revenues from a distributor, Ingram Micro, accounted for $16.2 million, or approximately 10% of total revenues. Revenues from Ingram Micro represented less than 10% of total revenues during the nine months ended March 28, 2003. No other customer or distributor accounted for 10% or more of our total revenues during these periods.

In the nine months ended March 29, 2002, our revenues were $115.3 million, or 74% of total revenues, from customers in North America, $29.6 million, or 19% of total revenues, from customers in Europe, the Middle East and Africa and $10.9 million, or 7% of total revenues, from customers in the Asia Pacific region. In the nine months ended March 28, 2003, our revenues were $153.8 million, or 74% of total revenues, from customers in North America, $40.6 million, or 19% of total revenues, from customers in Europe, the Middle East and Africa and $14.9 million, or 7% of total revenues, from customers in the Asia Pacific region.

Licensing revenues. The increase in licensing revenues occurred across all sales channels and most regions, and was primarily the result of the increased size and productivity of our sales force and the addition of new customers purchasing through our direct channel.

Maintenance, support and services revenues. The increase in maintenance, support and services revenues was primarily attributable to increased maintenance fees associated with sales of new licenses of our products and to increased technical support revenues. Because many of our customers renew maintenance agreements each year, increased maintenance revenues are generated from the cumulative growth in our customer base.

The following table sets forth information regarding the composition of our cost of revenues and fiscal period-to-period changes (dollars in thousands):

The absolute dollar increase in cost of licensing revenues was equally due to increased license volume and costs associated with new product releases. Cost of licensing revenues will vary depending on the volume, distribution method and mix of software licenses shipped. Cost of maintenance, support and services revenues increased as we continued to expand our customer support and professional services organizations to meet the demands of our growing customer base. These costs included increases in salary and benefit costs of $5.5 million, additional overhead cost allocations associated with increased headcount of $2.5 million and increased outside service costs of $815,000. Our overheads, which increased as the result of additional facilities and information technology costs over the comparative period, are generally allocated across departments based on headcount. However, the cost of maintenance, support and services revenues as a percentage of maintenance, support and services revenues benefited from cost-control initiatives. Amortization of developed technologies for the nine months ended

Our gross profit as a percentage of total revenues, or gross margin, increased from 74% for the nine months ended March 29, 2002 to 78% for the nine months ended March 28, 2003. The increase was primarily attributable to the elimination of amortization of developed technologies in the nine months ended March 28, 2003. Our gross margin from licensing revenues increased from 96% for the nine months ended March 29, 2002 to 97% for the nine months ended March 28, 2003. Our gross margin from maintenance, support and services revenues increased from 40% for the nine months ended March 29, 2002 to 45% for the nine months ended March 28, 2003. The increase was primarily the result of improved margins in maintenance and technical support, which was partially offset by decreased margins in our professional services organization. Our maintenance, support and services margins are impacted by the rate of utilization of our personnel and personnel costs relating to the use of our employees versus outside contractors, who are generally more expensive than our personnel.

The following table sets forth information regarding the composition of our operating expenses and fiscal period-to-period changes (dollars in thousands):

Sales and marketing. The increase in sales expenses in absolute dollars was primarily associated with increased salary and benefits expense of $8.9 million related to an overall increase in our sales force headcount and $725,000 related to higher total commissions associated with higher licensing revenues. In addition, ancillary costs such as travel and entertainment increased by $1.7 million. Advertising and promotion costs increased in absolute dollars by $895,000 primarily as a result of increased marketing campaigns and promotional material associated with major releases. The decrease in our sales and marketing expense as a percentage of total revenues resulted primarily from increased productivity in our direct sales force in addition to a higher percentage of sales by distributors, resellers and original equipment manufacturers.

Research and development. The increase in research and development expenses in absolute dollars primarily resulted from increased salary and benefits costs of $3.6 million associated with increased headcount. In addition, as research and development headcount comprises approximately 25% of our headcount, allocations for increases in facilities and overhead costs accounted for $3.6 million of the increase. We expect research and development

General and administrative. The increase in general and administrative expenses in absolute dollars and as a percentage of total revenues were primarily due to increases in salary and benefits expense of $3.3 million relating to increased staffing to support our growth and our enterprise resource planning system implementation. Expenses also increased by $1.6 million as a result of increased professional service fees, a non-recurring termination fee of $625,000 paid to Seagate Technology for the benefit of New SAC related to a previous consulting and advisory contract and recruiting fees and relocation fees of $715,000 associated with the hiring of several strategic positions.

Amortization of other intangible assets. Amortization of other intangible assets for the nine months ended March 29, 2002 related to the fair value of assembled workforce of $7.1 million pushed down to our financial statements as a result of the November 2000 transaction. There was no amortization during the nine months ended March 28, 2003 as a result of the reduction in June 2002 in the net carrying values of the intangible assets that were pushed down to our financial statements.

Interest and other income (expense), net was comprised of the following (dollars in thousands):

Net interest income for the nine months ended March 29, 2002 included $301,000 of interest received on the net receivable balance from Seagate Technology and $450,000 of non-recurring interest received on tax refunds. Since October 2001, we have earned the majority of our net interest income from our cash and cash equivalents at interest rates that were generally lower than those earned from Seagate Technology, which managed our cash prior to October 2001. The weighted average interest rate we earned fell from 2.8% for the nine months ended March 29, 2002 to 1.7% for the nine months ended March 28, 2003. Net interest income fluctuates depending on movements in the general level of interest rates, our average cash and available-for-sale securities balances, and, previously, our net position under the revolving loan agreement we had with Seagate Technology and the interest rates applied thereon.

Other income (expense) was largely comprised of net foreign exchange gains and losses, which represent the impact of foreign exchange rate fluctuations on the translation of foreign exchange transactions into U.S. dollars and varies depending upon movements in currency exchange rates. During the nine months ended March 28, 2003, we incurred a net foreign exchange loss of $770,000 primarily as the result of the translation of Canadian dollar payables at quarter end, which was the result of the strengthening of the Canadian dollar relative to the U.S. dollar. We recently implemented a partial hedging strategy for these exposures. We anticipate that we will also experience substantial foreign exchange expense in the quarter ending June 27, 2003 and potentially for future quarters due to the strengthening of the Canadian dollar relative to the U.S. dollar.

The change in effective tax rate was due primarily to the effect of continuing growth in profitability, a decrease in available foreign research and development tax credits and utilization of U.S. net operating losses in fiscal 2002 that had previously been subject to a valuation allowance.

The following table sets forth information regarding the composition of our revenues and fiscal year-to-year changes (dollars in thousands):

Revenues from Ingram Micro accounted for $27.7 million, or 16% of total revenues, for fiscal 2001 and $21.0 million, or 10% of total revenues, for fiscal 2002. The primary reason for the decrease during fiscal 2002 was the transition of one of our products from the distributor channel to direct sales. No other customer accounted for 10% or more of our total revenues during fiscal 2001 or fiscal 2002.

In fiscal 2001, our revenues were $123.5 million, or 74% of total revenues, from customers in North America, $31.8 million, or 19% of total revenues, from customers in Europe, the Middle East and Africa and $12.5 million, or 7% of total revenues, from customers in the Asia Pacific region. In fiscal 2002, our revenues were $159.8 million, or 74% of total revenues, from customers in North America, $41.8 million, or 19% of total revenues, from customers in Europe, the Middle East and Africa and $15.6 million, or 7% of total revenues, from customers in the Asia Pacific region.

Licensing revenues. The increase in licensing revenues was primarily attributable to an increase in the size and productivity of our direct sales force. Our direct sales force continued to add new customers, while continuing to make additional sales to our existing customers. In addition, we increased revenues from indirect sales, primarily from original equipment manufacturers. All of our channels benefited from the releases of our Crystal 8 product suite throughout fiscal 2001 and fiscal 2002.

Maintenance, support and services revenues. The absolute dollar increase in maintenance, support and services revenues was attributable to a higher cumulative installed customer base receiving maintenance. In addition, both consulting and technical support revenues increased as a result of new and existing agreements with our customers and the initiation of new pricing arrangements for these services.

The following table sets forth information regarding the composition of our cost of revenues and fiscal year-to-year changes (dollars in thousands):

We realized cost savings in cost of licensing revenues due to initiatives to reduce our production, fulfillment and shipping costs as a percentage of revenues. The absolute dollar increase in cost of maintenance, support and services revenues was the result of costs associated with increased headcount of $2.8 million and an increase in the use of external services to support our professional services organization of $2.1 million. The decline in cost of maintenance, support and services as a percentage of maintenance, support and services revenues was primarily attributable to the continued increase in maintenance revenues which have nominal associated costs, increased pricing for our technical support and cost control initiatives. At November 22, 2000, existing developed technologies were revalued and effective November 23, 2000, we began amortizing over 36 months the $15.2 million of developed technologies pushed down to our financial statements. The absolute dollar increase for fiscal 2002 was the result of amortization for fiscal 2001 being charged on a different and smaller intangible asset base up to and including the five months ended November 22, 2000.

Our gross margin increased from 70% for fiscal 2001 to 74% for fiscal 2002. The increase in our gross margin was primarily attributable to an increase in the margins for maintenance, services and support from 31% in fiscal 2001 to 40% in fiscal 2002.

The following table sets forth information regarding the composition of our operating expenses and fiscal year-to-year changes (dollars in thousands):

Sales and marketing. The absolute dollar increase in sales and marketing expenses was primarily associated with increased salary and benefits expense of $11.3 million related to an overall increase in our sales force headcount and $7.1 million related to higher total commissions associated with increased revenues. In support of our sales efforts, travel and entertainment costs increased by $1.1 million. The decrease as a percentage of revenues resulted from increased productivity of our sales force.

Research and development. The absolute dollar increase was primarily associated with costs associated with increased headcount of $1.4 million, offset by targeted reductions in discretionary spending of $355,000. The decrease in research and development costs as a percentage of total revenues was the result of revenues increasing at a greater rate than research and development costs due to cost control measures.

General and administrative. The increase in absolute dollars was primarily attributable to higher salary expense associated with our headcount growth of $755,000 and increased outside service costs of $1.9 million, which was offset in part by cost management initiatives.

Amortization of goodwill and other intangible assets. At November 22, 2000, existing goodwill and other intangible assets were revalued and effective November 23, 2000, we began amortizing over 36 months the $7.1 million of assembled workforce pushed down to our financial statements. The absolute dollar increase was the result of amortization for fiscal 2001 being charged on a different and smaller intangible asset base up to and including the five months ended November 22, 2000.

Write-off of in-process research and development. As part of the push down of the purchase price allocation of the November 2000 transaction, $7.1 million of in-process research and development was recorded. This amount, which was 4% of total revenues for fiscal 2001, was written off in its entirety in fiscal 2001 because the acquired technologies had not yet reached technological feasibility and there were no future alternative uses. We had no write-off of in-process research and development for fiscal 2002.

Unusual items. Unusual items were comprised of non-cash compensation expense arising from the acceleration and net exercise of Old Seagate options to purchase 51,500 shares of Old

Restructuring costs. The restructuring costs for fiscal 2001 related to the closure of eight offices in Europe and were part of a restructuring plan announced in September 2000 to consolidate our European sales organization. The restructuring costs were primarily comprised of costs related to the termination of office leases and other related office closure costs, as well as severance and benefits for nine sales and marketing employees who were terminated in September 2000. As of June 28, 2002, no material amount remained outstanding. We had no restructuring charges during fiscal 2002.

Interest and other income (expense), net was comprised of the following (dollars in thousands):

Interest income earned on the net receivable balance under our agreements with Old Seagate and its successor, Seagate Technology, was approximately $1.8 million for fiscal 2001 and $301,000 for fiscal 2002. Since October 2001, we have earned the majority of our net interest income from our cash and cash equivalent balances. While our cash and cash equivalents balances increased, the average interest rate was lower, which resulted in a decrease in net interest income for fiscal 2002.

The change in the effective tax rate was due primarily to our achievement of profitability and the absence of certain non-cash charges associated with the November 2000 transaction. In addition, the income tax provision for fiscal 2001 included benefits recorded during the period from July 1, 2000 to November 22, 2000 under the tax allocation agreement we had with Old Seagate. We provided a valuation allowance for fiscal 2001 and fiscal 2002 against the deferred tax assets arising primarily from temporary differences and net operating losses carried forward due to the uncertainty of their realizability.

The effective rate used to record the income tax provision differed from the 35% U.S. federal statutory rate in fiscal 2001 due primarily to the fact that we operate in various foreign jurisdictions, as well as an increase in the valuation allowance for U.S. deferred tax assets arising subsequent to the termination of the tax allocation agreement on November 22,

The effective rate used to record the income tax provision differed from the 35% U.S. federal statutory rate in fiscal 2002 due primarily to the benefits of operating in various foreign jurisdictions, including the availability of research and development investment tax credits in Canada, an increase in the valuation allowance and the inclusion of a reconstituted net operating loss. The increase in the valuation allowance and the inclusion of a reconstituted net operating loss are the results of filing the U.S. federal and state income tax returns for the year ended June 29, 2001 and reflecting a final revised purchase price allocation schedule regarding the November 2000 transaction.

The following table sets forth information regarding the composition of our revenues and fiscal year-to-year changes (dollars in thousands):

Revenues from Ingram Micro accounted for $25.3 million, or 20% of total revenues, for fiscal 2000 and $27.7 million, or 16% of total revenues, for fiscal 2001. No other distributors or customers accounted for 10% or more of our total revenues for fiscal 2000 or fiscal 2001.

In fiscal 2000, our revenues were $89.9 million, or 71% of total revenues, from customers in North America, $28.4 million, or 22% of total revenues, from customers in Europe, the Middle East and Africa and $8.6 million, or 7% of total revenues, from customers in the Asia Pacific region. In fiscal 2001, our revenues were $123.5 million, or 74% of total revenues, from customers in North America, $31.8 million, or 19% of total revenues, from customers in Europe, the Middle East and Africa and $12.5 million, or 7% of total revenues, from customers the Asia Pacific region.

Licensing revenues. The increase in licensing revenues for fiscal 2001 was primarily attributable to an increase in the size and productivity of our sales force subsequent to a turnover of the sales force and certain management positions in October 1999. In addition, new product releases during the latter half of fiscal 2000 and fiscal 2001, such as Crystal Reports 8.0 in February 2000 and Crystal Reports 8.5 and Crystal Enterprise 8.0 in March 2001, contributed to increased revenues. Crystal Reports 8.0 had higher prices than the prior version. Our remaining products in version 8 were priced in a number of new configurations in addition to the configurations offered in older versions.

Maintenance, support and services revenues. The absolute dollar increase in maintenance, support and services revenues was attributable to the higher cumulative installed customer base from new and existing customers, which resulted in increased sales of maintenance agreements and consulting services. The decline in maintenance, support and services revenues as a percentage of total revenues resulted from the accelerated growth in our licensing revenues for fiscal 2001.

The following table sets forth information regarding the composition of our cost of revenues and fiscal year-to-year change (dollars in thousands):

The absolute dollar increase in cost of revenues was primarily attributable to a $2.9 million increase in amortization of developed technologies that we recorded as a result of the push down accounting in fiscal 2001 related to the November 2000 transaction, which was offset in part by a corporate-wide initiative to manage costs.

Cost of licensing revenues. The increase in cost of licensing revenues in absolute dollars was due primarily to costs associated with an increased volume of shipments of our products during fiscal 2001, including increased production, fulfillment and shipping costs of $1.1 million. The lower cost of licensing revenues as a percentage of licensing revenues for fiscal 2001 was due to initiatives to reduce costs associated with our increased licensing revenues.

Cost of maintenance, support and services revenues. The increase in cost of maintenance, support and services was primarily due to increased salary and benefits expense of $2.9 million, offset by decreased outside services costs of $2.2 million. The decline in cost of maintenance, support and services revenues was attributable to the more efficient delivery of some of our support services and the mix in our use of company personnel versus sub-contracted consultants.

Amortization of developed technologies. At November 22, 2000, existing developed technologies were revalued and effective November 23, 2000, we began amortizing over 36 months the $15.2 million of developed technologies pushed down to our financial statements. The absolute dollar increase was the result of amortization for fiscal 2000 being charged on a different and smaller intangible asset base up to and including the five months ended November 22, 2000. Amortization for fiscal 2000 related to the amortization of previous allocations of intangible assets to us created by the October 1999 transaction.

Our gross margin increased from 64% for fiscal 2000 to 70% for fiscal 2001. Our gross margin increased due to a higher proportion of licensing revenues, as well as increased margins for licenses and maintenance, support and services, partially offset by the increase in amortization of developed technologies.

The following table sets forth information regarding the composition of our operating expenses and fiscal year-to-year changes (dollars in thousands):

Sales and marketing. The absolute dollar increase in sales and marketing expenses for fiscal 2001 was due primarily to the rebuilding and expansion of our sales force which accounted for approximately $10.5 million in increased costs over fiscal 2000, of which $6.7 million related to increased costs associated with increased headcount. This was offset by a decline of $3.1 million in marketing expenses, the majority of which related to a reduction of advertising and promotion costs. The decrease as a percentage of total revenues for fiscal 2001 was primarily attributable to the increase in productivity of our sales force and the resultant increase in revenues, the absence of costs associated with sales force turnover in fiscal 2000, as well as to a decline in marketing expenses.

Research and development. The absolute dollar increase was primarily associated with costs associated with increased headcount of $2.6 million, offset by targeted reductions in discretionary spending of $345,000 and reduced costs to localize our products of $620,000. The decrease in research and development costs as a percentage of total revenues resulted from total revenues increasing at a greater rate than research and development expenses and the more efficient use of our research and development resources.

General and administrative. The higher expenses in fiscal 2000 were primarily attributable to outside services expenses, which were approximately $2.2 million lower in fiscal 2001. The decline in fiscal 2001 was also due to more efficient management of general and administrative expenses including bad debt expenses, which declined by $1.3 million. This decline was partially offset by increases in salaries and benefit costs of $1.9 million related to an increase in personnel.

Amortization of goodwill and other intangible assets. At November 22, 2000, existing goodwill and other intangible assets were revalued and reduced to zero and effective November 23, 2000, we began amortizing over 36 months the $7.1 million of assembled workforce pushed down to our statements of operations. The absolute dollar decrease was the result of amortization for fiscal 2000 being charged on a different and larger intangible asset base up to and including the five months ended November 22, 2000.

Write-off of in-process research and development. We had no write-offs of in-process research and development for fiscal 2000. As part of the push down of the purchase price allocation of the November 2000 transaction, $7.1 million of in-process research and

Unusual items. Unusual items expenses in fiscal 2000 were related to the October 1999 exchange of shares and consisted of $239.6 million of compensation expense, $2.1 million of employer portion payroll taxes thereon and $877,000 of legal and accounting costs related to the October 1999 exchange of shares.

Unusual items expenses for fiscal 2001 resulted from the push down of non-cash compensation expense arising from the acceleration and net exercise of Old Seagate options to purchase 51,500 shares of Old Seagate common stock held by our employees on November 22, 2000.

Restructuring costs. The fiscal 2000 restructuring charges resulted from a company-wide restructuring plan announced in October 1999 to realign resources to better manage and control our business. The charges consisted of severance and benefits paid to approximately 125 employees from various locations and departments on October 23, 1999. The restructuring charges were paid during fiscal 2000 and no amounts or further restructuring liabilities related to this plan were outstanding as of June 30, 2000. Any benefits in the form of cost reductions because of reduced salaries were realized by the end of fiscal 2000 and were not expected to continue.

Restructuring charges for fiscal 2001 charges were related to the closure of eight offices in Europe, the Middle East and Africa and were part of a restructuring plan announced in September 2000 to consolidate the European sales organization. The charges were primarily comprised of costs related to the termination of office leases and other related office closure costs, as well as severance and benefits due to nine sales and marketing employees who were terminated in September 2000. At June 29, 2001, amounts remaining accrued but unpaid were not considered significant.

Interest and other income (expense), net was comprised of the following (dollars in thousands):

The increase in net interest income during fiscal 2001 was primarily attributable to interest earned on balances receivable under our agreements with Old Seagate and Seagate Technology and on excess cash. Early in fiscal 2000, we had a net payable position due to Old Seagate followed by a net receivable position later in the fiscal year. We recorded $583,000 of net interest expense in connection with the net payable. During fiscal 2001, we had a net receivable balance from Seagate Technology primarily as the result of cash payments we received for our net operating losses under the tax allocation agreement and we earned $1.8 million on the net receivable balance.

Other income was largely comprised of net foreign exchange gains and losses, which represent the impact of foreign exchange rate fluctuations on the translation of foreign exchange transactions into U.S. dollars and varies depending upon movements in currency exchange rates. During fiscal 2001, we had a net foreign exchange gain of $638,000 primarily as a result of the strengthening of the U.S. dollar relative to the Canadian dollar.

The change in the provision for income taxes was due to the absence of certain non-deductible compensation expenses recorded in connection with our October 1999 recapitalization and reorganization. In addition, the income tax provision for fiscal 2001 included benefits recorded during the period from July 1, 2000 to November 22, 2000 under the tax allocation agreement we had with Old Seagate. A valuation allowance for fiscal 2000 and fiscal 2001 was provided against the deferred tax assets primarily arising from temporary differences and net operating losses carried forward due to the uncertainty of their realizability.

The effective rate used to record the income tax benefit in fiscal 2000 was less than the 35% U.S. federal statutory tax rate due primarily to non-deductible expenses incurred in foreign jurisdictions in connection with the October 1999 recapitalization, including our October 1999 exchange of shares. The effective rate used to record the income tax provision differed from the 35% U.S. federal statutory rate in fiscal 2001 due primarily to the benefits of operating in various foreign jurisdictions which have differing tax treatments as compared to the U.S., as well as an increase in the valuation allowance for U.S. deferred tax assets arising subsequent to the termination of the tax allocation agreement on November 22, 2000 and non-deductible charges arising from push down accounting.

The table below shows our unaudited quarterly statements of operations data for each of the 11 quarters in the period ended March 28, 2003. This information has been derived from our unaudited financial statements, which, in our opinion, have been prepared on the same basis as our audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the information for the quarters presented. The results of operations for any quarter are not necessarily indicative of the results of operations for any future period.

Our total revenues and gross profit have increased each of the 11 quarters ended March 28, 2003, reflecting the growth of our business and increased customer base. Sales and marketing expenses have generally increased each quarter as we have steadily invested in our sales and marketing personnel and resources to address market opportunities. Sales and marketing expenses decreased in the quarter ended September 27, 2002 due to reduced marketing expenses in the quarters, following the release of products in the prior two quarters, a reduction in sales and marketing systems development expenses and reduced sales expenses. Research and development expenses have increased in each of the last seven quarters ending March 28, 2003, reflecting our commitment to continuing investment in product development and technology advancement. The quarterly fluctuation in general and administrative expenses was due to a variety of factors. In the three months ended December 29, 2000, general and administrative expenses increased due primarily to increased bad debt expenses, information technology costs, recruiting fees and outside services costs. In the three months ended March 29, 2002, general and administrative expenses increased due primarily to increased salary expenses, legal fees and other outside services expenses. In the three months ended September 27, 2002, general and administrative expenses increased due primarily to recruiting and relocation expenses for our senior executives, an additional bonus awarded by our board of directors to a senior executive officer and increased outside services costs, including consulting and legal fees. In the three months ended December 27, 2002, general and administrative expenses increased due primarily to increased personnel costs and consulting fees related to the implementation of our new enterprise resource planning system, a one-time payment of $625,000 to Seagate Technology for the benefit of New SAC relating to the termination of a consulting and advisory arrangement and increased outside services expenses, including legal fees. In the three months ended March 28, 2003, we had $801,000 of foreign exchange expense due to the strengthening of the Canadian dollar relative to the U.S. dollar. We anticipate that we will also experience substantial foreign exchange expense in the quarter ended June 27, 2003 and potentially for future quarters due to the strengthening of the Canadian dollar relative to the U.S. dollar.

The majority of our cash and available-for-sale securities are held in U.S. dollar denominated bank deposits or highly liquid investments in accordance with our investment policy. The remaining portion of our cash balances is denominated in the local currencies of our foreign operations, including Canadian dollars, British pounds, Japanese yen, Euros and other currencies. All of our cash is maintained in accounts with high credit quality financial institutions and our available-for-sale securities are maintained in highly rated instruments.

Our principal source of liquidity is our cash and available-for-sale securities, as well as the cash we generate from operations. During fiscal 2000, we used more cash in our operating activities than we generated primarily as the result of a receivable we extended to Old Seagate for income tax losses utilized by them due under the tax allocation agreement and the payment of $9.3 million compensation expense and related employer portion of payroll taxes associated with the June 1999 Old Seagate exchange offer. These were partially offset by a $24.4 million decline in accounts receivable as the result of a concerted effort to manage accounts receivable and increase the timeliness of cash collections. For fiscal 2001, fiscal 2002 and the nine months ended March 28, 2003, we have generated more cash from our operating activities than we used. We earned more revenues year-over-year, including deferred revenues, and have improved cash collections to 55 days sales outstanding for the quarter ended March 28, 2003. In addition, we increased our gross margins and reduced our overall operating costs as a percentage of total revenues.

In fiscal 2003, we began a lengthy implementation of an enterprise resource planning system for our North America and Asia Pacific regions. The system included modules for use by our financial and administrative functional departments including human resources, payroll, project management, budgeting, order management, accounts receivable, accounts payable, general ledger and other financial functions. To date, we have incurred approximately $6.2 million of expenditures in connection with the implementation of our enterprise resource planning system. The implementation of the enterprise resource planning system and the adjustment of our procedures to adapt to the new system has been slower and more costly than we anticipated. We expect to implement the system in Europe in early fiscal 2004 and expect to have the entire implementation completed by the end of calendar 2003.

Prior to the nine months ended March 28, 2003, our investing activities consisted solely of the purchase of property and equipment to support the growth of our business. In fiscal 2000, investing activities were primarily for the purchase of equipment. In fiscal 2001, investing activities were primarily the purchase of leaseholds improvements, computers, furniture and office equipment. During fiscal 2002, investing activities were primarily for the purchase of computer equipment and costs related to the purchase and implementation of a global enterprise resource planning system. Our investing activities in the nine months ended March 28, 2003 were related to implementation of new systems, including our enterprise resource planning system, leasehold improvements and furniture related to the expansion of existing leased space and other computer purchases.

We anticipate that our capital expenditures will be approximately $20 million for fiscal 2003, and expect that they will grow in fiscal 2004 to support improvements to our information systems infrastructure, the expansion of our facilities and the purchase of computer equipment to support the research and development of new products. The majority of our capital expenditures are denominated in Canadian dollars.

Prior to the nine months ended March 28, 2003, we did not invest in securities with maturities of 90 days or more but instead invested in securities with original maturities of 90 days or less. In addition, prior to October 2001, the majority of our cash balances were managed for us by Old Seagate and Seagate Technology, and represented a net receivable balance on the consolidated financial statements, on which we earned interest. During the nine months ended March 28, 2003, we purchased $12.3 million of short-term investments and received $6.3 million of maturity on some of these investments. In addition, we purchased $3.3 million of long-term investments, which had not matured as of March 28, 2003.

Prior to fiscal 2001, some of our working capital requirements were financed by borrowings from Old Seagate available under a revolving loan agreement that was subsequently amended on July 4, 2001 and renewed with Seagate Technology. The revolving loan agreement originally provided for maximum outstanding borrowings of up to $60.0 million, with the amount being reduced to $15.0 million on renewal. The revolving loan agreement expired on July 4, 2002 and was not renewed. There was no outstanding receivable or payable balance under this agreement upon its expiration.

We borrowed $24.0 million from Old Seagate in fiscal 2000 under the revolving loan agreement to fund our operations. During fiscal 2001, we repaid $4.8 million to Old Seagate under the revolving loan agreement. As a result of the receivable that arose in conjunction with the tax allocation agreement with Old Seagate, we received $31.0 million. In conjunction with the expiration of the revolving loan agreement, Old Seagate repaid the remaining balance of $4.3 million on the receivable balance, which was offset by nominal borrowing of $871,000 during fiscal 2002.

We receive cash payments on the issuance of common stock on the exercise of stock options by our employees and directors. Cash received from this source was nominal in fiscal 2000, $1.6 million in fiscal 2001, $1.9 million in fiscal 2002 and $648,000 for the nine months ended March 28, 2003. We cannot predict when our employees or directors will exercise their stock options and as such this source of cash is expected to vary.

During the nine months ended March 28, 2003, our Canadian subsidiary deposited $2.0 million into a guaranteed investment certificate to secure an overdraft credit facility and foreign exchange line. The balance and interest earned thereon is classified as restricted cash.

The following table summarizes our facilities operating lease commitments as of March 28, 2003 (in thousands):

Certain shares issued and option grants we made under our 1999 stock option plan to residents of California, Maryland and New York may not have complied with all applicable securities laws of those states. Accordingly, we are planning to make a rescission offer to these stockholders and optionees which will allow the holders to elect, during a limited period of time, to return their shares or options to us in return for a payment equal to their purchase price or 20% of their aggregate exercise price, as the case may be, plus any applicable interest. As of March 28, 2003, approximately 130,532 outstanding shares of our common stock and approximately 496,567 shares subject to outstanding options will be subject to the rescission offer. The shares and options had purchase and exercise prices ranging from $8.00 to $16.00 per share. We do not believe that the holders of these shares of our common stock and options to purchase our common stock will accept our offer because the prices at which we are offering to repurchase them are less than or equal to the fair market value of the estimated initial public offering price of our common stock. However, in the unlikely event that all of these persons accepted our offer, we would make total payments of approximately $2.2 million, which we would fund from our existing cash balances.

In October 2002, we executed an agreement with Comerica for a $15.0 million revolving line of credit. The revolving line provides for interest to be calculated at U.S. prime rate or LIBOR plus 2.5% per annum. Borrowings under the revolving line are limited to 80% of eligible accounts receivable, with an additional $2.0 million available in any month in which we maintain $15.0 million in our investment accounts with Comerica or some of its affiliates. On September 30, 2004, any outstanding principal and interest under the line of credit will be immediately due and payable. The revolving line is collateralized by substantially all of our personal property, excluding our intellectual property. The agreement also required our U.S. and Canadian subsidiaries to pledge all of their assets in support of our obligations under the agreement. We pledged shares of most of our subsidiaries.

The terms of the revolving line require us, among other things, to maintain the following quarterly financial covenants on a consolidated basis:



	•	a ratio of unrestricted cash and cash equivalents plus 80% of eligible accounts receivable to current liabilities less deferred revenue of at least 1.25 to 1.0;



	•	a tangible net worth of at least $28.0 million plus 50% of the net income for each quarter ending after October 1, 2002 plus 75% of the gross proceeds received by us from the sale of our equity securities; and



	•	positive free cash flow for the four quarter period then ended and positive free cash flow for at least two of the four quarters in such period.

We are restricted from selling, leasing or otherwise disposing of any part of our business or property under most circumstances. In addition, the agreement places restrictions on entering into arrangements that will result in a change of control, places restrictions on our ability to pay dividends and restricts our ability to incur other forms of indebtedness. We are also restricted from making some types of distributions or investments. We are also required to maintain at least an aggregate of $10 million in investment accounts with Comerica and some of its affiliates. No amounts were outstanding under the revolving line at March 28, 2003 or as of the date of this prospectus. At March 28, 2003, we maintained $35.1 million of our cash equivalents balance with Comerica.

Our Canadian subsidiary entered into a overdraft credit facility with The Bank of Nova Scotia during fiscal 2002 whereby The Bank of Nova Scotia will provide up to Canadian $2.0 million credit for certain overdrafts plus a foreign exchange forward trading line generally supporting notional contracts in the range of $4.0 million to $6.0 million. Any overdraft balances are subject to interest computed at the bank’s prime lending rate payable monthly. At March 28, 2003, there were no balances outstanding under this agreement. On September 26, 2002, our Canadian subsidiary placed $2.0 million on deposit with The Bank of Nova Scotia as a general hypothecation to the overdraft credit facility and the foreign exchange line. The funds held and the interest earned thereon are classified as restricted cash on our balance sheet.

Our future liquidity and capital requirements will depend on numerous factors, including:


	•	the amount and timing of our revenues;

	•	the extent to which our existing and new products gain market acceptance;

	•	the extent to which customers continue to renew maintenance agreements;

	•	the extent of required and planned capital expenditures required to support our current operations and growth; and

	•	available borrowings under future credit arrangements, if any.

We believe that the net proceeds from this offering, together with our current cash, cash equivalents, short-term investments and the cash generated from our operations, the overdraft agreement with The Bank of Nova Scotia, and the available borrowings under the line of credit with Comerica will be sufficient to meet our operating and capital requirements for at least the

next 12 months. We anticipate that our capital expenditures will be approximately $22.0 million in fiscal 2004. We have no current plans, and we are not currently negotiating, to obtain additional financing following the closing of this offering. The factors described above will affect our future capital requirements and the adequacy of our available funds. If we need to raise funds in the future, we may be required to raise those funds through public or private financings, strategic relationships or other arrangements. We cannot assure you that the funding, if needed, will be available on terms attractive to us, or at all. Furthermore, any additional equity financing may be dilutive to stockholders and debt financing, if available, may involve restrictive covenants. Our failure to raise capital as and when needed could have a negative impact on our ability to pursue our business strategy and maintain profitability.

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates and foreign exchange rates. We do not hold or issue financial instruments for trading purposes.

Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. The investment of cash is regulated by our investment policy of which the primary objective is the safety and preservation of our invested funds by limiting default risk, market risk and reinvestment risk. Among other selection criteria, our current investment policy states that all investments must be maintained in U.S. dollar denominated investment grade securities, with the exception of up to 20% of cash equivalents that may be held in non-U.S. dollar denominated investments, with no maturities exceeding two years. In addition, our investment policy does not allow for investment in technology companies.

We mitigate the effect of default risk by investing in only high credit quality securities and by using a portfolio manager to respond appropriately to a significant reduction in credit rating of any investment issuer, guarantor or depository. The portfolio includes only diversified marketable securities with active secondary or resale markets to ensure portfolio liquidity.

Our investments in debt securities include money market funds, investment grade commercial paper, corporate bonds, government agency securities and other debt securities. The diversity of our portfolio helps us to achieve our investment objective. As of March 28, 2003, all of our cash, cash equivalents, short-term and long-term investments were classified as available-for-sale.

While we are exposed to interest rate fluctuations in many countries, our interest income is most sensitive to fluctuations in the general level of U.S. interest rates. Declines in interest rates over time will reduce our interest income and we do not attempt to reduce or eliminate our exposure to interest rate risk through the use of derivative financial instruments due to the short-term nature of the investments. For the nine months ended March 29, 2002 and March 28, 2003, fluctuations in the U.S. interest rate did not have a material impact on our net interest income.

We conduct business on a global basis in international currencies. As such, we are exposed to adverse or beneficial movements in foreign exchange rates. The majority of our sales are denominated in U.S. dollars, the currency in which we report our financial statements; however, we do conduct a portion of our sales in currencies other than the U.S. dollar, including the British pound, Euro, Canadian dollar and Japanese yen.

We are also exposed to foreign exchange rate fluctuations as the financial results of our foreign subsidiaries are translated into U.S. dollars on consolidation. As exchange rates vary, these results, when translated, may vary from expectations and adversely or beneficially impact overall expected profitability.

We incur the majority of our research and development, customer support costs and administrative expenses in Canadian dollars and British pounds. For example, approximately 75% of our revenues were denominated in U.S. dollars, 10% in British pounds and less than 5% in Canadian dollars for the nine months ended March 28, 2003. Approximately 35% of our total expenses were denominated in the U.S. dollars, 15% in British pounds and 40% in Canadian dollars in the nine months ended March 28, 2003. These percentages fluctuate with exchange rates, business operating changes and cash flow versus expense patterns. We have evaluated our exposure to these risks and have determined that our only significant operating exposure to foreign currencies at this time is to the Canadian dollar. As such, we may experience foreign exchange gains or losses as the result of timing differences between expenses being incurred and paid. The strengthening of the Canadian dollar has negatively affected and may continue to negatively affect our operating expenses and net income and we continue to have foreign currency risk from this source. For the nine months ended March 28, 2003, a 10% increase in the Canadian dollar relative to the U.S. dollar would have increased our revenues by less than 1% but would have increased our expenses by approximately 4%.

We cannot predict the effect of exchange rate fluctuations upon our future results. We recently implemented a partial hedging strategy for these exposures. Although we recently have begun hedging, we cannot be sure that any hedging techniques we may implement will be successful or that our business, results of operations, financial condition and cash flows will not be adversely affected by exchange rate fluctuations.

In December 2002, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock Based Compensation — Transition and Disclosure — an Amendment of FASB Statement No. 123”, or SFAS 148. SFAS 148 amends Statement of Financial Accounting Standards 123, “Accounting for Stock-Based Compensation”, or SFAS 123, to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based compensation under SFAS 123. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 and Accounting Principles Board Opinion No. 28 “Interim Financial Reporting”, or APB 28, to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. We follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for most of our stock options. SFAS 148’s amendment of the transition and annual disclosure provisions of SFAS 123 is effective for fiscal years ending after December 15, 2002. The amendment to disclosure requirements under APB 28 is effective for interim periods beginning after December 15, 2002. As required by SFAS 148, we are providing quarterly disclosure of the effect of the fair value based method of accounting. We do not expect to voluntarily adopt the fair value based method of SFAS 123 and, therefore, we do not expect the measurement provisions of SFAS 148 to affect our financial statements.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”, or FIN 45. FIN 45 expands the disclosure requirements of guarantee obligations and requires that a liability be recorded in the guarantor’s balance sheet upon issuance of a guarantee. In addition, FIN 45 requires disclosures about the guarantees, including indemnifications, that an entity has issued. The disclosure provisions of FIN 45 are effective for financial statements of interim periods ending after December 15, 2002. However, the provisions for initial recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002. We do not expect the adoption of FIN 45 to have a material impact on our financial statements, other than required disclosures.

Our products are used by organizations of all sizes across almost all segments of the economy. As of March 28, 2003, we had delivered more than 14 million product licenses and had registered users in more than 170 countries. As a result, we have a diverse customer base that includes software developers, approximately 350 independent software vendors and numerous well established companies, such as Aetna, ADP, Citigroup, Coca-Cola, JP Morgan Chase Bank, Kraft Foods and Northrop Grumman.

Organizations of every size need to analyze and assess their performance quickly and effectively. As a result, every organization has a fundamental and widespread need for useful information. The burden on organizations to make more effective use of information is increasing rapidly in today’s environment, which is characterized by increasing data volume, uncertain economic trends, increasing competition and heightened legislative and regulatory requirements for data collection, reporting and disclosure.

Organizations have spent billions of dollars implementing software systems to efficiently capture, organize, store and protect data that measures their performance, including customer sales, expenses, inventory management and employee data. However, these transactional software systems were not primarily designed to facilitate easy access, viewing, manipulation and broad dissemination of data. Employees and customers often do not have access to the information within these systems. If they do, employees and customers do not typically have the ability to customize the information or analyze it from multiple perspectives. As a result, there is a basic need to access, analyze, understand and deliver information more effectively within and among organizations.

A broad category of software known as business intelligence has been developed to help organizations address the need to transform the organizations’ growing amount of data into useful information. In 2003, IDC estimated that the market for business intelligence software would be $4.5 billion in 2007.

Organizations have typically deployed business intelligence products that are custom developed or purchased as stand-alone products in a specific department or for an individual project. This approach has resulted in a proliferation of products and systems that are often not integrated with each other or existing enterprise systems and, as a result, only provide a fragmented view of the overall business. Many of these products and systems are costly and complex to maintain and support. In addition, many business intelligence products are designed primarily for sophisticated analytical users and are difficult for the non-technical user to master. Most non-technical users require intuitive and seamless access to data as part of their regular work tasks, regardless of where the data is stored in an organization.

To allow broad user access to data within and among organizations and to maximize the organizations’ return on investment, a business intelligence product should meet a range of complex needs. A business intelligence product should integrate data from disparate systems and applications, scale to support large numbers of users and offer flexible reporting that is easy to use and provides a full range of presentation, formatting and interactivity. We believe there is a significant opportunity to provide organizations with a different approach to business intelligence software by focusing on the most common information and reporting needs. In order to accomplish this objective, we believe business intelligence products should serve as an underlying information infrastructure that allows every user to access information in a form appropriate for the user.

We develop, market and support products that enable users to access data, add value to it through analysis and reporting and reliably manage and deliver the results within business applications or processes. Our business is driven by a primary guiding principle: to help organizations bring together their people and information to improve decision-making and performance. Our products focus first on solving the most common business intelligence need, which is for information reporting and delivery. To achieve our goals, we designed our products as a core reporting and analysis infrastructure for an organization’s data systems and applications. Our products allow organizations to maximize the value of the data they have without requiring extensive re-engineering or creation of additional systems that cannot work with the existing transactional software systems.

Lower overall information technology costs through standardization. Our products have been designed to access data from, and integrate with, a wide range of existing transactional software, database and custom-built systems. Our products facilitate data access, analysis and reporting in a consistent, standardized manner. This standardization empowers more users to access more information in a more usable form and allows organizations to integrate functions and applications more easily. As a result, organizations can better use and increase the return on their existing information technology investments. We also believe that our products are able to lower the overall information technology purchase, maintenance and training costs for organizations by consolidating those data analysis and reporting systems into our single platform.

Meet essential information management demands. We believe that information reporting, analysis and delivery are essential parts of almost every application in every organization. As organizations increasingly depend on using their information for most processes, the business intelligence infrastructure upon which they rely is subject to increased technological demands. We have developed our products to meet these demands and to be:


	•	scalable in terms of concurrent user volume, capacities, processing, throughput and use of hardware assets;

	•	reliable by providing high levels of uptime, high fault tolerance, disaster recovery and redundancy capability;

	•	high performance in terms of response and processing times for users and requests;

	•	manageable in terms of ease of deployment and cost of maintenance and ownership;

	•	flexible enough to be used in any size deployment; and

	•	extensible as organizational needs change over time.

Address the information requirements of all users and organizations. Our products can be used by technical and non-technical staff to improve decision-making and enhance competitiveness. Our products are flexible enough to provide users with an appropriate level of interactivity and sophistication. We believe that our products create a complete and integrated reporting, analysis, query and information delivery infrastructure to satisfy the requirements of sophisticated analysts and technical users while also providing the ease of use necessary to appeal to non-technical users. To address the specific requirements of customers of all sizes and their projects, our products are available individually or together as an integrated suite.

Ease of integration with existing systems. Our products are designed to be easy to deploy, customize and integrate into a customer’s existing information technology environment and processes. As the needs of each customer are unique, our products are open and flexible enough to provide developers and systems integrators with the means to complete deployments on an organizational or departmental basis. As a result, our customers can use our products in the manner that best suits their requirements and generates value from their systems and software investments.

Our goal is to become a leading global provider of business intelligence software and services through a focus on information reporting, analysis and delivery. To achieve this goal, we are pursuing the following strategies:

Continue to enhance our technology leadership position. We believe we are a technology leader in business intelligence software. We intend to continue to devote significant resources to technology development and to introduce new products and components that promote broader and more effective use of information. We intend to extend our leadership in product scalability, reliability and performance by focusing on solving the information management complexities and challenges faced by organizations. In addition, we are enhancing our integrated products by expanding our software’s interoperability with various transactional software systems, operating systems, development environments and data repositories. We intend to continue to provide open and flexible software that permits application developers to integrate and implement our reporting, analysis and delivery functionality into the applications they develop.

Increase sales through our broad multi-channel distribution model. We currently distribute our products through multiple distribution channels, including direct sales by our sales force and indirect sales by distributors, resellers, original equipment manufacturers and system integrators. We believe that this distribution strategy permits us to introduce all types of customers to our products and their benefits. We intend to continue to invest in developing these distribution channels to sell additional products to existing and new customers.

Leverage our strategic relationships. We intend to continue to align with those companies that lead or significantly influence the platforms, developer tools and applications for the markets in which they participate. We believe that these relationships will help us develop and market products that will become standards within those companies’ markets. We currently have relationships with leading software vendors, such as Microsoft and SAP, which bundle and/or resell our software with their products. Our software is also bundled and/or resold with the products of approximately 350 independent software vendors, and we intend to continue to expand those relationships to increase market share and user adoption. In addition, we intend to continue to pursue relationships with leading systems integrators.

Capitalize on our broad installed base of our products to drive wider enterprise adoption. We believe there is a significant opportunity to further penetrate our existing customer base with our current and future products. As of March 28, 2003, we had delivered over 14 million product licenses and had registered users in more than 170 countries. Components of our products are already in widespread use in a broad range of organizations. Therefore, we intend to continue to

Enhance our international sales and language support. We currently derive a substantial majority of our sales from our North American operations. We believe there is a significant opportunity to increase penetration of our products and services outside of North America. Currently, we have offices in over 30 locations around the world, including Asia, Australia and Europe. We intend to further expand our sales, marketing and support efforts in Asia, Australia and Europe. We generally offer the current versions of our products in English, French, German and Japanese. Some of our products are also available in Korean, Simplified and Traditional Chinese, Italian and Spanish. We intend to support other languages and make other localization efforts to increase our sales outside North America.

Crystal Reports is an integrated software package for query, report design, application development and report publishing functions. Crystal Reports is used to generate data driven, highly formatted, interactive reports which are stored in a proprietary file format. Crystal Reports is designed in a range of versions to meet the needs of report authors, analysts and application developers. Crystal Reports allows these users to:


	•	access most types of structured data;

	•	format, design and process a variety of reports; and

	•	integrate these reports into .NET, Java, COM and other development environments.

Reports can be published in a variety of formats including DHTML, RTF, Microsoft Excel, PDF and XML. Crystal Reports is deployed on the Windows operating system and is available in Simplified Chinese, English, French, German, Italian, Japanese, Korean and Spanish.

To build a common business report, such as a sales report, a technical report author could use Crystal Reports to access relevant sales and customer databases, organize and format the appropriate information, such as customer name, sales amount, product selection and shipping dates. The report could include tables of information, graphs, maps and/or images, conditional formatting, advanced business logic and summarized calculations. The finished report could be viewed and used by any end user, who could navigate the report by page or by clicking on charts or summaries for more detail and could also print or e-mail the report. An application developer could use one of the reporting components embedded within Crystal Reports to include this sales report as a seamless part of another application, such as a sales management system.

Crystal Analysis consists of software that includes functions for user ad hoc analysis, analytic reporting, analytic application development and online analytical processing for multi-dimensional data. We provide Crystal Analysis products in a range of client and server versions for a variety of users including non-technical users, analysts and developers. Our client-based analysis product provides powerful and guided data navigation and enables the creation of interactive report applications. Our analytic server product can be used to consolidate large amounts of data with complex business logic to facilitate sophisticated analysis by the end user.

All Crystal Analysis components can integrate with Crystal Enterprise and Crystal Reports. Our client-based analysis product can be deployed on Windows. Our analytic server product can be deployed on servers using the Windows, Solaris, AIX, HP-UX and Linux operating systems. Crystal Analysis is available in English, French, German and Japanese.

A business analyst could use the client-based Crystal Analysis product to access a large multidimensional data warehouse and track key information, such as product sales by region over time. The business analyst could simultaneously integrate key variables, such as margin and pipeline, and interactively explore sales results using different views of the data to identify trends in the information and forecast the impact of changes on the sales model or product mix.

Crystal Enterprise is infrastructure software that integrates our products and fosters efficient management and delivery of report information. It offers a customizable solution for providing interactive information to employees, customers and suppliers. Crystal Enterprise addresses a range of information management needs including the need for:


	•	a scalable, reliable platform to manage, process, store and deliver information to a large number of internal and external users; and

	•	standardized reporting, analysis and information delivery across multiple business applications.

Crystal Enterprise can be deployed on servers using the Windows, Solaris and AIX operating systems. Almost any web-browser or standards-based application can serve as the Crystal Enterprise user interface. Crystal Enterprise is available in English, French, German and Japanese.

A customer could use Crystal Enterprise to build, deploy and maintain a web-based sales information application or to deliver specific sales reports as part of a packaged customer relationship management system. Crystal Enterprise would store report content from Crystal Reports or Crystal Analysis, integrate with the customer’s existing user security protocols and process reports on demand for any user. The user interface could be presented as a user-customized summary page with navigation, scheduling and viewing capabilities to enable easy use by any type of user.

Crystal Applications are software templates that provide reports, user interface components and data models to support common processes, such as performance management, sales force management, e-commerce and telecommunications billing analyses. These templates are built using our Crystal Enterprise platform and are functional examples of how our products can be combined to address specific issues. We believe that these templates help accelerate customer adoption and deployment of our products.

A customer could customize, complete and deploy our performance management application template with Crystal Enterprise to provide a management scorecard to help track corporate performance against key metrics, such as number of new orders booked by month, days’ sales outstanding, customer shipments and sales representative turnover.

Our Crystal Enterprise partner kits are a series of software toolkits and packages that enable customers to integrate our products with those of other independent software vendors by providing an interface to the transactional software system’s data structures and security regimes. Most kits include data access drivers, sample reports and data structures and may

We believe that high quality, real time customer support is important to the successful marketing, sales and implementation of our products. Accordingly, in addition to offering our software products, we offer our customers a broad range of post-sale support services such as technical support, training and consulting. These services are designed to help us to optimize customer satisfaction and influence customers’ future purchasing decisions. We are committed to developing and sustaining long-term relationships with our customers and have dedicated substantial resources to customer service and support, including over 457 dedicated staff members as of March 28, 2003.

We offer maintenance programs for most of our products, which generally consist of product enhancements and upgrades when and as we make them available. We generally sell maintenance in 12-month increments.

To speed end user adoption of our products, our professional services organization provides consulting and training to plan and execute their deployment. We have a dedicated team in North America and England who perform these services for us alone or in combination with other consultants, system integrators or value added resellers.

Our technical support services are designed to assist our customers to use our products to their full potential. We believe effective technical support during product evaluations and implementations benefits our customers and that post-sales support has been and will continue to be a means to achieve greater customer satisfaction. We provide a range of technical support services to match the needs of different organizations including fee-for-service offerings. We operate technical support groups that are located at various sites around the world, including North America and Europe. We also offer 24 hour, seven-day toll-free telephone services with some types of technical support packages.

We have developed relationships with a wide range of technology vendors and service providers including industry leaders and influencers such as Microsoft and SAP. In many cases, we have integrated our products with those of the other party and our products are delivered with theirs. We believe these relationships generate new sales opportunities, increase our deployment capacity and enhance our products’ features.

We began our relationship with Microsoft in 1993. Microsoft currently integrates our products into its developer product suite, Visual Studio.NET and Business Solutions products. We receive advance notice of planned upgrades and improvements to Microsoft’s products so that we can integrate our products before shipment. We have a full time staff at Microsoft’s Redmond, Washington facilities. We also coordinate sales and marketing efforts where possible. Through its Business Solutions value-added reseller channel, Microsoft resells our products with its customer relationship management and enterprise resource planning products.

We have an original equipment manufacturer and reseller arrangement with SAP whereby SAP incorporates our Crystal Enterprise and Crystal Reports products into SAP’s BW 3.0 product, its data warehouse product. We receive advance notice of planned upgrades and improvements to SAP’s products so that we can integrate our products before shipment. We have full time staff at a site adjacent to SAP’s Walldorf, Germany facility.

We also have original equipment manufacturer relationships with approximately 350 independent software vendors. These companies sell and support our products and/or integrate our products into their applications. As a result of these relationships, we believe our customers may derive incremental value from the other applications by using our integrated reporting and analysis products without a separate deployment or integration cycle. We consider our relationships with these companies to be of strategic importance to us because they are generally industry leaders and influence adoption of products and technologies by customers.

As of March 28, 2003, we had delivered more than 14 million product licenses and had registered users in more than 170 countries. Our products are used by organizations of all sizes in almost every segment of the economy. As a result, we have a diverse customer base that includes a broad community of software developers and a number of well established companies. The following table lists some of our top 50 end user customers who purchased products directly from us by revenues, other than maintenance and support revenues, we recognized from July 3, 1999 to March 28, 2003.

We derived a substantial portion of our revenues from one distributor, Ingram Micro, during the last three fiscal years. As a percentage of our total revenues, Ingram Micro accounted for 20% in fiscal 2000, 16% in fiscal 2001, 10% in fiscal 2002 and less than 10% in the nine months ended March 28, 2003. No other customer accounted for 10% or more of our total revenues in fiscal 2000, fiscal 2001, fiscal 2002 or the nine months ended March 28, 2003.

In fiscal 2000, our revenues were $89.9 million, or 71% of total revenues, from customers in North America, $28.4 million, or 22% of total revenues, from customers in Europe, the Middle

East and Africa and $8.6 million or 7% of total revenues, from customers in the Asia Pacific region. In fiscal 2001, our revenues were $123.5 million, or 74% of total revenues, from customers in North America, $31.8 million, or 19% of total revenues, from customers in Europe, the Middle East and Africa and $12.5 million, or 7% of total revenues, from customers the Asia Pacific region. In fiscal 2002, our revenues were $159.8 million, or 74% of total revenues, from customers in North America, $41.8 million, or 19% of total revenues, from customers in Europe, the Middle East and Africa and $15.6 million, or 7% of total revenues, from customers in the Asia Pacific region. In the nine months ended March 28, 2003, our revenues were $153.8 million, or 74% of total revenues, from customers in North America, $40.6 million, or 19% of total revenues, from customers in Europe, the Middle East and Africa and $14.9 million, or 7% of total revenues, from customers in the Asia Pacific region. See our consolidated financial statements and note 16 to the financial statements in this prospectus for more information.

Our customers often purchase licenses for a single location, department or division and may later expand their use of our products to other parts of their organizations. We believe we can sell additional licenses of our existing products to our existing customer base and also sell those customers new products as we expand our product line.

The following case study illustrates how one of our customers, Aetna, a health insurance and benefits provider, adopted our products to solve a business problem. Aetna’s management needed to pull financial and operational data from disparate systems throughout the company, analyze that data quickly and present the resulting information in a form that would assist management in making effective business decisions. Aetna integrated our Crystal Enterprise 8.5 and Crystal Reports 8.5 products into its existing information systems, allowing Aetna to extract and present a unified view of financial and operational data from 50 different data sources that feed into its Microsoft SQL Server and IBM DB2 databases. Previously, in order for Aetna to tabulate monthly financial information from dozens of geographically dispersed offices, a full month was required using a combination of Microsoft Excel spreadsheets and Microsoft Word documents. With our products in place, Aetna was able to cut the time it takes to generate such monthly financial data from a full month to only 12 to 14 days. The reports created with our products present the information to Aetna’s management in a unified, flexible view that can break down financial and operational information based on business units, geography or customer segments. Additionally, by providing Aetna’s management with a one-company view of the organization, our software provides Aetna with a better view of the performance and profitability of its various products.

We organize our sales and marketing programs by geographic regions, including North America, Japan, the Asia Pacific region and the European region, which includes the Middle East and Africa. In most cases, we sell our English language products. In some cases, we adapt certain products for foreign markets, including translation of documentation and user interfaces to local languages.

To reach our customers, we utilize a direct sales force and indirect sales channels, such as our original equipment manufacturer relationships and a network of resellers and distributors. Our sales channels are supported by our pre-sales and technical specialists. Customers can also purchase some of our products by downloading them over the Internet.

We sell our products primarily through a direct sales force that is comprised of field sales personnel, inside sales personnel, telesales personnel and our eStore staff. Our field sales force,

consisting of customer account managers, professional service account coordinators and support managers, focus on mid-sized and large enterprises. Our inside sales force, consisting of customer account managers, professional services account coordinators and support managers, focus their efforts on small and mid-sized enterprises, with most selling conducted over the telephone. Our inside sales force most often contacts sales prospects who already use our Crystal Reports product. Our telesales group serves as a direct telephone link to customers who call our offices, affording us the opportunity to address customer issues and make additional sales. Our eStore provides us with an opportunity to test pricing and promotional strategies and conduct low-cost sales via the world wide web. Our direct sales force for North America is managed from our Vancouver, Canada offices. We also have a direct sales presence throughout the world managed from our offices in England, Japan and Singapore.

Our indirect revenues include sales to distributors, other resellers and original equipment manufacturers and as a percentage of total revenues were 40% in fiscal 2000, 37% in fiscal 2001, 33% in fiscal 2002 and 33% in the nine months ended March 28, 2003. We have established indirect sales channels through distributors and resellers, who primarily focus their sales efforts on small and mid-sized organizations. We sell our products through original equipment manufacturers that bundle our products with theirs. We have a sales team targeted at developing and maintaining our relationships with original equipment manufacturers.


	•	targeted print advertising in trade, technical and business publications;

	•	online advertising on our web site;

	•	cooperative marketing programs with original equipment manufacturers, distributors and other resellers;

	•	participation in seminars and tradeshows;

	•	direct mailings to both prospective and existing customers; and

	•	extensive public relations activities and programs to build relationships with key information technology community analysts and influencers.

Our marketing groups produce, or oversee the production of, substantially all of our online and print product literature, brochures, advertising and similar marketing and promotional material.

Since our inception, we have devoted significant resources to the development of our products and technology. We believe that our future success depends in large part on continued innovation and rapid product development. We conduct a majority of our research and development operations in Vancouver, Canada and Ipswich, England. As of March 28, 2003, our research and development team consisted of 438 persons.

We had research and development expenses of $27.4 million in fiscal 2000, $29.2 million in fiscal 2001, $30.5 million in fiscal 2002 and $29.9 million in the nine months ended March 28, 2003. Our customers did not fund any of our research and development expenses in fiscal 2000, fiscal 2001, fiscal 2002 or the nine months ended March 28, 2003. We pursue our product development objectives by developing new software products and product enhancements internally, but may from time to time acquire products, technologies and businesses

Our success and ability to compete is dependent in part on our ability to develop and maintain the proprietary aspects of our technology and operate without infringing upon the proprietary rights of others. We rely primarily on a combination of copyright, trade secret and trademark laws, confidentiality procedures, contractual provisions and other similar measures to protect our proprietary information. Due to the rapidly changing nature of applicable technologies, we believe that the improvement of existing products, reliance upon trade secrets and unpatented proprietary know-how and development of new products are generally more important than patent protection. We have two United States issued patents, eight patent applications pending in the United States and one foreign patent application pending. We also have an ongoing trademark registration program pursuant to which we register some of our product names, slogans and logos in the United States and in some foreign countries.

We also use contractual provisions to protect our intellectual property rights. We license our software to be integrated or sold with the products of numerous independent software vendors, as well as licensing directly to end users. These license agreements, which address our technology, documentation and other proprietary information, include restrictions intended to protect and defend our intellectual property. These licenses are generally non-transferable and are typically perpetual. We also require all of our employees, contractors and many of those with whom we have business relationships to sign non-disclosure and confidentiality agreements.

Our products also include third party software that we obtain the rights to use through license agreements. We use this software primarily to add features that we do not choose to develop internally.

The market for our products is highly competitive, rapidly evolving and subject to changing technology, customer needs and new product introductions. We compete principally with vendors of integrated query, reporting, analysis and information delivery software, such as Actuate, Brio Software, Business Objects, Cognos, Hummingbird, Information Builders and MicroStrategy. We also face or expect to face some competition from the SAS Institute and Informatica and expect increased competition from additional market entrants, including companies that specialize in the development, marketing and support of software products that assist users to access, analyze and interpret data to make business decisions. We also face competition from database and application vendors, such as Microsoft, Oracle, SAP and IBM, who offer reporting and analysis tools with their products.


	•	product functionality;

	•	performance and reliability;

	•	quality of customer support;

	•	ease of use and installation;

	•	availability and quality of consulting and implementation services;

	•	vendor reputation;

	•	demonstrable cost-effective benefits for users;


	•	price;

	•	sales and marketing capabilities; and

	•	financial stability of the software provider.

We believe that we currently compete effectively with our competitors on the basis of these factors. Our ability to remain competitive will depend to a great extent upon our ongoing performance in the areas of product development and customer support. To be successful in the future, we believe that we must respond promptly and effectively to the challenges of technological change and our competitors’ innovations by continually enhancing our product offerings. Performance in these areas will in turn depend upon our ability to attract and retain highly qualified technical personnel in a competitive market for experienced and talented software developers.

As of March 28, 2003, we had 1,703 full-time employees, including 599 in sales and marketing, 457 in services and support, 438 in research and development and 209 in general and administrative functions. None of our employees are represented by a labor union or are the subject of a collective bargaining agreement. We have never experienced a work stoppage and believe that our employee relations are good. We believe our future success will depend in large part upon our ability to attract and retain highly skilled managerial, product development, sales and marketing personnel.

Our principal executive offices are located in Palo Alto, California. Our other principal facilities are located in Canada and the United Kingdom. The majority of our facilities are occupied under leases that expire at various times through fiscal 2015. At March 28, 2003, our leased space approximates 361,000 square feet with approximately 220,000 square feet located in Canada, 60,000 square feet located in the United States, 60,000 square feet located in Europe and 21,000 square feet located in the Asia Pacific region. These figures exclude approximately 68,000 square feet of unoccupied space in Canada and approximately 3,000 square feet leased to others in the United States.

We believe that our facilities are adequate for our current needs and that suitable additional or substitute space will be available as needed to accommodate expansion of our operations.

In addition to the foregoing, we are subject to other litigation in the ordinary course of our business. While we believe that the ultimate outcome of these matters will not have a material adverse effect on us, the outcome of these matters is not determinable and negative outcomes may adversely affect business, results of operations and our financial condition.

Our directors and executive officers and certain information about them as of March 28, 2003 are as follows:

Jonathan J. Judge has served as our president and chief executive officer since October 2002 and a director since November 2002. From 1976 until he joined our company, Mr. Judge held various management positions with IBM, most recently as general manager of IBM’s personal computing division.

William G. Gibson has served as our chief operating officer since September 2000. From April 1998 to September 2000, Mr. Gibson served as the president, western region, of Rogers Wireless, Inc. From August 1997 to March 1998, Mr. Gibson served as vice president-business units at Lucent Technologies, Inc. Mr. Gibson served as vice president and general manager at Sprint PCS from April 1997 to August 1997. Mr. Gibson served as vice president and general manager of Ameritech Cellular and Paging from June 1993 to April 1997.

Eric Patel has served as our chief financial officer since November 1999. From February 1997 to November 1999, Mr. Patel served in various capacities at University Games, a board game manufacturing company, the most recent of which was chief financial officer and vice president of operations and international sales and marketing. From May 1993 to November 1996, Mr. Patel served as director of strategy for Dreyers Ice Cream.

Anthony L. Wind has served as our chief technology officer since July 2001. From December 1999 to July 2001, Mr. Wind served as our vice president of products and research and development. From February 1998 to December 1999, Mr. Wind served as our predecessor’s vice president of products. Mr. Wind served as director of research and development for our predecessors from September 1994 to February 1998.

Andrew L. Handford has served as our vice president of products and research and development since July 2001. From June 1999 to July 2001, Mr. Handford served as our director of product management. From July 1995 to June 1999, Mr. Handford held a series of management roles in our company and its predecessors.

Gregory B. Kerfoot has served as a director since August 1999 and has served as the chairman of our board of directors since July 2002. Mr. Kerfoot served as our chief executive officer from August 2000 until October 2002, and as president from August 1999 to October

2002. Mr. Kerfoot also served as our chief operating officer from August 1999 until August 2000. Mr. Kerfoot joined Old Seagate in May 1994 when Old Seagate acquired Crystal Computer Services. He continued as director of research and development for Crystal Computer Services. In May 1996, he was appointed president of Crystal Computer Services and later in 1996 was named executive vice president and general manager of Crystal Computer Services. From September 1997 to September 1999, Mr. Kerfoot served as the chief strategic officer for Seagate Software Holdings, as well as executive vice president and general manager of Seagate Software Holdings.

Fred D. Anderson has served as a member of our board of directors since August 2002. Mr. Anderson is executive vice president and chief financial officer of Apple Computer, Inc., which he joined in April 1996. Mr. Anderson is also a member of the board of directors of 3Com Corporation.

Robert L. Bailey has served as a member of our board of directors since April 2003. Mr. Bailey is the president and chief executive officer of PMC-Sierra, Inc. in which capacity he has served since July 1997. Mr. Bailey has served as a director for PMC-Sierra since October 1996 and as chairman of PMC-Sierra’s board of directors from February 2000 to February 2003.

Justin T. Chang has served as a member of our board of directors since February 2001. Mr. Chang is a partner of Texas Pacific Group and has been an executive of Texas Pacific Group since 1993. Prior to joining Texas Pacific Group, Mr. Chang was a financial analyst in the Merchant Banking Group and the Mergers and Acquisitions Group of Wasserstein Perella & Co., Inc. Mr. Chang is also a member of the board of directors of ON Semiconductor.

Stephen J. Luczo has served as a member of our board of directors since August 1999. Mr. Luczo served as the chairman of our board of directors from August 1999 to July 2002 and served as our chief executive officer from August 1999 to November 2000. Mr. Luczo became the chief executive officer and a director of Seagate Technology and New SAC in November 2000. From July 1998 to May 2000, he served as president and chief executive officer of Old Seagate and was a director of Old Seagate from July 1998 to November 2000. He joined Old Seagate in October 1993 as senior vice president, corporate development. In March 1995, he became Old Seagate’s executive vice president, corporate development and chief operating officer of the software group. Mr. Luczo is a member of the Listed Company Advisory Committee of the New York Stock Exchange.

David J. Roux has served as a member of our board of directors since February 2001. Mr. Roux is a managing member of Silver Lake Partners, a private equity firm he co-founded in January 1999. Since November 2000, Mr. Roux has served as chairman of New SAC and as a director of Seagate Technology. From November 2000 until June 2002, Mr. Roux also served as chairman of Seagate Technology. From February 1998 to November 1998, he served as the chief executive officer and president of Liberate Technologies. From September 1994 until December 1998, Mr. Roux held various management positions with Oracle Corporation, most recently as executive vice president of corporate development. Before joining Oracle, Mr. Roux served as senior vice president, marketing and business development at Central Point Software from April 1992 to July 1994. Mr. Roux is a member of the boards of directors of Gartner, Inc. and VERITAS.

John W. Thompson has served as a member of our board of directors since February 2001. Mr. Thompson has served as a director of Seagate Technology since November 2000. Mr. Thompson is chairman of the board of directors and chief executive officer of Symantec Corporation, which he joined in April 1999. From 1971 to April 1999, Mr. Thompson held various executive and management positions with IBM. Mr. Thompson is a member of the boards of directors of NiSource Inc. and United Parcel Service, Inc.

Donald L. Waite has served as a member of our board of directors since August 1999. Since November 2000, Mr. Waite has served as executive vice president and chief administrative officer of New SAC and Seagate Technology. Mr. Waite also serves as officer and/or director of several subsidiaries and affiliates of Seagate Technology. From March 1995 to November 2000, Mr. Waite served as executive vice president and chief administrative officer of Old Seagate. Mr. Waite also served as chief financial officer of Old Seagate from October 1983 to February 1998. Mr. Waite joined Old Seagate in 1983. Mr. Waite also serves as a member of the board of directors of California Micro Devices Corporation.

Our board of directors consists of nine members, each of whom is currently subject to election at our annual meeting of stockholders. Our board of directors is able to change the number of directors to ten without the approval of our stockholders but will be limited from making any other changes to the size of our board by our stockholders agreement with New SAC and some of New SAC’s shareholders that will be in effect when the registration statement related to this offering is declared effective by the Securities and Exchange Commission. See “Our Relationships and Arrangements with New SAC, Seagate Technology, our Officers and our Directors — Crystal Decisions Stockholders Agreement” for a discussion of how our directors are nominated and our committees are composed.

Executive officers are elected by the board of directors on an annual basis and serve until their successors have been duly elected and qualified. There are no family relationships among any of our directors or executive officers.

Our board of directors has a nominating and corporate governance committee, an audit committee, a compensation committee and, as of the closing of this offering, will have a strategic and financial transactions committee. Each of our committees will have the composition and responsibilities described below:

Our nominating and corporate governance committee is comprised of Messrs. Chang, Kerfoot and Roux, each of whom is a non-management member of our board of directors. The nominating and corporate governance committee is entitled to nominate four of our nine directors, subject to the approval of a majority of our board of directors. In the event that we elect to increase the size of our board of directors to ten members, then the nominating and corporate governance committee will be entitled to nominate five of our 10 directors. Additionally, the nominating and corporate governance committee is responsible for, among other things:


	•	developing and recommending to our board of directors a set of corporate governance principles applicable to our company;

	•	overseeing the process for evaluating our board of directors and management;

	•	evaluating the current composition, organization and governance of our board of directors and its committees, determining future requirements and making recommendations to our board of directors for approval; and

	•	reviewing and evaluating, at least annually, the performance of the nominating and corporate governance committee and its members, including the compliance of the nominating and corporate governance committee with its charter.

Our audit committee is comprised of Messrs. Anderson, Bailey, Thompson and Waite, each of whom is a non-management member of our board of directors. Messrs. Anderson, Bailey and Thompson are independent directors within the meaning of the independent director and audit committee requirements for quotation on the Nasdaq National Market. We intend to seek an exemption for Mr. Waite to remain on our audit committee after the completion of this offering.

Our compensation committee is comprised of Messrs. Anderson, Luczo, Roux and Thompson, each of whom is a nonmanagement member of our board of directors. In accordance with our compensation committee charter, at least two members of the compensation committee are outside directors as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, and at least two members are nonemployee directors within the meaning of Rule 16b-3 of the rules promulgated under the Securities Exchange Act of 1934, as amended. The compensation committee is responsible for, among other things:


	•	reviewing and making recommendations to our board of directors relating to the compensation policy for our employees, officers, directors and consultants;

	•	reviewing and making recommendations to our board of directors regarding all forms of compensation to be provided to our chief executive officer and all equity compensation grants to our officers;

	•	reviewing and making recommendations to our board of directors regarding general compensation goals and guidelines for our employees and the criteria by which bonuses to our employees are determined;

	•	making recommendations to our board of directors with respect to amendments to our benefit plans and changes to the number of shares reserved for issuance under our benefit plans; and

	•	producing an annual report on executive compensation for inclusion in our annual proxy statement.

Our strategic and financial transactions committee will be effective when this offering occurs and will be comprised of Messrs. Chang, Judge, Luczo and Roux. The committee is responsible for discussing matters relating to mergers, acquisitions or capital raising events in which we may have the opportunity to participate from time to time. After analyzing each potential transaction, the committee will make a recommendation to the board of directors for its consideration in determining whether to pursue a given transaction.

Beginning in June 2003, we will pay our directors cash compensation of $25,000 per year for their service as members of our board of directors. We will also pay the chairperson of our audit committee an additional $10,000 per year and the other members of that committee an additional $5,000 per year. We reimburse our directors for reasonable travel expenses in connection with attendance at board and committee meetings. Prior to June 2003, we did not pay any cash compensation to our directors, except for reimbursement for reasonable travel expenses in connection with attendance at board and committee meetings.

Under our 1999 stock option plan, nonemployee directors are eligible to receive stock option grants at the discretion of the board of directors. In May 2003, we granted each of Messrs. Anderson, Chang, Luczo, Roux, Thompson and Waite an option to acquire

10,000 shares of our common stock at $16.00 per share. In May 2003, we granted Mr. Bailey an option to purchase 25,000 shares of our common stock at $16.00 per share. In August 2002, we granted Mr. Anderson an option to purchase 25,000 shares of our common stock at $11.00 per share. In May 2001, we granted each of Messrs. Chang, Roux and Thompson an option to purchase 25,000 shares of our common stock at $8.00 per share. In November 1999, we granted Mr. Luczo an option to purchase 137,500 shares and granted Mr. Waite an option to purchase 25,000 shares of our common stock at an exercise price of $8.00 per share. Each of the grants vest as to 25% of the shares at the first anniversary of grant and as to 1/48th of the shares monthly thereafter. After this offering is completed, nonemployee directors will receive stock options pursuant to the 2002 director option plan. If desired, our board may also grant options to our directors under our 2002 stock option plan, which will become effective when the registration statement related to this offering is declared effective by the Securities and Exchange Commission.

Our board of directors established its compensation committee in November 1999. Prior to establishing the compensation committee, our board of directors as a whole performed the functions delegated to the compensation committee. Mr. Luczo, a member of our board and compensation committee, is an executive officer of Seagate Technology. Mr. Luczo is also a former officer of our company. See “Our Relationships and Arrangements with New SAC, Seagate Technology, our Officers and our Directors” for more information about transactions between us and Mr. Luczo.

The following table sets forth all compensation awarded, earned or paid for services rendered in all capacities to us during fiscal 2000, 2001 and 2002, to our chief executive officer and our four next most highly compensated executive officers, to whom we refer to collectively as the named executive officers in this prospectus, each of whose compensation exceeded $100,000 in fiscal 2002.


(1)	The stock options listed in the table represent options to purchase our common stock. See “Option Grants in Fiscal 2002” for additional information regarding options to purchase our stock granted during fiscal 2002.


(2)	Mr. Judge became our president and chief executive officer in October 2002 and is paid an annual base salary of $400,000 with a maximum bonus payout of $800,000. See “Employment Contracts, Change-of-Control Arrangements and Separation Agreements” for additional information regarding Mr. Judge’s agreement.


(3)	Mr. Kerfoot was our chief executive officer from August 2000 to October 2002, our president from August 1999 to October 2002 and our chief operating officer from August 1999 to August 2000.

(4)	Mr. Kerfoot donated his bonus to the Crystal Decisions Foundation, a non-profit charitable foundation.


(5)	Mr. Gibson’s compensation for fiscal 2001 included amounts since joining us in September 2000 as our chief operating officer.



(6)	Mr. Patel’s compensation for fiscal 2000 included amounts since joining us in November 1999 as our chief financial officer. Mr. Patel’s compensation includes amounts contributed by Mr. Patel to the group registered retirement savings plan in the amounts of $2,449 for fiscal 2001 and $9,342 for fiscal 2002. Excluded from Mr. Patel’s compensation was the employer match made by us under the group registered retirement savings plan, which was the lesser of Canadian $2,500 or 6% of annual salary for each calendar year.


(7)	Fiscal 2001 other annual compensation included approximately $76,900 related to a one-time net tax equalization amount that was paid by us on Mr. Patel’s behalf after his repayment of certain advances for Canadian tax liabilities.


(8)	Mr. Wind’s compensation includes amounts contributed by Mr. Wind to the group registered retirement savings plan in the amounts of $3,861 for fiscal 2000, $3,817 for fiscal 2001 and $3,640 for fiscal 2002. Excluded from Mr. Wind’s compensation was the employer match made by us under the group registered retirement savings plan, which was the lesser of Canadian $2,500 or 6% of annual salary for each calendar year.

All named executive officers are employed in Canada and paid in Canadian dollars. The amounts shown in the above table are expressed in U.S. dollars converted from Canadian dollars using the weighted average annual exchange rate for the relevant fiscal year.

The following table sets forth certain information concerning grants of stock options to each of our named executive officers during fiscal 2002. We granted each of the options to acquire our common stock set forth in the following table at the fair market value of our common stock at November 13, 2001, which was $8.50 per share.

All stock options granted to named executive officers in fiscal 2002 vest as to 25% of the shares subject to the option on the first anniversary of the vesting commencement date and as to 1/48th per month thereafter. Under our 1999 stock option plan, our board retains discretion to modify the terms of outstanding options. The percentage of total options granted was based on aggregate grants of options to purchase 1,909,909 shares of common stock to our employees and named executive officers in fiscal 2002.

The foregoing options were granted to our named executive officers at an exercise price equal to the fair market value of our common stock on the grant date, as determined by the compensation committee of our board of directors. Because there was no public market for our stock prior to this offering, the compensation committee determined the fair market value of our common stock by considering a number of factors, including, but not limited to, contemporaneous valuations, our current financial performance and prospects for future growth and profitability, the status of product releases and product integration, the absence of a resale market for our common stock, the control position held by New SAC and comparisons of certain of our key metrics with similar metrics for comparable publicly traded companies, including measures of market capitalization based on revenue multiples, price-to-earnings ratios and operating margins.

The table sets forth the hypothetical gains or option spreads that would exist for the options at the end of their respective 10-year terms based on assumed annualized rates of compound stock price appreciation of 5% and 10% from the dates the options were granted until the expiration of the 10-year option term. The disclosure of 5% and 10% assumed rates is required by the rules of the Securities and Exchange Commission and does not represent our estimate or projection of future common stock prices or stock price growth.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values

The following table sets forth certain information regarding the exercise of stock options in fiscal 2002 by the named executive officers and the value of options held by these individuals at June 28, 2002.

The value received is calculated as the market value of our common stock at the exercise date minus the exercise price. The value of unexercised in-the-money options is deemed to be the fair market value of our common stock at fiscal year end minus the exercise price. The fair market value of our common stock on June 28, 2002, as determined by the compensation committee of our board of directors, was $12.00 per share. However, we have used the estimated initial public offering price of $ per share for purposes of this computation.

Because there was no public market for our stock prior to this offering, the compensation committee determined the fair market value of our common stock of $12.00 per share as of June 28, 2002 by considering a number of factors, including, but not limited to, contemporaneous valuations, our current financial performance and prospects for future growth and profitability, the status of product releases and product integration, the absence of a resale market for our common stock, the control position held by New SAC and comparisons of certain of our key metrics with similar metrics for comparable publicly traded companies, including measures of market capitalization based on revenue multiples, price-to-earnings ratios and operating margins.

Employment Contracts, Change-of-Control Arrangements and Separation Agreements

In September 2002, we entered into an agreement with Mr. Judge in connection with Mr. Judge’s employment as our president and chief executive officer. We agreed to pay Mr. Judge a base salary of $400,000 with additional performance-based bonus compensation of up to a maximum of $800,000 per year. Mr. Judge also received an option grant of 1,000,000 shares at a per share exercise price of $11.00 in November 2002. Mr. Judge’s initial option vests as to 25% of the shares on the first anniversary of his employment with us and as to 1/48th of the total number of shares monthly thereafter. In addition, we agreed to recommend to our board of directors that the board grant Mr. Judge an option to purchase 125,000 shares of our stock upon successful completion of an initial public offering, as well as an option to purchase an additional 125,000 shares of stock upon completion of four successive quarters of attaining 100% of our revenues and profitability targets after completion of an initial public offering. These additional options will be granted at a fair market value to be determined by the board of directors on the date of grant and will be subject to four-year vesting from the date of grant.

Mr. Judge also is entitled to health benefits as well as reimbursement for reasonable premium costs for a $1 million term life insurance policy, up to a maximum annual premium of $20,000. We agreed to provide Mr. Judge with coverage for typical relocation expenses, reasonable attorneys’ fees in connection with the negotiation of his letter agreement and reasonable annual tax and financial planning expenses.

We have agreed to pay Mr. Judge a severance payment of $400,000 upon termination of his employment for any reason after five years as our employee. We have also agreed to assist Mr. Judge in establishing a Canadian immigrant trust. Mr. Judge agreed to place his Georgia residence in the trust during his employment with us for up to one day less than five years. In return, we agreed to pay or reimburse Mr. Judge for any Canadian departure taxes arising from his residence relating to the employment period of up to one day less than five years. If Mr. Judge is employed by us for at least five years, we have agreed to pay or reimburse him for any Canadian departure taxes related to his residence whenever the departure tax liability may arise, including following termination of his employment for any reason. However, if we terminate his employment without cause prior to his five-year employment anniversary, we will not be obligated to cover his Canadian departure taxes related to his residence. We refer to these payments as the residence tax payments.

In the event that we terminate Mr. Judge for any reason other than cause or if he resigns as a result of involuntary termination on or before his one-year anniversary of employment with us, we have agreed to pay Mr. Judge, in lieu of any other severance other than the severance payment or the residence tax payments, if due, 1.5 times his base salary and target bonus for the year and to cover his COBRA premiums for the full period provided by law or provide up to $2,500 per month for the same period in reimbursement for healthcare premiums if COBRA is not available. In the event that this termination occurs after his one-year anniversary of his employment with us, we have agreed to pay him the sum of his base salary and target bonus for the year in addition to the coverage for the COBRA premiums discussed above. In the event that we terminate Mr. Judge for cause or if he voluntarily resigns other than pursuant to involuntary termination, we may elect, in our sole discretion, to provide him with the benefits described in this paragraph so that he will be subject to a non-compete agreement and so that he will sign a release of all claims against us, our directors and our employees.

In the event of a change of control, we have agreed to provide Mr. Judge with immediate vesting of 50% of his then unvested shares with respect to his initial option grant of 1,000,000 shares and his pending grant of 125,000 options to be granted upon the successful completion of our initial public offering, as well as one additional year of vesting on any of his other options. In the event that he resigns within three months following a change of control in which he is not made the chief executive officer of the surviving entity, we have agreed to pay Mr. Judge, in lieu of any other severance other than the accelerated vesting described above and the severance and residence tax payments, if due, and a lump sum cash payment equal to two times the sum of his base salary and target bonus. In the event of an involuntary termination or termination by us without cause within 12 months following a change of control, we have agreed to pay Mr. Judge, in lieu of any other severance other than the accelerated vesting and the severance and residence tax payments, if due, a lump sum cash payment equal to two times the sum of his base salary and target bonus for the year, as well as providing full acceleration of his initial option grant of 1,000,000 shares and his pending grant of 125,000 shares and acceleration of one year of vesting for all of his other options, if any.

In July 2000, we entered into an agreement with Mr. Gibson in connection with Mr. Gibson’s employment as our chief operating officer. We agreed that if we terminated Mr. Gibson’s employment without just cause for which we have agreed to provide him written notice, we would pay him his then current base salary for one year, an amount equal to his bonus for the calendar year immediately preceding his termination and an allowance of 10% of his annual base salary in lieu of all other benefits. We would be required to pay these amounts to Mr. Gibson monthly over a one year period.

Other than our agreements with Messrs. Judge and Gibson, we currently do not have change-of-control or separation agreements with any of the named executive officers nor do we have any employment agreements that require our officers to provide services to us for any specific term.

Our board of directors adopted our 1999 stock option plan in August 1999 and reserved 11,250,000 shares of common stock for issuance under the 1999 plan. The 1999 plan was approved by our stockholders in August 1999.

The 1999 plan provides for grants of incentive stock options to employees, including officers and employee directors and nonstatutory stock options to employees, consultants and nonemployee directors of our company, our parent and our respective subsidiaries. The purposes of our 1999 plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to our employees and consultants to perform future services and to promote the success of our business. At the direction of the board of directors, the compensation committee administers our 1999 plan and determines, among other things, the optionees and the terms of options granted, including the exercise price, number of shares subject to the option and the exercisability thereof.

The term of the options granted under the 1999 plan is set forth in the option agreement. The term of an option may not exceed 10 years and, in the case of an incentive stock option granted to an optionee who owns more than 10% of the voting power of all the classes of stock of our company, parent or subsidiaries at the time of grant, the term of an option may not exceed five years. The exercise price for options granted under the 1999 plan is determined in the option agreement. However, in the case of options granted to an employee who owns stock representing more than 10% of the voting power of all classes of voting stock of our company, parent or subsidiaries, the exercise price may be no less than 110% of the fair market value of a share of our common stock at the time of the grant. For all other employees, the exercise price may not be less than fair market value of our common stock for an incentive stock option and may not be less than 85% of the fair market value for a nonstatutory stock option. Generally, options granted under the 1999 plan vest as to 25% of the shares subject to the option on the first anniversary of the vesting commencement date and as to 1/48th per month thereafter of the shares subject to the option.

No incentive stock options may be granted to an optionee, which, when combined with all other incentive stock options becoming exercisable in any calendar year that are held by that person, would have an aggregate fair market value in excess of $100,000. In any fiscal year, we may not grant any employee options to purchase more than 2,500,000 shares. However, in connection with his or her initial employment, an employee may be granted options to purchase up to an additional 1,500,000 shares that will not count against the 2,500,000 share limit.

In the event of a merger of our company or a sale of substantially all of our assets, any option which is not assumed or substituted by a successor will fully vest and then terminate upon the completion of the merger or sale.

The 1999 plan will terminate in August 2009, unless our board of directors terminates it sooner. Our board of directors has determined that we will not grant any additional options under the 1999 plan after this offering occurs other than under our French or United Kingdom sub-plans until such time as we receive sufficient regulatory approvals to grant options to persons in these jurisdictions under our 2002 stock option plan.

As of March 28, 2003, we had issued 512,079 shares of common stock upon the exercise of options under the 1999 plan. In addition, there were 8,686,357 options to purchase shares of our common stock outstanding and 2,050,680 shares available for grant under the 1999 plan as of March 28, 2003.

Certain shares issued and option grants made under the 1999 plan to residents of California, Maryland and New York may not have complied with all applicable securities laws of

those states. Accordingly, we are planning to make a rescission offer to these stockholders and optionees which will allow the holders to elect, during a limited period of time, to return their shares or options to us in return for a payment equal to their purchase price or 20% of their aggregate exercise price, plus any applicable interest. As of March 28, 2003, approximately 130,532 outstanding shares of our common stock and approximately 496,567 shares subject to outstanding options will be subject to the rescission offer. The shares and options had purchase and exercise prices ranging from $8.00 to $16.00 per share. We do not believe that the holders of these shares of our common stock and options to purchase our common stock will accept our offer because the prices at which we are offering to repurchase them are less than or equal to the fair market value of the estimated initial public offering price of our common stock. However, in the unlikely event that all of these persons accepted our offer, we would make total payments of approximately $2.2 million.

Our board of directors adopted our 2000 stock option plan in June 2000 and reserved 100,000 shares of common stock for issuance under the 2000 plan. Our stockholders approved the 2000 plan in June 2000.

The 2000 plan provides for grants of incentive stock options to employees, including officers and employee directors, of our company, parent or subsidiaries and nonstatutory stock options to employees, consultants and non-employee directors of our company, our parent and our respective subsidiaries. The purposes of our 2000 plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to our employees, consultants and non-employee directors and to promote the success of our business. At the request of the board of directors, the compensation committee administers our 2000 plan and determines, among other things, the optionees and the terms of options granted, including the exercise price, number of shares subject to the option and the exercisability thereof.

The term of the options granted under the 2000 plan is set forth in the option agreement. The term of an option may not exceed 10 years and, in the case of an incentive stock option granted to an optionee who owns more than 10% of the voting power of all of the classes of stock of our company, parents or subsidiaries at the time of grant, the term of an option may not exceed five years. The exercise price for options granted under the 2000 plan is determined in the option agreement. However, in the case of options granted to an employee who owns stock representing more than 10% of the voting power of all classes of voting stock of our company, parent or subsidiaries, the exercise price may be no less than 110% of the fair market value of a share of our common stock at the time of the grant. For all other employees, the exercise price may not be less than fair market value of our common stock for an incentive stock option and may not be less than 85% of the fair market value for a nonstatutory stock option. Under the terms of the stock option agreements under which the outstanding stock options were granted, the options were granted at fair market value and become fully vested and exercisable immediately prior to a merger or sale of substantially all of our assets, or on the date upon which a registration statement related to our initial public offering is declared effective by the Securities and Exchange Commission. We expect to record a non-cash dividend upon vesting of these options when our initial public offering occurs, as all of the options under this plan have been granted to employees of our parent or a company under common control.

The 2000 plan will terminate in June 2010, unless our board of directors terminates it sooner. Our board of directors has determined that we will not grant any additional options under the 2000 plan after this offering occurs.

As of March 28, 2003, we had granted options to purchase 80,725 shares of our common stock under the 2000 plan of which 53,225 options were outstanding; however, no shares have

Our board of directors adopted our 2002 stock option plan in May 2002 and amended it in May 2003. We expect the 2002 stock option plan to be approved by our stockholders prior to the effective date of this offering. This plan will be effective upon the effective date of a registration statement filed with the Securities and Exchange Commission in connection with this offering. A total of 2,500,000 shares of common stock have been reserved for issuance under our 2002 plan, together with an annual increase in the number of shares of common stock reserved under the plan beginning on the first day of our fiscal year, commencing July 3, 2004, in an amount equal to the lesser of:


	•	3,750,000 shares of common stock;

	•	5.0% of our outstanding shares of common stock on the last day of the prior fiscal year; or

	•	an amount determined by our board of directors.

The 2002 plan provides for grants of incentive stock options to our employees including officers and employee directors of our company, parent or subsidiaries and nonstatutory stock options to employees, consultants and nonemployee directors. The purposes of our 2002 plan are to attract and retain the best available personnel, to provide additional incentive to our employees, consultants and nonemployee directors and to promote the success of our business. At the request of the board of directors, the compensation committee administers our 2002 plan and determines, among other things, the optionees and the terms of options granted, including the exercise price, number of shares subject to the option and the exercisability thereof.

The term of the options granted under the 2002 plan is set forth in the option agreement. However, the term of an incentive stock option may not exceed 10 years and, in the case of an option granted to an optionee who owns more than 10% of the total combined voting power of all classes of stock of our company, parent or subsidiaries at the time of grant, the term of an option may not exceed five years. Options granted under the 2002 plan vest and become exercisable as set forth in each option agreement.

With respect to any optionee who owns more than 10% of the total combined voting power of all classes of stock of our company, parent or subsidiaries, the exercise price of any stock option granted must be at least 110% of the fair market value of our common stock on the grant date. For all other employees, the exercise price may not be less than fair market value. However, for all employees, options may be granted with an exercise price of less than fair market value on the date of grant pursuant to a merger or other corporate transaction.

No incentive stock options may be granted to an optionee, which, when combined with all other incentive stock options becoming exercisable in any calendar year that are held by that person, would have an aggregate fair market value in excess of $100,000. In any fiscal year, we may not grant any employee options to purchase more than 500,000 shares or 2,000,000 shares in the case of an employee’s initial employment.

In the event of a merger of our company or a sale of substantially all of the assets of our company, any option that is not assumed or substituted by a successor will fully vest and will terminate upon completion of the transaction.

The 2002 stock option plan will terminate in May 2013, unless our board of directors terminates it sooner.

As of March 28, 2003, we had not granted any options nor issued any shares of common stock upon the exercise of options granted under our 2002 plan and 2,500,000 shares remain available for grants under our 2002 plan.

Our board of directors adopted our 2002 director option plan in May 2002 and amended it in May 2003. We expect the 2002 director option plan to be approved by our stockholders prior to the effective date of this offering. This plan will become effective upon the effective date of a registration statement filed with the Securities and Exchange Commission in connection with this offering. We have reserved a total of 125,000 shares of common stock for issuance under the 2002 director option plan, together with an annual increase in the number of shares of common stock reserved under the plan beginning on the first day of our fiscal year commencing July 3, 2004 equal to the lesser of:


	•	150,000 shares of common stock;

	•	0.2% of the outstanding shares of our common stock on the last day of the prior fiscal year; or

	•	an amount determined by the board of directors.

The option grants under the 2002 director option plan are automatic and nondiscretionary, and the exercise price of the options is 100% of the fair market value of our common stock on the grant date.

Only nonemployee directors are eligible for grants under our 2002 director option plan. The 2002 director option plan provides for an initial grant to a new nonemployee director of an option to purchase 25,000 shares of common stock. Subsequent to the initial grants, each nonemployee director will be automatically granted an option to purchase 10,000 shares of common stock on the first meeting of our board of directors after our annual meeting of stockholders. So long as that director has been a member of our board of directors for six months or more at the time of our annual meeting.

The term of the options granted under the 2002 director option plan is 10 years, but the options expire three months following the termination of the optionee’s status as a director or 12 months if the termination is due to death or disability. The grants will become exercisable at a rate of 25% of the shares subject to the grant after the first anniversary of the date of grant and 1/48th of such shares per month commencing thereafter.

In the event of a merger of the company or a sale of substantially all of the assets of the company, any option which is not assumed or substituted will fully vest and will terminate upon completion of the transaction.

The 2002 director option plan will terminate in May 2013, unless our board of directors terminates it sooner.

Our regular full- and part-time employees in Canada are entitled to participate in a group registered retirement savings plan that we sponsor. This plan is established by contractual arrangement between participating employees and the Royal Bank of Canada, who operates the plan. The plan is registered under Section 146 of the Income Tax Act (Canada) and provides that employees may contribute, on a pre-tax basis, funds for investment on their behalf by Royal Bank of Canada. We contribute, on behalf of each participating employee, fifty cents for every dollar that the employee contributes to his or her plan account, up to an annual maximum of Canadian $2,500 or 6% of the employee’s annual salary, whichever is less. Employee participation in the plan is voluntary. We made matching contributions to the plan of an aggregate

Prior to the completion of this offering, we intend to adopt the Crystal Decisions 401(k) plan, which will cover all of our eligible employees who have attained the age of 21 and have completed one month of service with us. The 401(k) plan will exclude from participation employees of affiliated employers, employees subject to collective bargaining agreements and nonresident alien employees. The 401(k) plan is intended to qualify under Sections 401(a), 401(m) and 401(k) of the Internal Revenue Code of 1986, as amended, and the 401(k) plan trust is intended to qualify under Section 501(a) of the Internal Revenue Code. All contributions to the 401(k) plan by eligible employees, and the investment earnings thereon, are not taxable to these employees until withdrawn and are 100% vested immediately. Our eligible employees may elect to reduce their current compensation up to the maximum statutorily prescribed annual limit, and to have these salary reductions contributed on their behalf to the 401(k) plan. Prior to the completion of this offering, our employees were eligible to participate in Seagate Technology’s 401(k) plan. We made matching contributions to the Seagate Technology 401(k) plan of an aggregate of $186,000 in fiscal 2000, $295,000 in fiscal 2001, $367,000 in fiscal 2002 and $303,000 in the nine months ended March 28, 2003.

We have adopted provisions in our certificate of incorporation that limit the liability of our directors and executive officers for monetary damages for breach of their fiduciary duties to the maximum extent permitted by Delaware law. Under Delaware law, a certificate of incorporation may provide that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors except liability for:


	•	any breach of their duty of loyalty to our company or our stockholders;

	•	acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

	•	unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or

	•	any transaction from which the director derived an improper personal benefit.

The limits on a director or officer’s liability in our certificate of incorporation will not apply to liabilities arising under the federal securities laws and will not affect the availability of equitable remedies such as injunctive relief or rescission.

Our certificate of incorporation, together with our bylaws, provide that we must indemnify our directors and officers and may indemnify our other employees and agents to the fullest extent permitted by law. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity, regardless of whether our bylaws would otherwise permit indemnification. We believe that the indemnification provisions of our certificate of incorporation and bylaws are necessary to attract and retain qualified persons as directors and officers. We also maintain directors’ and officers’ liability insurance.

We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by the board of directors. These agreements provide for indemnification for related expenses including attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these provisions and agreements are necessary to attract and retain qualified

At present we are not aware of any pending litigation or proceeding involving any director, officer, employee or agent of our company in such person’s capacity with our company where indemnification will be required or permitted. We are also not aware of any threatened litigation or proceeding that might result in a claim for indemnification.

The following table sets forth information known to us with respect to the beneficial ownership of our common stock as of March 28, 2003 and as adjusted to reflect the sale of shares of common stock by us in this offering, by the following:


	•	each stockholder known by us to own beneficially more than 5% of our common stock;

	•	each of our named executive officers;

	•	each of our directors; and


	•	all directors and named executive officers as a group.

Except as otherwise noted below, the address of the beneficial owners is c/o Crystal Decisions, Inc., 895 Emerson Street, Palo Alto, California 94301.

We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed below, based on the information furnished by these owners, have sole voting power and investment power with respect to these shares, subject to applicable community property laws. New SAC, affiliates of Silver Lake Partners, affiliates of Texas Pacific Group and affiliates of August Capital are parties to a shareholders agreement and other arrangements that result in these persons acting as a group with respect to all matters submitted to our stockholders. We have based our calculation of the percentage of beneficial ownership of 38,012,579 shares of common stock outstanding as of March 28, 2003 and shares of common stock outstanding upon completion of this offering.

In computing the number of shares of common stock beneficially owned by a person and the percent ownership of that person, we deemed outstanding shares of common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of March 28, 2003. We did not deem these shares outstanding for purposes of computing the percent ownership of any other person.


	(1)	A wholly owned subsidiary of New SAC acquired 37,500,500 shares of our outstanding common stock in November 2000. Prior to this offering, New SAC’s subsidiary will be merged out of existence and New SAC will hold our shares directly. Messrs. Luczo and Roux, in their capacities as directors of New SAC, and Mr. Waite, in his capacity as an officer of New SAC, may be deemed to have shared voting or dispositive power over these shares. Each of them disclaims this beneficial ownership.

	(2)	Includes 37,500,500 shares of our common stock beneficially owned by New SAC, over which affiliates of Silver Lake Partners, L.P. may be deemed, as a result of their ownership of approximately 31.8% of New SAC’s total outstanding shares, to have shared voting or dispositive power. The affiliates of Silver Lake Partners, L.P. are Silver Lake Partners Cayman, L.P., Silver Lake Investors Cayman, L.P. and Silver Lake Technology Investors Cayman, L.P. The sole general partner of each of Silver Lake Partners Cayman, L.P. and Silver Lake Investors Cayman, L.P. is Silver Lake Technology Associates Cayman, L.P. and the sole general partners of each of Silver Lake Technology Associates Cayman, L.P. and Silver Lake Technology Investors Cayman, L.P. is Silver Lake (Offshore) AIV GP LTD. The shareholders of Silver Lake (Offshore) AIV GP LTD are James A. Davidson, Glenn H. Hutchins, David J. Roux, Integral Capital Partners SLP LLC, Yolande Jun and Karl Schade. Ms. Jun and Mr. Schade are employees of an affiliate of Silver Lake Partners, L.P. All persons identified above disclaim beneficial ownership of these shares.

	(3)	Includes 37,500,500 shares of our common stock beneficially owned by New SAC, over which affiliates of TPG SAC Advisors III Corp. may be deemed, as a result of their ownership of approximately 22.1% of New SAC’s total outstanding shares, to have shared voting or dispositive power. TPG SAC Advisors III Corp. is the sole general partner of TPG SAC GenPar, L.P., which is the sole general partner of SAC Investments, L.P. The shareholders of TPG SAC Advisors III Corp. are David Bonderman, James G. Coulter, William S. Price, Justin T. Chang and John Marren. Each of them, however, disclaims beneficial ownership of these shares, except to extent of his pecuniary interest therein.


	(4)	Includes 37,500,500 shares of our common stock beneficially owned by New SAC, over which affiliates of August Capital III, L.P., may be deemed, as a result of their ownership of approximately 11.4% of New SAC’s outstanding shares, to have shared voting or dispositive power. The members of August Capital Management III, L.L.C. may be deemed to have shared voting or dispositive power over those shares. August Capital Management III, L.L.C. is the general partner of August Capital III, L.P. The members of August Capital Management III, L.L.C. are Andrew S. Rapaport, John Johnston, David F. Marquardt and Andrew Anker. Each of them, however, disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein.



	(5)	Includes 172,916 shares of common stock that may be acquired upon the exercise of stock options exercisable within 60 days after March 28, 2003.



	(6)	Includes 161,456 shares of common stock that may be acquired upon the exercise of stock options exercisable within 60 days after March 28, 2003.



	(7)	Includes 139,405 shares of common stock that may be acquired upon the exercise of stock options exercisable within 60 days after March 28, 2003.



	(8)	Includes 59,075 shares of common stock that may be acquired upon the exercise of stock options exercisable within 60 days after March 28, 2003.



	(9)	Includes 1,342,707 shares of common stock that may be acquired upon the exercise of stock options exercisable within 60 days after March 28, 2003. Mr. Kerfoot also owns 170,000 shares of New SAC, representing 1.5% of New SAC’s total outstanding shares.


(10)	Represents 37,500,500 shares of common stock beneficially owned by New SAC to which Mr. Chang may be deemed, in his capacity as a principal of Texas Pacific Group, to have shared voting or dispositive power. Includes 14,062 shares of common stock that may be acquired upon the exercise of stock options exercisable within 60 days after March 28, 2003. TPG SAC Advisors III Corp., which owns approximately 22.1% of New SAC’s total outstanding shares, is the sole general partner of TPG SAC GenPar, L.P., which is the sole general partner of SAC Investments, L.P. Mr. Chang is also a shareholder of TPG SAC Advisors III Corp., which is the sole general partner of TPG SAC GenPar, L.P., which is the sole general partner of SAC Investments, L.P., which owns approximately 22.1% of New SAC’s total outstanding shares. Mr. Chang disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein.

(11)	At March 28, 2003, we held repurchase rights on 11,303 shares. Also, includes 43,750 shares of common stock that may be acquired upon the exercise of stock options exercisable within 60 days after March 28, 2003. Includes 37,500,500 shares of common stock beneficially owned by New SAC to which Mr. Luczo may be deemed, in his capacity as the chief executive officer and director of New SAC, to have shared voting or dispositive power. Mr. Luczo disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. Mr. Luczo owns 556,904 shares of New SAC, representing 4.9% of New SAC’s total outstanding shares.

(12)	Represents 37,500,500 shares of common stock beneficially owned by New SAC to which Mr. Roux may be deemed, in his capacity as a director of New SAC, to have shared voting or dispositive power. Mr. Roux disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. Includes 14,062 shares of common stock that may be acquired upon the exercise of stock options exercisable within 60 days after March 28, 2003.

(13)	Includes 14,062 shares of common stock that may be acquired upon the exercise of stock options exercisable within 60 days after March 28, 2003. Mr. Thompson owns 13,000 shares of New SAC, representing 0.1% of New SAC’s total outstanding shares.

(14)	At March 28, 2003, we held repurchase rights on 3,647 shares. Also includes 37,500,500 shares of common stock beneficially owned by New SAC to which Mr. Waite may be deemed, in his capacity as an officer of New SAC, to have shared voting or dispositive power. Mr. Waite disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. Mr. Waite owns 124,738 shares of New SAC, representing 1.1% of New SAC’s total outstanding shares.


(15)	See notes 2 through 14.

Our company was formed in August 1999 to acquire the operating assets and assume the liabilities of the business intelligence software business of Seagate Software Holdings. In connection with our incorporation, we issued 500 shares of our common stock to Seagate Software Holdings for aggregate consideration of $1,000.

In October 1999, Old Seagate completed an acquisition through a merger of all outstanding shares and options to acquire common stock of Seagate Software Holdings that it did not already own. In connection with the merger, Old Seagate issued 3.23 shares of its common stock for one share of Seagate Software Holdings common stock to the holders of Seagate Software Holdings common stock and options to purchase common stock. All options to purchase shares of Seagate Software Holdings common stock were vested in full immediately prior to the closing of the merger. In the event that an optionee of Seagate Software Holdings had outstanding options immediately prior to the closing of the merger, those options were net exercised, using the same fair market value as was applied in the merger, so that the holder received shares of Old Seagate common stock. Approximately 3,991,105 shares of Seagate Software Holdings common stock were tendered of which approximately 2,818,325 were exchanged into approximately 9,124,046 shares of Old Seagate common stock. The difference between the shares outstanding and the shares exchanged resulted from shares cancelled for the exercise price and payment of taxes.

As a result of the merger, our directors and officers received the number of shares of Old Seagate common stock set forth opposite his name:

Shortly after the merger, Seagate Software Holdings contributed all of its operating assets to us, and we assumed all of the related liabilities of Seagate Software Holdings. As consideration for these assets, we issued 37,500,000 shares of our common stock to Seagate Software Holdings.

In December 2000, we signed a software license agreement with Old Seagate, whose obligations were assigned to Seagate Technology. Under the terms of the license agreement, we granted Seagate Technology a non-exclusive, non-transferable, perpetual license to use certain business intelligence products and receive related maintenance and support services for one year. The total value of the license agreement was $1.6 million. The license agreement was priced at an approximate 50% discount to our established list price. We recognized $1.5 million of the revenues from the license agreement in fiscal 2001 and the remaining $151,000 in fiscal 2002. We also earned consulting revenues of $327,000 in fiscal 2001 and $30,000 in fiscal 2002.

The maintenance and support services related to the license agreement were renewed for one year during the three months ended December 28, 2001 and for an additional year in the three months ended March 28, 2003. Revenues from maintenance and support services are being recognized ratably over the term of the contract, which is one year. We recognized $282,000 in fiscal 2002 and $348,000 in the nine months ended March 28, 2003 in connection with these maintenance and support services. At March 28, 2003, there was approximately

Historically, Old Seagate and Seagate Technology, either directly or indirectly, provided substantial administrative and financial services to us under a general services agreement between Seagate Software Holdings and Old Seagate dated June 28, 1997. During fiscal 2001, the general services agreement was replaced by the following agreements between us and Seagate Technology and its affiliates: a corporate services agreement, a payroll services agreement and a management services agreement. Under substantially the same terms as the general services agreement, Seagate Technology and its affiliates continued to provide various cash management, taxation, administrative, accounting and similar corporate and managerial services as requested by us. Seagate Software Holdings contributed its rights, and we assumed Seagate Software Holdings’ obligations under the general services agreement in connection with the asset contribution in fiscal 2000. Seagate Technology assumed Old Seagate’s rights and obligations under the general services agreement in connection with the closing of the November 2000 transactions.

For various corporate services performed on our behalf, Old Seagate charged us $658,000 in fiscal 2000, Old Seagate and Seagate Technology charged us an aggregate of $1.2 million in fiscal 2001 and Seagate Technology charged us an aggregate of $865,000 in fiscal 2002 and an aggregate of $281,000 in the nine months ended March 28, 2003. The amounts we paid to Old Seagate and Seagate Technology represented a reasonable estimate of Old Seagate or Seagate Technology’s direct and indirect costs incurred in performing services for us. The cost allocated to us was intended to be on a basis no less favorable than what we could obtain from an unaffiliated third party. We have audit rights with respect to the computation and analysis of service fees pursuant to the general services agreement and the agreements that replaced the general services agreement in fiscal 2001.

In December 2002, we paid a non-recurring termination fee of $625,000 to Seagate Technology for the benefit of New SAC related to a previous consulting and advisory contract.

Additionally, on July 4, 2000, we signed a revolving loan agreement with Seagate Technology on substantially the same terms and conditions as the prior agreement, which was dated July 4, 1998, between Seagate Software Holdings and Seagate Technology. In connection with the asset contribution, Seagate Software Holdings’ rights and obligations under the 1998 intercompany revolving loan agreement were contributed to and assumed by us. Under the revolving loan agreement, Seagate Technology financed some of our working capital requirements. The revolving loan agreement provided for maximum borrowings of up to $60.0 million and expired on July 4, 2001. On July 4, 2001, we renewed this revolving loan agreement with Seagate Technology. The July 4, 2001 revolving loan agreement provided for maximum borrowings of up to $15.0 million and expired on July 4, 2002. We did not renew the revolving loan agreement and it expired on July 4, 2002.

We had receivables from Old Seagate of $25.7 million on June 30, 2000, receivables from Seagate Technology of $3.4 million on June 29, 2001, and no receivables from Seagate Technology as of June 28, 2002 or March 28, 2003 under the revolving loan agreement. Borrowings from Old Seagate and Seagate Technology were used primarily to fund our operating activities. During fiscal 2000, net borrowings under the revolving loan agreement were $24.0 million. During fiscal 2001, there were $4.8 million of net repayments under the revolving loan agreement. In addition during fiscal 2001, Seagate Technology repaid $31.0 million of the loan receivable under the revolving loan agreement. During fiscal 2002, Seagate Technology made $3.4 million of net repayments under the revolving loan agreement. There were no borrowings from Seagate Technology or repayments to Seagate Technology during the nine months ended March 28, 2003.

We were included in the consolidated federal and certain combined and consolidated foreign and state income tax returns of Old Seagate until November 22, 2000. Old Seagate and Seagate Software Holdings entered into a tax allocation agreement dated April 4, 1996 pursuant to which we computed hypothetical tax returns as if we were not joined in consolidated or combined returns with Old Seagate and assuming the maximum marginal federal corporate income tax rate. Generally, we were required to pay Old Seagate the positive amount of any hypothetical taxes. If the hypothetical tax returns showed entitlement to refunds, including any refunds attributable to a carryback, then Old Seagate would pay us the amount of any refunds. The amounts relating to the tax allocation agreement were included in the net intercompany revolving loan balance. The tax allocation agreement terminated upon the closing of the November 2000 transactions.

We entered into a state tax allocation agreement with several New SAC affiliates effective as of November 23, 2000. Under the terms of the state tax allocation agreement, each entity that is included in any state unitary and combined return with the other New SAC affiliates must compute hypothetical tax returns, with certain modifications, as if the entity were not included in combined returns with the other New SAC affiliates. Each entity must pay the positive amount of any such hypothetical taxes. If the hypothetical tax returns show entitlement to refunds, including any refunds attributable to carrybacks, then the other New SAC affiliates will pay the entitled entities the amount of such refunds within 30 days of the close of the fiscal year in which the entitled entities otherwise would have been able to utilize the net operating losses or tax credits on a separate return filing basis. We have not been included in any state unitary and combined return with the other New SAC affiliates since June 30, 2001. As of March 28, 2003, there were approximately $40,000 of tax-related receivables due to us from certain New SAC affiliates.

We occupy two facilities leased by Seagate Technology for which we pay Seagate Technology fair value rent and related costs in aggregate of approximately $340,000 per year. One of the subleases is expected to end in September 2003.

VERITAS and a subsidiary of VERITAS Software Corporation entered into a three-year cross license and original equipment manufacturer agreement with Crystal Decisions, Corp., a wholly owned subsidiary, on May 28, 1999. Messrs. Luczo and Kerfoot were members of the board of directors of VERITAS at that time. The cross license agreement provided for the licensing of certain products between the parties. We recognized revenues from VERITAS of $7,000 in fiscal 2000, no revenues in fiscal 2001 and no revenues in fiscal 2002.

On June 21, 2002, the cross license agreement was terminated and we entered into two software license and services agreements with VERITAS Software Global Corporation. Messrs. Luczo and Roux were members of the board of directors of VERITAS at that time. Under one of the agreements, VERITAS granted us a perpetual, irrevocable, non-exclusive, non-transferable worldwide license to use given products in specified amounts, solely in support of our internal business operations. The software license agreement provided for the purchase of annual maintenance and support, which was calculated as a percentage of the actual list price of the licensed software. In July 2002, we recorded approximately $622,000 as a prepaid expense related to the annual maintenance and support contract, which is being expensed ratably in fiscal 2003. In a separate agreement, we granted VERITAS a perpetual software license to use given products in specified amounts and 18 months of maintenance and support services for no consideration. The fair value of the license and maintenance and support services was approximately $126,000. We recognized no revenues under this agreement.

Our majority stockholder is New SAC, an exempted limited liability company organized under the laws of the Cayman Islands. New SAC was formed by affiliates of Silver Lake Partners,

Prior to November 22, 2000, we were a majority owned subsidiary of Seagate Software Holdings, a Delaware corporation and wholly owned subsidiary of Old Seagate.

We became an indirect subsidiary of New SAC on November 22, 2000 when Seagate Software (Cayman) Holdings acquired 37,500,500 shares, or 99.7% of our common stock outstanding on that date, under the terms of a stock purchase agreement with Old Seagate and Seagate Software Holdings. Upon completion of the transaction, New SAC purchased all of the operating assets of Old Seagate and its consolidated subsidiaries for cash and borrowings of $1.84 billion, including transaction costs of $25 million. This included Old Seagate’s rigid disc drive, storage area network, removable tape storage solutions businesses and operations, our common stock, and certain cash balances, but excluded the approximately 128 million shares of VERITAS common stock then held by Seagate Software Holdings and certain of Old Seagate’s equity investments, which were subsequently transferred to VERITAS through a merger of a wholly owned subsidiary of VERITAS into Old Seagate.

Messrs. Luczo, Kerfoot and Waite, who are members of our board of directors, each invested in the equity component of the financing for the November 2000 transaction with New SAC and each is a shareholder of New SAC. Mr. Luczo and Mr. Waite also participated in the financing of the transaction through the roll-over of a portion of their outstanding stock and options in Old Seagate to equity interests in New SAC and deferred compensation in a subsidiary of New SAC.

In addition, Mr. Luczo and Mr. Waite entered into employment agreements with Seagate Technology (US) Holdings, Inc. Each employment agreement has a three-year term, subject to automatic successive one-year renewals thereafter. Under the employment agreements, Mr. Luczo was appointed and serves as chief executive officer of New SAC and Seagate Technology, and Mr. Waite was appointed and serves as executive vice president and chief administrative officer of New SAC, Seagate Technology and Seagate Software (Cayman) Holdings, as well as the president and chief operating officer of Certance Holdings. Mr. Luczo also became a director of New SAC and Seagate Technology and Certance Holdings and chief executive officer, president and chief operating officer of Seagate Software (Cayman) Holdings.

Messrs. Luczo, Kerfoot and Waite also received shares of VERITAS common stock and cash to the extent of their outstanding common stock and options in Old Seagate, net of any amounts rolled over into equity and deferred compensation in New SAC and its affiliates. The per share amounts paid to these board members were the same as the amounts paid to other holders of Old Seagate common stock.

In connection with the November 2000 transactions, New SAC and its affiliates, including us, agreed to assume and indemnify VERITAS and its affiliates for substantially all liabilities arising in connection with Old Seagate’s and our operating assets and for selected tax liabilities. In return, VERITAS, Old Seagate and their affiliates agreed to indemnify New SAC and its affiliates, including us, for certain liabilities, including all taxes of Old Seagate for which New SAC and its affiliates are not obligated to indemnify VERITAS and its affiliates. VERITAS deposited $150 million in an escrow account. This amount will reduce these tax liabilities, including those of our company and our subsidiaries. To the extent any part of the $150 million is not utilized to satisfy these tax liabilities, it will be paid to the former stockholders of Old Seagate.

In July 2002, we entered into a reimbursement agreement with Seagate Technology and its affiliates which allocates the respective liabilities and obligations of the parties under the indemnification agreement. Under the reimbursement agreement, if we and Seagate Technology became obligated to indemnify VERITAS or Old Seagate under the indemnification agreement, a

subsidiary of Seagate Technology will be responsible for the first $125 million of the tax liabilities. Any amount in excess of the first $125 million will be allocated pro rata in accordance with the portion of the purchase price allocated to each entity in connection with the November 2000 transaction among various subsidiaries and affiliates Seagate Technology and us. For indemnification obligations other than tax liabilities, the parties agreed that the responsible entity will reimburse any entity that satisfies the obligation on its behalf.

In connection with this offering, we will enter into a stockholders agreement with New SAC, certain New SAC stockholders, some officers of Seagate Technology and some of our directors. The Crystal Decisions stockholders agreement will take effect upon the closing of this offering and, except as discussed below, will terminate in the event that 50% or more of our shares are sold or distributed to the public or are actively traded on a national securities exchange.

The Crystal Decisions stockholders agreement provides for a board of directors of nine members. However, with the agreement of six of the nine members of the board of directors, the size of the board may be increased from nine to 10 directors. Our board members will be appointed in the following manner:



	•	one will be designated by Silver Lake Partners, who will initially be David J. Roux;



	•	one will be designated by Texas Pacific Group, who will initially be Justin T. Chang;



	•	two will be designated by New SAC, who will initially be Stephen J. Luczo and Donald L. Waite;



	•	four (five, in the event the board is increased to ten members) will be nominated by our nominating and corporate governance committee and approved by a majority of the board, who will initially be Fred D. Anderson, Robert L. Bailey, Gregory B. Kerfoot and John W. Thompson;



	•	the remaining director will be our chief executive officer, who is currently Jonathan J. Judge.

The stockholders agreement also provides that the board of directors will establish audit, strategic and financial transactions, compensation and nominating and corporate governance committees of the board. The director designated by Silver Lake Partners will serve on the strategic and financial transactions, the compensation and the nominating and corporate governance committees. The director designated by Texas Pacific Group will serve on the strategic and financial transactions and the nominating and corporate governance committees. The stockholders agreement also provides that our chief executive officer will serve as the chairman of the strategic and financial transactions committee.

A member of the board of directors designated by a particular party to the stockholders’ agreement may only be removed by that particular stockholder. Any other board member may be removed with or without cause by vote of a majority of the stockholders who are parties to this agreement.

In order for our board to conduct business, our stockholders agreement requires that a majority of the board be present, including at least two members who were appointed by either New SAC, Texas Pacific Group or Silver Lake Partners. The consent of at least six members of our board of directors, including the consent of the directors designated by each of Silver Lake


	•	voluntarily commence a bankruptcy proceeding;

	•	enter into a business combination with any entity with consolidated assets that exceed 15% of our consolidated assets;

	•	increase or decrease the number of directors;

	•	sell assets in excess of 15% of our consolidated assets;

	•	authorize, issue or sell our equity securities, or options or warrants to purchase our equity securities (other than shares issued pursuant to management options issued pursuant to plans approved by our board of directors) in excess of 15% of our outstanding shares;

	•	pay dividends or make other designated distributions in excess of 15% of our net income in the prior fiscal year;

	•	redeem or otherwise acquire equity securities in excess of 5% of our stockholders’ equity; or

	•	amend our certificate of incorporation or bylaws.

Accordingly, either Silver Lake Partners or Texas Pacific Group may limit our ability to engage in transactions requiring stockholder approval or the approval of our board of directors. In addition, hiring or terminating our chief executive officer will require the consent of at least six directors other than the chief executive officer, but including the directors designated by each of Silver Lake Partners and Texas Pacific Group.

Notwithstanding these provisions, the parties to the stockholders agreement have agreed that the operation of our board of directors and its committees will operate so as to permit us to comply with applicable law and maintain our listing on the Nasdaq National Market. The provisions relating to the composition and operation of our board of directors will terminate upon the earlier of the termination of the Crystal Decisions stockholders agreement or the date on which we are no longer entitled to the controlled company exception under the proposed rules of the Nasdaq National Market.

New SAC may not transfer any of our shares prior to 18 months after the closing of this offering without the prior consent of Silver Lake Partners, Texas Pacific Group and Stephen J. Luczo. Between 18 months and four years after the closing of this offering, New SAC will distribute all or part of our shares held by New SAC to the New SAC shareholders upon the request of either Silver Lake Partners or Texas Pacific Group. After the fourth anniversary of the closing of this offering, any New SAC shareholder who is a party to our stockholders agreement may request that New SAC distribute all of our shares that it continues to hold to New SAC’s shareholders. New SAC is not required to make more than one distribution of our shares in any three-month period. Each of Silver Lake Partners, Texas Pacific Group, August Capital and Integral Capital Partners will have tag-along rights with respect to some transfers by Silver Lake Partners, Texas Pacific Group or August Capital of shares representing more than 3% of our outstanding common stock.

We have agreed, subject to exceptions, to include shares of our common stock held by New SAC or any shareholder of New SAC on any registration statement that we file after the closing of this offering. In the case of an underwritten offering, the amount of shares to be registered will be subject to cutbacks at the discretion of the managing underwriters. Subject to limitations


	•	New SAC six demand registrations;

	•	each of Silver Lake Partners and Texas Pacific Group three demand registrations; and

	•	August Capital one demand registration.

After the 18-month anniversary of the closing of this offering, if any of our shares are held by New SAC, any of Silver Lake Partners, Texas Pacific Group or August Capital may exercise their demand rights by requiring that we register all or a portion of the shares held by New SAC. In addition, subject to certain exceptions, New SAC, Silver Lake Partners, Texas Pacific Group or August may from time to time request registration of their shares of our common stock on Form S-3, although we do not have to file more than two registration statements on Form S-3 within any 12 month period. We have agreed to indemnify those selling shares pursuant to the exercise of these registration rights against certain liabilities including liabilities under the Securities Act.

As of the date of the closing of the November 2000 transactions, our parent company, New SAC, entered into a shareholders agreement with its shareholders, certain members of our board of directors and specified members of Seagate Technology’s management. The New SAC shareholders agreement will terminate in the event that 50% or more of New SAC’s shares are sold or distributed to the public or are actively traded on a national securities exchange.

New SAC’s board of directors consists of nine members, three of whom are designated by Silver Lake Partners, two of whom are designated by Texas Pacific Group, one of whom is an executive officer of New SAC whose appointment is reasonably acceptable to a majority of the directors, one of whom is an independent director proposed by Silver Lake Partners, approved by Texas Pacific Group and reasonably acceptable to a majority of the directors, one of whom is the chief executive officer of New SAC and one of whom is a director elected pursuant to the provisions of New SAC’s governing documents. The consent of at least seven members of New SAC’s board of directors is required before New SAC may voluntarily commence a bankruptcy proceeding, enter into a material business combination, sell a material amount of assets, enter into a material transaction with some of the shareholders of New SAC or any of its affiliates, authorize, issue or sell equity securities or options or warrants to purchase equity securities, pay dividends or redeem equity securities or amend its memorandum and articles of association. Accordingly, our ability to engage in some transactions requiring shareholder approval will effectively be limited without the consent of New SAC shareholders. In addition, the consent of eight directors is required to increase or decrease the size of New SAC’s board, and the consent of seven directors is required for the exercise of the drag-along rights described below, and the consent of at least five directors, with no Seagate Technology management directors participating, is required to terminate the chief executive officer of New SAC or appoint his successor.

The parties to the New SAC shareholders agreement have preemptive rights allowing them to acquire for cash, in proportion to their respective shareholdings in New SAC, additional securities proposed to be issued and sold by New SAC, excluding shares issued upon the exercise of outstanding options granted under employee benefit plans or similar arrangements. If

No party to the New SAC shareholders agreement is permitted to sell, transfer or otherwise dispose of any of New SAC’s shares until the earlier of November 22, 2003 or 180 days after New SAC’s initial public offering without the prior consent of both Silver Lake Partners and Texas Pacific Group, subject to specific exceptions. After the earlier of November 22, 2003 or 180 days after New SAC’s initial public offering, each New SAC shareholder subject to the agreement will have a right of first offer to acquire any New SAC shares that another New SAC shareholder to the agreement proposes to sell or otherwise transfer, and any third-party buyer will be subject to approval of New SAC’s board of directors, excluding those directors affiliated with the transferring shareholder. In addition, each New SAC shareholder and member of Seagate Technology management who is a party to the New SAC shareholder’s agreement has tag-along rights, which are the rights to include a proportionate number of shares, on the same terms and conditions, in any sale by another party to the agreement to a third party. Beginning after the earlier of November 22, 2003 or 180 days after New SAC’s initial public offering, any New SAC shareholder holding a majority of the outstanding shares of New SAC will also have drag-along rights, meaning that if the shareholder receives an offer from a third party to purchase a majority of New SAC’s outstanding shares or enter into a business combination, the shareholder will have the right to cause New SAC’s other shareholders to join in the sale or business combination on the same terms and conditions.

Subject to limitations specified in the New SAC shareholders agreement, New SAC agreed to include New SAC shares held by the New SAC shareholders in any public offering, other than New SAC’s initial public offering by granting:


	•	to each shareholder to the agreement unlimited rights to participate in an offering initiated by New SAC;

	•	to all shareholders holding at least 20% of New SAC’s outstanding shares three demand registrations; and

	•	to any single shareholder holding at least 10% of New SAC’s outstanding shares one demand registration right with respect to that shareholder.

In addition, subject to certain conditions, all New SAC shareholders may require New SAC to register New SAC shares they hold on Form S-3 without limits to the number of those registrations. New SAC agreed to pay all registration expenses relating to these registrations and to indemnify the selling shareholders.

Distribution Upon Initial Public Offering of Certain Subsidiaries; New Shareholders Agreement

At any time 190 days after the initial public offering of the shares of designated subsidiaries of New SAC, Silver Lake Partners or Texas Pacific Group, or both, can require that New SAC distribute to its shareholders the remaining shares New SAC holds of the newly public subsidiary’s stock. Upon the distribution of a newly public subsidiary’s shares, the newly public subsidiary is required to enter into a new agreement with the New SAC shareholders, on substantially the same terms as the New SAC shareholders agreement. In connection with this offering, Silver Lake Partners and Texas Pacific Group have agreed not to exercise this right in the future with respect to us. Instead, New SAC, New SAC’s shareholders, certain Seagate Technology officers and some of our directors have entered into a new agreement with us, the material terms of which are summarized above.

At the effective time of this offering, we expect to enter into a consulting agreement with Silver Lake Partners, one of the shareholders of New SAC. David J. Roux, a principal of Silver Lake Partners, is a member of our board of directors. Under the terms of the consulting agreement we expect to retain Silver Lake Partners to provide management, business strategy, consulting and financial services from time to time. We have agreed to reimburse Silver Lake Partners and its affiliates for all reasonable out-of-pocket expenses incurred in connection with the consulting services Silver Lake Partners provides to us including travel expenses and expenses of Silver Lake Partners’ counsel. We have agreed to indemnify Silver Lake Partners against claims related to the consulting services Silver Lake Partners has agreed to provide us.

Since our inception we have issued the following options to our named executive officers and directors and they have exercised options to acquire our common stock as follows:


(1)	As of March 28, 2003, we held the right to repurchase 11,303 of the 87,500 shares. Our repurchase right lapsed for 21,875 shares on October 22, 2000 and thereafter lapses at a rate of 1/48th per month of the shares subject to the option.

(2)	As of March 28, 2003, we held the right to repurchase 3,647 of the 25,000 shares. Our repurchase right lapsed for 6,250 shares on October 22, 2000 and thereafter lapses at a rate of 1/48th per month of the shares subject to the option.

Subject to stockholder approval, which we expect to occur in July 2003, we intend to amend our certificate of incorporation and bylaws. These amendments will be effective shortly after our annual meeting and prior to closing of this offering. The following description of capital stock assumes the effectiveness of these amendments except as otherwise noted. We are authorized to issue 150,000,000 shares of common stock, $0.001 par value. Prior to the closing of this offering, we will be authorized to issue 350,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares of undesignated preferred stock, $0.001 par value.

As of March 28, 2003, we had 38,012,579 shares of common stock outstanding that were held of record by approximately 240 stockholders.

The holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of common stock are entitled to receive ratably any dividends that may be declared from time to time by the board of directors out of funds legally available for that purpose. In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock then outstanding. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock.

Our board of directors has the authority, without action by our stockholders, to designate and issue preferred stock in one or more series. The board of directors may also designate the rights, preferences and powers of each series of preferred stock, any or all of which may be greater than the rights of the common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock upon the rights of holders of the common stock until the board of directors determines the specific rights of the holders of the preferred stock. However, these effects might include:


	•	restricting dividends on the common stock;

	•	diluting the voting power of the common stock;

	•	impairing the liquidation rights of the common stock; and

	•	delaying or preventing a change in control of our company without further action by the stockholders.

Certain provisions of Delaware law and our certificate of incorporation and bylaws could make the acquisition of our company through a tender offer, a proxy contest or other means more difficult and could make the removal of incumbent officers and directors more difficult. We expect these provisions to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of our company to first negotiate with our board of directors. We believe that the benefits provided by our ability to negotiate with the proponent of an unfriendly or unsolicited proposal outweigh the

At the time of the closing of this offering, we will be subject to Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging under certain circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:


	•	prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;


	•	upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (1) shares owned by persons who are directors and also officers and (2) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or


	•	on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.

Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting securities. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that Section 203 may also discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

Our bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to the board of directors. At an annual meeting, stockholders 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. Stockholders may also consider a proposal or nomination by a person who was a stockholder of record on the record date for the meeting and on the date that notice of the proposal or nomination was given, who is entitled to vote at the meeting and who has given to our secretary timely written notice, in proper form, of his or her intention to bring that business before the meeting. The bylaws do not give the board of directors the power to approve or disapprove stockholder nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting of the stockholders. However, our bylaws may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

Under Delaware law, a special meeting of stockholders may be called by the board of directors or by any other person authorized to do so in the certificate of incorporation or the bylaws. Our certificate of incorporation and bylaws provide that only a majority of our board of

directors, the chairman of the board, the chief executive officer or president can call a special meeting of stockholders. Because our stockholders do not have the right to call a special meeting, a stockholder could not force stockholder consideration of a proposal over the opposition of the board of directors by calling a special meeting of stockholders prior to the time a majority of the board of directors believed or the chief executive officer believed the matter should be considered or until the next annual meeting provided that the requestor met the notice requirements. The restriction on the ability of stockholders to call a special meeting means that a proposal to replace the board also could be delayed until the next annual meeting.

Delaware law provides that stockholders may execute an action by written consent in lieu of a stockholder meeting. However, Delaware law also allows us to eliminate stockholder actions by written consent. Elimination of written consents of stockholders may lengthen the amount of time required to take stockholder actions because actions by written consent are not subject to the minimum notice requirement of a stockholder’s meeting. However, we believe that the elimination of stockholders’ written consents may deter hostile takeover attempts. Without the availability of stockholders’ actions by written consent, a holder controlling a majority of our capital stock would not be able to amend our bylaws or remove directors without holding a stockholders meeting. The holder would have to obtain the consent of a majority of the board of directors, the chairman of the board, the chief executive officer or president to call a stockholders’ meeting and satisfy the notice periods determined by the board of directors. Our certificate of incorporation and bylaws provide for the elimination of actions by written consent of stockholders upon the closing of this offering.

Our certificate of incorporation provides that the vote of the holders of at least two thirds of the outstanding shares entitled to vote at the election of directors, voting together as a single class, is required to amend the following provisions of our certificate of incorporation:


•	Article V, which relates to management of our company’s business, including provisions relating to stockholder action by written consent and special meetings of stockholders;


•	Article VI, which relates to removal of directors, vacancies on the board of directors and advance notice procedures for stockholder meetings;


•	Article VII, which relates to amendment of our bylaws;


•	Article VIII, which relates to indemnification of directors and officers; and


•	Article IX, which relates to amendment of the preceding provisions of the certificate of incorporation.

Our bylaws and our certificate of incorporation provide that amendment of any of the following provisions of our bylaws require the affirmative vote of at least two-thirds of the outstanding shares entitled to vote at the election of directors, voting together as a single class:


•	Article II, which relates to meetings of stockholders;


•	Sections 3.2, 3.3, 3.4 and 3.14, which relate to the number of directors, election, qualification and term of office of directors, resignation, vacancies and removal on the board of directors;


•	Article VI, which relates to indemnification of directors and officers; and


•	Article IX, which relates to amendment of the preceding provisions of the bylaws.

We have applied to have our common stock listed on the Nasdaq National Market for quotation under the symbol “CRSX”.

The transfer agent and registrar for our common stock is Wells Fargo Shareowner Services located at P.O. Box 64854, St. Paul, Minnesota 55164-0854 and its telephone number is (800) 401-1957.

Prior to this offering, there has been no public market for our stock. Future sales of substantial amounts of our common stock in the public market following this offering or the possibility of these sales occurring could adversely affect prevailing market prices for our common stock or could impair our ability to raise capital through an offering of equity securities.

After this offering, we will have outstanding shares of common stock, based upon shares outstanding as of March 28, 2003, assuming no exercise of outstanding options after March 28, 2003. All of the shares sold in this offering will be freely tradable without restriction under the Securities Act except for any shares purchased by our affiliates as that term is defined in Rule 144 under the Securities Act. The remaining shares of common stock held by existing stockholders are restricted shares as that term is defined in Rule 144 under the Securities Act. We issued and sold the restricted shares in private transactions in reliance upon exemptions from registration under the Securities Act. Restricted shares may be sold in the public market only if they are registered under the Securities Act or if they qualify for an exemption from registration, such as the exemptions provided under Rule 144 under the Securities Act, which is summarized below.

Our directors, New SAC and certain of our executive officers and employees, who collectively hold an aggregate of restricted shares, and the underwriters entered into lock-up agreements in connection with this offering. These lock-up agreements provide that, with certain limited exceptions, these persons and entities have agreed not to offer, sell, contract to sell, grant any option to purchase or otherwise dispose of any of our shares for a period of 180 days after the effective date of this offering. All of our other stockholders and optionees have contractual commitments with us which prevent them from selling their shares until 180 days after the date of this prospectus. Pursuant to the terms of the underwriting agreement entered into between New SAC, us and the underwriters, we agreed not to release any of these stockholders from their contractual lockup commitments without the consent of Goldman, Sachs & Co., except that we may allow each such stockholder or optionee to sell up to 750 shares of common stock, or an aggregate of shares, after 90 days after the date of this prospectus. Goldman, Sachs & Co. may, in its sole discretion and at any time without prior notice, release all or any portion of the shares subject to these lock-up agreements. We have also entered into an agreement with Goldman, Sachs & Co. that, with certain exceptions, we will not offer, sell or otherwise dispose of our common stock until 180 days after the date of this prospectus.

Taking into account the lock-up agreements, the number of shares that will be available for sale in the public market under the provisions of Rules 144 and 144(k) will be as follows:

In December 2000, we filed a registration statement on Form S-8 under the Securities Act covering all shares of common stock reserved for issuance under and subject to outstanding options under our 1999 stock option plan and 2000 stock option plan. See “Executive Compensation — Incentive Plans”. Shortly after the effectiveness of the offering, we intend to file a registration statement on Form S-8 under the Securities Act covering shares of common stock reserved for issuance under our 2002 stock option plan and our 2002 director option plan. Shares of common stock issued upon exercise of options under the Form S-8 will be available for sale in the public market, subject to Rule 144 volume limitations applicable to affiliates and subject to the contractual restrictions described above. As of March 28, 2003, options to

Our stockholders who acquired the shares of our common stock they hold between August 1999 and December 2000 may resell the shares pursuant to Rule 144 under the Securities Act. Unless the stockholder who acquired shares from us upon exercise of stock options prior to the filing of our registration statement on Form S-8 is currently our officer, director or affiliate, that stockholder will be able to sell all of the shares they acquired as soon as their contractual lockup period expires.

In addition, after the 180th day after this offering, our officers, directors, New SAC and other affiliates will be eligible to sell shares of our common stock they hold under Rule 144. In general, under Rule 144 as currently in effect, a person or persons whose shares are required to be aggregated, who has beneficially owned restricted shares for at least one year, including the holding period of any prior owner except an affiliate, would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:


	•	one percent of the number of shares of common stock then outstanding, which will equal approximately shares immediately after the offering, or

	•	the average weekly trading volume of our common stock during the four calendar weeks preceding the date on which notice of the sale is filed.

Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us. Under Rule 144(k), a person who is not deemed to have been an affiliate of our company at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years including the holding period of any prior owner except an affiliate, is entitled to sell the shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

Additionally, subject to limitations in our stockholders agreement, we granted demand registration rights, rights to participate in offerings that we initiate and Form S-3 registration rights to some or all of the following individuals or groups: New SAC, shareholders of New SAC, including Silver Lake Partners, Texas Pacific Group and August Capital. For a further description of these rights, see “Our Relationships and Arrangements with New SAC, Seagate Technology, Our Officers and Our Directors — Crystal Decisions Stockholders Agreement — Registration Rights”.

Crystal Decisions, New SAC and the underwriters for the offering named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc. and Thomas Weisel Partners LLC are the representatives of the underwriters.

The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until the option is exercised.

If the underwriters sell more shares than the total number set forth in the table above, the underwriters have an option to buy up to an additional shares from New SAC to cover such sales. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.

The following table shows the per share and total underwriting discount to be paid to the underwriters by Crystal Decisions and New SAC. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.

Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. Any such securities dealers may resell any shares purchased from the underwriters to other brokers or dealers at a discount of up to $ per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the other selling terms.

Crystal Decisions, New SAC and our directors, executive officers and certain employees have agreed with the underwriters not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of Goldman, Sachs & Co. All of our other stockholders and optionees have contractual commitments with us which preclude them from selling their shares until 180 days after the date of this prospectus. Pursuant to the terms of the underwriting agreement entered into between New SAC, us and the underwriters, we agreed not to release any of these stockholders and optionees from the contractual lockup commitments without the consent of Goldman, Sachs & Co., except that we may allow each stockholder or optionee to sell up to 750 shares of common stock, or an aggregate of shares, after 90 days after the date of this prospectus.

Prior to this offering, there has been no public market for the shares. The initial public offering price will be negotiated among Crystal Decisions and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be Crystal Decisions’ historical performance, estimates of the business potential and earnings prospects of Crystal Decisions, an assessment of Crystal Decisions’ management and the consideration of the above factors in relation to market valuation of companies in related businesses.

The common stock will be quoted on the Nasdaq National Market under the symbol CRSX.

In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares from New SAC in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted to them. “Naked” short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

A prospectus in electronic format will be made available on the web sites maintained by one or more of the lead managers of this offering and may also be made available on web sites maintained by other underwriters. The underwriters may agree to allocate a number of shares of common stock to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the lead managers to underwriters that may make Internet distributions on the same basis as other allocations.

Purchases to cover a short position and stabilizing transactions may have the effect of preventing or retarding a decline in the market price of Crystal Decisions’ common stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the Nasdaq National Market, in the over-the-counter market or otherwise.

Each underwriter has represented, warranted and agreed that: (i) it has not offered or sold and, prior to the expiry of a period of six months from the closing date, will not offer or sell any shares to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in

The securities may not be offered, sold, transferred or delivered in or from The Netherlands, as part of their initial distribution or as part of any re-offering, and neither this prospectus nor any other document in respect of the offering may be distributed or circulated in The Netherlands, other than to individuals or legal entities which include, but are not limited to, banks, brokers, dealers, institutional investors and undertakings with a treasury department, who or which trade or invest in securities in the conduct of a business or profession.

The securities have not been and will not be registered under the Securities and Exchange Law of Japan. Each underwriter has represented and agreed that it has not offered or sold, and it will not offer or sell, directly or indirectly, any securities in Japan or to, or for the account or benefit of, any resident of Japan or to, or for the account or benefit, of any resident for reoffering or resale, directly or indirectly, in Japan or to, or for the account or benefit of, any resident of Japan except (i) pursuant to an exemption from the registration requirements of, or otherwise in compliance with, the Securities and Exchange Law of Japan and (ii) in compliance with the other relevant laws and regulations of Japan.

No offer to sell the securities has been or will be made in Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”), by means of any document, other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, except in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong, and unless permitted to do so under the securities laws of Hong Kong, no person has issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purpose of issue, any advertisement, document or invitation relating to the securities in Hong Kong other than with respect to the securities intended to be disposed of to persons outside Hong Kong or only to persons whose business involves the acquisition, disposal or holding of securities whether as principal or agent.

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly this and any other document or material in connection with the offer or sale, or invitation or subscription or purchase, of the securities may not be circulated or distributed, nor may the securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than under circumstances in which such offer, sale or invitation does not constitute an offer or sale, or invitation for subscription or purchase, of the securities to the public in Singapore.

The underwriters do not expect sales to discretionary accounts to exceed five percent of the total number of shares offered.

Crystal Decisions estimates that the total expenses of the offering, excluding the underwriting discount, will be approximately $ . Crystal Decisions will pay New SAC’s expenses, including certain legal fees, in the offering, excluding the underwriting discount.

Crystal Decisions and New SAC have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act.

From time to time, certain of the underwriters have provided, and continue to provide, investment banking and other services to Crystal Decisions and its affiliates for which they receive customary fees and commissions. In particular:


	•	Goldman, Sachs & Co. served as financial advisor to Silver Lake Partners and other shareholders of New SAC in the November 2000 transactions.

	•	An affiliate of Goldman, Sachs & Co. was an initial purchaser in the private placement of an aggregate principal amount of $210 million of 12 1/2% senior subordinated notes due 2007 issued by New SAC’s subsidiary, Seagate Technology International, as part of the financing of the November 2000 transactions.

	•	Affiliates of Goldman, Sachs & Co. were lenders under the senior secured credit facilities entered into by New SAC’s subsidiaries, Seagate Technology HDD Holdings and Seagate Technology (US) Holdings, Inc., as part of the financing of the November 2000 transactions.

	•	Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc. are lenders under the senior secured credit facilities entered into by New SAC’s subsidiaries, Seagate Technology Holdings and Seagate Technology (US) Holdings, Inc. in May 2002.

	•	Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc. were initial purchasers in the private placement of an aggregate principal amount of $400 million of 8% senior notes due 2009 issued by Seagate Technology HDD Holdings, an affiliate of Seagate Technology and New SAC, in May 2002.

	•	Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc., Goldman, Sachs & Co. and Thomas Weisel Partners LLC were underwriters in Seagate Technology’s initial public offering of an aggregate amount of $870 million of common stock in December 2002.


	•	Investment partnerships affiliated with Goldman, Sachs & Co. owned approximately 2.19% of New SAC’s ordinary shares as of March 28, 2003 and, as a result, indirectly owned approximately 2.16% of our outstanding common shares through their ownership of New SAC as of March 28, 2003.

The validity of the common stock offered hereby will be passed upon for us by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California, and for the underwriters by Sullivan & Cromwell LLP. Investment partnerships comprised of members of and persons associated with Wilson Sonsini Goodrich & Rosati own an interest representing less than 1% of the capital commitments of Silver Lake Partners.

Ernst & Young LLP, independent auditors, have audited our consolidated and combined financial statements as of June 29, 2001, June 28, 2002 and March 28, 2003 and each of the three years in the period ended June 28, 2002 and the nine months ended March 28, 2003, as set forth in their report. We have included our consolidated and combined financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

We have filed with the Securities and Exchange Commission, or SEC, a registration statement on Form S-1 under the Securities Act with respect to the common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules filed as part of the registration statement. For further information with respect to us and our common stock, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The reports and other information we file with the SEC can be read and copied at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington D.C. 20549. Copies of these materials can be obtained at prescribed rates from the Public Reference Section of the SEC at the principal offices of the SEC, 450 Fifth Street, N.W., Washington D.C. 20549. You may obtain information regarding the operation of the public reference room by calling 1(800) SEC-0330. The SEC also maintains a web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

We are subject to the information and periodic reporting requirements of the Securities Exchange Act and, in accordance therewith, file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information are available for inspection and copying at the SEC’s public reference rooms and the web site of the SEC referred to above. Our Internet address is http://www.crystaldecisions.com.

We provide our stockholders with annual reports containing, among other information, financial statements audited by an independent public accounting firm and we make available to our stockholders quarterly reports containing unaudited financial data for the first three quarters of each fiscal year. We also intend to furnish other reports as we may determine or as required by law.

We have audited the accompanying consolidated balance sheets of Crystal Decisions, Inc., as of June 29, 2001, June 28, 2002 and March 28, 2003 and the related consolidated and combined statements of operations, stockholders’ equity and cash flows for the fiscal years ended June 30, 2000, June 29, 2001 and June 28, 2002 and the nine months ended March 28, 2003. These consolidated and combined financial statements are the responsibility of Crystal Decisions, Inc.’s management. Our responsibility is to express an opinion on these consolidated and combined financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 consolidated and combined financial statements referred to above present fairly, in all material respects, the consolidated financial position of Crystal Decisions, Inc. at June 29, 2001, June 28, 2002 and March 28, 2003 and the consolidated and combined results of its operations and its cash flows for each of the fiscal years ended June 30, 2000, June 29, 2001, June 28, 2002 and the nine months ended March 28, 2003, in conformity with accounting principles generally accepted in the United States.

The foregoing report is in the form that will be signed upon the completion of the restatement of capital accounts described in note 20 to the consolidated and combined financial statements.

Crystal Decisions, Inc. (“Crystal Decisions” or the “Company”) provides business intelligence software and services that enable the effective use and management of information within and among organizations. Crystal Decisions develops, markets and supports products that allow organizations of all sizes to access data from disparate systems, create useful, interactive information from that data through analysis and reporting and deliver that information to users. Crystal Decisions is incorporated in Delaware and headquartered in Palo Alto, California.

While Crystal Decisions’ primary market is North America, the Company has over 25 offices and operations in 10 countries, through which the Company markets and distributes its products. The Company has significant operations and certain administrative functions in Vancouver, Canada. The Company’s products are sold through a direct sales force and certain indirect sales channels, such as distributors and original equipment manufacturers (“OEMs”).

Crystal Decisions is a majority owned subsidiary of Seagate Software (Cayman) Holdings, a Cayman Islands limited corporation, which is a wholly owned subsidiary of New SAC, a Cayman Islands limited corporation (“New SAC”), which is also the majority shareholder of Seagate Technology (“Seagate Technology”), whose predecessor was Seagate Technology, Inc. (“Old Seagate”). Prior to November 22, 2000, the Company was a majority owned subsidiary of Seagate Software Holdings, Inc. (“Seagate Software Holdings”, formerly known as Seagate Software, Inc.), a Delaware corporation and wholly owned subsidiary of Old Seagate.

Subsequent to March 28, 2003, Seagate Software (Cayman) Holdings, will merge with and into one of the Company’s wholly owned subsidiaries and New SAC will become the direct holder of the majority of the Company’s common stock.

The minority interests in the Company’s capital stock amounted to approximately 10.5%, 13.0%, 16.1% and 19.8% on a fully converted basis as of June 30, 2000, June 29, 2001, June 28, 2002 and March 28, 2003, respectively. These minority interests are comprised of the Company’s outstanding common stock held by current and former employees and nonemployee directors of the Company, as well as the outstanding unexercised options granted to purchase the Company’s common stock.

New SAC is owned by a group of investors including affiliates of Silver Lake Partners, Texas Pacific Group, August Capital, J.P. Morgan Partners, LLC, investment partnership affiliates of Goldman, Sachs & Co. and certain individuals, including members of the Company’s Board of Directors.

Seagate Software Holdings commenced operations in May 1994 when Old Seagate acquired Crystal Computer Services, Inc., a company engaged in developing and marketing report writing software.

Prior to May 28, 1999, Seagate Software Holdings comprised two business units, the Information Management Group business (“IMG business”) and the Network Storage and Management Group business (“NSMG business”). The NSMG business developed and marketed software products and provided related services enabling information technology professionals to manage distributed network resources and to secure and protect enterprise

data. On May 28, 1999, Seagate Software Holdings contributed its NSMG business to VERITAS Software Corporation (“VERITAS”) in exchange for VERITAS common stock.

On August 23, 1999, Crystal Decisions (formerly Seagate Software Information Management Group Holdings, Inc.) was formed specifically to acquire the operating assets and assume the liabilities of the IMG business. To incorporate, Crystal Decisions issued 500 shares of its common stock to Seagate Software Holdings for aggregate consideration of $1,000.

On October 20, 1999, Old Seagate acquired all outstanding shares and options of Seagate Software Holdings. The acquisition was completed through the merger of Seagate Daylight Merger Corp., a wholly owned subsidiary of Old Seagate, with and into Seagate Software Holdings. On the closing of the merger, Seagate Software Holdings became a wholly owned subsidiary of Old Seagate. On November 16, 1999, Seagate Software Holdings contributed the operating assets, liabilities and interests in subsidiaries of its IMG business to Crystal Decisions. As consideration, Crystal Decisions issued 37,500,000 shares of its common stock to Seagate Software Holdings. Seagate Software Holdings retained the shares of VERITAS common stock and other non-operating assets. On November 22, 2000, 37,500,500 shares, or 99.7% of the then outstanding common stock, of Crystal Decisions was purchased by New SAC, through Seagate Software (Cayman) Holdings, and resulted in a change in control of Crystal Decisions as described in note 2.

The consolidated and combined financial statements of Crystal Decisions have been prepared by the Company in accordance with United States generally accepted accounting principles (“GAAP”). The accompanying financial statements present the consolidated financial position of Crystal Decisions and its wholly owned subsidiaries after elimination of intercompany transactions and balances. These consolidated and combined financial statements have been prepared using the historical cost basis of accounting adjusted for the reorganization of the IMG business on November 16, 1999 and the application for push down accounting at November 22, 2000 as the result of the change in control of Crystal Decisions.

For all periods prior to November 16, 1999, these financial statements are presented as if Crystal Decisions had existed as an entity separate from Seagate Software Holdings. The financial statements include the historical assets, liabilities, revenues and expenses that are directly related to the IMG business. For all periods prior to November 16, 1999, when Crystal Decisions was “carved out” of Seagate Software Holdings, the consolidated and combined financial statements present the combined historical financial position, results of operations, stockholders’ equity and cash flows of the ongoing IMG business of Seagate Software Holdings and are not necessarily indicative of what the financial position, results of operations, stockholders’ equity or cash flows would have been had Crystal Decisions been an independent legal entity during the years prior to November 16, 1999. For certain assets and liabilities of Crystal Decisions that were not specifically identifiable with the IMG business, estimates were used to allocate assets and liabilities to Crystal Decisions by applying methodologies management believed to be appropriate.

For all periods prior to November 16, 1999, the consolidated and combined statement of operations include all revenues and costs attributable to Crystal Decisions, including allocations of certain corporate administration, finance and management costs. Such costs were proportionately allocated to the IMG business based on detailed inquiries and estimates of time incurred by Seagate Software Holdings’ corporate marketing and general and administrative

departmental managers. In addition, certain of Seagate Software Holdings’ operations were shared locations involving activities that pertained to the IMG business as well as to the NSMG business of Seagate Software Holdings. Costs incurred in shared locations were allocated based on specific identification, or where specific identification was not possible, costs were proportionately allocated between the IMG business and the NSMG business based on either headcount, square footage or a percentage of revenues as management believed was reasonable.

Under rules and regulations of the Securities and Exchange Commission, because more than 95% of Crystal Decisions was acquired on November 22, 2000 and a change of control occurred as described in note 2, Crystal Decisions restated all its assets and liabilities in the financial statements as of November 22, 2000 on a “push down” accounting basis. Accordingly, results of operations prior to November 22, 2000 do not reflect these adjustments.

Crystal Decisions operates and reports financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. Accordingly, fiscal 2000 ended on June 30, 2000 (“fiscal 2000”), fiscal 2001 ended on June 29, 2001 (“fiscal 2001”) and fiscal 2002 ended on June 28, 2002 (“fiscal 2002”). Fiscal 2000, 2001 and 2002 were each comprised of 52 weeks. Fiscal 2003 ended on June 27, 2003 and was comprised of 52 weeks. The nine-month periods ended March 29, 2002 and March 28, 2003 were each comprised of 39 weeks.

Certain comparative period figures have been reclassified to conform to the current basis of presentation. Such reclassifications had no effect on net income (loss) as previously reported.

On May 12, 2003, the Company’s Board of Directors approved a one for two reverse split of the Company’s outstanding common stock. The split is subject to the approval of the Company’s stockholders which is expected to occur in July 2003. Unless otherwise noted, all share and per share data included herein have been adjusted to reflect the one for two reverse stock split as if it had occurred at the beginning of the periods reflected.

At November 22, 2000, as the result of the completion of transactions under a stock purchase agreement (the “Stock Purchase Agreement”) Crystal Decisions became a majority owned subsidiary of New SAC. New SAC indirectly acquired 37,500,500 shares, or 99.7% of Crystal Decisions’ outstanding common stock on November 22, 2000. The Stock Purchase Agreement was entered into on March 29, 2000 by Old Seagate, Seagate Software Holdings and Suez Acquisition Company (Cayman) Limited (“Suez Acquisition Company”), an entity affiliated with, among others, Silver Lake Partners L.P. and Texas Pacific Group. Suez Acquisition Company was a limited corporation organized under the laws of the Cayman Islands and was formed solely for the purpose of entering into the Stock Purchase Agreement and related acquisitions with Old Seagate and Seagate Software Holdings. Prior to the closing of the transactions under the Stock Purchase Agreement, Suez Acquisition Company assigned all of its rights under the Stock Purchase Agreement to New SAC, an exempted limited liability company organized under the laws of the Cayman Islands.

Upon closing of the transactions under the Stock Purchase Agreement, on November 22, 2000, New SAC purchased substantially all of the operating assets of Old Seagate and its consolidated subsidiaries for cash and borrowings of $1.84 billion, including transactions costs of $25 million. This included Old Seagate’s rigid disc drive, storage area network, removable tape storage solutions businesses and operations, Crystal Decisions’ common stock and certain cash

balances, but excluded the approximately 128 million shares of VERITAS common stock then held by Seagate Software Holdings and certain of Old Seagate’s equity investments. In addition, the wholly owned subsidiaries of New SAC assumed substantially all of the operating liabilities of Old Seagate, Seagate Software Holdings and their consolidated subsidiaries. New SAC also acquired certain strategic equity investments in various companies owned by Old Seagate. This transaction is referred to hereafter as the New SAC Transaction.

The New SAC Transaction constituted a purchase of Old Seagate and resulted in a change in control of Crystal Decisions. Under purchase accounting rules, the net purchase price under this transaction was allocated to the assets and liabilities of Old Seagate and its subsidiaries, including Crystal Decisions, based on their fair values at the date of the closing of the New SAC Transaction. The accounting for the purchase transaction has been “pushed down” from New SAC to Crystal Decisions’ consolidated and combined financial statements.

The table below summarizes the $41.5 million net purchase price allocation to Crystal Decisions of the tangible and intangible assets acquired based on their fair values. The fair values of the tangible and intangible assets, including in-process research and development, were determined based upon independent appraisals provided by New SAC. The net purchase price allocation to Crystal Decisions exceeded the book value of the net assets acquired by $20.5 million. This excess of $20.5 million was recorded as an increase to additional paid-in capital to reflect the revaluation of the net tangible and intangible assets acquired.

As of June 28, 2002, the Company reduced to zero the net carrying values of the intangible assets pushed down to the financial statements in connection with the New SAC Transaction. The reduction in the recorded intangible assets resulted from an allocation of the tax benefits recognized by Old Seagate in its U.S. income tax returns attributable to acquisition related deferred tax assets in accordance with SFAS 109. There was no impact on the Company’s valuation allowance. The Company’s share of the reduction in intangibles, net of income taxes, was allocated as follows:

As a result of the New SAC Transaction and the push down accounting, the Company’s results of operations after November 22, 2000, particularly the depreciation and amortization charges, are not necessarily comparable to the results of operations prior to that date. The

following summarizes the impact of push down accounting, resulting from the New SAC Transaction, on the Company’s financial statements for the periods presented:


	•	Revenues. Deferred revenues were reduced by $1.3 million and revenues were reduced on a declining basis during the 12 months following the New SAC Transaction. Consequently, revenues were lower by $1.2 million for fiscal 2001 and $128,000 for fiscal 2002, than they would have been had the push down adjustments not occurred. There was no impact during the nine months ended March 28, 2003.

	•	Depreciation. Long-lived tangible assets were reduced by $4.3 million on November 22, 2000. Consequently, depreciation expense recorded was $1.5 million less for each of fiscal 2001 and 2002 and $678,000 less for the nine months ended March 28, 2003, than would have been recorded had the push down adjustments not occurred.

	•	Amortization. Additional amortization expense of $3.3 million and $5.6 million for fiscal 2001 and fiscal 2002, respectively, was recorded resulting from the incremental fair value of intangible assets pushed down to the Company’s consolidated financial statements on November 22, 2000.

	•	Elimination of intangible assets, net of deferred taxes. As a result of the application of SFAS 109, the net carrying values of the intangible assets pushed down to Crystal Decisions’ consolidated financial statements were reduced to zero at June 28, 2002 by a charge of $9.1 million against additional paid-in capital on the statement of stockholders’ equity. Therefore, commencing in the first quarter of fiscal 2003, there was no amortization charged to the Company’s statement of operations related to intangible assets.

	•	In-process research and development. During fiscal 2001, $7.1 million of in-process research and development costs were expensed. There was no similar expense in fiscal 2002 or the nine months ended March 28, 2003.

Because the statement of operations, cash flows and stockholders’ equity reflect the comprehensive revaluation of Crystal Decisions’ assets and liabilities from November 22, 2000, the following presents the statement of operations, cash flows and stockholders’ equity for the period from July 1, 2000 to November 22, 2000, which represents the activity before the New SAC Transaction (“Pre-New SAC Transaction”), and the period from November 23, 2000 to June 29, 2001, which represents that activity after the New SAC Transaction (“Post-New SAC Transaction”).

Immediately following the closing of the transactions under the Stock Purchase Agreement, and under the terms of the agreement and plan of merger and reorganization, VERITAS acquired the remainder of Old Seagate by way of the merger of a wholly owned subsidiary of VERITAS with and into Old Seagate, with Old Seagate becoming a wholly owned subsidiary of VERITAS. At the time of the merger, Old Seagate’s assets included a specified amount of cash, an investment in VERITAS, and certain specified investments and liabilities. This transaction is referred to hereafter as the VERITAS merger.

In connection with the New SAC Transaction, New SAC and its subsidiaries, including Crystal Decisions, entered into an Indemnification Agreement on March 29, 2000 with VERITAS under which the parties agreed to assume and indemnify VERITAS and its affiliates for substantially all liabilities arising in connection with Old Seagate’s and Crystal Decisions’ operating assets and for selected tax liabilities indefinitely. In return, VERITAS, Old Seagate and their affiliates agreed to indemnify New SAC and its consolidated subsidiaries, including Crystal Decisions, for certain liabilities, including all taxes of Old Seagate for which New SAC and its

subsidiaries are not obligated to indemnify VERITAS and its affiliates. VERITAS deposited $150 million into an escrow account, of which the full amount remains as of March 28, 2003. This amount may be withdrawn by New SAC to satisfy these liabilities indemnified by VERITAS, including those of Crystal Decisions and its subsidiaries. To the extent that any part of the $150 million is not utilized to satisfy these liabilities, the monies will be paid to the former stockholders of Old Seagate. The terms of the indemnification provide for no limitation to the maximum potential future payments, if any. Accordingly, the maximum potential future payments, if any, cannot be reasonably estimated.

In July 2002, Crystal Decisions entered into a Reimbursement Agreement with Seagate Technology and its affiliates, which allocates the respective liabilities and obligations of New SAC and its affiliates including the Company, under the Indemnification Agreement. Under the Reimbursement Agreement, if Old Seagate and its affiliates, including Crystal Decisions, became obligated to indemnify VERITAS or Old Seagate under the Indemnification Agreement, Seagate Technology HDD Holdings will be responsible for the first $125 million of tax liabilities. Any amount in excess of the first $125 million will be allocated on a pro rata basis in accordance with the portion of the purchase price allocated to each entity in connection with the November 2000 transaction among Seagate Technology HDD Holdings, Seagate Technology SAN Holdings, Certance Holdings and the Company’s direct majority shareholder, Seagate Software (Cayman) Holdings. Except for Seagate Software (Cayman) Holdings, these entities were either directly or indirectly held subsidiaries of Old Seagate. The portion of the purchase price allocated to Seagate Software (Cayman) Holdings in connection with the November 2000 transaction for United States federal income tax purposes was 7.8%. For indemnification obligations other than tax liabilities, the agreement provides that the responsible entity will reimburse any entity that satisfies that obligation on its behalf.

The preparation of the consolidated and combined financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the amounts reported in the consolidated and combined financial statements and accompanying notes. Estimates are used for, but are not limited to, allowance for doubtful accounts, certain reserves, useful lives for equipment and intangible assets, employee benefits, income taxes and litigation. Actual results could differ materially from those estimates.

The Company derives revenues from the sale of licenses for software products and services such as maintenance, technical support, training and consulting services. Licenses for software products are sold separately or with services as part of a bundled arrangement. Maintenance and technical support contracts are sold with licenses in a bundled arrangement or sold separately as a contract renewal. Training and consulting services are provided as part of a bundled arrangement or sold separately based on a project or time and materials basis.

For each sales transaction, the Company determines whether evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collection is probable. If any of these criteria are not met, recognition of revenues is deferred until such time as all of the criteria are met.

In bundled software arrangements that include rights to multiple software products and/or services, the Company recognizes revenues using the residual method as prescribed by the Statement of Position 98-9 “Modification of SOP No. 97-2 Software Revenue Recognition with Respect to Certain Transactions.” Under the residual method, revenues are allocated to the undelivered elements based on vendor specific objective evidence of fair value of the undelivered elements and the residual amount of revenues are allocated to the delivered elements. Vendor specific objective evidence of the fair value of maintenance and technical support contracts is based on renewal rates as determined by the prices paid by the Company’s customers when maintenance is sold separately. Vendor specific objective evidence of fair value of training and consulting services is based upon daily rates as determined by the prices paid by the Company’s customers when these services are sold separately.

For all bundled arrangements, the Company assesses whether the service elements of the arrangement are essential to the functionality of the other elements of the arrangement. When services are considered essential or the arrangement involves customization or modification of the software, both the license and service revenues under the arrangement are recognized under the percentage of completion method of contract accounting, based on cost of labor inputs. Expected losses, if any, in respect of consulting services are accrued once they become known.

For those arrangements for which the Company has concluded that the service elements are not essential to the other elements of the arrangement, the Company uses vendor specific objective evidence of fair value for the service elements to account for the arrangement using the residual method, regardless of any separate prices stated within the contract for each element. Revenues allocable to maintenance and technical support contracts are recognized ratably over the term of the respective contracts, which are typically one year. Maintenance contracts include rights to unspecified software product enhancements and upgrades when and as the Company makes them available. Revenues allocable to training and consulting services are recognized as the services are performed.

For sales to distributors and resellers, revenues are recognized upon product delivery. The Company reserves an amount equal to its estimate of all product subject to rights of return and resale contingencies. Some of the factors that are considered in determining this estimate include historical experience, level of inventory in the distribution channels, nature of the product, fixed or determinable fees and payment terms. The reserve reduces the revenues and the related receivables.

For sales to OEMs, revenues are recognized when the OEM reports sales that have occurred to an end user customer, provided that collection is probable. Some OEM arrangements include the payment of an upfront arrangement fee which is deferred and recognized either ratably over the contractual period or when the OEM reports sales that have occurred to an end user customer, in accordance with the contractual terms. If the Company determines, through royalty audits or other means, that an OEM did not report revenues accurately, the Company attempts to reconcile the discrepancies and, if appropriate, records additional revenues upon resolution.

Effective on the adoption of Emerging Issues Task Force (“EITF”) Issue No. 01-14, “Income Statement Characterization of Reimbursements Received for ‘Out-of-Pocket’ Expense Incurred” (“EITF 01-14”), by the Company on December 29, 2001, the Company began to record out-of-pocket expense reimbursements as revenues versus a reduction of costs of revenues incurred. Comparative consolidated and combined statements of operations have been reclassified. The adoption of EITF 01-14 has not affected net income (loss) in any past or current period.

The functional currency of the Company and certain subsidiaries is the applicable local currency as determined in accordance with SFAS 52, “Foreign Currency Translation”. The Company’s reporting currency is the U.S. dollar. Assets and liabilities of the Company’s subsidiaries with functional currencies other than the U.S. dollar are translated into U.S. dollar equivalents at the rate of exchange in effect on the balance sheet date. Revenues and expenses are translated at the weighted average monthly rates for the period. Translation gains and losses are recorded as a separate component of stockholders’ equity, and transaction gains and losses are reflected in determining net income (loss). For those foreign operations whose functional currency is the U.S. dollar, financial results are translated using a combination of current and historical exchange rates and any translation adjustments are included in net income (loss), along with all transaction gains and losses for the period.

Due to the number of currencies involved, the constant change in currency exposures, and the substantial volatility of currency exchange rates, the effect of exchange rate fluctuations upon future operating results could be significant. As of March 28, 2003, the Company had not undertaken hedging transactions to cover any currency or translation exposure.

Accumulated other comprehensive income (loss) is comprised of foreign currency translation gains and losses. Crystal Decisions has reported the components of comprehensive income (loss) on the consolidated and combined statements of stockholders’ equity.

Cash equivalents consist of cash deposited with banks and highly liquid, high quality debt securities with original maturities of 90 days or less at the time of purchase. Investments with maturity dates greater than 90 days but less than one year at the time of purchase are classified as short-term investments. Investments with maturity dates of greater than one year at the time of purchase are classified as long-term investments. In accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, and based on the Company’s intention to have the marketable securities available to support its current operations, the Company classifies all marketable securities as available-for-sale. All investments are carried at amortized cost, which approximates fair market value. Restricted cash consists of amounts held on deposit that are required as collateral under an overdraft credit facility.

Financial instruments that potentially subject the Company to credit risk consist primarily of cash, available-for-sale investments and accounts receivable. Crystal Decisions places its cash

and available-for-sale investments with high credit quality financial institutions. The Company invests its excess cash primarily in money market funds, commercial paper, U.S. government and government sponsored securities and other debt securities.

The Company sells its products to many companies in various industries throughout the world, with the majority of receivables from companies located in North America. The Company performs ongoing credit evaluations of its customers and maintains reserves for potential credit losses. The Company bases its estimated losses on historical experience including bad debt write-offs, specific identification of probable bad debts based on collection efforts, aging of accounts receivable and other factors. Historically, such losses have been within management’s expectations. The Company generally requires no collateral from its customers. At March 28, 2003, receivables due from Ingram Micro, Inc. (“Ingram Micro”), a distributor, were approximately 10% of the Company’s accounts receivable balance before allowances and reserves.

Inventories are stated at the lower of cost (first in, first out method) or market and consist primarily of materials used in software products, related supplies and packaging materials. During fiscal 2000, product support materials in the amount of $350,000 were written off as obsolete. There were no other revaluations of inventory to the lower of cost or market during fiscal 2000, fiscal 2001, fiscal 2002 or the nine months ended March 28, 2003.

Equipment and leasehold improvements are stated at cost less accumulated depreciation. Equipment is depreciated using the straight-line method over the estimated useful lives of the assets ranging from two to four years. Leasehold improvements are depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the remaining terms of the lease. Where assets are fully depreciated and are no longer in use, the fully depreciated cost and related accumulated amortization is written off.

As described in note 2, all intangible assets at June 28, 2002 were revalued and reduced to zero by a charge to additional paid-in capital. Prior to June 28, 2002, amortization of goodwill and purchased intangible assets was provided on a straight line basis over the respective useful lives of the assets, which ranged from three to five years.

In October 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). Crystal Decisions adopted SFAS 144 effective June 29, 2002. SFAS 144 supercedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of” (“SFAS 121”). SFAS 144 retains the requirements of SFAS 121 to (a) recognize an impairment loss if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and (b) measure an impairment loss as the difference between the carrying amount and the fair value of the asset. The adoption of SFAS 144 had no impact on the Company’s financial position or results of operations because there were no impaired long-lived assets as of the date

of adoption. There were no long-lived assets that were considered to be impaired during the periods presented.

Crystal Decisions applies SFAS 86 “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed”(“SFAS 86”) to software technologies developed internally, acquired in business acquisitions or purchased. SFAS 86 requires the capitalization of certain internal development costs once technological feasibility is established, which generally occurs upon the completion of a working model. Internal development costs incurred prior to the establishment of technical feasibility are expensed as incurred and are included as research and development expense. As the time period between the completion of a working model and the general availability of software has been short, costs qualifying for capitalization were insignificant. Accordingly, there were no capitalized software development costs at June 29, 2001, June 28, 2002 or March 28, 2003.

As described in note 2, all purchased developed technologies at June 28, 2002 were revalued and reduced to zero by a charge to additional paid-in capital. Purchased developed technologies were amortized based on a straight-line basis over the estimated useful life (three to four years). The recoverability of the carrying value of purchased developed technologies was reviewed periodically. The carrying value of purchased developed technologies was compared to the estimated future gross revenues from that product including maintenance revenues and customer support revenues reduced by the estimated future costs of completing and disposing of that product, including the costs of performing maintenance and customer support (net undiscounted cash flows) and to the extent that the carrying value exceeded the net undiscounted cash flows, the difference is written off.

Advertising costs are expensed as incurred. Advertising costs included in sales and marketing expense totaled $13.3 million, $10.2 million and $10.7 million for fiscal 2000, fiscal 2001 and fiscal 2002, respectively. Advertising costs totaled $7.3 million and $9.0 million for the nine months ended March 29, 2002 and March 28, 2003, respectively.

Shipping and handling costs for all software delivered to customers for new licenses and upgrades of existing licenses are included in cost of licensing revenues.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an Amendment of FASB Statement No. 123” (“SFAS 148”). This statement amends SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based compensation under SFAS 123. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 and Accounting Principles Board Opinion No. 28, “Interim Financial Reporting” (“APB 28”) to require prominent disclosure of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income (loss) and net income (loss) per share in annual and interim financial statements. SFAS 148’s amendment of the transition and annual

disclosure provisions of SFAS 123 is effective for fiscal years ending after December 15, 2002. The amendment to disclosure requirements under APB 28 is effective for interim periods beginning after December 15, 2002.

At March 28, 2003, the Company had two stock-based employee compensation plans, which are described in note 13. Crystal Decisions measures compensation expense for its 1999 Stock Option Plan using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations.

The following table provides the required pro forma disclosures of the effect on net income (loss) and net income (loss) per share as if the fair value-based method had been applied in measuring compensation expense (in thousands, except per share amounts):

Aside from a one-time charge of approximately $41,000 in connection with certain stock options issued to employees in England, no stock-based employee compensation cost was reflected in net income for the periods presented as all other stock options granted under the 1999 Stock Option Plan and 2000 Stock Option Plan (the “Plans”) had an exercise price equal to the market value of the underlying common stock at the date of grant. During fiscal 2000, the reported net loss included $239.6 million related to compensation expense associated with the exchange of Seagate Software Holdings common stock for Old Seagate common stock (note 9). During fiscal 2001, the reported net loss included $1.9 million related to compensation expense for Old Seagate stock options on the sale of Old Seagate (note 9).

The pro forma effects of applying SFAS 123 for the periods presented are not likely to be representative of the pro forma effects of future periods as the stock options usually vest over a period of four years, no stock options were issued under the Plans prior to November 1999, the number of stock options awarded varies from one period to another and the Black-Scholes fair value of each award depends on the assumptions at the grant date.

See note 13 for discussion of the assumptions used in the Black-Scholes option pricing model and the resulting estimated fair value of employee stock options.

The Company is subject to income taxes in both the United States and numerous foreign jurisdictions and the use of estimates is required in determining the Company’s provision for income taxes. The Company accounts for its income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS 109 prescribes the liability method. Under this method deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and the tax bases of assets and liabilities, and are measured using the enacted statutory tax rates that will be in effect for the year in which the differences are expected to reverse. The Company records a valuation allowance to reduce its deferred tax assets when uncertainty regarding their realizability exists. Although the Company believes its tax estimates are reasonable, the ultimate tax determination involves significant judgment that could be subject to audit by tax authorities in the ordinary course of business.

Net Income (Loss) Per Share. Under the provisions of SFAS No. 128, “Earnings per share”, basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed using the weighted average number of shares of common stock outstanding and dilutive common stock equivalents outstanding during the period using the treasury stock method. The incremental shares included as common stock equivalents result from the weighted average fair market values of stock options being in excess of the exercise prices for the stock options outstanding. Potential dilutive securities are excluded from the computation of diluted net income (loss) per share where their inclusion would not be dilutive.

The Company’s cash, cash equivalents, short-term and long-term investments are summarized in the table below. Crystal Decisions classifies its investments in debt securities as available-for-sale and records these investments at the amortized cost, which approximates their fair value. Gains and losses on available-for-sale securities held at June 28, 2002 and March 28, 2003 and gross realized gains or losses on sales of available-for-sale securities during fiscal 2002 and the nine months ended March 28, 2003 were not significant.

The above amounts do not include $2.0 million of restricted cash on deposit with The Bank of Nova Scotia (note 5). Under the Revolving Loan Agreement with Comerica described in note 14(b), the Company is required to maintain $10.0 million of its investments with Comerica or its affiliates.

On September 26, 2002, the Company placed $2.0 million on deposit with The Bank of Nova Scotia as a general hypothecation to an overdraft credit facility. The monies held and the interest earned thereon are classified as restricted cash. The overdraft credit facility provides up to Canadian $2.0 million credit for certain overdrafts plus a foreign exchange forward trading line supporting notional contracts of between $4.0 million and $6.0 million. At March 28, 2003, there was no balance outstanding under this overdraft credit facility.

During the nine months ended March 28, 2003, fully depreciated assets were written off resulting in a reduction of both cost and accumulated depreciation of $2.1 million.

Depreciation and amortization expense on property and equipment was $4.3 million, $4.4 million and $5.2 million for fiscal 2000, fiscal 2001 and fiscal 2002, respectively. Depreciation and amortization expense was $2.2 million for the five-month period ended November 22, 2000 and $2.2 million for the period from November 23, 2000 to June 29, 2001. Depreciation and amortization expense on property and equipment was $3.7 million and $6.6 million for the nine months ended March 29, 2002 and March 28, 2003, respectively.

As described in note 2, Crystal Decisions revalued its intangible assets as a result of the New SAC Transaction. Commencing on November 23, 2000, these intangible assets were amortized on a straight-line basis over their estimated useful lives (three years). Amortization on

these intangible assets was $4.3 million and $7.4 million, respectively, for the period from November 23, 2000 to June 29, 2001 and for fiscal 2002. Amortization on these intangibles was $5.6 million and zero, respectively, for the nine months ended March 29, 2002 and March 28, 2003.

In July 2001, the FASB issued SFAS No. 141 “Business Combinations” (“SFAS 141”) and SFAS No. 142 “Goodwill and Other Intangible Assets” (“SFAS 142”). Crystal Decisions adopted SFAS 141 effective July 1, 2001 and SFAS 142 effective June 29, 2002. Under SFAS 142, goodwill and indefinite life intangible assets are no longer amortized but are reviewed for impairment annually or more frequently if impairment indicators arise. Certain intangible assets, such as assembled workforce, are no longer considered intangible assets under SFAS 142 and would instead be classified as goodwill. Separate intangible assets that are deemed to have definite lives continue to be amortized over their estimated useful lives. There was no goodwill or remaining definite or indefinite life intangible assets on the consolidated balance sheet as of June 28, 2002 or March 28, 2003.

Had the Company been accounting for its intangible assets under SFAS 142 for all periods presented, the Company’s net income (loss) and net income (loss) per share would have been as follows (in thousands, except per share amounts):

The balances amortized to November 22, 2000 related to goodwill and intangible assets, including assembled workforce and trademarks, related to the June 1999 Old Seagate exchange offer and the October 1999 Old Seagate exchange of shares (note 9). The amortization expense related to these assets was $648,000 for the period from July 1, 2000 to November 22, 2000.

In December 2000, Crystal Decisions signed a software license agreement (the “License Agreement”) with Old Seagate, whose obligations were assigned to Seagate Technology. Under the terms of the License Agreement, Crystal Decisions granted Seagate Technology a non-exclusive, non-transferable, perpetual license to use certain business intelligence products and

receive related maintenance and support services for one year. The total value of the License Agreement was $1.6 million. The License Agreement was priced at an approximate 50% discount to Crystal Decisions’ established list price. During fiscal 2001 and fiscal 2002, respectively, Crystal Decisions recognized approximately $1.5 million and $151,000 of revenues from the License Agreement. The License Agreement also provided for consulting revenues of which Crystal Decisions earned $327,000 and $30,000 in fiscal 2001 and fiscal 2002, respectively (adjusted for the application of EITF 01-14).

The maintenance and support services related to the License Agreement were renewed for one year during the three months ended December 28, 2001 and for an additional year in the three months ended March 28, 2003. Revenues from the maintenance and support services are being recognized ratably over the term of the contract, which is one year. Crystal Decisions recognized maintenance and support revenues from Seagate Technology of $282,000, $176,000 and $348,000, respectively, during fiscal 2002, the nine months ended March 29, 2002 and nine months ended March 28, 2003.

Historically, Old Seagate provided substantial administrative and financial services to Crystal Decisions under a General Services Agreement dated June 28, 1997. During fiscal 2001, the General Services Agreement was replaced by the following agreements between Crystal Decisions and Seagate Technology and its affiliates: a Corporate Services Agreement, a Payroll Services Agreement and a Management Services Agreement under substantially the same terms as the General Services Agreement with Old Seagate. The term of the new agreements are each three years with successive renewal periods of one year. Seagate Technology provides various services as requested by Crystal Decisions for which it charges Crystal Decisions through corporate expense allocations. The amount of corporate expense charges depends upon the total amount of allocable costs incurred by Seagate Technology on behalf of Crystal Decisions less amounts charged as a specific cost or expense rather than by allocation. Such costs have been proportionately allocated to Crystal Decisions based on detailed inquiries and estimates of time incurred by Seagate Technology’s corporate general and administrative departmental managers. Crystal Decisions’ management believes that the allocation methods applied to the costs provided under the agreements in place are reasonable. Seagate Technology has charged Crystal Decisions the fair market value of these services and thus no material additional costs would have been incurred had Crystal Decisions obtained these services from a third party.

Crystal Decisions began to perform internally a number of the services that it previously relied upon Seagate Technology to provide and thus expects that overall the charges will be less for fiscal 2003 than fiscal 2002. Amounts charged to Crystal Decisions’ general and administrative expense were $658,000, $1.2 million and $865,000 for fiscal 2000, fiscal 2001 and fiscal 2002, respectively. Amounts charged to Crystal Decisions for the nine months ended March 29, 2002 and March 28, 2003, respectively, were $712,000 and $281,000. Commencing November 23, 2000 up to and including the three months ended December 27, 2002, these balances included a quarterly charge of $25,000 for consulting and advisory fees under an annual monitoring agreement that were paid on Crystal Decisions’ behalf by Seagate Technology to certain New SAC investors. In December 2002, Seagate Technology discontinued the annual monitoring agreement. In settlement for the remaining term of the agreement, Crystal Decisions paid $625,000, which was included in general and administrative expense on the statement of operations for the three months ended December 27, 2002. Management believes Seagate Technology charged Crystal Decisions the fair market value of these services and thus no material additional costs would have been incurred had Crystal Decisions obtained these services from a third party.

Until October 22, 2000, certain employees of Crystal Decisions also participated in the Old Seagate Employee Stock Purchase Plan (the “Purchase Plan”). The Purchase Plan permitted eligible employees who had completed thirty days of employment prior to the inception of the offering period to purchase common stock of Old Seagate through payroll deductions at the lower of 85% of the fair market value of the common stock at the beginning or at the end of each six-month offering period. Under the Purchase Plan, Crystal Decisions employees purchased 57,245 and 24,181 shares of Old Seagate common stock in fiscal 2000 and fiscal 2001, respectively. The Company did not make matching payments for such employee stock purchases. The Purchase Plan terminated prior to the closing of the New SAC Transaction.

As of June 29, 2001 and June 28, 2002, there were no amounts outstanding from Old Seagate included in accounts receivable. At March 28, 2003, there was approximately $423,000 in accounts receivable due from Seagate Technology.

As of June 29, 2001 there were no amounts owing to Old Seagate included in accounts payable. At June 28, 2002 and March 28, 2003, there was approximately $1.3 million and $182,000, respectively, in accounts payable due to Seagate Technology.

VERITAS and a subsidiary of VERITAS Software Corporation entered into a three-year cross license and original equipment manufacturer agreement with Crystal Decisions, Corp., a wholly owned subsidiary, on May 28, 1999. Two members of the Company’s board of directors were also members of the board of directors of VERITAS at that time. The cross license agreement provided for the licensing of certain products between the parties. The Company recognized revenues from VERITAS of $7,000 in fiscal 2000, no revenues in fiscal 2001 and no revenues in fiscal 2002.

On June 21, 2002, the cross license agreement was terminated and the Company entered into two software license and services agreements with VERITAS Software Global Corporation. Two members of the Company’s board of directors were also members of the board of directors of VERITAS at that time. Under one of the agreements, VERITAS granted the Company a perpetual, irrevocable, non-exclusive, non-transferable worldwide license to use given products in specified amounts, solely in support of the Company’s internal business operations. The software license agreement provided for the purchase of annual maintenance and support, which was calculated as a percentage of the actual list price of the licensed software. In July 2002, the Company recorded approximately $622,000 as a prepaid expense related to the annual maintenance and support contract, which is being expensed ratably in fiscal 2003. In a separate agreement, the Company granted VERITAS a perpetual software license to use given products in specified amounts and 18 months of maintenance and support services for no consideration. The fair value of the license and maintenance and support services was approximately $126,000. The Company has not recognized any revenues under this agreement.

See also notes 2, 9, 11, 14, 15, 17 and 20 for other related party transactions.

On November 22, 2000, the date of the closing of the New SAC Transaction, vesting of Seagate Technology options were accelerated and each share was net exercised for merger

consideration of 0.4465 shares of VERITAS common stock and $8.55 cash per share of Seagate Technology. The accelerated vesting and net exercise of these options resulted in compensation expense to Old Seagate. At November 22, 2000, options to purchase 51,500 shares of Old Seagate common stock were held by certain Crystal Decisions’ employees. As a result, the Company recorded approximately $1.9 million of non-cash compensation expense attributable to its employees as a capital contribution from Old Seagate. The compensation expense was recorded as an unusual item in the consolidated and combined statement of operations for fiscal 2001.

On October 20, 1999, the stockholders of Seagate Software Holdings approved the merger of Seagate Daylight Merger Corp., a wholly owned subsidiary of Old Seagate, with and into Seagate Software Holdings. The merger was effected on October 20, 1999. Seagate Software Holdings’ assets consisted of the assets of the IMG business and its investment in the common stock of VERITAS. Upon the closing of the merger, Seagate Software Holdings became a wholly owned subsidiary of Old Seagate. All outstanding options to purchase Seagate Software Holdings common stock were accelerated immediately prior to the merger. In connection with the merger, Seagate Software Holdings minority stockholders and optionees received payment in the form of 3.23 shares of Old Seagate’s common stock per share of Seagate Software Holdings common stock less any amounts due for the payment of the exercise price of unexercised options. Old Seagate issued 9,124,046 shares of its common stock to minority stockholders and optionees of Seagate Software Holdings in connection with the merger.

Seagate Technology accounted for the exchange of shares of its common stock as the acquisition of a minority interest in Seagate Software Holdings’ common stock outstanding and vested more than six months held by employees and all stock held by former employees and consultants. The fair value of the shares of Old Seagate issued was $19.4 million and was recorded as the purchase price of this minority interest and was allocated to all the identifiable tangible and intangible assets and liabilities of Seagate Software Holdings. Old Seagate accounted for the exchange of shares of its common stock for stock options in Seagate Software Holdings held by employees and stock held and vested by employees less than six months as the settlement of an earlier stock award. During fiscal 2000, Old Seagate recorded compensation expense of $283.6 million, plus $2.1 million of employer portion of payroll taxes, related to the purchase of the minority interest in Seagate Software Holdings.

The Crystal Decisions’ consolidated and combined statement of operations for fiscal 2000 includes an allocation of compensation expense arising from the October 1999 Old Seagate exchange of shares of $239.6 million of the total compensation expense of $283.6 million. Compensation expense was allocated to Crystal Decisions on the basis of employees specifically identified with the IMG business and for those employees that performed services for the IMG business, on the basis of time estimates. The offsetting entry was recorded as a capital contribution from Old Seagate on the statement of stockholders’ equity. The $2.1 million of employer portion of payroll taxes paid related to Crystal Decisions employees was recorded as an unusual expense in fiscal 2000. In addition, Crystal Decisions incurred $877,000 of legal and accounting costs in fiscal 2000 in connection with its recapitalization and reorganization.

The components of the unusual items expense recorded in fiscal 2000 that are attributable to the employees of Crystal Decisions consisted of the following (in thousands):

The consolidated and combined financial statements of Crystal Decisions at June 30, 2000 also included an allocation of $1.2 million of the $19.4 million purchase price allocation described previously that was pushed down to the consolidated and combined financial statements of Crystal Decisions. The allocation to Crystal Decisions was based on the estimated fair value of the IMG business relative to the fair value of Seagate Software Holdings. A number of factors were considered in determining the estimated fair value of the IMG business, including historical and projected revenues, earnings and cash flows, as well as other factors and consultations with financial advisors.

The allocation of the purchase price to the intangible assets of Crystal Decisions as of October 20, 1999 consisted of the following (in thousands):

During fiscal 2000, Crystal Decisions incurred $1.3 million of restructuring charges related to the termination of excess personnel as Crystal Decisions realigned its resources to better manage and control its business. The charges resulted from a company-wide restructuring plan announced in October 1999 and were comprised of charges for severance and benefits paid to approximately 125 employees from various locations and departments, including direct sales force personnel, who were terminated on October 23, 1999. The restructuring charges were paid during fiscal 2000 and no amounts were outstanding as of June 30, 2000.

During fiscal 2001, Crystal Decisions incurred $573,000 of restructuring charges. The charges related to the closure of eight offices in Europe and were part of a restructuring plan announced in September 2000 to consolidate the European sales organization into fewer locations. The charges were primarily comprised of costs related to the termination of office leases and other related closure costs, as well as severance and benefits due to nine sales and marketing employees who were terminated in September 2000. At June 29, 2001, amounts remaining accrued but unpaid were not considered significant. At June 28, 2002, no amounts remained outstanding.

Net income (loss) before provision for (benefit from) income taxes consisted of the following (in thousands):

The provision for (benefit from) income taxes consisted of the following (in thousands):

Undistributed earnings of the Company’s foreign subsidiaries are considered to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes was provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for applicable foreign tax credits) and withholding taxes payable as imposed by the tax authorities of those foreign countries.

The Company is subject to income taxes in both the United States and numerous foreign jurisdictions and the use of estimates are required in determining the Company’s worldwide provision for income taxes. Although the Company believes its tax estimates are reasonable, the ultimate tax determination involves significant judgment that could be subject to audit by tax authorities in the ordinary course of business.

A reconciliation of income taxes computed at the U.S. statutory rate to the provision for (benefit from) income taxes is as follows (in thousands):

Prior to the close of the New SAC Transaction, Crystal Decisions was included in the consolidated federal and certain combined and consolidated foreign and state income tax returns of Old Seagate. Old Seagate and Crystal Decisions had entered into a tax sharing agreement (the “Tax Allocation Agreement”) pursuant to which Crystal Decisions computed hypothetical taxes as if Crystal Decisions was not joined in the combined or consolidated returns with Old Seagate. Crystal Decisions paid Old Seagate the positive amount of any such hypothetical taxes. If the hypothetical taxes showed entitlement to refunds, including any refunds attributable to a carryback, then Old Seagate would pay Crystal Decisions the amount of such refunds. In prior periods, Crystal Decisions generated substantial cash payments from the Company’s tax losses utilized by Old Seagate, which were used to reduce the obligation under the revolving loan agreement (“Revolving Loan Agreement”) (note 14). As of the end of fiscal 2000 and fiscal 2001, respectively, $67.0 million and $4.0 million of intercompany tax related balances due to Crystal Decisions from Old Seagate were offset against amounts due, if any, to Old Seagate under the Revolving Loan Agreement. On November 22, 2000, the Tax Allocation Agreement was terminated.

On November 23, 2000, the Company entered into a state tax allocation agreement with several New SAC affiliates. The computation of taxes was similar to that under the Tax Allocation Agreement. Effective June 30, 2001 the state tax allocation agreement ceased to apply. As of March 28, 2003, there were approximately $40,000 of tax related receivables due to Crystal Decisions from certain New SAC affiliates.

Until October 22, 2000, certain employees of Crystal Decisions participated in the Old Seagate Employee Stock Purchase Plan. During fiscal 2000 and fiscal 2001, respectively, $109,000 and $33,000 of income tax benefits relating to the exercise of stock options under this plan by the Company’s employees were credited to additional paid-in capital. The offsetting entry increased amounts due to Old Seagate pursuant to the Tax Allocation Agreement.

During fiscal 2002, the Company’s Canadian subsidiary transferred intellectual property to another foreign subsidiary. The transaction resulted in current taxes of $3.4 million, which were classified as an asset on the consolidated balance sheet and are being amortized over the life of

the transferred asset, which the Company has determined to be two years. As of March 28, 2003, $1.7 million of the asset was classified as “Prepaid and other current assets” and $425,000 was classified as “Other non-current assets” on the consolidated balance sheet.

Deferred income taxes reflect the net tax effects of loss carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of Crystal Decisions’ deferred tax assets and liabilities consisted of the following (in thousands):

During the nine months ended March 28, 2003, the Company reduced its valuation allowance against deferred tax assets to reflect the amount of the future tax benefit that is more likely than not to be realized. A valuation allowance continues to be provided against those deferred tax assets for which there is uncertainty of future realization.

The Company had foreign net operating losses of approximately $9.8 million, which are available to offset future foreign taxable income. The $9.8 million net operating losses can be used indefinitely in the future.

Below is a reconciliation of the numerator and denominator used to calculate net income (loss) per share (in thousands, except per share data) as calculated on a pre-split basis and a post-split basis after giving effect to the reverse stock split.

The number of anti-dilutive stock options (post-split) excluded from the net income (loss) calculation was 474,884 for fiscal 2002 and 1,394,339 and 258,004 for the nine months ended March 29, 2002 and March 28, 2003, respectively.

As at March 28, 2003, Crystal Decisions’ authorized capital stock consisted of 150,000,000 shares of common stock at $0.001 par value per share. No dividends have been declared or paid to date by Crystal Decisions.

The Crystal Decisions 1999 and 2000 Stock Option Plans (the “Crystal Decisions Plans”) provide for the issuance of incentive and nonstatutory stock options to employees, directors and consultants of Crystal Decisions, New SAC and subsidiaries of the consolidated group.

Crystal Decisions reserved 11,250,000 shares under the 1999 Stock Option Plan. Options granted under this plan are generally granted at fair market value, expire 10 years from the date of the grant and vest over 48 months, with the shares subject to the option vesting as to 25% on the first anniversary of the vesting commencement date and as to 1/48th of the option per month

thereafter. As of June 30, 2000, June 29, 2001, June 28, 2002 and March 28, 2003 respectively, 4,313,247, 5,340,022, 6,695,111 and 8,686,357 options were outstanding under the 1999 stock option plan and 6,936,228, 5,711,533, 4,123,611 and 2,050,680 options remained available for grant.

Crystal Decisions reserved 100,000 shares under the 2000 Stock Option Plan. Options granted under this plan were granted at fair market value, expire 10 years from the date of grant and become fully vested and exercisable immediately prior to a merger or asset sale, other than the New SAC Transaction, or on the date an initial public offering of Crystal Decisions’ common stock is declared effective by the Securities and Exchange Commission. A dividend will be recorded upon the vesting of these options at fair value under SFAS 123. All of the options under this plan were granted to employees of Seagate Technology before the New SAC Transaction. At June 30, 2000, 80,725 options were outstanding under the 2000 stock option plan and 19,275 options remained available for grant. As of June 29, 2001, June 28, 2002 and March 28, 2003, respectively, 53,225 options were outstanding under the 2000 stock option plan and 46,775 options remained available for grant.

Following is a summary of stock option activity from the inception of the Crystal Decisions Plans through the end of March 28, 2003:

The following table summarizes the status of the Company’s stock options outstanding and exercisable at March 28, 2003:

Crystal Decisions has elected to measure compensation expense for its 1999 Stock Option Plan using the intrinsic value method prescribed by APB 25 and related interpretations.

As required by SFAS 123, as modified by SFAS 148, the Company is required to present pro forma disclosure of the effects of using the fair value method and has done so in note 3 “Stock-Based Compensation”. For purposes of the pro forma disclosure, management estimates the fair value of stock options issued to employees using the Black-Scholes option valuation model. This model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected life of options and the Company’s expected stock price volatility. Therefore, the estimated fair value of the Company’s employee stock options could vary significantly as a result in changes in the assumptions used.

The weighted average assumptions used and the resulting estimates of weighted-average fair value of options granted during the following periods, without taking into account the one for two reverse stock split, were as follows:

Until October 22, 2000, the employees of Crystal Decisions were eligible to participate in the Old Seagate Employee Stock Purchase Plan (“Purchase Plan”). The weighted average fair value of shares granted under Purchase Plan was $11.47 in fiscal 2000. The fair value was estimated assuming no dividends and the following weighted average assumptions: an expected life of six months, a risk-free interest rate of 5.7% and a volatility of 78%. The weighted average purchase price of shares granted under the Purchase Plan was $23.38 per share in fiscal 2000. The estimated fair value of the options was amortized over the six-month purchase period for stock purchases under the Purchase Plan ending October 22, 2000.

For purposes of pro forma disclosures pursuant to SFAS 123, the expected volatility assumptions used by the Company have been based on an average of our competitors’ historical volatilities over the expected life of the stock options.

Under the provisions of the 1999 Stock Option Plan, a former employee and certain non-employee directors have exercised certain of their options to purchase common stock, including the unvested portion. At the option of Crystal Decisions and within 30 days of termination of these individuals, Crystal Decisions may, but is not obligated to, repurchase the unvested shares at the original purchase price. There was no stock subject to repurchase as of June 30, 2000. As of June 29, 2001, June 28, 2002 and March 28, 2003, respectively, there were 64,499, 35,416

and 14,950 unvested shares that could become subject to repurchase at an aggregate repurchase price of $515,992, $283,328 and $119,600, respectively.

On July 4, 2001, Crystal Decisions and Seagate Technology renewed the Revolving Loan Agreement originally dated June 28, 1996, which was previously with Old Seagate. The renewed Revolving Loan Agreement provided for maximum outstanding borrowings of up to $15.0 million, which was reduced from the amended loan dated July 4, 2000, which provided for maximum outstanding borrowings of up to $60.0 million. As explained in note 11, the Company also had amounts receivable from (or payable to) Old Seagate under the Tax Allocation Agreement for income tax loss benefits utilized by Old Seagate relative to Crystal Decisions’ tax loss position.

The loan balance due to Old Seagate was offset against the net receivable pursuant to the Tax Allocation Agreement in accordance with the terms of the contractual agreements.

The Revolving Loan Agreement expired on July 4, 2002 and was not renewed. The net receivable or net payable balance was presented on the consolidated balance sheets in accordance with the terms of the Revolving Loan Agreement and Tax Allocation Agreement.

Prior to fiscal 2001, certain of Crystal Decisions’ working capital requirements were financed through the revolving loan agreements and at July 2, 1999 there was a net payable balance due to Old Seagate. At June 30, 2000, there was a net receivable balance due from Old Seagate of $25.7 million, largely as the result of amounts due from Old Seagate Under the Tax Allocation Agreement for income tax loss benefits utilized by Old Seagate relative to Crystal Decisions’ tax loss position.

During the three months ended June 29, 2001, Seagate Technology repaid $31.0 million of the net balance receivable under the Revolving Loan Agreement, thereby decreasing the receivable balance at June 29, 2001 to $3.4 million. During the three months ended September 28, 2001, Seagate Technology repaid the remaining portion of the receivable balance. At June 28, 2002, or on the expiration of the Revolving Loan Agreement on July 4, 2002, there was no net balance receivable or payable under the Revolving Loan Agreement.

During all periods, interest income or expense was calculated on a monthly basis on the outstanding net receivable or net payable revolving loan balance. During fiscal 2000, net interest expense of $583,000 was incurred at an average rate of 7.85%, being LIBOR plus 2% per annum. During fiscal 2001, net interest income of $1.8 million was earned at an average rate of 6.46%. During fiscal 2001 and 2002, interest income was earned at Seagate Technology’s in-house portfolio yield rate. During fiscal 2002, net interest income of $301,000 was earned at an average rate of 3.71% for the first fiscal quarter of 2002.

In October 2002, Crystal Decisions executed an accounts receivable-based revolving facility (the “Revolving Line”) with Comerica Bank-California (“Comerica”). The Revolving Line provides up to $15.0 million in borrowings for general working capital purposes. Interest is calculated, depending on the nature of the advance, at either the U.S. prime rate or LIBOR plus 2.5% per annum. On prime rate advances, interest is payable monthly. On LIBOR advances, interest is payable on a quarterly basis and at the end of each LIBOR period. Borrowings under

the Revolving Line are limited to 80% of eligible accounts receivable, with an additional $2.0 million available in any month in which Crystal Decisions maintains $15.0 million of its investment accounts with Comerica or its affiliates. The Revolving Line expires on September 30, 2004 at which time the outstanding principal and interest payable balances are due immediately. The Revolving Line is collateralized by substantially all the Company’s personal property, excluding intellectual property. The agreement also required the Company’s U.S. and Canadian subsidiaries to pledge their assets in support of Crystal Decisions’ obligations under the agreement. The Company was required to pledge shares of most of its subsidiaries to Comerica.

The terms of the Revolving Line require Crystal Decisions to maintain certain quarterly financial covenants related to liquidity, minimum tangible net worth and quarterly free cash flow. The agreement restricts certain of the Company’s activities. For example, it restricts the Company from selling, leasing or otherwise disposing of any part of the business or property under most circumstances. In addition, the agreement prohibits the Company from entering into arrangements which will result in a change of control or in which the Company would incur certain forms of indebtedness without Comerica’s consent. The Company is also restricted from making certain types of distributions and investments. The Company is required to maintain at least an aggregate of $10.0 million in investment accounts with Comerica and some of its affiliates. No amounts were outstanding under the Revolving Line at March 28, 2003. At March 28, 2003, Crystal Decisions maintained $35.1 million of its cash equivalents balance with Comerica.

On November 22, 2000, as part of the financing of the New SAC Transaction, New SAC, through an indirect subsidiary Seagate Technology (U.S.) Holdings, Inc., entered into a credit agreement for senior credit facilities with a syndicate of banks and other financial institutions (the “Credit Agreement”). The senior credit facilities negotiated under the Credit Agreement provided senior secured financing of up to $900 million, consisting of $700 million of term loans and a $200 million revolving credit facility. In addition, Seagate Technology International, which is an indirect subsidiary of New SAC, issued unsecured senior subordinated notes (the “Notes”) under an Indenture dated November 22, 2000, at a discount to the aggregate principal amount of $210 million, for gross proceeds of approximately $201 million. The Notes had an original maturity date of November 15, 2007 and incurred interest payable semi-annually at a rate of 12.5% per annum.

Under these agreements, New SAC and certain of its subsidiaries, including Crystal Decisions and certain of its subsidiaries, were guarantors on a joint and several, whole and unconditional basis, of the senior credit facilities and the Notes. In addition, the majority of New SAC’s and certain of its subsidiaries’ assets, including certain of Crystal Decisions’ assets and its capital stock, were pledged against the term loans under the Credit Agreement. Also, New SAC, and certain of its subsidiaries, including Crystal Decisions and certain of its subsidiaries, had agreed to certain covenants under the Credit Agreement and the Notes, including restrictions on future equity and borrowing transactions, business acquisitions and disposals, making certain restricted payments and dividends, making certain capital expenditures, incurring guarantee obligations and engaging in mergers or consolidations.

As New SAC did not require Crystal Decisions’ cash flow to be used to service the obligations pursuant to the Credit Agreement or the Notes, and as the Company believed that none of the guarantees or pledges of assets under the term loans or its guarantee obligations

under the Indenture were likely to be invoked, Crystal Decisions’ consolidated and combined financial statements did not reflect any of the proportionate debt and interest charges related to the financing of the New SAC Transaction.

On May 13, 2002, New SAC and its affiliates completed a refinancing of the secured credit facilities and a tender offer for all of the outstanding Notes and repaid the remaining balance outstanding on the terms loans under the former senior secured credit facilities. Crystal Decisions and its subsidiaries were released from all of the guarantees, pledge of assets and restrictive covenants that existed under the Credit Agreement and Indenture. Crystal Decisions did not fund any debt or interest repayments in respect to the Credit Agreement during the period the credit remained outstanding.

Crystal Decisions operates in a single business segment — information management software. Crystal Decisions’ markets its products and services in the United States and in foreign countries through its direct sales force and indirect distribution channels. Within the segment, the chief operating decision maker, Crystal Decisions’ chief executive officer, evaluates the performance of the business based upon revenues from product and services, revenues by geographic regions and revenues by product channels.


(1)	Revenues are attributed to geographic locations based on the location of the customer.

(2)	Europe includes the Middle East and Africa.

(3)	Includes distributors, resellers and OEMs.

A third-party customer, Ingram Micro, accounted for a total of $25.3 million, $27.7 million and $21.0 million, of total revenues during fiscal 2000, fiscal 2001 and fiscal 2002, respectively. Ingram Micro accounted for approximately 10% of total revenues in the nine months ended March 29, 2002 and less than 10% of total revenues in the nine months ended March 28, 2003. No other customer accounted for 10% or more of Crystal Decisions consolidated total revenues during fiscal 2000, fiscal 2001, fiscal 2002 or the nine months ended March 28, 2003.

Crystal Decisions leases its facilities under lease agreements. Rent expense for facilities under operating leases was $5.7 million, $6.4 million and $7.8 million for fiscal 2000, fiscal 2001 and fiscal 2002, respectively. Rent expense was $5.7 million and $6.1 million for the nine months ended March 29, 2002 and March 28, 2003, respectively. Facility operating leases expire at various dates through fiscal 2015 and contain various provisions for rental adjustments. The leases require Crystal Decisions to pay property taxes, insurance and normal maintenance costs. Crystal Decisions also occupies two facilities leased by Seagate Technology for which fair value rent and related costs in aggregate of approximately $340,000 per annum are charged. One of

these subleases is expected to end in September 2003. Approximate minimum lease payments for the Company’s facilities were as follows at March 28, 2003 (in thousands):

In November 1997, Vedatech Corporation (“Vedatech”) commenced an action in the Chancery Division of the High Court of Justice in the United Kingdom against Crystal Decisions (UK) Limited, a wholly owned subsidiary of Crystal Decisions. The liability phase of the trial was completed in March 2002, with Crystal Decisions prevailing on all claims except for a quantum meruit claim. The court ordered the parties to mediate the amount of that claim and, in August 2002, the parties came to a mediated settlement. The mediated settlement was not material to Crystal Decisions’ operations and contained no continuing obligations. In September 2002, however, the Company received a notice that Vedatech is seeking to set aside the settlement. The mediated settlement and related costs are accrued in the consolidated financial statements. In April 2003, Crystal Decisions filed an action in the High Court of Justice seeking a declaration that the mediated settlement agreement is valid and binding. In connection with this request for declaratory relief Crystal Decisions paid the agreed settlement amount into the court. Although Crystal Decisions believes that Vedatech’s basis for seeking to set aside the mediated settlement is meritless, the outcome cannot be determined at this time. If the mediated settlement were to be set aside, a negative outcome could adversely affect Crystal Decisions’ financial position and results of operations.

In addition to the foregoing, Crystal Decisions is subject to other litigation in the ordinary course of its business. Where the Company believes a loss is probable and can be reasonably estimated, the estimated loss is accrued in the consolidated financial statements. Where the outcome of these matters is not determinable no provision is made in the financial statements until the loss, if any, is probable and can be reasonably estimated or the outcome becomes known.

While Crystal Decisions believes that the ultimate outcome of these matters will not have a material adverse effect on the Company, the outcome of these matters is not determinable and negative outcomes may adversely effect Crystal Decisions’ financial position or results of operations.

interim periods ending after December 15, 2002; however, the provisions for initial recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002.

The Company has pledged certain assets and shares in connection with the Revolving Line agreement with Comerica described in note 14.

The Company also maintains directors’ and officers’ liability insurance with respect to liabilities arising out of certain matters, including matters arising under the securities laws. This insurance is subject to limitations, conditions and deductibles set forth in the respective insurance policy. There is no pending litigation or proceeding involving any director or officer of the Company as to which indemnification is being sought, nor is the Company aware of any threatened litigation that may result in claims for indemnification.

As part of the New SAC Transaction referred to in note 2, New SAC and certain of their subsidiaries, including Crystal Decisions, entered into an Indemnification Agreement with VERITAS. The Indemnification Agreement provides that New SAC, including Crystal Decisions, is required to indemnify VERITAS and its affiliates for specified liabilities of Old Seagate and Seagate Software Holdings, including selected taxes.

On May 12, 2003, the Company’s Board of Directors approved an initial public offering of shares of common stock of Crystal Decisions under the Securities Act of 1933. Prior to this offering, there has been no public market for the common stock of Crystal Decisions.

On May 12, 2003, the Company’s Board of Directors approved an increase in the number of authorized shares of the Company’s common stock from 150,000,000 to 350,000,000 shares (post-split). The Company’s Board of Directors also approved the creation and authorization of 10,000,000 shares (post-split) of undesignated preferred stock, par value $0.001 per share. These amendments to the Company’s certificate of incorporation will become effective after approval by the Company’s stockholders, which is expected to occur in July 2003.

On May 12, 2003, the Company’s Board of Directors approved a one for two reverse stock split of the Company’s common stock subject to approval by the Company’s stockholders. The reverse stock split will not become effective until the completion of the Company’s annual meeting of stockholders, which is expected to occur in July 2003. All share amounts and per share data reflected in these consolidated and combined financial statements are shown after giving retroactive effect to the one for two reverse stock split, except where noted.

On May 12, 2003, the Company’s Board of Directors approved, subject to stockholder approval, the following actions to occur concurrent with the effectiveness of the Company’s planned initial public offering:


	•	Termination of the 1999 Stock Option Plan and 2000 Stock Option Plan as to future option grants other than pursuant to subplans for certain of the Company’s subsidiaries outside of the United States until such time as new sub-plans for these foreign subsidiaries have received any necessary qualification under applicable foreign laws.

	•	Adoption of the 2002 Stock Option Plan — 2,500,000 shares of common stock will be reserved for issuance under the 2002 Stock Option Plan. On the first day of each fiscal year, starting with July 3, 2004, the number of shares in the reserve will increase by the lesser of 3,750,000 shares of common stock; 5.0% of outstanding shares of common stock on the last day of the previous fiscal year; or an amount determined by the Board of Directors. The plan will terminate in May 2013, unless the Board of Directors terminates it sooner.

	•	Adoption of the 2002 Director Option Plan — 125,000 shares of common stock will be reserved for issuance under the 2002 Director Option Plan. On the first day of each fiscal year, starting with July 3, 2004, the number of shares in the reserve will increase by the lesser of 150,000 shares of common stock; 0.2% of outstanding shares of common stock on the last day of the previous fiscal year; or an amount determined by the Board of Directors. The plan will terminate in May 2013, unless the Board of Directors terminates it sooner.

Pursuant to the terms of options granted under the Company’s 2000 Stock Option Plan, all options to purchase the Company’s common stock outstanding as of the date of the effectiveness of a registration statement filed by the Company in connection with its initial public offering will become fully vested and exercisable. As a result of these provisions, at the time of the Company’s initial public offering, options to purchase 53,225 shares of the Company’s common stock at a per share exercise price of $8.00 will become fully vested and immediately exercisable. The Company will record a dividend based on the fair value of those options upon the date of vesting which is the date the registration statement becomes effective. The value of those options will be determined using the Black-Scholes option valuation model.

On May 12, 2003, the Company’s Board of Directors approved a pledge of $1.0 million in cash as an endowment to the Community Foundation of Silicon Valley. This amount was paid on June 30, 2003. In addition, it was approved that a charitable matching plan be established pursuant to which the Company will match employee donations to the charitable organization described above. The matching of contributions will be on a dollar for dollar basis subject to a maximum annual charitable contribution by the Company in any fiscal year of an amount equal to one percent of the Company’s income before interest, taxes and amortization for the prior fiscal year. This plan shall continue from fiscal year to fiscal year. The maximum amount that could be paid by Crystal Decisions under this matching plan for fiscal 2003 is approximately $220,000.

The Community Foundation of Silicon Valley is an independent, public benefit organization that provides grants to charitable groups in areas such as education, arts and cultural participation and neighborhoods and civic engagement. The Community Foundation of Silicon Valley also works with independent, public benefit organizations to provide grants that are used in communities outside of the San Francisco bay area. The Community Foundation of Silicon Valley awards grants equal to at least 5% of its endowment annually.

Certain shares issued and option grants made under the 1999 Stock Option Plan to residents of California, Maryland and New York may not have complied with all applicable securities laws of those states. Accordingly, the Company is planning to make a rescission offer to these stockholders and optionees which will allow the holders to elect, during a limited period of time, to return their shares or options to the Company in return for a payment equal to their purchase price or 20% of their aggregate exercise price, plus any applicable interest. As of March 28, 2003, approximately 130,532 outstanding shares of the Company’s common stock and approximately 496,567 shares subject to outstanding options will be subject to the rescission offer. The shares and options had purchase and exercise prices ranging from $8.00 to $16.00 per share. The Company does not believe that the holders of these shares of the Company’s common stock and options to purchase the Company’s common stock will accept the Company’s offer because the prices at which the Company is offering to repurchase them are less than or equal to the fair market value of the estimated initial public offering price of the Company’s common stock. However, in the unlikely event that all of these persons accepted the Company’s offer, the Company would make total payments of approximately $2.2 million, which the Company would fund from the Company’s existing cash balances. Of this aggregate cash payment, approximately $1.2 million would be recorded as compensation expense on the repurchase of outstanding options and the remainder would be recorded against equity.

No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

The following table sets forth the costs and expenses, other than the underwriting discount, payable by the registrant in connection with the sale of the securities being registered. All amounts are estimates except the SEC registration fee, the NASD filing fee and the Nasdaq National Market listing fee.

The registrant will pay New SAC’s expenses, including certain legal fees, in the offering, excluding the underwriting discount.

As permitted by Section 145 of the Delaware General Corporation Law, the registrant’s amended and restated certificate of incorporation includes a provision that eliminates the personal liability of its directors for monetary damages for breach or alleged breach of their duty of care. In addition, as permitted by Section 145 of the Delaware General Corporation Law, the bylaws of the registrant provide that: (1) the registrant is required to indemnify its directors and executive officers and persons serving in these capacities in other business enterprises at the registrant’s request, to the fullest extent permitted by Delaware law, including in those circumstances in which indemnification would otherwise be discretionary; (2) the registrant may, in its discretion, indemnify employees and agents in those circumstances where indemnification is not required by law; (3) the registrant is required to advance expenses, as incurred, to its directors and executive officers in connection with defending a proceeding, except that it is not required to advance expenses to a person against whom the registrant brings a claim for breach of the duty of loyalty, failure to act in good faith, intentional misconduct, knowing violation of law or deriving an improper personal benefit; (4) the rights conferred in the bylaws are not exclusive, and the registrant is authorized to enter into indemnification agreements with its directors, executive officers and employees; and (5) the registrant may not retroactively amend the bylaw provisions in a way that is adverse to our directors, executive officers and employees in these matters.

The registrant’s policy is to enter into indemnification agreements with each of its directors and executive officers that provide the maximum indemnity allowed to directors and executive officers by Section 145 of the Delaware General Corporation Law and the bylaws, as well as certain additional procedural protections. In addition, the indemnification agreements provide that the registrant’s directors and executive officers will be indemnified to the fullest possible extent not prohibited by law against all expenses, including attorney’s fees, and settlement amounts paid or incurred by them in any action or proceeding, including any derivative action by or in the

right of the registrant, on account of their services as directors or executive officers of the registrant or as directors or officers of any other company or enterprise when they are serving in these capacities at the request of the registrant. The registrant will not be obligated pursuant to the indemnification agreements to indemnify or advance expenses to an indemnified party with respect to proceedings or claims initiated by the indemnified party and not by way of defense, except with respect to proceedings specifically authorized by the registrant’s board of directors or brought to enforce a right to indemnification under the indemnification agreement, the registrant’s bylaws or any statute or law. Under the agreements, the registrant is not obligated to indemnify the indemnified party (1) for any expenses incurred by the indemnified party with respect to any proceeding instituted by the indemnified party to enforce or interpret the agreement, if a court of competent jurisdiction determines that each of the material assertions made by the indemnified party in any proceeding was not made in good faith or was frivolous; (2) for any amounts paid in settlement of a proceeding unless the registrant consents to such settlement; (3) with respect to any proceeding brought by the registrant against the indemnified party for willful misconduct, unless a court determines that each of such claims was not made in good faith or was frivolous; (4) on account of any suit in which judgment is rendered against the indemnified party for an accounting of profits made from the purchase or sale by the indemnified party of securities of the registrant pursuant to the provisions of §16(b) of the Securities Exchange Act of 1934, and related laws; (5) on account of the indemnified party’s conduct which is finally adjudged to have been knowingly fraudulent or deliberately dishonest, or to constitute willful misconduct or a knowing violation of the law; (6) on account of any conduct from which the indemnified party derived an improper personal benefit; (7) on account of conduct the indemnified party believed to be contrary to the best interests of the registrant or its stockholders; (8) on account of conduct that constituted a breach of the indemnified party’s duty of loyalty to the registrant or its stockholders; or (9) if a final decision by a court having jurisdiction in the matter shall determine that such indemnification is not lawful. In addition, Messrs. Luczo, Roux, Thompson and Waite have entered into indemnification agreements with New SAC. Mr. Roux, who serves on the board of the registrant, has entered into an indemnification agreement with an affiliate of Silver Lake Partners.

The indemnification provisions in the bylaws and the indemnification agreements entered into between the registrant and its directors and executive officers may be sufficiently broad to permit indemnification of the registrant’s officers and directors for liabilities arising under the Securities Act of 1933.

Reference is made to the following documents filed as exhibits to this registration statement regarding relevant indemnification provisions described above and elsewhere herein:

Since our incorporation in August 1999, the registrant has sold and issued the following securities:


	1.	In August 1999, the registrant issued and sold 500 shares of Common Stock to one accredited investor for $1,000 pursuant to Section 4(2) of the Securities Act.

	2.	In November 1999, the registrant issued and sold 37,500,000 shares of Common Stock to one accredited investor for the operating assets, liabilities and interests in subsidiaries of its information management business pursuant to Section 4(2) of the Securities Act.

	3.	From November 1999 to December 2000, the registrant issued and sold 141,410 shares of Common Stock to 22 employees and directors for $1,131,280 pursuant to Section 4(2) of the Securities Act.

The recipients of securities in each such transaction represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and warrants issued in such transactions. All recipients had adequate access, through their relationships with us, to information about us.

a. Exhibits. The following exhibits are included herein or incorporated herein by reference:


	(1)	Incorporated by reference to the registrant’s Registration Statement on Form 10 filed on October 27, 2000 (File No. 000-31859).

	(2)	Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ended March 30, 2001.

	(3)	Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ended December 29, 2000.

	(4)	Incorporated by Reference to the registrant’s Annual Report on Form 10-K for the period ended June 28, 2002.

	(5)	Incorporated by reference to the registrant’s Annual Report on Form 10-K for the period ended June 29, 2001.

	(6)	Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ended September 27, 2002.

	(7)	Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ended September 28, 2001.

	(8)	Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ended March 28, 2003.

	(9)	Incorporated by reference to Exhibit 10.10 to the registration statement on Form S-4 (reg. no. 333-88388) of Seagate Technology filed with the SEC on May 16, 2002.


(10)	Incorporated by reference to Exhibit 10.11 to the registration statement on Form S-4 (reg. no. 333-88388) of Seagate Technology filed with the SEC on May 16, 2002.

(11)	Incorporated by reference to Exhibit 2.3 to the registration statement on Form S-4 (reg. no. 333-88388) of Seagate Technology filed with the SEC on May 16, 2002.

(12)	Incorporated by reference to Exhibit 2.4 to the registration statement on Form S-4 (reg. no. 333-88388) of Seagate Technology filed with the SEC on May 16, 2002.


(13)	Incorporated by reference to Exhibit 2.5 to the registration statement on Form S-4 (reg. no. 333-88388) of Seagate Technology filed with the SEC on May 16, 2002.

(14)	Incorporated by reference to Exhibit 2.6 to the registration statement on Form S-4 (reg. no. 333-88388) of Seagate Technology filed with the SEC on May 16, 2002.

(15)	Incorporated by reference to Exhibit 10.18 to amendment no. 10 to the registration statement on Form S-4 (reg. no. 333-88388) of Seagate Technology filed with the SEC on December 17, 2002.

We have audited the consolidated balance sheets of Crystal Decisions, Inc., as of June 29, 2001, June 28, 2002 and March 28, 2003 and the related consolidated and combined statements of operations, stockholders’ equity and cash flows for the fiscal years ended June 30, 2000, June 29, 2001 and June 28, 2002 and the nine months ended March 28, 2003 and have issued our report thereon dated April 17, 2003 (except note 20, as to which the date is July , 2003) included elsewhere in this Registration Statement. Our audits also included the financial statement schedules listed in Item 16(b) of this Registration Statement. These schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits.

In our opinion, the financial statement schedules referred to above, when considered in relation to the consolidated and combined financial statements taken as a whole, present fairly in all material respects the information set forth therein.

The foregoing report is in the form that will be signed upon the completion of the restatement of capital accounts described in note 20 to the consolidated and combined financial statements.

Schedule II — Valuation and Qualifying Accounts — Accounts receivable allowances.

Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.


	(1)	For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

	(2)	For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment No. 1 to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Palo Alto, State of California on July 1, 2003.


	By:	/s/ JONATHAN J. JUDGE ______________________________________ Jonathan J. Judge


	President and Chief Executive Officer

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints, jointly and severally, Jonathan J. Judge and Eric Patel, and each of them, as his attorney-in-fact, with full power of substitution, for him in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments), and any and all registration statements filed pursuant to Rule 462 under the Securities Act of 1933, as amended, in connection with or related to the offering contemplated by this registration statement and its amendments, if any, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by his said attorney to any and all amendments to said registration statement.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:


	(1)	Incorporated by reference to the registrant’s Registration Statement on Form 10 filed on October 27, 2000 (File No. 000-31859).

	(2)	Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ended March 30, 2001.


	(3)	Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ended December 29, 2000.

	(4)	Incorporated by reference to the registrant’s Annual Report on Form 10-K for the period ended June 28, 2002.

	(5)	Incorporated by reference to the registrant’s Annual Report on Form 10-K for the period ended June 29, 2001.

	(6)	Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ended September 27, 2002.

	(7)	Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ended September 28, 2001.

	(8)	Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ended March 28, 2003.

	(9)	Incorporated by reference to Exhibit 10.10 to the registration statement on Form S-4 (reg. no. 333-88388) of Seagate Technology filed with the SEC on May 16, 2002.


(10)	Incorporated by reference to Exhibit 10.11 to the registration statement on Form S-4 (reg. no. 333-88388) of Seagate Technology filed with the SEC on May 16, 2002.

(11)	Incorporated by reference to Exhibit 2.3 to the registration statement on Form S-4 (reg. no. 333-88388) of Seagate Technology filed with the SEC on May 16, 2002.

(12)	Incorporated by reference to Exhibit 2.4 to the registration statement on Form S-4 (reg. no. 333-88388) of Seagate Technology filed with the SEC on May 16, 2002.

(13)	Incorporated by reference to Exhibit 2.5 to the registration statement on Form S-4 (reg. no. 333-88388) of Seagate Technology filed with the SEC on May 16, 2002.

(14)	Incorporated by reference to Exhibit 2.6 to the registration statement on Form S-4 (reg. no. 333-88388) of Seagate Technology filed with the SEC on May 16, 2002.

(15)	Incorporated by reference to Exhibit 10.18 to amendment no. 10 to the registration statement on Form S-4 (reg. no. 333-88388) of Seagate Technology filed with the SEC on December 17, 2002.

EX-1.1 3 f90383a1exv1w1.txt EXHIBIT 1.1 EXHIBIT 1.1 CRYSTAL DECISIONS, INC. COMMON STOCK, PAR VALUE $0.001 PER SHARE ----------- UNDERWRITING AGREEMENT , 2003 Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc., Thomas Weisel Partners LLC, As representatives of the several Underwriters named in Schedule I hereto, c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004. Ladies and Gentlemen: Crystal Decisions, Inc., a Delaware corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of shares of Common Stock, par value $0.001 per share ("Stock"), of the Company and New SAC, a Cayman Islands limited corporation, a stockholder of the Company (the "Selling Stockholder"), proposes, subject to the terms and conditions stated herein, to sell to the Underwriters an aggregate of shares and, at the election of the Underwriters, up to additional shares of Stock. The aggregate of shares to be sold by the Company and the Selling Stockholder is herein called the "Firm Shares" and the aggregate of additional shares to be sold by the Selling Stockholder is herein called the "Optional Shares". The Firm Shares and the Optional Shares that the Underwriters elect to purchase pursuant to Section 2 hereof are herein collectively called the "Shares". 1. (a) The Company represents and warrants to, and agrees with, each of the Underwriters that: (i) A registration statement on Form S-1 (File No. 333-105559) (the "Initial Registration Statement") in respect of the Shares has been filed with the Securities and Exchange Commission (the "Commission"); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to you, and, excluding exhibits thereto, to you for each of the other Underwriters, have been declared effective by the Commission in such form; other than a registration statement, if any, increasing the size of the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), which became effective upon filing, no other document with respect to the Initial Registration Statement has heretofore been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Act is hereinafter called a "Preliminary Prospectus"; the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any, including all exhibits thereto and including the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of the Initial Registration Statement at the time it was declared effective, each as amended at the time such part of the Initial Registration Statement became effective or such part of the Rule 462(b) Registration Statement, if any, became or hereafter becomes effective, are hereinafter collectively called the "Registration Statement"; such final prospectus, in the form first filed pursuant to Rule 424(b) under the Act, is hereinafter called the "Prospectus"; (ii) No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein or by the Selling Stockholder for use therein; (iii) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to the Registration Statement and any amendment thereto and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein or by the Selling Stockholder for use therein; (iv) Neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements included in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, in each case except as would not, individually or in the aggregate, have a material adverse effect on the Company's general affairs, management, financial position, prospects, stockholders' equity or results of operations (a "Material Adverse Effect"), otherwise than as set forth or contemplated in the Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any change in the capital stock (other than the exercise of stock options outstanding and the grant of stock options authorized under the stock option plans described in the Prospectus), short term debt or 2 long-term debt of the Company or any of its subsidiaries or any Material Adverse Effect, or any event which would be reasonably likely to have a Material Adverse Effect on the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Prospectus; (v) The Company and its subsidiaries own no real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not materially interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries; (vi) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except where the failure to be so qualified or in good standing as a foreign corporation would not, individually or in the aggregate, have a Material Adverse Effect. Each subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation; (vii) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and conform to the description of the Stock contained in the Prospectus; and all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and (except for directors' qualifying shares) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims, except as described in the Prospectus; (viii) The unissued Shares to be issued and sold by the Company to the Underwriters hereunder have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and fully paid and non-assessable and will conform to the description of the Stock contained in the Prospectus; (ix) The issue and sale of the Shares to be sold by the Company and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their 3 properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except the registration under the Act of the Shares and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters; (x) Neither the Company nor any of its subsidiaries is (i) in violation of its Certificate of Incorporation or By-laws, or (ii) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound, except, in the case of (ii), for any violation or default that would not, individually or in the aggregate, have a Material Adverse Effect on the Company and its subsidiaries, taken as a whole; (xi) The statements set forth in the Prospectus under the caption "Description of Capital Stock", insofar as they purport to constitute a summary of the terms of the Stock, under the caption "Underwriting", insofar as they purport to describe the provisions of the laws and documents referred to therein, and under the caption "Our Relationships and Arrangements with New SAC, Seagate Technology, Our Officers and Our Directors", insofar as they purport to constitute summaries of certain terms of documents referred to therein, are accurate and complete in all material respects; (xii) Other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect on the Company and its subsidiaries, taken as a whole; and, to the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (xiii) The Company is not and, after giving effect to the offering and sale of the Shares, will not be an "investment company", as such term is defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"); (xiv) Neither the Company nor any of its affiliates does business with the government of Cuba or with any person or affiliate located in Cuba within the meaning of Section 517.075, Florida Statutes; (xv) Ernst & Young LLP, who have certified certain financial statements of the Company and its subsidiaries, are independent public accountants as required by the Act and the rules and regulations of the Commission thereunder; (xvi) The Company and its subsidiaries own or possess, or can acquire on reasonable terms, valid licenses or other rights to use all patents, trademarks, service marks, trade names, copyrights, know-how, trade secrets and other intellectual property necessary to conduct the business of the Company and its subsidiaries in the manner in which it has been and is being conducted, and except as set forth in the Prospectus, the Company and its subsidiaries have not received any notice of infringement or of conflict with (and the Company knows of no such infringement or conflict with) asserted rights of others with respect to any patents, trademarks, service marks, trade names, copyrights, know-how, trade secrets or 4 other intellectual property which, if determined adversely to the Company or its subsidiaries, would individually or in the aggregate have a Material Adverse Effect on the Company and its subsidiaries taken as a whole; (xvii) Except as disclosed in the Prospectus, the Company and its subsidiaries, taken as a whole, are insured by insurers of recognized financial responsibility against such losses and risks in such amounts as are prudent and customary in the business in which they are engaged; and neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would individually or in the aggregate have a Material Adverse Effect on the Company and its subsidiaries taken as a whole; (xviii)The Company and its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (b) The Selling Stockholder represents and warrants to, and agrees with, each of the Underwriters and the Company that: (i) All consents, approvals, authorizations and orders necessary for the execution and delivery by the Selling Stockholder of this Agreement and for the sale and delivery of the Shares to be sold by the Selling Stockholder hereunder, have been obtained, except such as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters; and the Selling Stockholder has full right, power and authority to enter into this Agreement and to sell, assign, transfer and deliver the Shares to be sold by the Selling Stockholder hereunder; (ii) The sale of the Shares to be sold by the Selling Stockholder hereunder and the compliance by the Selling Stockholder with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any statute, indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Selling Stockholder is a party or by which the Selling Stockholder is bound or to which any of the property or assets of the Selling Stockholder is subject, nor will such action result in any violation of the provisions of the Memorandum and Articles of Association of the Selling Stockholder or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Selling Stockholder or the property of the Selling Stockholder; (iii) The Selling Stockholder has, and immediately prior to the each Time of Delivery (as defined in Section 4 hereof) the Selling Stockholder will have, good and valid title to the Shares to be sold by the Selling Stockholder hereunder, free and clear of all liens, encumbrances, equities or claims; and, upon delivery of such Shares and payment therefor pursuant hereto, good and valid title to such Shares, free and clear of all liens, encumbrances, equities or claims, will pass to the several Underwriters; 5 (iv) The Selling Stockholder will comply with the restrictions set forth in the Lock-up Agreement, substantially in the form of Annex III hereto; (v) The Selling Stockholder has not taken and will not take, directly or indirectly, any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares; (vi) To the extent that any statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto are made in reliance upon and in conformity with written information furnished to the Company by the Selling Stockholder expressly for use therein, such Preliminary Prospectus and the Registration Statement did, and the Prospectus and any further amendments or supplements to the Registration Statement and the Prospectus, when they become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and (vii) In order to document the Underwriters' compliance with the reporting and withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982 with respect to the transactions herein contemplated, the Selling Stockholder will deliver to you prior to or at the First Time of Delivery (as hereinafter defined) a properly completed and executed United States Treasury Department Form W-8 (or other applicable form or statement specified by Treasury Department regulations in lieu thereof). 2. Subject to the terms and conditions herein set forth, (a) the Company and the Selling Stockholder agree, severally and not jointly, to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company and the Selling Stockholder, at a purchase price per share of $ , the number of Firm Shares (to be adjusted by you so as to eliminate fractional shares) determined by multiplying the aggregate number of Shares to be sold by the Company and the Selling Stockholder by a fraction, the numerator of which is the aggregate number of Firm Shares to be purchased by such Underwriter as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the aggregate number of Firm Shares to be purchased by all of the Underwriters from the Company and the Selling Stockholder hereunder and (b) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Shares as provided below, the Selling Stockholder agrees to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Selling Stockholder at the purchase price per share set forth in clause (a) of this Section 2, that portion of the number of Optional Shares as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Optional Shares by a fraction the numerator of which is the maximum number of Optional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Optional Shares that all of the Underwriters are entitled to purchase hereunder. The Selling Stockholder hereby grants to the Underwriters the right to purchase at their election up to Optional Shares, at the purchase price per share set forth in the paragraph above, for the sole purpose of covering sales of shares in excess of the number of Firm Shares. Any 6 such election to purchase Optional Shares may be exercised only by written notice from you to the Selling Stockholder, given within a period of 30 calendar days after the date of this Agreement and setting forth the aggregate number of Optional Shares to be purchased and the date on which such Optional Shares are to be delivered, as determined by you but in no event earlier than the First Time of Delivery (as defined in Section 4 hereof) or, unless you and the Selling Stockholder otherwise agree in writing, earlier than two or later than ten business days after the date of such notice. 3. Upon the authorization by you of the release of the Firm Shares, the several Underwriters propose to offer the Firm Shares for sale upon the terms and conditions set forth in the Prospectus. 4. (a) The Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and registered in such names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior notice to the Company and the Selling Stockholder shall be delivered by or on behalf of the Company and the Selling Stockholder to Goldman, Sachs & Co., through the facilities of the Depository Trust Company ("DTC") for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified by the Company and each of the Selling Stockholder, as their interests may appear, to Goldman, Sachs & Co. at least forty-eight hours in advance. The Company and the Selling Stockholder will cause the certificates representing the Shares to be made available for checking and packaging at least twenty-four hours prior to the Time of Delivery (as defined below) with respect thereto at the office of DTC or its designated custodian (the "Designated Office"). The time and date of such delivery and payment shall be, with respect to the Firm Shares, 7:00 a.m., Palo Alto time, on , 2003 or such other time and date as Goldman, Sachs & Co., the Company and the Selling Stockholder may agree upon in writing, and, with respect to the Optional Shares, 7:00 a.m., Palo Alto time, on the date specified by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the Underwriters' election to purchase such Optional Shares, or such other time and date as Goldman, Sachs & Co., the Company and the Selling Stockholder may agree upon in writing. Such time and date for delivery of the Firm Shares is herein called the "First Time of Delivery", such time and date for delivery of the Optional Shares, if not the First Time of Delivery, is herein called the "Second Time of Delivery", and each such time and date for delivery is herein called a "Time of Delivery". (b) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross receipt for the Shares and any additional documents requested by the Underwriters pursuant to Section 7(o) hereof, will be delivered at the offices of Sullivan & Cromwell LLP, 1870 Embarcadero Road, Palo Alto, California, 94303 (the "Closing Location"), and the Shares will be delivered at the Designated Office, all at such Time of Delivery. A meeting will be held at the Closing Location at 3:30 p.m., Palo Alto time, on the New York Business Day next preceding such Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. 5. The Company agrees with each of the Underwriters: (a) To prepare the Prospectus in a form approved by you and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement, or, if 7 applicable, such earlier time as may be required by Rule 430A(a)(3) under the Act; to make no further amendment or any supplement to the Registration Statement or Prospectus which shall be disapproved by you promptly after reasonable notice thereof; to advise you, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish you with copies thereof; to advise you, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus or suspending any such qualification, promptly to use its best efforts to obtain the withdrawal of such order; (b) Promptly from time to time to take such action as you may reasonably request to qualify the Shares for offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (c) Prior to 10:00 A.M., New York City time, on the New York Business Day next succeeding the date of this Agreement and from time to time, to furnish the Underwriters with written and electronic copies of the Prospectus in New York City in such quantities as you may reasonably request, and, if the delivery of a prospectus is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Shares and if at such time any events shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such period to amend or supplement the Prospectus in order to comply with the Act, to notify you and upon your request to prepare and furnish without charge to each Underwriter and to any dealer in securities as many written and electronic copies as you may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance, and in case any Underwriter is required to deliver a prospectus in connection with sales of any of the Shares at any time nine months or more after the time of issue of the Prospectus, upon your request but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many written and electronic copies as you may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act; (d) To make generally available to its securityholders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules 8 and regulations of the Commission thereunder (including, at the option of the Company, Rule 158); (e) During the period beginning from the date hereof and continuing to and including the date 180 days after the date of the Prospectus, not to offer, sell, contract to sell or otherwise dispose of, except as provided hereunder, any securities of the Company that are substantially similar to the Shares, including but not limited to any securities that are convertible into or exchangeable for, or that represent the right to receive, Stock or any such substantially similar securities (other than pursuant to employee stock option plans existing on, or upon the conversion or exchange of convertible or exchangeable securities outstanding as of, the date of this Agreement), without your prior written consent; (f) During the period beginning from the date hereof and continuing to and including the date 180 days after the date of the Prospectus, to enforce (including, without limitation, through the placement of restrictive legends on securities of the Company and the issuance of stop transfer instructions to the Company's transfer agent), and, without the prior written consent of Goldman, Sachs & Co., not to waive or amend, all agreements, including stock option agreements, between the Company and any employee or other holder of securities of the Company (other than those persons listed on Schedule II hereto or the Selling Stockholder) restricting such employee or holder from effecting any offer, sale or other disposition of any securities of the Company and the Company acknowledges that the Underwriters have requested in connection with the proposed sale of the Shares that employees and other holders of securities of the Company not sell or otherwise transfer any securities of the Company as provided herein; provided, however, that after 90 days from the date of the Prospectus, the Company shall be permitted to release each employee or other holder of the Company's securities (other than those persons listed on Schedule II hereto or the Selling Stockholder) from the foregoing restrictions with respect to a number of shares equal to the lesser of (i) 750 shares or (ii) such person's vested options to purchase the Company's common stock per employee. The Company represents and warrants that it has the valid and enforceable right to restrict the sale, transfer or disposition of all such securities of the Company held by such employees or other holders of securities of the Company in accordance with the foregoing; (g) To furnish to its stockholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders' equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), to make available to its stockholders consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail; provided, however, that the Company shall be deemed to have satisfied this requirement by filing such reports with the Securities and Exchange Commission via Edgar and posting a link to such Edgar filing on the Company's web site; (h) During a period of five years from the effective date of the Registration Statement, to furnish to you copies of all reports or other communications (financial or other) furnished to stockholders, and to deliver to you (i) as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as you may from 9 time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Company and its subsidiaries are consolidated in reports furnished to its stockholders generally or to the Commission); (i) To use the net proceeds received by it from the sale of the Shares pursuant to this Agreement in the manner specified in the Prospectus under the caption "Use of Proceeds"; (j) To use its best efforts to list for quotation the Shares on the National Association of Securities Dealers Automated Quotations National Market System ("NASDAQ"); (k) To file with the Commission such information on Form 10-Q of Form 10-K as may be required by Rule 463 under the Act; (l) If the Company elects to rely upon Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the Act; and (m) Upon request of any Underwriter, to furnish, or cause to be furnished, to such Underwriter an electronic version of the Company's trademarks, servicemarks and corporate logo for use on the website, if any, operated by such Underwriter for the purpose of facilitating the on-line offering of the Shares (the "License"); provided, however, that the License shall be used solely for the purpose described above, is granted without any fee and may not be assigned or transferred. 6. The Company covenants and agrees with the several Underwriters that (a) the Company will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company's counsel (and for counsel for the Selling Stockholder in an amount approved by the board of directors of the Company for the specified services approved by the Company's board of directors) and accountants in connection with the registration of the Shares under the Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of printing or producing any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares; (iii) all expenses in connection with the qualification of the Shares for offering and sale under state securities laws as provided in Section 5(b) hereof, including the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky survey (iv) all fees and expenses in connection with listing the Shares on NASDAQ; and (v) the filing fees incident to, and the fees and disbursements of counsel for the Underwriters in connection with, securing any required review by the National Association of Securities Dealers, Inc. of the terms of the sale of the Shares; and (b) the Company will pay or cause to be paid: (i) the cost of preparing stock certificates; (ii) the cost and charges of any transfer agent or registrar and (iii) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section; and (c) the Selling Stockholder will pay or cause to be paid all costs and expenses incident to the performance of the Selling Stockholder's obligations hereunder which are not otherwise specifically provided for in this Section, including (i) any fees and expenses of counsel for the Selling Stockholder not paid by the Company, (ii) all expenses and taxes incident to the sale and delivery of the Shares to be sold by 10 the Selling Stockholder to the Underwriters hereunder. In connection with clause (c) of the preceding sentence, Goldman, Sachs & Co. agrees to pay New York State stock transfer tax, and the Selling Stockholder agrees to reimburse Goldman, Sachs & Co. for associated carrying costs if such tax payment is not rebated on the day of payment and for any portion of such tax payment not rebated. It is understood, however, that the Company shall bear, and the Selling Stockholder shall not be required to pay or to reimburse the Company for, the cost of any other matters not directly relating to the sale and purchase of the Shares pursuant to this Agreement (provided, however, that the Selling Stockholder shall pay any underwriting discounts and commissions associated with the sale of Stock by the Selling Stockholder), and that, except as provided in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, stock transfer taxes on resale of any of the Shares by them, and any advertising expenses connected with any offers they may make. 7. The obligations of the Underwriters hereunder, as to the Shares to be delivered at each Time of Delivery, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company and of the Selling Stockholder herein are, at and as of such Time of Delivery, true and correct, the condition that the Company and the Selling Stockholder shall have performed all of its and their obligations hereunder theretofore to be performed, and the following additional conditions: (a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule 462(b) Registration Statement shall have become effective by 10:00 P.M., Washington, D.C. time, on the date of this Agreement; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to your reasonable satisfaction; (b) Sullivan & Cromwell LLP, counsel for the Underwriters, shall have furnished to you such written opinion or opinions (a draft of each such opinion is attached as Annex II(a) hereto), dated such Time of Delivery, with respect to such matters as you may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; (c) Wilson Sonsini Goodrich & Rosati, a Professional Corporation, counsel for the Company, shall have furnished to you their written opinion, dated such Time of Delivery, in the form attached as Annex II(b) hereto. (d) Lawson Lundell, Canadian counsel for the Company, shall have furnished to you their written opinion, dated such Time of Delivery, in the form attached as Annex II(c) hereto. (e) Freshfields Bruckhaus Deringer, English counsel for the Company, shall have furnished to you their written opinion, dated such Time of Delivery, in the form attached as Annex II(d) hereto. (f) A&L Goodbody, Irish counsel for the Company, shall have furnished to you their written opinion, dated such Time of Delivery, in the form attached as Annex II(e) hereto. 11 (g) Simpson Thacher & Bartlett LLP, outside U.S. counsel for the Selling Stockholder, shall have furnished to you their written opinion, dated such the First Time of Delivery, in the form attached as Annex II(f) hereto. (h) On the date of the Prospectus at a time prior to the execution of this Agreement, at 9:30 a.m., New York City time, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at each Time of Delivery, Ernst & Young LLP shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, to the effect set forth in Annex I hereto; (i) (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus, and (ii) since the respective dates as of which information is given in the Prospectus there shall not have been any change in the capital stock (other than issuances of common stock upon the exercise of options to purchase common stock previously granted or the grant of options to purchase common stock pursuant to the stock plans described in the Prospectus), short term debt or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in the judgment of the Representatives so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus; (j) On or after the date hereof (i) no downgrading shall have occurred in the rating accorded the Company's debt securities by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities; (k) On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or material limitation in trading in the Company's securities on NASDAQ; (iii) a general moratorium on commercial banking activities declared by either Federal, New York or California State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or (v) the occurrence of any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iv) or (v) in the judgment of the Representatives makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus; 12 (l) The Shares at such Time of Delivery shall have been duly approved for quotation, subject to notice of issuance, on NASDAQ; (m) The Company shall have obtained and delivered to the Underwriters from (i) each officer and director of the Company listed on Schedule II hereto executed copies of a Lock-up Agreement, substantially in the form of Annex III hereto, (ii) the Selling Stockholder, an executed copy of a Lock-up Agreement, substantially in the form of Annex III hereto and (iii) an executed or electronically acknowledged option agreement which contains the language substantially in the form of Annex IV hereto from each of the Company's stockholders or option holders not listed on Schedule II and the Selling Stockholder; (n) The Company shall have complied with the provisions of Section 5(c) hereof with respect to the furnishing of prospectuses on the New York Business Day next succeeding the date of this Agreement; and (o) The Company and the Selling Stockholder shall have furnished or caused to be furnished to you at such Time of Delivery certificates of officers of the Company and of the Selling Stockholder, respectively, satisfactory to you as to the accuracy of the representations and warranties of the Company and the Selling Stockholder, respectively, herein at and as of such Time of Delivery, as to the performance by the Company and the Selling Stockholder of all of their respective obligations hereunder to be performed at or prior to such Time of Delivery, and as to such other matters as you may reasonably request, and the Company shall have furnished or caused to be furnished certificates as to the matters set forth in subsections (a) and (i) of this Section. 8. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Goldman, Sachs & Co. expressly for use therein or by the Selling Stockholder for use therein. (b) The Selling Stockholder will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue 13 statement, alleged untrue statement, omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by the Selling Stockholder expressly for use therein; and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the liability of the Selling Stockholder pursuant to this subsection (b) shall not exceed the net proceeds received by the Selling Stockholder from the sale of Shares by the Selling Stockholder. (c) Each Underwriter will indemnify and hold harmless the Company and each Selling Stockholder against any losses, claims, damages or liabilities to which the Company or the Selling Stockholder may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Underwriter through Goldman, Sachs & Co. expressly for use therein; and will reimburse the Company and each Selling Stockholder for any legal or other expenses reasonably incurred by the Company or the Selling Stockholder in connection with investigating or defending any such action or claim as such expenses are incurred. (d) Promptly after receipt by an indemnified party under subsection (a), (b) or (c) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party. 14 (e) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a), (b) or (c) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Stockholder on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (d) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Selling Stockholder on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Stockholder on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Selling Stockholder bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Selling Stockholder on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, each of the Selling Stockholder and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (e), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission and the Selling Stockholder shall not be required to contribute any amount in excess of the net proceeds received by the Selling Stockholder from the sale of Shares by the Selling Stockholder. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint. (f) The obligations of the Company and the Selling Stockholder under this Section 8 shall be in addition to any liability which the Company and the Selling Stockholder may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 8 shall be in addition to any liability which the respective Underwriters may otherwise have and shall 15 extend, upon the same terms and conditions, to each officer and director of the Company and to each person, if any, who controls the Company or the Selling Stockholder within the meaning of the Act. 9. (a) If any Underwriter shall default in its obligation to purchase the Shares which it has agreed to purchase hereunder at a Time of Delivery, you may in your discretion arrange for you or another party or other parties to purchase such Shares on the terms contained herein. If within thirty-six hours after such default by any Underwriter you do not arrange for the purchase of such Shares, then the Company and the Selling Stockholder shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to you to purchase such Shares on such terms. In the event that, within the respective prescribed periods, you notify the Company and the Selling Stockholder that you have so arranged for the purchase of such Shares, or the Company and the Selling Stockholder notify you that they have so arranged for the purchase of such Shares, you or the Company and the Selling Stockholder shall have the right to postpone a Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term "Underwriter" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Shares. (b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company and the Selling Stockholder as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased does not exceed one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, then the Company and the Selling Stockholder shall have the right to require each non-defaulting Underwriter to purchase the number of Shares which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company and the Selling Stockholder as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased exceeds one-eleventh of the aggregate number of all of the Shares to be purchased at such Time of Delivery, or if the Company and the Selling Stockholder shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to the Second Time of Delivery, the obligations of the Underwriters to purchase and of the Selling Stockholder to sell the Optional Shares) shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company or the Selling Stockholder, except for the expenses to be borne by the Company and the Underwriters as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. 10. The respective indemnities, agreements, representations, warranties and other statements of the Company, the Selling Stockholder and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made 16 by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Company, or the Selling Stockholder, or any officer or director or controlling person of the Company, or any controlling person of the Selling Stockholder, and shall survive delivery of and payment for the Shares. 11. If this Agreement shall be terminated pursuant to Section 9 hereof, neither the Company nor the Selling Stockholder shall then be under any liability to any Underwriter except as provided in Sections 6 and 8 hereof; but, if for any other reason any Shares are not delivered by or on behalf of the Company and the Selling Stockholder as provided herein, the Company will reimburse the Underwriters through you for all out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Shares not so delivered, but the Company and the Selling Stockholder shall then be under no further liability to any Underwriter in respect of the Shares not so delivered except as provided in Sections 6 and 8 hereof. 12. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you jointly or by Goldman, Sachs & Co. on behalf of you as the representatives. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to you as the representatives in care of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration Department; if to the Selling Stockholder shall be delivered or sent by mail, telex or facsimile transmission to counsel for the Selling Stockholder at its address set forth in the table captioned "Principal and Selling Stockholders" in the Registration Statement; and if to the Company shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Secretary; provided, however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters' Questionnaire or telex constituting such Questionnaire, which address will be supplied to the Company or the Selling Stockholder by you on request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 13. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Company and the Selling Stockholder and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company and each person who controls the Company, the Selling Stockholder or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. 14. Time shall be of the essence of this Agreement. As used herein, the term "business day" shall mean any day when the Commission's office in Washington, D.C. is open for business. 15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 17 17. The Company and the Selling Stockholder are authorized, subject to applicable law, to disclose any and all aspects of this potential transaction that are necessary to support any U.S. federal income tax benefits expected to be claimed with respect to such transaction, and all materials of any kind (including tax opinions and other tax analyses) related to those benefits, without the Underwriters imposing any limitation of any kind. If the foregoing is in accordance with your understanding, please sign and return to us eight counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement among each of the Underwriters, the Company and the Selling Stockholder. It is understood that your acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among Underwriters, the form of which shall be submitted to the Company and the Selling Stockholder for examination, upon request, but without warranty on your part as to the authority of the signers thereof. 18 Very truly yours, Crystal Decisions, Inc. By: -------------------------------- Name: Title: New SAC By: -------------------------------- Name: Title: Accepted as of the date hereof: Goldman, Sachs & Co. Morgan Stanley & Co. Incorporated Citigroup Global Markets Inc. Thomas Weisel Partners LLC By: ------------------------------------------- (Goldman, Sachs & Co.) On behalf of each of the Underwriters 19 EX-4.2 4 f90383a1exv4w2.txt EXHIBIT 4.2 EXHIBIT 4.2 STOCKHOLDERS AGREEMENT THIS STOCKHOLDERS AGREEMENT, dated as of [-], 2003 (this "Agreement"), is entered into among Crystal Decisions, Inc. (the "Company"), New SAC ("New SAC"), Silver Lake Technology Investors Cayman, L.P., Silver Lake Investors Cayman, L.P., Silver Lake Partners Cayman, L.P., (collectively, "Silver Lake"), SAC Investments, L.P. ("TPG"), August Capital III, L.P. ("August"), J.P. Morgan Partners (BHCA), L.P. ("J.P. Morgan"), GS Capital Partners III, L.P., GS Capital Partners III Offshore, L.P., Goldman, Sachs & Co. Verwaltungs GmbH, Stone Street Fund 2000 L.P., Bridge Street Special Opportunities Fund 2000, L.P. (collectively, "GS"), Staenberg Venture Partners II, L.P., Staenberg Seagate Partners, LLC (collectively, "Staenberg"), Integral Capital Partners V, L.P., Integral Capital Partners V Side Fund, L.P. (collectively, "Integral") and the individuals listed on the signature pages hereto. Each of the entities listed above other than the Company and each of the individuals listed on the signature pages hereto are sometimes referred to individually as a "Stockholder" and together as the "Stockholders." RECITALS: A. The Company, a subsidiary of New SAC, and New SAC are proposing to sell shares of the common stock, par value $0.001 per share (the "Shares"), of the Company to the public in an initial Public Offering. B. As of [-], 2003, New SAC has an aggregate of [11,416,152.39] voting and non-voting ordinary shares (collectively, the "Ordinary Shares") outstanding, and the ownership of such shares is as follows: Silver Lake holds 3,628,999 of the outstanding Ordinary Shares; TPG holds 2,520,000 of the outstanding Ordinary Shares; August holds 1,300,000 of the outstanding Ordinary Shares; Integral holds 191,000 of the outstanding Ordinary Shares; J.P. Morgan holds 750,000 of the outstanding Ordinary Shares; GS holds 250,000 of the outstanding Ordinary Shares; Staenberg holds 100,000 of the outstanding Ordinary Shares; and the remainder of the outstanding Ordinary Shares are held by certain management employees of the Company and other individuals. C. After the completion of the Company's initial Public Offering, it is expected that New SAC will own approximately [-]% of the Company's issued and outstanding Shares, which may be distributed to the other Stockholders on the terms and conditions set forth herein. D. Each of the Stockholders is a party to the New SAC Shareholders Agreement, which grants to the Stockholders certain rights, and imposes certain obligations, with respect to their ownership of shares of New SAC. E. The Stockholders wish to provide for certain matters relating to their respective current and future holdings of Shares and the governance of the Company, including an agreement as to the manner in which they will exercise (or refrain from exercising) their rights under the New SAC Shareholders Agreement upon the consummation of the Company's initial Public Offering. 2 NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows: ARTICLE I. INTRODUCTORY MATTERS 1.1. Defined Terms. In addition to the terms defined elsewhere herein, the following terms have the following meanings when used herein with initial capital letters: "AAA" has the meaning given that term in Section 5.12 of this Agreement. "Additional Director" means a Director who is nominated by the Company's nominating and corporate governance committee and approved by a majority of the Board. "Affiliate" has the meaning given that term in Rule 405 promulgated under the Securities Act; provided that officers, Directors or employees of the Company will not be deemed to be Affiliates of a stockholder of the Company for purposes hereof solely by reason of being officers, Directors or employees of the Company. "Agreement" means this Agreement, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof. "Assumption Agreement" means a writing substantially in the form of Exhibit A hereto whereby a Permitted Transferee or other Transferee pursuant to Section 2.4 becomes a party to, and agrees to be bound to the same extent as its Transferor by, the terms of this Agreement. "Board" means the Board of Directors of the Company. "Business Day" means a day other than a Saturday, Sunday, federal or New York or California state holiday or other day on which commercial banks in New York City or San Francisco are authorized or required by law to close. "Chief Executive Officer" has the meaning given that term in Section 4.1(a) of this Agreement. "Company" means Crystal Decisions, Inc., a corporation organized and existing under the laws of the State of Delaware. "Demand Registration" has the meaning given that term in Section 3.2(a) of this Agreement. "Determination Date" has the meaning given that term in Section 4.2(b) of this Agreement. "Director" means any member of the Board. 3 "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time. "Holder" has the meaning given that term in Section 3.6(a) of this Agreement. "Indemnified Parties" has the meaning given that term in Section 3.6(a) of this Agreement. "Initial Share Holding Period" has the meaning given to that term in Section 2.1(a) of this Agreement. "Initiating Holder" has the meaning given that term in Section 3.1(a) of this Agreement. "Legend" has the meaning given that term in Section 2.1(h) of this Agreement. "Management Shareholders" means, collectively, the parties identified on the signature pages of the Management Shareholders Agreement as "Management Shareholders" and each other individual who from time to time executes a Joinder Agreement as contemplated by Section 7.2 of the Management Shareholders Agreement. "Management Shareholders Agreement" means that certain Management Shareholders Agreement, dated as of November 22, 2000, among New SAC and the Management Shareholders that are parties thereto. "New SAC Designee" has the meaning given that term in Section 4.1(a) of this Agreement. "New SAC Shareholders Agreement" means that certain Shareholders Agreement, dated as of November 22, 2000, among New SAC, Silver Lake, TPG, August, J.P. Morgan, GS, Staenberg, Integral and the individuals listed on the signature pages thereto. "Permitted Transferee" means, in the case of any Stockholder, (A) any controlled Affiliate (other than an individual) of such Stockholder, any Affiliate (other than an individual) which is under common control with such Stockholder or any Affiliate (other than an individual) which controls such Stockholder (which, in the case of J.P. Morgan, shall include any investment fund managed by a controlled Affiliate of J.P. Morgan Chase & Co.), (B) any general or limited partner, director, officer, managing or non-managing member or employee of such Stockholder or controlled Affiliate of such Stockholder (including, in the case of Silver Lake and TPG, the general or limited partners of the general and limited partners of such Stockholders), (C) the heirs, executors, administrators, testamentary trustees, legatees or beneficiaries of any of the individuals referred to in clause (B), (D) for estate planning purposes, any trust, the beneficiaries of which include only (1) such Stockholder, (2) Permitted Transferees referred to in clauses (A), (B) and (C) and (3) spouses and lineal descendants of Permitted Transferees referred to in clause (B), and (E) a corporation, partnership, limited liability company or similar entity, a majority of the equity of which is owned and controlled by such Stockholder and/or Permitted Transferees referred to in clauses (A), (B), (C) and (D). 4 "Person" means any individual, corporation, limited liability company, partnership, trust, joint stock company, business trust, unincorporated association, joint venture, governmental authority or other legal entity of any nature whatsoever. "Proposed Sale" has the meaning given that term in Section 2.3(a) of this Agreement. "Proposed Transferee" has the meaning given that term in Section 2.3(a) of this Agreement. "Public Offering" means the sale of any class of common stock of the Company or equivalent securities to the public pursuant to an effective registration statement (other than a registration statement on Form S-4 or S-8 or any similar or successor form) filed under the Securities Act. "Registrable Securities" means (i) any Shares held by a Stockholder or any Permitted Transferees, (ii) any Shares issued as (or issuable upon the conversion or exercise of any warrant, right, option or other convertible security which is issued as) a dividend, stock split or other distribution, recapitalization or reclassification with respect to, or in exchange for, or in replacement of, such Shares, (iii) any Shares or any security convertible into, or exchangeable or exercisable for, Shares which may be issued or distributed in respect thereof by way of a stock dividend, stock split or other distribution, recapitalization or reclassification, (iv) any Shares held by Management Shareholders that were received directly from New SAC and not acquired pursuant to an exercise of options and (v) any Shares held by the original parties to the New SAC Shareholders Agreement who are not parties to this Agreement. For purposes of this Agreement, with respect to any Stockholder, any Registrable Securities held by such Stockholder will cease to be Registrable Securities when (A) a registration statement covering such Registrable Securities has been declared effective and such Registrable Securities have been disposed of pursuant to such effective registration statement, (B) such Registrable Securities shall have been offered and sold pursuant to Rule 144 (or any similar provision then in effect) under the Securities Act, (C) all Registrable Securities held by such Stockholder are eligible for transfer to the public pursuant to Rule 144 (or any similar provision then in effect) under the Securities Act, without restriction as to manner of sale or amount sold, (D) such Registrable Securities are sold by a Person in a transaction in which rights under the provisions of this Agreement are not assigned in accordance with this Agreement or (E) such Registrable Securities cease to be outstanding. "Registration Expenses" means any and all expenses incident to the performance by the Company of its obligations under Sections 3.1 and 3.2, including without limitation (i) all SEC, stock exchange, or National Association of Securities Dealers, Inc. (the "NASD") registration and filing fees (including, if applicable, the fees and expenses of any "qualified independent underwriter," as such term is defined in Rule 2720 of the NASD, and of its counsel), (ii) all fees and expenses of complying with securities or blue sky laws (including fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities), (iii) all printing, messenger and delivery expenses, (iv) all fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange and all rating agency fees, (v) the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits and/or "cold 5 comfort" letters required by or incident to such performance and compliance, (vi) any fees and disbursements of underwriters customarily paid by the issuers or sellers of securities, including liability insurance if the Company so desires or if the underwriters so require, and the reasonable fees and expenses of any special experts retained in connection with the requested registration, but excluding underwriting discounts and commissions and transfer taxes, if any, (vii) the reasonable out-of-pocket expenses of not more than one law firm incurred by all the Stockholders and their Permitted Transferees in connection with any registration of Registrable Securities, and (viii) the costs and expenses of the Company relating to analyst and investor presentations or any "road show" undertaken in connection with any registration and/or marketing of the Registrable Securities; provided that nothing in this clause (viii) shall obligate the Company to engage or participate in any such presentations or road show. "Registration Rights Holders" means, collectively, the Stockholders and their Permitted Transferees and also, for purposes of Section 3.1 only, (i) the Management Shareholders and (ii) the parties to the New SAC Shareholders Agreement who are not parties to this Agreement. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time. "Selling Holder" has the meaning given that term in Section 2.3 of this Agreement. "Shares" means, with respect to any stockholder of the Company, the common stock, par value $0.001 per share, of the Company, whether now owned or hereafter acquired (including upon exercise of options, warrants, rights, including preemptive rights, or otherwise), held by such stockholder other than shares acquired in a Public Offering or in the public market after the initial Public Offering of the Company. "Silver Lake Designee" has the meaning given that term in Section 4.1(a) of this Agreement. "Special Audit" means an audit of the Company other than the regular audit conducted by the Company at the end of its fiscal year. "Stockholder" has the meaning given that term in the recitals to this Agreement. "Tagging Stockholder" has the meaning given that term in Section 2.3(a) of this Agreement. "Target" has the meaning given that term in Section 4.2(b)(ii) of this Agreement. "Target" has the meaning given that term in Section 4.2(b)(ii) of this Agreement. "TPG Designee" has the meaning given that term in Section 4.1(a) of this Agreement. "Transfer" means, with respect to any Share (or direct or indirect economic or other interest therein), a transfer, sale, assignment, pledge, hypothecation or other disposition, whether directly or indirectly (pursuant to the creation of a derivative security or otherwise), the grant of an option or other right or the imposition of a restriction on disposition or voting or by operation 6 of law. When used as a verb, "Transfer" shall have the correlative meaning. In addition, "Transferred" and "Transferee" shall have the correlative meanings. 1.2. Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Unless the context otherwise requires: (a) "or" is disjunctive but not exclusive, (b) words in the singular include the plural, and in the plural include the singular, and (c) the words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Exhibit references are to this Agreement unless otherwise specified. ARTICLE II. TRANSFERS; CERTAIN DISTRIBUTIONS 2.1. Limitations on Transfer. (a) Unless Silver Lake, TPG and Stephen J. Luczo each consents in writing, New SAC may not Transfer any Shares (including Transfers contemplated by Section 2.2) prior to the date 18 months following the date of the initial Public Offering of the Shares (such period, the "Initial Share Holding Period"). (b) From the end of the Initial Share Holding Period until the fourth anniversary of the date of the initial Public Offering by the Company, either Silver Lake or TPG may request in writing that all or a portion of the Shares held by New SAC be distributed to the shareholders of New SAC in accordance with the Memorandum and Articles of Association of New SAC. A copy of any such request shall be delivered to each of the other Stockholders contemporaneously with the delivery of such request to the Company. During such period, if either Silver Lake or TPG requests in writing that New SAC distribute a portion of its Shares, within 15 days of New SAC's receipt of such request the other may request that New SAC increase the number of Shares to be so distributed. Upon the receipt of any such request to distribute Shares, New SAC shall take all actions necessary to ensure that any such distribution takes place as promptly as practicable. (c) After the fourth anniversary of the date of the initial Public Offering of the Company, any of Silver Lake, TPG, August, J.P. Morgan, GS, Staenberg or Integral may request that New SAC distribute all, but not less than all, of its remaining Shares pro rata to the shareholders of New SAC. Upon the receipt of any such request to distribute Shares, New SAC shall use all commercially reasonable efforts to take all actions necessary to ensure that any such distribution takes place as promptly as practicable. (d) Notwithstanding anything to the contrary in this Section 2.1, in no event shall New SAC be required to make more than one distribution of Shares in any three-month period. (e) After the Initial Share Holding Period, Silver Lake, TPG or August may demand that the Company effect the registration under the Securities Act of all or a portion of 7 the Shares held by New SAC, consummate such sale, and distribute the proceeds of such sale pro rata to the shareholders of New SAC; provided that Silver Lake, TPG or August may exercise its demand right under this Section 2.1(e) only if at the time of such exercise it would be entitled to exercise a demand pursuant to the terms of Section 3.2(a)(ii). Any party exercising its rights under this Section 2.1(e) shall be deemed to have exercised a demand for its own account and the number of demand requests that such party is entitled to pursuant to Section 3.2 shall be reduced by one. The Demand Registration procedures set forth in Sections 3.2, 3.3, 3.4 and 3.5 shall apply to any demand request made pursuant to this Section 2.1(e). (f) Stockholders may Transfer Shares only in accordance with, and subject to the applicable provisions of, both Article II and Article III hereof. (g) In the event of any purported Transfer by a Stockholder of any Shares in violation of the provisions of this Agreement, such purported Transfer will be void and of no effect, and the Company will not give effect to such Transfer. (h) Each certificate representing Shares held by a Stockholder, including, without limitation, New SAC, will bear a legend on the face thereof substantially to the following effect (with such additions thereto or changes therein as the Company may be advised by counsel are required by law or necessary to give full effect to this Agreement, the "Legend"): "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE STOCKHOLDERS AGREEMENT AMONG CRYSTAL DECISIONS, INC., NEW SAC AND THE STOCKHOLDERS PARTY THERETO, DATED AS OF [-], 2003, AS AMENDED AND SUPPLEMENTED FROM TIME TO TIME IN ACCORDANCE WITH THE TERMS THEREOF, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF CRYSTAL DECISIONS, INC. THE STOCKHOLDERS AGREEMENT CONTAINS, AMONG OTHER THINGS, CERTAIN PROVISIONS RELATING TO THE VOTING AND TRANSFER OF THE SHARES SUBJECT TO THE AGREEMENT. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE, DIRECTLY OR INDIRECTLY, MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT." "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE." The Legend will be removed by the Company, with respect to any certificate representing Shares, by the delivery of substitute certificates without such Legend in the event of a Transfer permitted by this Agreement and in which the Transferee is not required to enter into an Assumption Agreement pursuant to Section 2.4; provided, however, that the second paragraph of the Legend will only be removed if at such time it is no longer required for purposes of applicable securities laws. 2.2. Transfer to Permitted Transferees. 8 (a) Subject to the limitations set forth in Section 2.1, any Stockholder may Transfer any or all of the Shares held by it to any Permitted Transferee of such Stockholder who duly executes and delivers an Assumption Agreement, provided that such Transfer shall not be effective unless and until the Company shall have been furnished with information reasonably satisfactory to it demonstrating that such Transfer is exempt from or not subject to the provisions of Section 5 of the Securities Act and any other applicable securities laws. (b) Each Permitted Transferee of any Stockholder to which Shares are transferred shall, and such Stockholder shall cause such Permitted Transferee to, transfer back to such Stockholder (or to another Permitted Transferee of such Stockholder) any Shares it owns prior to such Permitted Transferee ceasing to be a Permitted Transferee of such Stockholder. (c) This Section 2.2 shall not apply to the grant by J.P. Morgan of a participation interest to one or more other investment funds managed by a controlled Affiliate of J.P. Morgan Chase & Co. without change in record ownership. 2.3. Tag-Along Rights. (a) So long as this Agreement remains in effect, in the case of a proposed Transfer of Shares in excess of [-] [NOTE: to equal 3% of the outstanding Crystal shares post-IPO] of the issued and outstanding Shares (as adjusted for any dividend, stock split or other distribution, recapitalization or reclassification with respect to, or in exchange for, or in replacement of, such Shares) in a single transaction or related series of transactions by Silver Lake, TPG or August (a "Selling Holder") (other than (i) pursuant to Section 2.2 hereof, (ii) following the initial Public Offering by the Company pursuant to the exercise of rights set forth in Article III or (iii) in a bona fide sale to the public pursuant to Rule 144 under the Securities Act) (a "Proposed Sale"), Silver Lake, TPG, August or Integral (each of such Stockholders who exercises their rights under this Section 2.3(a), a "Tagging Stockholder") shall have the right to require the proposed Transferee (a "Proposed Transferee") to purchase from such Tagging Stockholder up to the number of Shares of the same class proposed to be Transferred equal to the product (rounded up to the nearest whole Share) of (i) the quotient determined by dividing (A) the aggregate number of Shares of such class owned by such Tagging Stockholder by (B) the aggregate number of Shares of such class owned by the Selling Holder and all Tagging Stockholders and (ii) the total number of Shares of such class proposed to be directly or indirectly Transferred to the Proposed Transferee in the Proposed Sale, at the same price per Share and upon the same terms and conditions (including, without limitation, time of payment and form of consideration) as to be paid and given to the Selling Holder; provided that in order to be entitled to exercise its right to sell Shares to the Proposed Transferee pursuant to this Section 2.3, each Tagging Stockholder must agree to make to the Proposed Transferee the same representations, warranties, covenants, indemnities and agreements as the Selling Holder agrees to make in connection with the Proposed Sale and agree to the same conditions to the Proposed Sale as the Selling Holder agrees (except that, in the case of representations, warranties, conditions, covenants, indemnities and agreements pertaining specifically to the Selling Holder, each Tagging Stockholder shall make comparable representations, warranties, covenants, indemnities and agreements and shall agree to comparable conditions, in each case to the extent applicable and pertaining specifically to itself and only to itself); provided that all representations, warranties, covenants, indemnities and agreements (other than those referred to 9 in the immediately preceding exception) shall be made by the Selling Holder and each Tagging Stockholder severally and not jointly and that any liability to the Selling Holder and the Tagging Stockholders thereunder shall be borne by each of them on a pro rata basis determined according to the number of Shares sold by each of them. Each Tagging Stockholder will be responsible for its proportionate share of the costs of the Proposed Sale to the extent not paid or reimbursed by the Proposed Transferee or the Company. (b) The Selling Holder will give notice to each Tagging Stockholder of each Proposed Sale not later than five days after the execution of the definitive agreement relating to the Proposed Sale, setting forth the number of Shares proposed to be so Transferred, the name and address of the Proposed Transferee, the proposed amount and form of consideration (and if such consideration consists in part or in whole of property other than cash, the Selling Holder will provide such information, to the extent reasonably available to the Selling Holder, relating to such non-cash consideration as the Tagging Stockholders together may reasonably request in order to evaluate such non-cash consideration) and other terms and conditions of payment offered by the Proposed Transferee. The Selling Holder will deliver or cause to be delivered to each Tagging Stockholder copies of all transaction documents relating to the Proposed Sale as the same become available. The tag-along rights provided by this Section 2.3 must be exercised by the Tagging Stockholders within five Business Days following receipt of the notice required by the preceding sentence by delivery of a written notice to the Selling Holder indicating its desire to exercise its rights and specifying the number of Shares it desires to sell. (c) If any Tagging Stockholder exercises its rights under Section 2.3(a), the closing of the purchase of the Shares with respect to which such rights have been exercised will take place concurrently with the closing of the sale of the Selling Holder's Shares to the Proposed Transferee. 2.4. Rights and Obligations of Transferees. Any Transferee of Shares (other than Transferees who acquire Shares (i) pursuant to Section 2.2, (ii) pursuant to the exercise of rights set forth in Article III, (iii) following the initial Public Offering by the Company, in a bona fide sale to the public pursuant to Rule 144 under the Securities Act or (iv) a Public Offering) will be required, at the time of and as a condition to such Transfer, to become a party to this Agreement by executing and delivering an Assumption Agreement and, upon executing and delivering an Assumption Agreement, will be treated as a Stockholder for all purposes hereof; provided, however, that no such Transferee will acquire any rights (but will be subject to the obligations) under Article IV unless it acquires all of the Shares held by either Silver Lake and its Permitted Transferees, TPG and its Permitted Transferees or August and its Permitted Transferees, as the case may be. ARTICLE III. REGISTRATION RIGHTS 3.1. Piggyback Rights. (a) If the Company at any time following the initial Public Offering by the Company proposes to register any of the Shares under the Securities Act (other than a registration on Form S-4 or S-8, or any successor or other forms promulgated for similar 10 purposes), whether or not for sale for its own account (including pursuant to Section 3.3), it will, at each such time, give prompt written notice to the Registration Rights Holders of its intention to do so and of the Registration Rights Holders' rights under this Section 3.1. Upon the written request of any Registration Rights Holder made within 14 days after the receipt of any such notice (which request shall specify the number of Registrable Securities intended to be disposed of by such Registration Rights Holder), the Company will use its reasonable best efforts to effect the registration under the Securities Act of all Registrable Securities which the Registration Rights Holders have so requested to be registered; provided that (i) if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company or any other holder of securities that initiated such registration (an "Initiating Holder") shall determine for any reason not to proceed with the proposed registration of the securities to be sold by it, the Company or such Initiating Holder may, at its election, give written notice of such determination to the Registration Rights Holders and, thereupon, the Company shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses incurred in connection therewith), and (ii) if such registration involves an underwritten offering, the Registration Rights Holders of Registrable Securities requesting to be included in the registration must sell their Registrable Securities to the underwriters selected by the Company, on the same terms and conditions as apply to the Company or the Initiating Holders, as the case may be, with, in the case of a combined primary and secondary offering, such differences, including any with respect to indemnification and liability insurance, as may be customary or appropriate in combined primary and secondary offerings. If a registration requested pursuant to this Section 3.1(a) involves an underwritten public offering, any Registration Rights Holder requesting to be included in such registration may elect, in writing prior to the effective date of the registration statement filed in connection with such registration, not to register all or any portion of such securities in connection with such registration. Nothing in this Section 3.1(a) shall operate to limit the right of a Registration Rights Holder to (i) request the registration of Registrable Securities that consist of Shares issuable upon conversion, exercise or exchange of convertible, exercisable or exchangeable securities, as applicable, held by such Registration Rights Holder notwithstanding the fact that at the time of request such Registration Rights Holder holds only such securities and not the underlying Shares or (ii) request the registration at one time of Registrable Securities that consist of both Shares and securities convertible into or exercisable or exchangeable for Shares. (b) The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Section 3.1. (c) If a registration pursuant to this Section 3.1 involves an underwritten offering and the managing underwriter advises the Company in writing that, in its opinion, the number of Registrable Securities and other securities requested to be included in such registration exceeds the number which can be sold in such offering, so as to be reasonably likely to have an adverse effect on the price, timing or distribution of the securities offered in such offering, then the Company will include in such registration (i) first, 100% of the securities, if any, the Company proposes to sell for its own account, provided that the registration of Shares contemplated by this Section 3.1 was initiated by the Company with respect to shares intended to be registered for sale for its own account, (ii) second, the number of securities requested to be included by New SAC, if any, in such registration which in the opinion of the managing 11 underwriter, can be sold, without having the adverse effect referred to above, and (iii) third, such number of Registrable Securities requested to be included in such registration which, in the opinion of such managing underwriter, can be sold without having the adverse effect referred to above, which number of Registrable Securities shall be allocated pro rata among all such requesting holders of Registrable Securities, based on the relative number of Registrable Securities then held by each such requesting holder of Registrable Securities. In the event that (i) the Company did not initiate the registration of securities intended to be registered for sale for its own account and (ii) the number of Registrable Securities and Shares of other holders, in each case entitled to registration rights with respect to such Shares requested to be included in such registration is less than the number which, in the opinion of the managing underwriter, can be sold, the Company may include in such registration securities it proposes to sell for its own account up to the number of securities that, in the opinion of the underwriter, can be sold. 3.2. Demand Registration. (a) At any time after the 180th day following the initial Public Offering by the Company and, in the case of Silver Lake, TPG or August, after New SAC has distributed Shares pursuant to Section 2.1, upon the written request of any of New SAC, TPG, Silver Lake or August (a "Demand Party") requesting that the Company effect the registration (a "Demand Registration") under the Securities Act of all or part of such Demand Party's Registrable Securities and specifying the amount and intended method of disposition thereof, the Company will promptly give written notice of such requested registration to the other holders of Registrable Securities and other holders of securities entitled to notice of such registration and thereupon will, as expeditiously as possible, file a registration statement to effect the registration under the Securities Act of: (i) such Registrable Securities which the Company has been so requested to register by the Demand Party; (ii) the Registrable Securities of other Registration Rights Holders which the Company has been requested to register by written request given to the Company within 14 days after the giving of such written notice by the Company (which request shall specify the amount and intended method of disposition of such securities); all to the extent necessary to permit the disposition (in accordance with the intended method thereof as aforesaid) of the Registrable Securities and such other securities so to be registered; provided that the Company shall not be required to effect the registration of Registrable Securities (i) at the request of New SAC under this Section 3.2(a) on more than six occasions, (ii) at the request of Silver Lake under this Section 3.2(a) or under Section 2.1(e) on more than three occasions, (iii) at the request of TPG under this Section 3.2(a) or under Section 2.1(e) on more than three occasions, or (iv) at the request of August under this Section 3.2(a) or under Section 2.1(e) on more than one occasion; provided, that the Company shall not be obligated to file a registration statement relating to any registration request under this Section 3.2(a): (x) within a period of 180 days (or such lesser period as the managing underwriters in an underwritten offering may permit) after the effective date of any other 12 registration statement relating to any registration request under this Section 3.2(a), Section 2.1(e) or relating to any registration effected under Section 3.1; (y) if with respect thereto the managing underwriter, the SEC, the Securities Act, or the form on which the registration statement is to be filed, would require the conduct of a Special Audit, in which case the filing may be delayed until the completion of such Special Audit (and the Company shall, upon request of TPG, Silver Lake or August, as the case may be, use its reasonable best efforts to cause such Special Audit to be completed expeditiously and without unreasonable delay); or (z) if the Company is in possession of material non-public information and the Board determines in good faith that disclosure of such information would not be in the best interests of the Company and its stockholders, in which case the filing of the registration statement may be delayed until the earlier of the second Business Day after such conditions shall have ceased to exist and the 90th day after receipt by the Company of the written request from TPG, Silver Lake or August, as the case may be, to register Registrable Securities under this Section 3.2(a). Nothing in this Section 3.2(a) shall operate to limit the right of a Registration Rights Holder to (i) request the registration of Registrable Securities that consist of Shares issuable upon conversion, exercise or exchange of convertible, exercisable or exchangeable securities, as applicable, held by such Registration Rights Holder notwithstanding the fact that at the time of request such Registration Rights Holder holds only such securities and not the underlying Shares or (ii) request the registration at one time of Registrable Securities that consist of both Shares and securities convertible into or exercisable or exchangeable for Shares. (b) The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Section 3.2. (c) A registration requested pursuant to this Article III will not be deemed to have been effected unless the registration statement filed by the Company with the SEC in connection with such registration has been declared effective by the SEC; provided that, if, within 180 days after it has become effective, the offering of Registrable Securities pursuant to such registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court, then such registration will be deemed not to have been effected. (d) If a requested registration pursuant to this Section 3.2 involves an underwritten offering and regardless of whether the Company is registering any securities therein, the Board shall have the right to select the investment banker or bankers and managers to administer the offering, including the lead managing underwriter. (e) If a requested registration pursuant to this Section 3.2 involves an underwritten offering and the managing underwriter advises the Company in writing that, in its opinion, the number of Registrable Securities requested to be included in such registration exceeds the number which can be sold in such offering, so as to be reasonably likely to have an adverse effect on the price, timing or distribution of the securities offered in such offering, then 13 the Company will include in such registration such number of Registrable Securities requested to be included in such registration which, in the opinion of such managing underwriter, can be sold without having the adverse effect referred to above, which number shall be allocated pro rata among all such holders of Registrable Securities requesting to be included in such registration based on the relative number of Registrable Securities then held by each such holder of Registrable Securities. In the event that the number of Registrable Securities and Shares of other holders, in each case entitled to registration rights with respect to such Shares requested to be included in such registration is less than the number which, in the opinion of the managing underwriter, can be sold, the Company may include in such registration securities it proposes to sell for its own account up to the number of securities that, in the opinion of the underwriter, can be sold. (f) August agrees not to exercise any Demand Registration rights it may have pursuant to Section 3.2 of the New SAC Shareholders Agreement without first obtaining the written consent of each of Silver Lake and TPG. Each of Silver Lake and TPG agree not to exercise any Demand Registration rights it may have pursuant to Section 3.2 of the New SAC Shareholders Agreement without first obtaining the written consent of TPG, in the case of Silver Lake, or Silver Lake, in the case of TPG. 3.3. Form S-3 Registration. If the Company receives from New SAC, Silver Lake, TPG or August a written request or requests that the Company effect a registration on Form S-3 (or any successor to Form S-3) and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Stockholder or Stockholders, the Company will: (a) promptly give notice of the proposed registration, and any related qualification or compliance, to the other Registration Rights Holders who hold Registrable Securities; and (b) as expeditiously as possible, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registration Rights Holder's or Registration Rights Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Registration Rights Holder or Registration Rights Holders joining in such request as are specified in a written request given within fourteen (14) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 3.3: (i) if Form S-3 (or any successor form) is not available for such offering by the Registration Rights Holders; or (ii) if the Registration Rights Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public of less than $500,000; or 14 (iii) if the Company shall furnish to the Registration Rights Holders a certificate signed by the chairman of the Board stating that in the good faith judgment of the Board, it would not be in the best interests of the Company for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than ninety (90) days after receipt of the request of the Registration Rights Holder or Registration Rights Holders under this Section 3.3; provided, that such right to delay a request shall be exercised by the Company not more than once in any twelve (12) month period; or (iv) if the Company has, within the twelve (12) month period preceding the date of such request, already effected two (2) registrations on Form S-3 for the Registration Rights Holders pursuant to this Section 3.3; or (v) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; or (vi) if with respect thereto the managing underwriter, the SEC, the Securities Act, or the form on which the registration statement is to be filed, would require the conduct of a Special Audit, in which case the Company shall have the right to defer the filing of the Form S-3 registration statement until the completion of such Special Audit (and the Company shall, upon the request of New SAC, TPG, Silver Lake or August, as the case may be, use its reasonable best efforts to cause such Special Audit to be completed expeditiously and without unreasonable delay). (c) Subject to the foregoing, the Company shall file a Form S-3 registration statement covering the Registrable Securities and other securities so requested to be registered as expeditiously as possible after receipt of the request or requests of the Registration Rights Holders. Registrations effected pursuant to this Section 3.3 shall not be counted as demands for registration or registrations effected pursuant to Section 3.2. (d) The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Section 3.3. 3.4. Registration Procedures. If and whenever the Company is required to file a registration statement with respect to, or to use its reasonable best efforts to effect or cause the registration of, any Registrable Securities under the Securities Act as provided in this Agreement the Company will as expeditiously as possible: (a) prepare and, in any event within 120 days after the end of the period within which a request for registration may be given to the Company pursuant to Section 3.2, file with the SEC a registration statement on an appropriate form with respect to such Registrable Securities and use its reasonable efforts to cause such registration statement to be declared effective by the SEC; provided however, that the Company may discontinue any registration of securities as to which it is the Initiating Party at any time prior to the effective date of the 15 registration statement relating thereto (and, in such event, the Company shall pay the Registration Expenses incurred in connection therewith); provided, further, that not less than five (5) Business Days before filing a registration statement or prospectus, or any amendments or supplements thereto, the Company will furnish to counsel for the sellers of Registrable Securities covered by such registration statement copies of all documents proposed to be filed, which documents will be subject to the review and input of such counsel; (b) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period not in excess of 270 days (unless such registration statement relates to an underwritten Public Offering, in which event the registration statement shall not be required to remain effective at the request of the Registration Rights Holders for a period of in excess of 45 days) and to comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement; provided that not less than five (5) Business Days before filing a registration statement or prospectus, or any amendments or supplements thereto, the Company will furnish to counsel for the sellers of Registrable Securities covered by such registration statement copies of all documents proposed to be filed, which documents will be subject to the review and input of such counsel; (c) furnish to each seller of such Registrable Securities such number of copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits filed therewith, including any documents incorporated by reference), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and summary prospectus), in conformity with the requirements of the Securities Act, and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities by such seller; (d) use its reasonable efforts to register or qualify such Registrable Securities covered by such registration in such jurisdictions as each seller shall reasonably request, and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where, but for the requirements of this subsection (d), it would not be obligated to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction; (e) use its reasonable best efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; (f) notify each seller of any such Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act within the appropriate period mentioned in Section 3.4(b), of the 16 Company's becoming aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such seller, prepare and furnish to such seller a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (g) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable (but not more than 18 months) after the effective date of the registration statement, an earnings statement which shall satisfy the provisions of Section 11(a) of the Securities Act; (h) (i) use its reasonable best efforts to list such Registrable Securities on any securities exchange on which the Shares are then listed if such Registrable Securities are not already so listed and if such listing is then permitted under the rules of such exchange; (ii) if such Registrable Securities are convertible, exchangeable or exercisable into Shares, upon the reasonable request of sellers of a majority of such Registrable Securities, use its reasonable best efforts to list such securities and, if requested, the Shares underlying such securities, notwithstanding that at the time of request such sellers hold only such securities, on any securities exchange so requested, if such Registrable Securities are not already so listed and if such listing is then permitted under the rules of such exchange; and (iii) use its reasonable efforts to provide a transfer agent and registrar for such Registrable Securities covered by such registration statement not later than the effective date of such registration statement; (i) enter into such customary agreements (including an underwriting agreement in customary form), which may include indemnification provisions in favor of underwriters and other Persons in addition to, or in substitution for the indemnification provisions hereof, and take such other actions as sellers of a majority of shares of such Registrable Securities included in such registration statement or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; (j) obtain a "cold comfort" letter or letters from the Company's independent public auditors in customary form and covering matters of the type customarily covered by "cold comfort" letters as the seller or sellers of a majority of shares of such Registrable Securities included in such registration statement shall reasonably request; (k) make available for inspection by any seller of such Registrable Securities covered by such registration statement, by any underwriter participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by any such seller or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company's officers, Directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; 17 (l) notify counsel for the holders of Registrable Securities included in such registration statement and the managing underwriter or agent, immediately, and confirm the notice in writing (i) when the registration statement, or any post-effective amendment to the registration statement, shall have been declared effective by the SEC, or any supplement to the prospectus or any amendment to the prospectus shall have been filed, (ii) of the receipt of any comments from the SEC, (iii) of any request of the SEC to amend the registration statement or amend or supplement the prospectus or for additional information, and (iv) of the issuance by the SEC of any stop order suspending the effectiveness of the registration statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the registration statement for offering or sale in any jurisdiction, or of the institution or threatening of any proceedings for any of such purposes; (m) use its reasonable best efforts to prevent the issuance of any stop order suspending the effectiveness of the registration statement or of any order preventing or suspending the use of any preliminary prospectus and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment; (n) if requested by the managing underwriter or agent or any holder of Registrable Securities covered by the registration statement, promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or agent or such holder reasonably requests to be included therein, including, with respect to the number of Registrable Securities being sold by such holder to such underwriter or agent, the purchase price being paid therefor by such underwriter or agent and with respect to any other terms of the underwritten offering of the Registrable Securities to be sold in such offering (unless the Company, after consultation with counsel, reasonably concludes that such information would be materially misleading to prospective buyers in the Public Offering); and make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after being notified of the matters incorporated in such prospectus supplement or post-effective amendment; (o) cooperate with the holders of Registrable Securities covered by the registration statement and the managing underwriter or agent, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing securities to be sold under the registration statement, and enable such securities to be in such denominations and registered in such names as the managing underwriter or agent, if any, or the Registration Rights Holders that sellers may request; (p) obtain for delivery to the holders of Registrable Securities being registered and to the underwriter or agent an opinion or opinions from counsel for the Company in customary form and in form, substance and scope reasonably satisfactory to such holders, underwriters or agents and their counsel; and (q) cooperate with each seller of Registrable Securities and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD. 3.5. Other Registration-Related Matters. 18 (a) The Company may require any Person that is selling Shares in a Public Offering pursuant to Sections 3.1, 3.2 or 3.3 to furnish to the Company in writing such information regarding such Person and pertinent to the disclosure requirements relating to the registration and the distribution of the Registrable Securities which are included in such Public Offering as the Company may from time to time reasonably request in writing. (b) Each Registration Rights Holder agrees, severally and not jointly, that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.4(f), it will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until its receipt of the copies of the amended or supplemented prospectus contemplated by Section 3.4(f) and, if so directed by the Company, each Registration Rights Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in their possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event the Company gives any such notice, the period for which the Company will be required to keep the registration statement effective will be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 3.4(f) to and including the date when each seller of Registrable Securities covered by such registration statement has received the copies of the supplemented or amended prospectus contemplated by Section 3.4(f). (c) Each holder of Registrable Securities will, in connection with an underwritten Public Offering of the Company's securities, upon the request of the Company or of the underwriters managing any underwritten offering of the Company's securities, agree in writing not to effect any sale, disposition or distribution of Registrable Securities (other than those included in the Public Offering) without the prior written consent of the managing underwriter for such period of time commencing 7 days before and ending 30 days (or such earlier date as the managing underwriter shall agree) after the effective date of such registration. No Stockholder shall be released from such lock-up period by the managing underwriter unless all of the Stockholders are so released. 3.6. Indemnification. (a) In the event of any registration of any securities of the Company under the Securities Act pursuant to Section 3.1, 3.2 or 3.3, the Company hereby indemnifies and agrees to hold harmless, to the extent permitted by law, the sellers of any Registrable Securities covered by such registration statement (each a "Holder"), each Affiliate of such Holder and their respective directors and officers, members or general and limited partners (and the directors, officers, employees, affiliates and controlling Persons of any of the foregoing), each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such Holder or any such underwriter within the meaning of the Securities Act (collectively, the "Indemnified Parties"), against any and all losses, claims, damages or liabilities, joint or several, and expenses to which such Indemnified Party may become subject under the Securities Act, common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof, whether or not such Indemnified Party is a party thereto) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which 19 such securities were registered under the Securities Act, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in light of the circumstances when they were made, and the Company will reimburse such Indemnified Party for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that the Company will not be liable to any Indemnified Party in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, in any such preliminary, final or summary prospectus, or any amendment or supplement thereto in reliance upon and in conformity with written information with respect to such Indemnified Party furnished to the Company by such Indemnified Party expressly for use in the preparation thereof. Such indemnity will remain in full force and effect regardless of any investigation made by or on behalf of such Holder or any Indemnified Party and will survive the Transfer of such securities by such Holder. (b) The Company may require, as a condition to including any Registrable Securities in any registration statement filed in accordance with Section 3.1, 3.2 or 3.3 that the Company shall have received an undertaking reasonably satisfactory to it from the Holder of such Registrable Securities or any prospective underwriter to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 3.6(a)) the Company, all other Holders or any prospective underwriter, as the case may be, and any of their respective Affiliates, directors, officers and controlling Persons, with respect to any untrue statement in or omission from such registration statement, any preliminary, final or summary prospectus contained therein, or any amendment or supplement, if such untrue statement or omission was made in reliance upon and in conformity with written information with respect to such Holder or underwriter furnished to the Company by such Holder or underwriter expressly for use in the preparation of such registration statement, preliminary, final or summary prospectus or amendment or supplement, or a document incorporated by reference into any of the foregoing. Such indemnity will remain in full force and effect regardless of any investigation made by or on behalf of the Company or any of the Holders, or any of their respective affiliates, directors, officers or controlling Persons and will survive the Transfer of such securities by such Holder. In no event shall the liability of any selling Holder of Registrable Securities hereunder be greater in amount than the dollar amount of the net proceeds actually received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Promptly after receipt by an Indemnified Party hereunder of written notice of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 3.6, such Indemnified Party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of the Indemnified Party to give notice as provided herein will not relieve the indemnifying party of its obligations under Section 3.6(a) or 3.6(b), except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an Indemnified Party, unless in such Indemnified Party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party will be 20 entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such Indemnified Party, and after notice from the indemnifying party to such Indemnified Party of its election so to assume the defense thereof, the indemnifying party will not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. If, in such Indemnified Party's reasonable judgment, having common counsel would result in a conflict of interest between the interests of such indemnified and indemnifying parties, then such Indemnified Party may employ separate counsel reasonably acceptable to the indemnifying party to represent or defend such Indemnified Party in such action, it being understood, however, that the indemnifying party will not be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time for all such Indemnified Parties (and not more than one separate firm of local counsel at any time for all such Indemnified Parties) in such action. No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or litigation. (d) If the indemnification provided for hereunder from the indemnifying party is unavailable to an Indemnified Party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to herein, then the indemnifying party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and Indemnified Parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and Indemnified Parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or Indemnified Parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party under this Section 3.6(d) as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. In no event shall the liability of any selling Holder of Registrable Securities hereunder be greater in amount than the dollar amount of the net proceeds actually received by such Holder upon the sale of the Registrable Securities giving rise to such contribution obligation. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 3.6(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (e) Indemnification similar to that specified in this Section 3.6 (with appropriate modifications) shall be given by the Company and each seller of Registrable 21 Securities with respect to any required registration or other qualification of securities under any law or with any governmental entity other than as required by the Securities Act. (f) The obligations of the parties under this Section 3.6 will be in addition to any liability which any party may otherwise have to any other party. ARTICLE IV. CORPORATE GOVERNANCE MATTERS 4.1. Board of Directors. (a) Directors of the Company shall be elected annually. After the consummation of the initial Public Offering, the Board shall initially be comprised of nine members, provided that the Board may elect by a resolution (passed in accordance with the terms of Section 4.2(b) hereof) to increase the size of the Board to ten members. The members of the Board shall consist of one designee of Silver Lake (the "Silver Lake Designee"), one designee of TPG (the "TPG Designee"), two designees of New SAC (each a "New SAC Designee") (who shall initially be Donald L. Waite and Stephen J. Luczo), four Additional Directors (who shall initially be Fred D. Anderson, Robert L. Bailey, Gregory B. Kerfoot and John W. Thompson) and the chief executive officer of the Company from time to time serving (the "Chief Executive Officer"), provided that if the size of the Board is increased to ten members, then the total number of Additional Directors shall be increased to five. Members of the Board who are not required to be designated by a Stockholder pursuant to the rights provided in this Agreement shall be nominated and elected in accordance with the certificate of incorporation and bylaws of the Company. (b) A member of the Board designated by a Stockholder pursuant to the rights provided in this Agreement may only be removed by such Stockholder. Any other member of the Board may be removed with or without cause by vote of a majority of the Stockholders of the Company. If, following an election to the Board pursuant to this Section 4.1, any Silver Lake Designee shall resign or be removed or be unable to serve for any reason prior to the expiration of his or her term as a Director, Silver Lake shall notify the Board in writing of a replacement Silver Lake Designee and each of the Company and all of the Stockholders hereby agree to take such actions provided for under the terms of the Shares held by them as will result in the appointment of such Silver Lake Designee to the Board. If Silver Lake requests that any Silver Lake Designee be removed as a Director (with or without cause) by written notice thereof to the Company, then each of the Company and all of the Stockholders shall take all actions provided for under the terms of the Shares held by them necessary to effect such removal upon such request. If, following an election to the Board pursuant to this Section 4.1, any TPG Designee shall resign or be removed or be unable to serve for any reason prior to the expiration of his or her term as a Director, TPG shall notify the Board in writing of a replacement TPG Designee and each of the Company and all of the Stockholders hereby agree to take such actions provided for under the terms of the Shares held by them as will result in the appointment of such TPG Designee to the Board. If TPG requests that any TPG Designee be removed as a Director (with 22 or without cause) by written notice thereof to the Company, then each of the Company and all of the Stockholders shall take all actions provided for under the terms of the Shares held by them necessary to effect such removal upon such request. If, following an election to the Board pursuant to this Section 4.1, any New SAC Designee shall resign or be removed or be unable to serve for any reason prior to the expiration of his or her term as a Director, New SAC shall notify the Board in writing of a replacement New SAC Designee and each of the Company and all of the Stockholders hereby agree to take such actions provided for under the terms of the Shares held by them as will result in the appointment of such New SAC Designee to the Board. If New SAC requests that any New SAC Designee be removed as a Director (with or without cause) by written notice thereof to the Company, then each of the Company and all of the Stockholders shall take all actions provided for under the terms of the Shares held by them necessary to effect such removal upon such request. If, following an election to the Board pursuant to this Section 4.1, any Additional Director shall resign or be removed or be unable to serve for any reason prior to the expiration of his or her term as a Director, the nominating and corporate governance committee of the Company shall notify the Board in writing of a replacement and, provided that such replacement Additional Director satisfies all the criteria set forth in the definition of "Additional Director" herein, each of the Company and all of the Stockholders hereby agree to take such actions provided for under the terms of the Shares held by them as will result in the appointment of such replacement Additional Director to the Board. Any Director who is no longer designated by Silver Lake, TPG or New SAC shall be designated instead by the other members of the Board and shall be considered a "Board Designee" for all purposes hereunder. If any Board Designee shall resign or be removed or be unable to serve for any reason prior to the expiration of his or her term as a Director, then the nominating and corporate governance committee of the Company will take such actions provided for under the terms of the Shares as will result in the appointment to the Board of an individual designated by the Board. If the Board requests that any Board Designee be removed as a Director (with or without cause) by written notice thereof to the Company, then each of the Company and each Stockholder shall take all actions provided for under the terms of the Shares necessary to effect such removal upon such request. (c) The Company will pay all reasonable out-of-pocket expenses incurred by the Directors in connection with their participation in meetings of the Board (and committees thereof). Each of the Silver Lake Designee, the TPG Designee and the New SAC Designees will receive the same compensation, in the form of cash and options to purchase Shares, that the Company pays to its Additional Directors, which amount will be determined by the Company and the Board from time to time. (d) Notwithstanding anything in this Agreement to the contrary, the Board and all of the committees of the Board will operate in such a way to permit the Company to comply with applicable law and maintain its listing on The New York Stock Exchange or the NASDAQ National Market system, as applicable. 23 4.2. Actions by the Board of Directors. (a) The Stockholders and the Company shall use their reasonable best efforts to take all actions necessary (including amending the certificate of incorporation and bylaws of the Company, if necessary) to provide that, for so long as this Agreement is in effect, a quorum for any meeting of the Board shall require the presence of (x) Directors constituting at least a majority of the entire Board, and (y) at least two of the following four Directors: (i) the Silver Lake Designee, (ii) the TPG Designee and (iii) the New SAC Designees. Unless agreed to by unanimous consent of the Board in writing, subject to applicable law, no action by the Board will be valid unless approved by a majority of the Directors at a meeting properly convened at which a quorum is present. The Company and the Stockholders shall use their reasonable best efforts to take such further action to provide that the certificate of incorporation and/or bylaws of the Company will provide that they may not be amended by action of the Board unless such amendment is approved in the manner set forth in the immediately preceding sentence. The Company and the Stockholders shall take (or shall cause the Directors appointed by them to take) such action as is necessary to cause (i) the Board to establish audit, strategic and financial transactions, compensation and nominating and corporate governance committees of the Board, the duties of which shall be determined by the Board, (ii) the Silver Lake Designee to serve on the strategic and financial transactions, compensation and nominating and corporate governance committees, (iii) the TPG Designee to serve on the strategic and financial transactions and nominating and corporate governance committees and (iv) the Chief Executive Officer of the Company to serve as the Chairman of the strategic and financial transactions committee. The Stockholders and the Company shall use their reasonable best efforts to take all necessary action to cause the certificate of incorporation and bylaws of the Company to provide that no action by a committee of the Board of a type referred to in Section 4.2(b) below shall be valid unless approved in the same manner as required by action of the entire Board, as provided in this paragraph (a). (b) Subject to applicable law, the Company shall not take any of the actions set forth in items (i) through (viii) below without the prior consent of at least six of the nine (or ten, as the case may be) Directors, including the affirmative vote of each of the Silver Lake Designee and the TPG Designee. (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency or similar law; (ii) merge or consolidate with any other Person other than a subsidiary of the Company (the "Target") if the book value of the assets of the Target as of the end of its most recently ended fiscal quarter preceding the earlier of the date the Company enters into definitive agreements in respect of such transaction or publicly announces such transaction (the "Determination Date") would exceed 15% of the consolidated assets of the Company; (iii) sell, transfer or otherwise dispose of (including by merger, dividend or other distribution, formation of a joint venture or otherwise) any assets in one or a series of related transactions if the book value of such assets exceeds 15% of the consolidated assets of the 24 Company as of the end of the Company's most recent fiscal quarter preceding the Determination Date; (iv) increase or decrease the number of Directors that comprise the entire Board; (v) authorize, issue or sell (including by merger or otherwise) any shares, options, warrants or rights to acquire shares of the Company in excess of 15% of the Company's outstanding shares (other than issuances of Shares pursuant to options to acquire the Company's common stock issued pursuant to plans approved by the Board); (vi) pay, declare or set aside any sums or other property for the payment of any dividends on, or make any other distributions in respect of (including by merger or otherwise), any shares of the Company, or any warrants, options, rights or securities convertible into, exchangeable or exercisable for, shares of the Company in excess of 15% of the net income of the Company for the most recently completed fiscal year preceding the Determination Date (excluding purchases from employees pursuant to employee benefit plans or arrangements); (vii) redeem, purchase or otherwise acquire (including by merger or otherwise), any shares of the Company or any warrants, options and rights or securities convertible into, exchangeable or exercisable for, shares of the Company in excess of 5% of the stockholders' equity, or redeem or purchase otherwise acquire or make any payments with respect to any share appreciation rights or phantom share plans in excess of 5% of the net income of the Company for the most recently completed fiscal year preceding the Determination Date (excluding purchases from employees pursuant to employee benefit plans or arrangements); or (viii) amend, modify or repeal any of the provisions of the certificate of incorporation or bylaws of the Company, except as required to comply with its obligations under Section 4.1 of this Agreement. Finally, the prior consent of at least six of the nine (or ten, as the case may be) Directors (including the affirmative vote of each of the Silver Lake Designee and the TPG Designee and other than the Chief Executive Officer, who shall be required to abstain) shall be required to hire or terminate the employment contract of the Chief Executive Officer. Notwithstanding the foregoing, nothing in this Section 4.2 shall limit the rights of any Stockholder under Article III. (c) Unless otherwise agreed by a majority of the Board (including the affirmative vote of each of the Silver Lake Designee, the TPG Designee and each New SAC Designee), the Board shall follow the following procedures: (i) Special meetings of the Board may be held at any time upon the call of the Chairman of the Board, the Chief Executive Officer, the president of the Company or a majority of the members of the Board then in office by notice given by the secretary of the Company personally or by telephone, or sent by first-class mail, overnight mail, courier service or telegram. If the notice is mailed, it shall be deposited in the United States mail at least four (4) calendar days before the time of the holding of the meeting. If the notice is delivered by telegram, overnight mail or courier, it shall be deemed adequately delivered when the telegram is 25 delivered to the telegraph company or the notice is delivered to the overnight mail or courier service company at least forty-eight (48) hours before such meeting. If by facsimile transmission, such notice shall be deemed adequately delivered when the notice is transmitted at least twelve (12) hours before such meeting. If by telephone or hand delivery the notice shall be given at least twelve (12) hours prior to the time set for the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. Reasonable efforts shall be made to ensure that each Director actually receives timely notice of any meeting. (ii) A reasonably detailed agenda shall be supplied to each Director reasonably in advance of each meeting of the Board, together with other appropriate documentation with respect to agenda items calling for board action, to inform adequately Directors regarding matters to come before the board. Any Director wishing to place a matter on the agenda for any meeting of the applicable board of directors may do so by communicating with the chairman of the Board sufficiently in advance of the meeting of the Board so as to permit timely dissemination to all Directors of information with respect to the agenda items. 4.3. Voting of Shares; Action by the Company. At any annual or special meeting of stockholders of the Company or in any written consent executed in lieu of such a meeting of stockholders, the Stockholders shall take all other action provided for under the terms of the Shares held by them, including by way of voting their Shares, to give effect to the agreements contained in this Agreement. In order to effectuate the provisions of this Article IV, each Stockholder hereby agrees that when any action or vote is required to be taken by such Stockholder pursuant to this Agreement, such Stockholder shall use his or its best efforts to call, or cause the appropriate officers and Directors of the Company to call, a special or annual meeting of stockholders of the Company, as the case may be, or execute or cause to be executed a consent in writing in lieu of any such meetings pursuant to applicable provisions of the Delaware General Corporations Law and the common law of the State of Delaware. In addition, the Company shall use its commercially reasonable best efforts to take all actions to give effect to the agreements contained in this Agreement. ARTICLE V. MISCELLANEOUS 5.1. Competition. Any Stockholder and any Affiliate of such Stockholder may engage in or possess an interest in other investments, business ventures or entities of any nature or description, independently or with others, similar or dissimilar to, or that compete with, the investments or business of the Company, and may provide advice and other assistance to any such investment, business venture or entity, and the Company and the Stockholders shall have no rights by virtue of this Agreement in and to such investments, business ventures or entities or the income or profits derived therefrom, and the pursuit of any such investment or venture, even if competitive with the business of the Company, shall not be deemed wrongful or improper. Upon the written request of the Company (which request shall not be made more than once in any 90-day period), 26 each Stockholder shall, subject to applicable law and the terms of any applicable confidentiality agreement or similar agreement or arrangement, use its reasonable efforts to disclose, as soon as reasonably practicable and on a confidential basis, to the Board any such interest, investment or business venture that involves the enterprise reporting software business that is owned by such Stockholder; provided, however, that no Stockholder shall be required to disclose passive minority interests in such interest, investment or business venture if such passive minority interests are immaterial to such Stockholder. No Stockholder nor any Affiliate thereof shall be obligated to present any particular investment or business opportunity to the Company even if such opportunity is of a character that, if presented to the Company, could be taken by the Company, and any Stockholder or any Affiliate thereof shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment opportunity. 5.2. Effective Date. This Agreement shall become effective on the date of the consummation of the Company's initial Public Offering and prior to such time shall have no force or effect. If the Company's initial Public Offering is abandoned or is not consummated for any reason by March 31, 2004, this Agreement shall terminate without any further action of the parties hereto and neither party shall have any liability to the other with the respect to the provisions contained herein. 5.3. Exercise of Certain Rights Under the New SAC Shareholders Agreement. (a) Each of Silver Lake and TPG agree to refrain from exercising their rights under Section 2.7 of the New SAC Shareholders Agreement. (b) Each of Silver Lake and TPG (i) agree that the composition of the Board as provided herein is acceptable to them and (ii) agree not to exercise their rights under Section 5.1(d) of the New SAC Shareholders Agreement to cause the Board to be comprised in the same manner as the board of directors of New SAC. (c) Each of the Stockholders agrees to waive its rights under Section 5.2(d) of the New SAC Shareholders Agreement to require the amendment of the certificate of incorporation and bylaws of the Company. (d) Each of Silver Lake, TPG, August and New SAC agree that (i) New SAC shall not cause the Company to make, and the Company shall not be required to make, any distributions as a result of Section 6.5 of the New SAC Shareholders Agreement and (ii) the New SAC shareholders shall have no obligation to cause New SAC to make any distributions referred to in Section 6.5 of the New SAC Shareholders Agreement to the extent such distributions relate to the incurrence of "Subpart F Income" (within the meaning of Section 952 of the Internal Revenue Code of 1986, as amended) or other phantom income by a New SAC shareholder as a result of the investment by New SAC in the Company or any subsidiary of the Company. (e) Pursuant to the provisions of Section 6.6(b) of the New SAC Shareholders Agreement, each of Silver Lake and TPG agree that New SAC shall have no obligation to avoid 27 the incurrence of Subpart F Income with respect to the business and operations of the Company or any subsidiary of the Company. 5.4. Additional Securities Subject to Agreement. Each Stockholder agrees that any other equity securities of the Company which it hereafter acquires by means of a stock split, stock dividend, distribution, exercise of options or warrants or otherwise (other than shares acquired in a Public Offering, in the public market or otherwise from persons other than the Company or another Stockholder after the initial Public Offering of the Company) will be subject to the provisions of this Agreement to the same extent as if held on the date hereof. 5.5. Termination. Other than as specified below, the provisions of this Agreement will terminate and be of no further force and effect upon the date on which at least 50% of the number of issued and outstanding shares of the Company have been publicly distributed or sold (including shares issued upon the exercise of employee stock options), or are being actively traded on a national securities exchange or interdealer quotation system. Notwithstanding the foregoing, (i) Article III of this Agreement shall survive the termination of this Agreement until such time as all Registrable Securities held by the Stockholders cease to be Registrable Securities, (ii) Article IV of this Agreement shall survive until the earlier of (x) such time as the Company is no longer qualified as a "controlled company" under the rules of the NASDAQ or (y) the date on which at least 50% of the number of the issued and outstanding shares of the Company have been publicly distributed or sold (including shares issued upon the exercise of employee stock options), or are being actively traded on a national securities exchange or interdealer quotation system and (iii) Section 5.3 of this Agreement shall survive the termination of this Agreement until such time as the termination of the New SAC Shareholders Agreement. 5.6. Notices. All notices, consents, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by courier service, by cable, by telecopy, by telegram, by telex or registered or certified mail (postage prepaid, return receipt requested) as follows (or at such other address for a party as shall be specified in a notice given in accordance with this Section 5.6): (a) if to the Company: Crystal Decisions, Inc. 895 Emerson Street Palo Alto, CA 94301 Attention: Susan J. Wolfe, Esq., General Counsel Telecopy: (650) 838-7451 28 with a copy to: Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, CA 94304 Attention: Larry Sonsini, Esq. John T. Sheridan, Esq. Telecopy: (650) 493-6811 (b) if to Silver Lake: Silver Lake Partners, L.P. 2725 Sand Hill Road Suite 150 Menlo Park, CA 94025 Attention: David Roux Telecopy: (650) 233-8125 with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 Attention: William E. Curbow, Esq. Telecopy: (212) 455-2502 (c) if to TPG: SAC Investments, L.P. c/o Texas Pacific Group 301 Commerce Street Suite 3300 Fort Worth, TX 76102 Attention: Richard A. Ekleberry Telecopy: (817) 871-4080 with a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, NY 10006 Attention: Paul J. Shim, Esq. Telecopy: (212) 225-3999 29 (d) if to August: August Capital 2480 Sand Hill Road Suite 101 Menlo Park, CA 94025 Attention: Mark Wilson Telecopy: (650) 234-9910 with a copy to: Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP 155 Constitution Drive Menlo Park, CA 94025 Attention: Steven R. Franklin, Esq. Telecopy: (650) 321-2800 (e) if to J.P. Morgan: J.P. Morgan Partners, L.L.C. 50 California Street 29th Floor San Francisco, CA 94111 Attention: Shahan Soghikian Telecopy: (415) 591-1205 with copies to: J.P. Morgan Partners, L.L.C. Official Notices Clerk 1221 Avenue of the Americas New York, NY 10020 Telecopy: (212) 899-3401 -and- Latham & Watkins 135 Commonwealth Drive Menlo Park, CA 94025 Attention: Anthony J. Richmond, Esq. Telecopy: (650) 463-2600 (f) if to GS: GS Capital Partners III, L.P. 85 Broad Street, 10th Floor New York, NY 10004 Attention: Anne Musella Telecopy: (212) 357-5505 30 with a copy to: Sullivan & Cromwell 1870 Embarcadero Road Palo Alto, CA 94303 Attention: Matthew G. Hurd, Esq. Telecopy: (650) 461-5700 (g) if to Staenberg: Staenberg Venture Partners 2000 First Avenue, Suite 1001 Seattle, WA 98121 Attention: John Chase Telecopy: (206) 770-0117 with a copy to: Dorsey & Whitney LLP U.S. Bank Centre 1420 Fifth Avenue, Suite 3400 Seattle, WA 98101 Attention: [_____________] Telecopy: [_____________] (h) if to Integral: Integral Capital Partners 2750 Sand Hill Rd. Menlo Park, CA 94025 Attention: Pamela Hagenah Telecopy: 650-233-0366 (i) if to New SAC: New SAC c/o Silver Lake Partners, L.P. 2725 Sand Hill Road Building C, Suite 150 Menlo Park, CA 94025 Attention: David Roux Telecopy: (650) 233-8125 31 with copies to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 Attention: William E. Curbow, Esq. Telecopy: (212) 455-2502 -and- Simpson Thacher & Bartlett 3330 Hillview Avenue Palo Alto, CA 94304 Attention: William H. Hinman, Esq. Telecopy: (650) 251-5002 -and- Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, NY 10006 Attention: Paul J. Shim, Esq. Telecopy: (212) 225-3999 5.7. Further Assurances. The parties hereto will sign such further documents, cause such meetings to be held, resolutions passed, exercise their votes and do and perform and cause to be done such further acts and things as may be necessary in order to give full effect to this Agreement and every provision hereof. 5.8. Assignment. This Agreement will inure to the benefit of and be binding on the parties hereto and their respective successors and permitted assigns. Except as specifically provided herein, this Agreement may not be assigned by any party hereto without the express prior written consent of the other parties, and any attempted assignment, without such consents, will be null and void. 5.9. Amendment; Waiver. This Agreement may be amended, supplemented or otherwise modified only by a written instrument executed by the parties hereto; provided, however, that this Agreement may be amended, supplemented or otherwise modified by a written instrument executed only by the Stockholders so long as any such amendment, supplement or modification does not impose any material additional burdens on the Company. No waiver by any party of any of the provisions hereof will be effective unless explicitly set forth in writing and executed by the party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including without limitation, any investigation by or on behalf of any party, will be 32 deemed to constitute a waiver by the party taking such action of compliance with any covenants or agreements contained herein. The waiver by any party hereto of a breach of any provision of this Agreement will not operate or be construed as a waiver of any subsequent breach. 5.10. Third Parties. Except as otherwise set forth herein, this Agreement does not create any rights, claims or benefits inuring to any person that is not a party hereto nor create or establish any third party beneficiary hereto; provided that the Management Shareholders shall be third party beneficiaries only with respect to the provisions of Sections 3.1, 3.4, 3.6 and related definitions of this Agreement. 5.11. Governing Law. This Agreement will be governed by, and construed in accordance with, the laws of the State of Delaware. 5.12. Binding Arbitration. Any controversy, dispute or claim arising out of, in connection with, or in relation to, the construction, performance, or breach of this Agreement shall be adjudicated by arbitration conducted in accordance with the existing rules for commercial arbitration of the American Arbitration Association, or any successor organization in New York or California (the "AAA"), as determined by the party initiating the arbitration. The demand for arbitration shall be delivered in accordance with the notice provisions of this Agreement. Arbitration hereunder shall be conducted by a single arbitrator selected jointly by the parties hereto. If within thirty (30) days after a demand for arbitration is made, the parties hereto are unable to agree on a single arbitrator, three arbitrators shall be appointed. Each party shall select one arbitrator and those two arbitrators shall then select within thirty (30) days a third neutral arbitrator. If the arbitrators selected by the parties cannot agree on the third arbitrator, they shall discuss the qualifications of such third arbitrator with the AAA prior to selection of such arbitrator, which selection shall be in accordance with the existing rules of the AAA. If an arbitrator cannot continue to serve, a successor to an arbitrator selected by the parties shall be also selected by the same party, and a successor to a neutral arbitrator shall be selected as specified above. A full rehearing will be held only if the neutral arbitrator is unable to continue to serve or if the remaining arbitrators unanimously agree that such a rehearing is appropriate. Any discovery in connection with arbitration hereunder shall be limited to information directly relevant to the controversy or claim in arbitration. Judgment upon any arbitration award rendered may be entered in any court of competent jurisdiction. EACH PARTY HERETO UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT. 5.13. Specific Performance. Without limiting or waiving in any respect any rights or remedies of the parties hereto under this Agreement now or hereinafter existing at law or in equity or by statute, each of the parties hereto will be entitled to seek specific performance of the obligations to be performed by the other in accordance with the provisions of this Agreement, including during such time prior to the final and binding decision in any arbitration contemplated by Section 5.12. 33 5.14. Entire Agreement. This Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter hereof. 5.15. Titles and Headings. The section headings contained in this Agreement are for reference purposes only and will not affect the meaning or interpretation of this Agreement. 5.16. Severability. If any provision of this Agreement is declared by any court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this Agreement will not be affected and will remain in full force and effect. 5.17. Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original and all of which together will be deemed to be one and the same instrument. 5.18. Regulatory Matters. Each of New SAC, the Company and the Stockholders severally agrees to cooperate with J.P. Morgan in all reasonable respects in the event that any proposed distribution of Shares to J.P. Morgan pursuant to this Agreement or other transaction by the Company or New SAC would reasonably be expected by J.P. Morgan to result in a Regulatory Problem (as such term is defined in the Regulatory Sideletter between New SAC and the predecessor of J.P. Morgan dated as of November 22, 2000) for the purpose of avoiding or otherwise structuring around such a Regulatory Problem. Anything contained in this Section 5.18 to the contrary, neither any Stockholder nor the Company shall be required under this Section to take any action that would adversely affect such Person's rights under this Agreement or as a stockholder of the Company. J.P. Morgan agrees to notify the Company as to whether or not it would have a Regulatory Problem promptly (and in any event within five Business Days) after receipt of written notice of the specifics of a proposed transaction. Failure to respond within such five Business Day period shall be deemed to be a response that such transaction will not result in a Regulatory Problem. J.P. Morgan represents that, as of the date hereof and based on present law, the ownership by it of 4.9% or less of the outstanding voting stock of any class of stock of the Company would not constitute a Regulatory Problem. 5.19. Notice and Assistance Regarding Distributions. In the event that New SAC at any time determines that it will make a distribution of Shares in kind to the Stockholders, New SAC will use its reasonable best efforts to provide advance notice of such event to all Stockholders. In the event that such a distribution could reasonably be expected by New SAC to require further action by a Stockholder to permit it to receive such Shares or a Stockholder apprises New SAC of such (including, by way of example, 34 any further filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended), New SAC and the Company will use its respective reasonable best efforts to cooperate and assist with such action including, without limitation, making any related government filings required of any of them on a prompt and timely basis. Any such cooperation and assistance shall be provided in the same manner in all material respects to each Stockholder requesting the same. IN WITNESS WHEREOF, each of the undersigned has executed this Agreement or caused this Agreement to be executed on its behalf as of the date first written above. CRYSTAL DECISIONS, INC. By: -------------------------------------- Name: Title: NEW SAC By: -------------------------------------- Name: Title: SILVER LAKE TECHNOLOGY INVESTORS CAYMAN, L.P. By: Silver Lake (Offshore) AIV GP Ltd., its General Partner By: -------------------------------------- Name: Title: SILVER LAKE INVESTORS CAYMAN, L.P. By: Silver Lake Technology Associates Cayman, L.P., its General Partner By: Silver Lake (Offshore) AIV GP Ltd., its General Partner By: -------------------------------------- Name: Title: SILVER LAKE PARTNERS CAYMAN, L.P. By: Silver Lake Technology Associates Cayman, L.P., its General Partner By: Silver Lake (Offshore) AIV GP Ltd., its General Partner By: -------------------------------------- Name: Title: SAC INVESTMENTS, L.P. By: TPG SAC Advisors III Corp., its General Partner By: -------------------------------------- Name: Title: AUGUST CAPITAL III, L.P. By: -------------------------------------- Name: Title: J.P. MORGAN PARTNERS (BHCA), L.P. By: JPMP MASTER FUND MANAGER, its General Partner By: JPMP CAPITAL CORP, its General Partner By: -------------------------------------- Name: Title: Managing Director GS CAPITAL PARTNERS III, L.P. By: GS Advisors III, L.L.C., its General Partner By: -------------------------------------- Name: Title: GS CAPITAL PARTNERS III OFFSHORE, L.P. By: GS Advisors III, L.L.C., its General Partner By: -------------------------------------- Name: Title: GOLDMAN, SACHS & CO. VERWALTUNGS GmbH By: -------------------------------------- Name: Title: and By: -------------------------------------- Name: Title: STONE STREET FUND 2000 L.P. By: Stone Street 2000, L.L.C., its General Partner By: -------------------------------------- Name: Title: BRIDGE STREET SPECIAL OPPORTUNITIES FUND 2000, L.P. By: Bridge Street Special Opportunities Fund 2000, L.L.C., its General Partner By: -------------------------------------- Name: Title: STAENBERG VENTURE PARTNERS II, L.P. By: -------------------------------------- Name: Title: STAENBERG SEAGATE PARTNERS, LLC By: -------------------------------------- Name: Title: INTEGRAL CAPITAL PARTNERS V, L.P. By: Integral Capital Management V, LLC, its General Partner By: -------------------------------------- Name: Title: INTEGRAL CAPITAL PARTNERS V SIDE FUND, L.P. By: ICP Management V, LLC, its General Partner By: -------------------------------------- Name: Title: ------------------------------------------ Gregory Kerfoot EX-10.26 5 f90383a1exv10w26.txt EXHIBIT 10.26 EXHIBIT 10.26 [Letterhead of SLP] _____ __, 2003 Crystal Decisions, Inc. 895 Emerson Street Palo Alto, CA 94301 Dear Sirs: This letter serves to confirm our retention by Crystal Decisions, Inc. (together with its divisions and subsidiaries, the "Company") to provide management, consulting and financial services to the Company as follows: 1. The Company has retained us, and we hereby agree to accept such retention, to provide to the Company, to the extent approved by the Company in advance in accordance with this section, certain management, business strategy, consulting and financial services of the type customarily performed by us. The Company agrees to reimburse us and our affiliates, from time to time upon request, for all reasonable out-of-pocket expenses incurred in connection with this retention, including travel expenses and expenses of our counsel. Prior to the effective date of this agreement, the Company received the approval of its Audit Committee to reimburse us and our affiliates up to $14,000 per quarter (the "Pre-Approved Amount") for reasonable out-of-pocket expenses incurred in connection with this retention, including travel expenses and expenses of our counsel. We may seek these reimbursements up to the Pre-Approved Amount without any further action by the Company's Audit Committee. Other services shall be provided when and if requested in writing by the President and Chief Executive Officer of the Company and approved in advance by the Company's Audit Committee. The Company will reimburse us for travel expenses in accordance with the Company's policy. 2 2. Upon agreement of the Company and us, we may also invoice the Company for additional fees in connection with acquisition or divestiture transactions or in the event that we, or any of our affiliates, perform services for the Company above and beyond those called for by this agreement. 3. The Company agrees to indemnify and hold us, our affiliates and their and our respective partners, executives, officers, directors, employees, agents and controlling persons (each such person, including us, being an "Indemnified Party") harmless from and against any and all losses, claims, damages and liabilities (including, without limitation, losses, claims, damages and liabilities arising from or in connection with legal actions brought by or on behalf of the holders or future holders of the outstanding securities of the Company or creditors or future creditors of the Company), joint, several or otherwise, to which such Indemnified Party may become subject under any applicable federal or state law, or otherwise, related to or arising out of any activity contemplated by this agreement or our retention pursuant to, and our or our affiliates' performance of the services contemplated by, this agreement and will reimburse any Indemnified Party for all expenses (including reasonable counsel fees and disbursements) upon request as they are incurred in connection with the investigation of, preparation for or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party and whether or not such claim, action or proceeding is initiated or brought by the Company; provided, however, that you will not be liable under the foregoing indemnification provision (and amounts previously paid that are determined not required to be paid by the Company pursuant to the terms of this Paragraph shall be repaid promptly) to the extent that any loss, claim, damage, liability or expense is found by a court to have resulted from our bad faith or gross negligence. You also agree that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company related to or arising out of our retention pursuant to, or our affiliates, performance of the services 3 contemplated by, this agreement except to the extent that any loss, claim, damage, liability or expense is found by a court to have resulted from our bad faith or gross negligence. You also agree that, without our prior written consent, you will not settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which an Indemnified Party is an actual or potential party and in respect of which indemnification could be sought under the indemnification provision in the immediately preceding paragraph, unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising out of such claim, action or proceeding. Promptly after receipt by an Indemnified Party of notice of any suit, action, proceeding or investigation with respect to which an Indemnified Party may be entitled to indemnification hereunder, such Indemnified Party will notify the Company in writing of the assertion of such claim or the commencement of such suit, action, proceeding or investigation, but the failure so to notify the Company shall not relieve the Company from any liability which it may have hereunder, except to the extent that such failure has materially prejudiced the Company. If the Company so elects within a reasonable time after receipt of such notice, the Company may participate at its own expense in the defense of such suit, action, proceeding or investigation. Each Indemnified Party may employ separate counsel to represent it or defend it in any such suit, action, proceeding or investigation in which it may become involved or is named as a defendant and, in such event, the reasonable fees and expense of such counsel shall be borne by the Company; provided, however, that the Company will not be required in connection with any such suit, action, proceeding or investigation, or separate but substantially similar actions arising out of the same general allegations or circumstances, to pay the fees and disbursements of more than one separate counsel (other than local counsel) for all Indemnified Parties in any single action or proceeding. Whether or not the Company participates in the defense of any claim, both the Company and we shall cooperate in the defense thereof and shall furnish such records, 4 information and testimony, and attend such conferences, discovery proceedings, hearing, trial and appeals, as may be reasonably requested in connection therewith. If the indemnification provided for hereunder is determined by a court of competent jurisdiction to be unavailable to an Indemnified Party, or insufficient to hold any Indemnified Party harmless, in respect of any losses, claims, damages or liabilities (other than any losses, claims, damages or liabilities found in a final judgment by a court to have resulted from our willful misconduct, bad faith or gross negligence), then the Company, on the one hand, in lieu of indemnifying such Indemnified Party, and we, on the other hand, will contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received, or sought to be received, by the Company on the one hand and us, solely in our capacity as an advisor under this agreement, on the other hand in connection with the transactions to which such indemnification, contribution or reimbursement is sought, or (ii) if (but only if) the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Company on the one hand and us on the other, as well as any other relevant equitable considerations; provided, however, that in no event shall our aggregate contribution hereunder exceed the amount of fees actually received by us in respect of the transaction at issue pursuant to this agreement. The amount paid or payable by a party as a result of the losses, claims, damages and liabilities referred to above will be deemed to include any legal or other fees or expense, reasonably incurred in defending any action or claim. The Company and we agree that it would not be just and equitable if contribution pursuant to this paragraph were determined by pro rata allocation or by any other method which does not take into account the equitable considerations referred to in this paragraph. The indemnity, contribution and expenses reimbursement obligations the Company has under this Paragraph shall be in addition to any liability the Company may have, 5 and notwithstanding any other provision of this letter, shall survive the termination of this agreement. 4. Any advice or opinions provided by us may not be disclosed or referred to publicly or to any third party (other than the Company's legal, tax, financial or other advisors, who shall be directed by the Company not to disclose or otherwise make public any such advice or opinions), except in accordance with our prior written consent (which consent shall not be unreasonably withheld) or as required by law. 5. We shall act as an independent contractor, with duties solely to the Company. The provisions hereof shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors and assigns. Nothing in this agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns, any rights or remedies under or by reason of this agreement. Without limiting the generality of the foregoing, the parties acknowledge that nothing in this agreement, expressed or implied, is intended to confer on any present or future owner of any securities of the Company or its subsidiaries or affiliates, or any present or future creditor of the Company or its subsidiaries or affiliates, any rights or remedies under or by reason of this agreement or any performance hereunder. 6. This agreement shall be governed by and construed in accordance with the laws of California. 7. The terms of this agreement are effective as of the date first written above. This agreement shall continue in effect until the earlier of (i) its termination by the mutual consent of the parties hereto or (ii) Silver Lake Technology Investors Cayman, L.P., Silver Lake Investors Cayman, L.P. and Silver Lake Partners Cayman, L.P., collectively, ceasing to own, 6 either indirectly (through their ownership interest in New SAC) or directly, 10% of the issued and outstanding common shares, par value $0.01 per share, of the Company. 8. Each party hereto represents and warrants that the execution and delivery of this agreement by such party has been duly authorized by all necessary action of such party. 9. If any term or provision of this agreement or the application thereof shall, in any jurisdiction and to any extent, be invalid and unenforceable, such term or provision shall be ineffective, as to such jurisdiction, solely to the extent of such invalidity or unenforceability without rendering invalid or unenforceable any remaining terms or provisions hereof or affecting the validity or enforceability of such term or provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereto waive any provision of law that renders any term or provision of this agreement invalid or unenforceable in any respect. 10. Each of the Company and us waives all right to trial by jury in any action, proceeding or counterclaim (whether based upon contract, tort or otherwise) related to or arising out of our retention pursuant to, or our performance of the services contemplated by this agreement. 7 If the foregoing sets forth the understanding between us, please so indicate on the enclosed signed copy of this letter in the space provided therefor and return it to us, whereupon this letter shall constitute a binding agreement among us. Very Truly Yours, Silver Lake Technology Management, L.L.C. By: _______________________________ AGREED TO AND ACCEPTED CRYSTAL DECISIONS, INC. By: ___________________________ EX-23.1 6 f90383a1exv23w1.txt EXHIBIT 23.1 Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated April 17, 2003 (except Note 20, as to which the date is July , 2003) in Amendment No. 1 to the Registration Statement (Form S-1 No. 333-105559) and related Prospectus of Crystal Decisions, Inc. 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Delaware	7372	77-0537234
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)






Title of Each Class of Securities to be	Proposed Maximum Aggregate
Registered	Offering Price(1)	Amount of Registration Fee


Common Stock, $0.001 par value	$172,500,000	$13,956(2)


PROSPECTUS SUMMARY
RISK FACTORS
FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
DIVIDEND POLICY
CAPITALIZATION
DILUTION
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
MANAGEMENT
EXECUTIVE COMPENSATION
PRINCIPAL AND SELLING STOCKHOLDERS
OUR RELATIONSHIPS AND ARRANGEMENTS WITH NEW SAC, SEAGATE TECHNOLOGY, OUR OFFICERS AND OUR DIRECTORS
DESCRIPTION OF CAPITAL STOCK
SHARES ELIGIBLE FOR FUTURE SALE
UNDERWRITING
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND ADDITIONAL INFORMATION
EXHIBIT 1.1
EXHIBIT 4.2
EXHIBIT 10.26
EXHIBIT 23.1


	Per Share	Total

Initial public offering price	$	$
Underwriting discount	$	$
Proceeds, before expenses, to Crystal Decisions	$	$
Proceeds, before expenses, to New SAC	$	$


Common stock offered by Crystal Decisions		shares

Common stock offered by the selling stockholder, New SAC		shares

Common stock to be outstanding after this offering		shares


Use of proceeds		General corporate purposes, including working capital, capital expenditures of approximately $22.0 million in fiscal 2004 and potential acquisitions of complementary businesses, products and technologies. We will not receive any proceeds from the sale of shares of our common stock by New SAC in this offering.


Proposed Nasdaq National Market symbol		CRSX


Larry W. Sonsini, Esq. John V. Roos, Esq. John T. Sheridan, Esq. Julia Reigel, Esq. Wilson Sonsini Goodrich & Rosati Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 (650) 493-9300		John L. Savva, Esq. Steven B. Stokdyk, Esq. Sullivan & Cromwell LLP 1870 Embarcadero Road Palo Alto, CA 94303-3308 (650) 461-5600



	Fiscal Years Ended(1)														Nine Months Ended

	July 3,			July 2,			June 30,			June 29,			June 28,		March 29,		March 28,
	1998(2)			1999(2)(3)			2000(2)(3)			2001(3)(4)			2002(4)		2002		2003

															(unaudited)
Statement of Operations Data:
Total revenues	$	116,429		$	142,565		$	126,909		$	167,722		$	217,170	$	155,796	$	209,266
Gross profit		79,710			92,008			81,459			117,172			160,722		115,012		163,469
Total operating expenses		84,703			190,965			357,696			130,109			145,786		105,469		130,999
Income (loss) from operations		(4,993	)		(98,957	)		(276,237	)		(12,937	)		14,936		9,543		32,470
Net income (loss)	$	(13,259	)	$	(96,375	)	$	(221,162	)	$	(11,469	)	$	12,955	$	9,084	$	23,546
Basic net income (loss) per share	$	(0.35	)	$	(2.57	)	$	(5.90	)	$	(0.30	)	$	0.34	$	0.24	$	0.62
Diluted net income (loss) per share	$	(0.35	)	$	(2.57	)	$	(5.90	)	$	(0.30	)	$	0.34	$	0.24	$	0.59
Basic weighted average shares outstanding		37,501			37,501			37,501			37,627			37,800		37,759		37,975
Diluted weighted average shares outstanding		37,501			37,501			37,501			37,627			38,403		37,990		39,798



	As of March 28, 2003

	Actual		As Adjusted

			(unaudited)
Balance Sheet Data:
Cash, cash equivalents and short-term investments	$	91,658	$
Restricted Cash		2,009
Working capital		40,044
Total assets		184,908
Long-term liabilities		2,842
Total stockholders’ equity		65,599


	Substantially all of our revenues are derived from two of our products and a decline in sales for those products could substantially reduce our revenues and affect our profitability.


	We face significant exposure to foreign exchange rate fluctuations and if we were to experience a substantial fluctuation, our profitability may change in unpredictable ways outside of our control.


	We may have difficulties providing and managing the increased technical performance and support requirements for large-scale deployments, which could cause a decline in or delay in recognition of our revenues and an increase of our expenses.


	If our products are not compatible with various operating systems, we may not be able to sell products to potential customers.


	We have strategic relationships with Microsoft and SAP AG which, if terminated, would reduce our revenues and operating results.


	We will not be able to maintain our sales growth, if we do not attract, retain and motivate qualified sales personnel.


	Undetected product errors or defects could result in the loss of revenues, delayed market acceptance of our products or claims against us.


Goldman, Sachs & Co.	Morgan Stanley


Citigroup	Thomas Weisel Partners LLC


	If the market in which we sell business intelligence software does not grow as we anticipate, our revenues may not grow.


	If we do not compete effectively with companies selling business intelligence products, our revenues may not grow and could decline.


	Mergers of or other strategic transactions by our competitors could weaken our competitive position or reduce our revenues.


	Because some of our competitors have significantly greater financial, technical, sales and marketing resources than we have and pre-existing relationships with many of our potential customers, we might not be able to sustain profitability or gain additional market share.


	If the current economic slowdown continues and our customers reduce, delay or cancel purchases of our products and services, our results of operations will be harmed.


	Technological advances and evolving industry standards could reduce our future product sales, which could cause our revenues to grow more slowly or decline.


	Due to the length of our product development cycle, we may fail to react rapidly to market forces, which would hinder our ability to meet market demands.


	We may not be able to operate our business successfully as it grows, if we are unable to improve our internal systems, processes and controls.


	We derive a material portion of our revenues from customers outside of North America, and our failure to address the difficulties associated with marketing, selling and supporting our products outside North America could cause our sales to decline.


	The loss of key personnel, failure to integrate replacement personnel or any inability to attract and retain additional personnel could affect our ability to grow our business successfully.


	Our ability to pay dividends and engage in other transactions may be limited if we do not receive Comerica Bank-California’s consent because we are subject to limitations under our revolving line of credit.


	We may be obligated to indemnify our customers if they are subject to third party claims and any indemnification obligation could hurt our results of operations and harm our reputation.


	We are a party to litigation, including an action commenced by Vedatech Corporation in the United Kingdom, and in the event of an adverse judgment against us in any litigation, we may have to pay damages, which could cause us to incur expenses to defend ourselves or affect our liquidity if we are required to pay damages.


	If we are compelled to pay any indemnity claims by VERITAS, our assets could be depleted substantially.


	Our directors may have conflicts of interest because of their ownership of capital stock of, and their board membership or employment with, New SAC and its other affiliates.


	Because New SAC controls our board of directors and will own % of our outstanding stock following this offering, your ability to influence corporate matters will be greatly limited.


	Because New SAC is and will continue to be our majority stockholder, you may not receive some of the perceived corporate governance benefits of our status as a company whose stock is quoted on the Nasdaq National Market.


	Our stock could be subject to substantial market price and volume fluctuations due to a number of factors, many of which will be beyond our control, that may prevent our stockholders from reselling our common stock at a profit.


	We have broad discretion in how we use the proceeds of this offering, and we may not use these proceeds effectively.


	The provisions of our charter documents may deter potential acquisition bids that our stockholders may believe are desirable, and the market price of our common stock may be lower as a result.