MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
MARK SOLOMON (151949)
TRAVIS E. DOWNS, III (148274)
JAMES I. JACONETTE (179565)
600 West Broadway
Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058 GOLDSTEIN LITE & DEPALMA
ALLYN Z. LITE
CAMHY KARLINSKY & STEIN LLP ROBERT J. BERG
RONALD D. LEFTON Two Gateway Center
1740 Broadway, 16th Floor 12th Floor
New York, NY 10019-4315 Newark, NJ 07102-5003
Telephone: 212/977-6600 Telephone: 201/623-3000
GARWIN, BRONZAFT, GERSTEIN APPEL, CHITWOOD & HARLEY
& FISHER, L.L.P. JOHN HINTON, IV
SCOTT W. FISHER 1400 Resurgens Plaza
1501 Broadway, Suite 1416 945 East Paces Ferry Road
New York, NY 10036 Atlanta, GA 30326
Telephone: 212/398-0055 Telephone: 404/266-1650
Attorneys for Plaintiffs
[Additional counsel appear on signature page.]
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
JOHN WEHR, THERESA A. GREENFIELD and ) No. C 97-1801
SCOTT H. GREENFIELD, JOHN BLEYAERT, )
WILLIAM H. KATZ, ELENA MALUNIS and ) CLASS ACTION
GARY MALUNIS, and ABBEY CAPITAL )
PARTNERS, L.P., On Behalf of )
Themselves and All Others Similarly )
Situated, ) COMPLAINT FOR VIOLATION
) OF THE SECURITIES
Plaintiffs, ) EXCHANGE ACT OF 1934
)
vs. )
)
INFORMIX CORPORATION, PHILLIP E. )
WHITE, HOWARD H. GRAHAM, MICHAEL R. )
STONEBRAKER, STEPHEN E. HILL, DAVID H. )
STANLEY, RONALD M. ALVAREZ, MIKE )
SARANGA, STEVEN R. SOMMER, DAVID )
KENNETH COULTER, KAREN BLASING, EDWIN )
C. WINDER and IRA H. DORF, ) Plaintiffs Demand A
) Trial By Jury
Defendants. )
_______________________________________)
OVERVIEW OF ACTION
1. This is a class action on behalf of purchasers of
Informix Corp. ("Informix" or the "Company") stock between April
16, 1996 and March 31, 1997 (the "Class Period"). This action
alleges that defendants made false and misleading statements about
Informix's business, finances and future prospects, while at the
same time they were selling some 960,000 shares of their Informix
stock without disclosing adverse inside information, pocketing over
$22.2 million.
2. Informix is a multi-national supplier of high-
performance, parallel processing database technology for open
systems. The Company was founded in 1980, went public in 1986, and
released its current top of the line product, the Online Dynamic
Server RDBMS in 1988. The Company's products also include
applications development tools for creating client/server
production applications, decision-support systems, hot query
interfaces, and software that allows information to be shared from
personal computers to mainframes within the corporate computing
environment. The Company's customers consist primarily of end-
users, application vendors, original computer equipment
manufacturers ("OEMs") and distributors.
3. After a disastrous foray into desktop applications in the
late 1980s, Informix has concentrated on its database product line.
From 1990 to 1995, Informix's sales jumped from $146 million to
$708 million, and profits surged from a loss of $46 million to a
profit of $105 million. From the end of 1990 until the end of
1995, Informix's stock price climbed from the post-split equivalent
of $.56 per share to approximately $30 per share. As a result of
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 1 -
its enormous growth rate, Informix's stock traded at a price
earnings multiple reserved for premier growth companies with track
records of meeting the investment community's expectations for high
profit growth. Informix's stock performance enabled its corporate
executives to exercise stock options and sell stock at large
profits and enabled Informix to grow by using its stock to make
acquisitions of other companies. For these reasons, maintaining
Informix's image of strong growth and its high stock price was
extremely important to Informix's top executives, who closely
monitored the trading of Informix's stock on a daily basis.
4. Beginning in late 1995 and early 1996, however,
Informix's growth rate was beginning to slow. Competition from
Oracle, a much larger database software vendor, was fierce.
Informix could compete only by offering superior products. To that
end, on February 19, 1996, Informix acquired Illustra Information
Technologies, Inc. ("Illustra"), a company that provided dynamic
content management database software and tools for managing complex
data. As the acquisition was made with stock, it was very
important that Informix maintain a high stock price both prior to
and after the acquisition, even in the face of deteriorating
business. Informix issued approximately 12.7 million shares of
Informix stock to acquire all outstanding shares of Illustra and
reserved an additional 2.3 million shares for issuance in
connection with the assumption of Illustra's outstanding stock
options, which stock translated into approximately $390 million for
a company that only had about $10 million in sales. However,
Illustra had commercialized innovative technology for managing
images, maps, sound, video and other complex types of data, where
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 2 -
conventional databases only stored numbers and letters. Informix
planned to introduce a Universal Server product offering this
technology by the end of 1996. Following the announcement of this
acquisition, Informix's stock price reached an all-time high of
$36-3/4 on February 27, 1996 as defendant Phillip White projected
1996 Informix sales of $1 billion.
5. Not only was Informix's growth rate beginning to slow,
but its margins were contracting due to several factors. First,
the competition from Informix's competitors, especially Oracle, was
forcing Informix to offer large discounts and special incentives to
close sales. Second, Informix was having a difficult time
adequately providing service and support to its expanded customer
base, which was necessitating the hiring and training of more
personnel, greatly increasing operating expenses. Third,
Illustra's operating margins were poor and were a drain on
Informix's overall margins. Given its declining margins,
Informix's ability to show favorable results depended increasingly
on its reporting strong revenue growth.
6. For all these reasons, beginning at least by the first
quarter of 1996, defendants undertook a scheme and course of
conduct intended to inflate Informix's results through various
financial manipulations. For example, to increase quarterly
reported revenues during 1996, Informix entered into various
"barter" transactions totalling approximately $55 million, where
Informix recorded as revenue by agreeing to sell its software
products not for cash, but by agreeing to accept goods or services
of certain of its vendors. These transactions were either
improperly recorded as revenue or, at a minimum, the nature of
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 3 -
these transactions should have been disclosed so that investors
could have known that these "sales" were not for cash. Moreover,
as there was little cost associated with these transactions,
Informix was able to add a large portion of the sales figures as
profit on the Company's financial statements.
7. In addition, Informix began to generate additional
"sales" to its OEM and other reseller customers by increasingly
obtaining their commitment to purchase a specified number of units
of software for future resales rather than by merely receiving
payments for Informix software as it was needed or was bundled with
the OEM's product and sold. In effect, Informix was thus pre-
selling product to OEMs and other resellers for which they had no
current need, adversely affecting Informix's ability to maintain
sales levels in the future. More importantly, Informix had to
provide incentive for the OEM and other reseller customers to make
such commitments, and such commitments were obtained by offering
discounts or other special inducements. These types of
transactions are also often obtained through "side agreements" or
promises that the customer will not have to pay for the product or
can return or exchange the product if it is not bundled or is
upgraded or superseded. These "side" commitments are approved by
senior management but are left out of the license contract so as to
not raise questions about the propriety of recording the sales as
revenue.
8. As another way to achieve the revenue growth it needed,
in early 1996, Informix started a two-tier distribution network to
expand the number of customers it could reach. Informix's insiders
knew this was an extremely risky strategy as its products required
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 4 -
a great deal of servicing and technical support, which many
distributors might be unable or unwilling to provide. The new
distribution method, however, greatly benefitted Informix's
insiders in that it permitted them to ship into the distribution
channel, and to record as revenue, large amounts of product where
end-user customers were not yet identified. In this way, Informix
could report the revenue growth necessary to support its stock
price, even though actual demand for Informix's products was not
growing. Thus, Informix began, during the first quarter of 1996
and continuing throughout 1996, to improperly report revenue on
shipments to distributors where the distributors had the right to
return and/or to cancel sales.
9. Through these improper revenue recognition methods,
Informix was able to report revenue growth throughout 1996, even
though the Company's business and prospects were deteriorating, as
follows:
3/31/96 6/30/96 9/30/96 12/31/96
------- ------- ------- --------
Revenues $204.0M $226.3M $238.2M $270.8M
Net Income $ 15.9M $ 21.6M $ 26.2M $ 34.1M
Earnings Per $ 0.10 $ 0.14 $ 0.17 $ 0.22
Share ======= ======= ======= =======
Even with improperly recorded revenues, these results barely made
or slightly missed expectations for those quarters, and were less
than the growth rate Informix had experienced in the past. But
defendants continually assured the market that changes in the
Company's sales force and distribution plan were about to take hold
and that margins would improve as the Company completed the sales
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 5 -
reorganization and completed development of the Universal Server
product.
10. As Informix reported these results during 1996, insiders
took advantage of the inflated price of Informix's stock to sell
more than 840,000 shares for proceeds of over $20 million.
11. The individual defendants hoped that Informix could
continue to report increasing growth through improper revenue
recognition and that when, and if, growth slowed in late 1996 or
early 1997, due to this improper revenue recognition, they could
conceal any shortfall by replacing it with sales of its new
Universal Server product. However, Informix's new distribution
method was a failure as distributors were unable and unwilling to
provide the service needed by value-added resellers ("VARs") and
end-users, and these customers complained vociferously. In late
1996 and early 1997, Informix was forced to change its distribution
method, resulting in it discontinuing relationships with key
distributors, who canceled and/or returned significant numbers of
licenses with Informix during the first quarter of 1997. Despite
these problems in early 1997, the defendants continued to assure
the market that revenues and earnings would continue to grow so
that the price of Informix's stock would not decrease any further,
thus permitting the defendants to sell an additional 117,500 shares
of Informix stock at inflated prices for proceeds exceeding $2.2
million.
12. Suddenly, before the stock market opened on April 1,
1997, Informix began to reveal the true problems it had, when it
revealed that first quarter 1997 revenues would be in the range of
$130 million to $145 million, half of what the Company had led the
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 6 -
market to expect in the preceding weeks! The price of Informix's
stock reacted sharply to these revelations as it dropped $5-7/32 on
April 1, 1997, or approximately 35%, on a one-day volume of 24.3
million shares, more than six times Informix's average daily
volume. However, even this huge drop in estimated revenues did not
fully apprise the market of Informix's severe problems.
Incredibly, Informix refused to answer questions from analysts or
the media, and refused to provide details concerning the cause of
the stunning decline in revenues, on the advice of counsel, "to
avoid providing additional evidence for any shareholder suits that
might be triggered by the announcement," as was reported by The
Wall Street Journal. Thus, Informix is blatantly continuing to
conceal its wrongdoing and the reasons for its sales collapse from
the public, from its investors and from securities regulators, even
as this Complaint is being filed. Nevertheless, securities
analysts called the announcement "an unmitigated disaster" and "a
huge, huge mess."
13. When Informix revealed that its first quarter 1997
earnings would be a fraction of what was expected, it sent certain
analysts copies of its report on Form 10-K, which was due to be
filed with the SEC on March 31, 1997. However, the version of the
report mailed to analysts did not contain certain disclosures which
were included in the report on Form 10-K that Informix filed with
SEC. One of these disclosures revealed that Informix had
approximately $177 million of unsold product in OEM, distributor
and reseller channels as of December 31, 1996 -- half of all such
sales for the entire year. Informix further revealed that during
1996 it had recorded $55 million in "bartered" revenues. As the
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 7 -
market digested these revelations, the price of Informix's stock
dropped even further to as low as $7-1/8 by April 10, 1997 on
reported volume exceeding 23 million shares on that day alone.
14. Taking advantage of the inflation in Informix's stock
price during the Class Period, the individual defendants sold
960,908 shares of their Informix stock at prices as high as $26.50
per share, pocketing about $22.2 million, and, in many instances,
selling large portions of the shares they owned (or had acquired
via the exercise of options during the Class Period):
% Of
Total
Shares Aggregate Shares
Defendant Sold Proceeds Sold
--------- ------- --------- ------
White 90,000 $2,161,300 88%
Graham 140,000 $3,212,820 96%
Stonebraker 366,250 $8,362,131 44%
Hill 68,489 $1,531,110 98%
Stanley 47,000 $1,082,100 78%
Alvarez 50,600 $1,089,120 100%
Saranga 65,000 $1,490,000 97%
Sommer 35,000 $ 820,650 97%
Coulter 45,000 $1,160,700 85%
Blasing 3,569 $ 92,165 100%
Winder 30,000 $ 771,350 70%
Dorf 20,000 $ 520,000 96%
TOTALS: 960,908 $22,293,446 64%
======= =========== ===
15. These stock sales were unusual in timing and amount.
Some of these sales took place just 30-60 days prior to Informix
revealing on April 1, 1997, serious problems with its business and
very disappointing financial results.
16. Each of the positive statements about Informix's business
during the Class Period was materially false and misleading when
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 8 -
issued, and failed to disclose, inter alia, the following adverse
information which was then known only to defendants due to their
access to internal Informix data:
(a) That Informix had recognized revenue throughout 1996
in violation of Generally Accepted Accounting Principles ("GAAP")
on shipments to OEMs, distributors, resellers and other customers
that were contingent on resale or acceptance or contained other
contingent terms, such as exchange rights or new version upgrade
provisions, etc.;
(b) That Informix recognized revenue throughout 1996 for
which it had no reasonable basis to estimate future returns,
particularly with regard to its new two-tiered distribution
systems;
(c) That Informix's reported revenues were inflated due
to its deceptive use of "barter" transactions in which it recorded
as revenues $55 million in revenues during 1996 in exchange for
customer product;
(d) That defendants had no reasonable basis for a belief
that Informix's sales would continue to rapidly increase during and
after 1996 because defendants knew that there was already an excess
of products in the OEM, reseller and distribution channels and that
huge amounts of sales recorded during 1996 were improper and were
contingent on resale or other contingencies occurring;
(e) That future demand for many of Informix's products
would be constrained by the excess levels of product already held
by OEMs, distributors, and other resellers, who had accepted
shipments of more product than they expected to sell because
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 9 -
Informix agreed that they could return the product if it could not
be sold;
(f) That there was no basis for making positive
representations about Informix's revenues and margins, as
defendants knew that they were being forced to give discounts and
special incentives to close sales and that Informix was shipping
more product to OEMs and the distributor/reseller channel than was
being resold to end-users, and which would adversely affect
Informix's sales and margins going forward; and
(g) That absent Informix's improper revenue recognition,
Informix was experiencing little if any growth and its projections
of future growth were false.
17. The chart below shows Informix's stock prices while
defendants were issuing their false and misleading statements,
defendants' stock sales at inflated prices and the stock's collapse
as the true facts became publicly known.
Informix Corp.
April 16, 1996 - April 11, 1997
Daily Stock Prices
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 10 -
JURISDICTION AND VENUE 18. Jurisdiction exists pursuant to §27 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. §78aa, and 28 U.S.C. §1331. The claims asserted herein arise under §§10(b), 20(a) and 20A of the Exchange Act, 15 U.S.C. §§78j(b), 78t(a) and 78t-1, and Rule 10b-5. 19. Venue is proper in this District pursuant to §27 of the Exchange Act and 28 U.S.C. §1391(b). Many of the acts giving rise to the violations complained of occurred in this District. 20. In connection with the wrongs complained of, defendants used the instrumentalities of interstate commerce including the U.S. mails and the facilities of the national securities markets. THE PARTIES 21. (a) Plaintiff John Wehr purchased 400 shares of Informix common stock on January 23, 1997 at $24.46 per share and 550 shares on February 5, 1997 at $20.67 per share and has been damaged thereby. (b) Plaintiffs Theresa A. Greenfield and Scott H. Greenfield purchased 2,500 shares of Informix common stock on December 17, 1996 at $21-7/8 per share and have been damaged thereby. (c) Plaintiff John Bleyaert purchased 150 shares of Informix common stock on January 31, 1997 at $22.53 per share and has been damaged thereby. (d) Plaintiff William H. Katz purchased 500 shares of Informix common stock on November 29, 1996 at $23-7/8 per share and has been damaged thereby. COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 11 -
22. Defendant Informix is headquartered in Menlo Park, California and is a multi-national supplier of high-performance, parallel processing database technology for open systems. The Company was founded in 1980, went public in 1986, and released its current top of the line product, the Online Dynamic Server RDBMS in 1988. The Company's products also include applications development tools for creating client/server production applications, decision- support systems, hot query interfaces, and software that allows information to be shared from personal computers to mainframes within the corporate computing environment. The Company's customers consist primarily of end-users, application vendors, OEMs, VARs and distributors. Informix stock trades in an efficient market on the NASDAQ National Market System. 23. (a) Defendant Phillip E. White ("White") has been the Company's Chief Executive Officer and a director since January 1989, when he resigned from Wyse Technology, Inc. just as Wyse revealed that its sales had plummeted and its stock lost 80% of its value in less than five months. He has held the additional office of President since August 1990 and of Chairman since December 1992. Because of defendant White's positions with the Company, he knew the adverse non-public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management and Board of Directors' meetings and committees thereof and via COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 12 -
reports and other information provided to him in connection therewith. During the Class Period, defendant White sold 90,000 shares of Informix stock, 88% of his stock holdings, for proceeds of $2,161,300. (b) Defendant Howard H. Graham ("Graham") joined the Company in February 1990 as Vice President, Finance and Chief Financial Officer and became Senior Vice President, Finance and Chief Financial Officer in March 1991. He was formerly Chief Financial Officer of Wyse Technology, Inc., from which he resigned just before it was revealed that its sales had plummeted and its stock price lost 80% of its value. He resigned from Informix in December 1996. Because of defendant Graham's position with the Company, he knew the adverse non-public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management meetings and via reports and other information provided to him in connection therewith. During the Class Period, defendant Graham sold 140,000 shares of Informix stock, 96% of his stock holdings, for proceeds of $3,212,820. COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 13 -
(c) Defendant Michael R. Stonebraker ("Stonebraker") joined the Company as Vice President and Chief Technology Officer in February 1996. Stonebraker co-founded Illustra, a supplier of object-relational database management systems, in July 1992, and served in a consulting capacity with Illustra as Chief Technology Officer until February 1996. Because of defendant Stonebraker's position with the Company, he knew the adverse non-public informa- tion about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management meetings and via reports and other information provided to him in connection therewith. During the Class Period, defendant Stonebraker sold 366,250 shares of Informix stock, 44% of his stock holdings, for proceeds of $8,362,131. (d) Defendant Stephen E. Hill ("Hill") joined the Company in December 1985, and has served the Company in a variety of strategic planning, development and marketing positions. Hill currently serves as Vice President, Advanced Technology. Because of defendant Hill's positions with the Company, he knew the adverse non-public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management meetings COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 14 -
and via reports and other information provided to him in connection therewith. During the Class Period, defendant Hill sold 68,489 shares of Informix stock, 98% of his stock holdings, for proceeds of $1,531,110. (e) Defendant David H. Stanley ("Stanley") joined the Company as Vice President, Legal, General Counsel and Assistant Secretary in July 1988. In August 1990, Stanley was elected to the additional office of Secretary. In March 1995, Stanley assumed the additional responsibility for corporate services and became Vice President, Legal and Corporate Services, General Counsel and Secretary. Because of defendant Stanley's positions with the Company, he knew the adverse non-public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management meetings and via reports and other information provided to him in connection therewith. During the Class Period, defendant Stanley sold 47,000 shares of Informix stock, 78% of his stock holdings, for proceeds of $1,082,100. (f) Defendant Ronald M. Alvarez ("Alvarez") joined the Company in December 1991 as Director of Latin America Operations. He was promoted to Executive Director, Latin America Operations in March 1993, and to Vice President, Latin America in May 1995. He was appointed to his current position of Vice President, Americas Sales in January 1996. Because of defendant Alvarez' position with the Company, he knew the adverse non-public information about its COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 15 -
business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management meetings and via reports and other information provided to him in connection therewith. During the Class Period, defendant Alvarez sold 50,600 shares of Informix stock, 100% of his stock holdings, for proceeds of $1,089,120. (g) Defendant Mike Saranga ("Saranga") joined the Company as Senior Vice President, Product Management and Development in May 1993. Because of defendant Saranga's position with the Company, he knew the adverse non-public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management meetings and via reports and other information provided to him in connection therewith. During the Class Period, defendant Saranga sold 65,000 shares of Informix stock, 97% of his stock holdings, for proceeds of $1,490,000. (h) Defendant Steven R. Sommer ("Sommer") joined the Company as Vice President, Marketing in May 1993. Because of defendant Sommer's position with the Company, he knew the adverse non-public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company's operating COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 16 -
plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management meetings and via reports and other information provided to him in connection therewith. During the Class Period, defendant Sommer sold 35,000 shares of Informix stock, 97% of his stock holdings, for proceeds of $820,650. (i) Defendant David Kenneth Coulter ("Coulter") joined the Company in February 1988 as Managing Director, UK. From January 1990 to April 1992, Coulter was Vice President, Europe. He became Senior Vice President, Europe, Middle East and Africa in April 1992 and was named Senior Vice President, International in January 1996. Coulter became Executive Vice President, Worldwide Field Operations in November 1996. Because of defendant Coulter's position with the Company, he knew the adverse non-public informa- tion about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management meetings and via reports and other information provided to him in connection therewith. During the Class Period, defendant Coulter sold 45,000 shares of Informix stock, 85% of his stock holdings, for proceeds of $1,160,700. (j) Defendant Karen Blasing ("Blasing") joined the Company in November 1992 as Director of Financial Planning and Analysis and became Controller in June 1996. Because of defendant Blasing's position with the Company, she knew the adverse non- COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 17 -
public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management meetings and via reports and other information provided to her in connection therewith. During the Class Period, defendant Blasing sold 3,569 shares of Informix stock, 100% of her stock holdings, for proceeds of $92,165. (k) Defendant Edwin C. Winder ("Winder") joined the Company in February 1990. Since joining the Company, Winder has held a variety of executive positions in sales, marketing and customer service. He is currently the Company's Senior Vice President, Japan Operations. Because of defendant Winder's position with the Company, he knew the adverse non-public informa- tion about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management meetings and via reports and other information provided to him in connection therewith. During the Class Period, defendant Winder sold 30,000 shares of Informix stock, 70% of his stock holdings, for proceeds of $771,350. (l) Defendant Ira H. Dorf ("Dorf") joined the Company as Vice President, Human Resources in October 1989. Because of defendant Dorf's position with the Company, he knew the adverse COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 18 -
non-public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management meetings and via reports and other information provided to him in connection therewith. During the Class Period, defendant Dorf sold 20,000 shares of Informix stock, 96% of his stock holdings, for proceeds of $520,000. (m) The individuals named as defendants in ¶23(a)-(l) are referred to herein as the "Individual Defendants." 24. Defendants White and Graham, by reason of their positions as CEO and Chairman of Informix's Board of Directors and Chief Financial Officer, respectively, were controlling persons of Informix and had the power and influence, and exercised the same, to cause Informix to engage in the conduct complained of herein. 25. During the Class Period, each Individual Defendant occupied a position that made him privy to non-public information concerning Informix. Because of this access, each of these defendants knew that the adverse facts specified herein were being concealed. Notwithstanding their duty to refrain from selling Informix stock while in the possession of material, non-public information concerning Informix, the defendants sold about 960,000 shares of the Company's stock, profiting from their fraudulent scheme. Plaintiff Arnold Finkelstein ("Finkelstein") purchased 2,000 shares contemporaneously with defendants White's and Stonebraker's stock sales on November 6, 1996, plaintiff Finkelstein purchased 2,000 shares contemporaneously with defendant Graham's stock sales on February 7, 1997 and plaintiff Finkelstein purchased 2,000 shares contemporaneously with defendant Stonebraker's stock sales on February 14, 1997. COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 19 -
MOTIVE AND OPPORTUNITY 26. Each defendant had the opportunity to commit and participate in the fraud. The Individual Defendants were the top officers of Informix and they controlled its press releases, corporate reports, SEC filings and its communications with analysts. Thus, they controlled the public dissemination of, and could falsify, the information about Informix's business, products, financial results and future prospects that reached the public and impacted the price of its stock. 27. Each of the Individual Defendants also had the motive to commit and participate in the fraud. In recent years, Informix's stock traded at a price earnings multiple reserved for premier growth companies with track records of meeting the investment community's expectations for high profit growth. This stock performance enabled Informix's corporate executives to exercise stock options and to sell stock at large profits and enabled Informix to grow by using its stock to make acquisitions of other companies. The executives wanted to maintain their positions with Informix which would have been threatened had Informix's actual poor results been exposed. For all these reasons, maintaining Informix's image of strong growth and its high stock price was extremely important to Informix's top executives in addition to avoiding a complete stock collapse immediately following the acquisition of Illustra. Defendants also wanted to cover up the problems with and deterioration in Informix's business to make it appear that Informix's business was succeeding and achieving the 30% (or more) growth they had forecasted, so that its stock would trade at artificially inflated levels, high enough so that they COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 20 -
could insider trade by selling significant amounts of their Informix stock in part by exercising stock options to acquire Informix stock and then immediately selling off the Informix stock they acquired at artificially inflated prices, pocketing large sums for themselves. Also, the defendants were motivated to misrepresent the status of Informix's distribution strategy and its introduction of its new product, Universal Server, to conceal the serious problems Informix was having with customers and its new product in an attempt to maintain Informix's competitive position with SyBase and Oracle, which was increasingly impaired by the success of these competitors, and would have been even more seriously damaged if Informix admitted the extent to which it was having serious problems with its servicing customers and introducing its new product. INFORMIX'S AND ITS INSIDERS' ACTUAL KNOWLEDGE OR RECKLESS DISREGARD OF THE UNDISCLOSED ADVERSE CONDITIONS IMPACTING INFORMIX'S BUSINESS 28. As part of Informix's corporate planning and management process, it prepares a corporate business plan and budget for each fiscal year, typically referred to as the Fiscal Year Corporate Plan/Budget. The Fiscal Year Corporate Plan/Budget ("Plan/Budget") for a given fiscal year is prepared and revised during the last half of the preceding fiscal year and is completed by top management for Board review and approval near the end of the prior fiscal year. Thus, with respect to Informix's 1996 and 1997 Plan/Budgets, work began on the Plan/Budgets in the last half of 1995 and 1996, respectively, and the 1996 and 1997 Plan/Budgets were completed by top management for Board review and approval by COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 21 -
October or November of 1995 and 1996, respectively. Informix's Plan/Budgets were very detailed presentations of the corporation's operations and included planned or forecasted revenues, expenses, net income and earnings per share for the fiscal year on an overall corporate basis. In addition, Informix's Plan/Budgets also included forecasted revenues by product line, and by geographic area, i.e., North America, Europe, and Asia. Informix's Plan/Budgets presented these forecasted or budgeted results on a monthly, quarterly and annual basis and contained narrative explanations as to the plans' key assumptions and how management proposed to achieve those results. Each Individual Defendant was aware of and received copies of Informix's 1996 and 1997 Plan/Budgets and each played a significant role in preparing, revising and/or approving those Plan/Budgets. 29. In order to monitor Informix's corporate performance throughout the fiscal year, Informix's top managers receive monthly financial reports prepared by its financial department, headed by Graham, Chief Financial Officer (until his resignation) and Richard Blass, Vice President of Corporate Finance, as well as other written and oral reports from members of management, including divisional managers. In order to effectively manage its business and control its cash flow, Informix's management information system was capable of generating reports on a daily basis showing orders received (by product), shipments (by product), software development costs (by product), as well as overall corporate revenue, cash balances, receivables, etc. As a result of this system, Informix's top managers were aware of the corporation's performance on a daily basis and were thus aware, virtually immediately, of any COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 22 -
significant problems with orders, channel inventories, demand for new and existing products or shipment delays, etc. 30. In addition to this daily monitoring system, Informix's finance department generated monthly financial reports providing detailed data with respect to overall corporate revenue, net income and earnings per share, as well as sales by specific product lines and by geographic region -- all presented so as to compare performance for that month, that quarter and the year-to-date compared to the Plan/Budgets. These financial reports include a so-called "Flash" report prepared after the end of each month (and also throughout each month) and distributed immediately to top management, which provides summary product shipment, sales and income data. These monthly financial reports also include a so- called "Monthly Financial Statement/ Package," which provided even more detailed information, including graphic comparisons of actual performance to forecasted performance and a narrative explanation of material variances of actual results compared to forecasted or budgeted results, which is completed within ten days after the end of the month and immediately provided to members of top management. 31. When Informix encountered serious service problems in the distribution channel and as Informix accumulated excessive unsold software in the channel in mid-1996, Informix's internal corporate procedures required that the sales and finance managers immediately advise top management of these problems via oral and written reports. Such reports were issued and included the following: (1) identification of the service problems; (2) notification to top management of the impact on volume shipments and revenue; and (3) COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 23 -
requested input on satisfying customer service and product demands in light of the problems. 32. Thus, when the serious channel problems were discovered in early-1996, the Individual Defendants were immediately advised of the problems by the sales and finance personnel. Informix closely monitored the amount of unsold product in the distribution channel and received sell-through reports from its distributors, OEMs and other resellers via its sales personnel. Because the two- tier distribution network was Informix's most important development and was indispensable to Informix achieving the revenue and earnings growth it had forecasted for 1996 and 1997, the significant amount of unsold channel inventory which was cancelable was immediately a matter of major concern and discussion among Informix's top corporate managers, including the Individual Defendants. 33. Internally at Informix, the problems with servicing the distribution channel customers and the accumulating inventory in the channel continued to be encountered during the Class Period and were so serious that by the end of 1996, Informix had to discontinue its distribution strategy and stop shipping to Ingram Micro, and Informix's insiders were aware that there was more than $177 million of unsold inventory at OEMs, resellers or distributors. In addition, Informix began to experience weak North American sales due to continuing problems with its North American direct sales force, weak sales to OEM customers and weaker than forecasted sales in Europe and Asia. As a result, Informix was suffering a very poor first quarter 1997, with revenues, net income and earnings per share well below forecasted and budgeted levels. COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 24 -
This information was provided to each of the defendants in the January, February and March 1997 "Flash" financial reports and/or the financial statement reporting packages distributed to them throughout the Class Period. 34. Because of the foregoing, each of the Individual Defendants was aware of Informix's 1996 and 1997 forecasts and budgets and of the internal reports detailing the distribution problems, and the financial reports comparing Informix's actual results to those budgeted and/or forecasted. Based on the negative internal reports specified earlier and reports of the Company's actual performance compared to that budgeted and forecasted, the Individual Defendants each knew Informix's business was not performing as well as publicly represented. Thus, defendants each actually knew that the forward-looking public statements issued during the Class Period about Informix were false and misleading when made and actually knew or recklessly disregarded that the non- forward-looking statements issued during the Class Period about Informix were false and misleading when made. DEFENDANTS' FRAUDULENT SCHEME AND COURSE OF BUSINESS 35. Each of the defendants is liable as a participant in a fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of Informix stock, including false and misleading statements and/or concealed material, adverse facts. The scheme: (i) deceived the investing public regarding Informix's business; (ii) artificially inflated the price of Informix stock; (iii) caused plaintiffs and other members of the Class to purchase Informix stock at inflated prices; and (iv) permitted the Individual Defendants to sell approximately 960,000 shares of COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 25 -
Informix stock at as high as $26.50 per share, pocketing some $22.2 million. 36. In recent years, Informix reported revenue growth exceeding 30% on an annual basis. During 1995, Informix reported the following results (on a pooling of interests basis with Illustra): 1995 ---- 3/31 6/30 9/30 12/31 Year ---- ---- ---- ----- ------- Revenue $148 million $164 million $183 million $219 million $714 million Net income $17.6 million $20.2 million $23.9 million $35.9 million $97.6 million EPS $0.12 $0.14 $0.16 $0.20 $0.65 In fiscal 1994 and 1993, Informix had revenues of $470.1 million and $352.1 million, respectively. 37. As a result of these results, Informix stock traded at a price earnings multiple reserved for premier growth companies with track records of meeting market expectations for high profit growth. For the reasons pleaded elsewhere, maintaining an image of strong growth and thus a high stock price was extremely important to Informix's top executives. FALSE AND MISLEADING STATEMENTS DURING THE CLASS PERIOD 38. After the close of the market on April 15, 1996, Informix issued a press release announcing its financial results for the first quarter of 1996, ended March 31, 1996. The reported earnings for the quarter of $.10 per share was at the high-end of the range publicly projected by Informix on April 7, 1996. The press release quoted defendant White as stating: "We accomplished alot in the first quarter with a modest shortfall in North American revenues but with continued strong growth in Europe . . . . We completed the COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 26 -
acquisition of Illustra, continued our record setting TPC results and announced Informix's Universal Server, which we expect to ship later this year. We continue to be the company with the highest database license revenue growth rate in the industry: our database license revenue increased 52% in the first quarter, compared with the first quarter of 1995." 39. Following the release, Informix's management held a conference call and other communications with securities analysts, who generally reacted favorably to the announced results. In these communications with analysts, White and Graham blamed the slowdown in sales in the first quarter on the failure of the Company to close 10-20 medium-sized deals, in part due to the significant changes that the sales organization had undergone during the quarter. However, they represented that Informix was seeing a build-up of larger deals in the domestic pipeline for the second quarter of the year. For example, a Wheat First Securities analyst raised its estimates for Informix's 1996 and 1997 results and raised its rating on Informix from "hold" to "out perform." The Wheat First analyst emphasized that "Informix posted impressive database server revenue growth of 52% in Q1'96 despite operational disruptions in the North American sales force." Similarly, a Bear Stearns analyst initiated coverage of Informix on April 18, 1996, rating the stock "attractive," noting that "we look for EPS to climb 42% in 1997 after an essentially flat performance in 1996. Therefore, we believe that the company can sustain annual EPS growth of 30%." 40. On or about April 19, 1996, Informix issued its Annual Report to Shareholders for its fiscal year ended December 31, 1995. In a letter to shareholders, defendant White commented on what the COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 27 -
report described as a "year of phenomenal growth" and Informix's prospects: We're very pleased with our 1995 results and remain confident that Informix is well-positioned to continue its strong growth. We're even more excited about Informix's future prospects -- not only in terms of how our own business can continue to grow, but also the innovative new ways in which our customers and partners are using Informix technology to meet their dynamic information management needs. With regard to its revenues, the annual report represented: The company derives revenues principally from licensing its software and providing technical product support and updates to customers. License revenues may involve the shipment of product by the Company or the granting of a license to a customer to manufacture products. . . . The Company's products are sold directly to end-user customers or through resellers, including original equipment manufacturers (OEMs), distributors, and application vendors. The Company's revenues have been increasingly derived from sales contracts directly with end users and less from the distributor or OEM sales channels. These end-user sales contracts can be relatively large in size and are difficult to forecast both in timing and dollar value. In addition, these revenue contracts have lower associated software distribution and selling costs. From time to time, the Company has recognized substantial net revenue from these large software license agreements. These transactions, which are difficult to predict, have caused fluctuations in net revenues and net income because of the relatively high gross margin on such revenues. The Company expects that these sorts of transactions and the resulting fluctuations will continue. The Annual Report disclosed that the Company had restructured its sales organization effective in the first quarter of 1996, which reorganization included new management in North America and the integration of Illustra products and personnel. The Annual Report also described in a note to the consolidated financial statements the Company's revenue recognition policy: The Company generally recognizes license revenue from sales of software licenses upon delivery of the software COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 28 -
product to a customer. However, for certain computer hardware manufacturers and end-user licensees with amounts payable within twelve months, the Company will recognize revenue at the time the customer makes a contractual commitment for a minimum non-refundable license fee, if such computer hardware manufacturers and end-user licensees meet certain criteria established by the Company. License revenue from resellers (such as distributors and application vendors) and from other computer hardware manufacturers and end users may be recognized at the earlier of either payment of the license fee or the shipment of the software media on a per-unit basis. However, in no case is revenue recognized unless a master or first copy is delivered to the customer. * * * The Company's revenue recognition policy is in compliance with the provisions of the American Institute of Certified Public Accountants' Statement of Position 91-1, "Software Revenue Recognition." 41. On or about April 29, 1996, defendant White spoke at the Hambrecht & Quist, Inc. Technology Conference where he represented that Informix expected 1996 revenue to exceed $1 billion. 42. On or about May 15, 1996, Informix filed with the SEC its report on Form 10-Q for the quarter ended March 31, 1996, which was signed by defendant Graham. This report included the same financial results that had been presented in the Company's press release of April 15, 1996. The report represented: "All significant adjustments, in the opinion of management, which are normal, recurring in nature and necessary for a fair presentation of the financial position and results of the operations of the Company, have been consistently recorded." With regard to Informix's revenues, the report on Form 10-Q represented: The Company's revenues have been increasingly derived from sales contracts directly with end users and less from the distributor or OEM sales channels. These end- user sales contracts can be relatively large in size and are difficult to forecast both in timing and dollar value. In addition, these revenue contracts have lower COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 29 -
associated software distribution and selling costs. From time to time, the Company has recognized substantial net revenue from these large software license agreements. These transactions, which are difficult to predict, have caused fluctuations in net revenues and net income because of the relatively high gross margin on such revenues. The Company expects that these sorts of transactions and the resulting fluctuations will continue. Informix's results for the first quarter of 1996 and its statements regarding these results were false and misleading as the results were materially overstated in violation of GAAP due to Informix's improper revenue recognition as described in ¶¶69-80. 43. On May 30, 1996, Informix's senior management, including White and Graham, held an analyst meeting at which they increased analysts' confidence that Informix would meet their second quarter numbers earnings per share estimates of approximately $.17 per share. Defendant Alvarez commented to analysts that the North American Group's growth rate was higher than in the prior quarter and that fewer "swing" deals were needed to make the second quarter than were needed in the first quarter. Informix also described to analysts dramatic changes to Informix's domestic sales organization, moving to a "name account" model instead of a geographic one. 44. Between April 19, 1996 and May 17, 1996, various defendants sold over 170,000 shares of their Informix stock holdings, at prices as high as $26-1/4, for proceeds of over $4.3 million. 45. On June 26, 1996, Informix made a presentation at the William Blair & Co. Investment Conference and spoke to analysts during "breakout" sessions and in one-on-one meetings. In such meetings, defendant Graham represented that the pipeline of COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 30 -
business "looks strong." Graham also told analysts that product pricing had not changed for better or worse over the prior six months. There was no basis for these representations because Informix was being forced to give discounts and special incentives to close sales and Informix was shipping more product to OEMs and the reseller channel than was being resold to customers. 46. In early July 1996, Informix held an analysts' day as part of its worldwide user group week. While Informix management, including White and Graham, did not comment directly on the second quarter results, they indicated that Informix had not "pushed" much from a sales standpoint during the last week of the quarter, leading analysts to believe that the Company knew it was going to meet the projections. In addition, defendant White, while commenting on the financial condition of Informix, said that things were "bright, sunny, and great." 47. On July 16, 1996, Informix issued a press release announcing its results for the second quarter of fiscal year 1996, ended June 30, 1996, prepared and reviewed by White, Graham and Blasing. The Company reported revenues for the second quarter of $226 million, an increase of 38% from the second quarter of 1995, and earnings per share of $.14, compared with $.14 in the second quarter of the prior year. The release quoted White as stating: "'Our second quarter results once again proved that we have the fastest growing database with database license growth of 61% versus 1995.'" The release noted that revenue in the North American region increased by 48%. Consensus estimates were for earnings of $.16 per share. COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 31 -
48. Following the issuance of the press release, Informix's senior management, including White and Graham, held a conference call and other communications with securities analysts to comment on the Company's results and future prospects. In these communications, Informix's management emphasized that database server license revenue grew 61% year-over-year, once again making Informix the fastest growing database company. Defendants blamed the disappointing earnings for the quarter on a three percentage point increase in the cost of services, as Informix claimed that it had made a conscious decision to provide the appropriate level of service as its products had become more complex. Nevertheless, defendants White and Graham represented that they expected revenues to out-pace expense growth in the future as a result of Informix's strong new-product cycle. Defendants also represented that the reorganization of the North American sales force was starting to show results, which turnaround was described as "an important milestone" by one analyst. Another analyst described the message communicated by Informix's senior management as follows: In sum, Informix' Q2 results were very good on the top line -- the company is faced with the challenge of controlling expenses in the second half of 1996 as it grows to take full advantage of the market's demand and its strong product cycle. We expect total revenue growth to continue in the high-30% range and profitability to improve next year to the customary 20% operating profit margin. There was no reasonable basis for defendants' representations that Informix's margins would improve and revenues would continue to grow in the "high 30% range," because defendants knew that they were being forced to give discounts and special incentives to close sales and that Informix was shipping more product to OEMs and the COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 32 -
distributor/reseller channel than was being resold to end-users which would result in returns and cancellations in future quarters adversely affecting margins. 49. On or about August 15, 1996, Informix filed with the SEC its report on Form 10-Q for the quarter ended June 30, 1996, signed by defendants Graham and Blasing. The report on Form 10-Q contained the same results for the quarter as was announced in the press release of July 16, 1996. The report represented: "All significant adjustments, in the opinion of management, which are normal, recurring in nature and necessary for a fair presentation of the financial position and results of the operations of the Company, have been consistently recorded." The report also represented that Informix's operating income had been affected negatively in the quarter as a result of operating expenses growing more rapidly than revenues primarily in the North American region as Informix invested heavily in personnel in sales, marketing and customer service, and due to costs involved in the acquisitions of Illustra and Stanford Technology Group. The report described the Company's revenues as follows: The company derives revenues principally from licensing its software and providing technical product support and updates to customers. License revenues may involve a shipment of product by the Company or the granting of a license to a customer to manufacture products. . . . The Company's products are sold directly to end-user customers or through resellers, including original equipment manufacturers (OEMs), distributors, and application vendors. In the past couple of years, the company's customer mix was decreasing in the distributor and hardware OEM channels in favor of the end user and application vendor channels. However, this year, the Company expects this trend to shift towards a higher proportion of OEM sales as its strategy is now more focused on partnerships with several hardware vendors. The Company has recognized substantial net revenue from large software license agreements. These transactions, COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 33 -
which are difficult to predict, have caused fluctuations in net revenues and net income because of the relatively high gross margin on such revenues. The Company expects that these sorts of transactions and the resulting fluctuations will continue. Informix's results for the second quarter of 1996 and its statements regarding those results were false and misleading because the results were materially overstated in violation of GAAP due to Informix's improper revenue recognition as described in ¶¶69-80. 50. Between July 19, 1996 and August 16, 1996, defendants sold 465,569 shares of their Informix stock holdings for proceeds of more than $11.2 million, at prices as high as $26.50 per share, without revealing the adverse facts known to them concerning Informix's business and prospects, as is described herein. 51. As Informix's third quarter end approached, White and Graham communicated with securities analysts concerning the progress of the quarter and the Company's prospects. These defendants led securities analysts to believe that the Company expected healthy sequential operating margin improvement in the third quarter and that Informix's stock would appreciate significantly over the following year. For example, after a visit with Informix management, including Graham, a Merrill Lynch analyst reported that Informix's third quarter 1996 could show "200-300 basis points of margin improvement" over the operating margin reported for the second quarter of 1996. The report stated that it expected that the combination of Informix's "robust product release" and the "increasing likelihood of accelerating quarterly earnings momentum" would allow Informix to expand its price/earnings multiple on top of a healthy earnings base in 1997. COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 34 -
There was no reasonable basis for defendants' representations that Informix's margins would improve and revenues would continue to grow, because defendants knew that they were being forced to give discounts and special incentives to close sales and that Informix was shipping more product to OEMs and the distributor/reseller channel than was being resold to end-users which would result in returns and cancellations in future quarters which would adversely affect margins. 52. On October 16, 1996, Informix issued a press release prepared and reviewed by White, Graham and Blasing, among others, announcing its results for the third quarter of its fiscal year 1996, ended September 30, 1996. The release reported revenue of $238 million, an increase of 30% over the third quarter of 1995, and net income per share of $.17, compared with $.16 in the prior year's third quarter. The release quoted defendant White as stating: "'At 30% overall revenue growth, but with 50% database growth vs. the third quarter of 1995, we remain the fastest growing database company . . . .'" 53. The third quarter results reported by Informix fell short of most analysts' expectations. Nevertheless, following a conference call and other communications with defendants, some analysts remained encouraged by the fact that sales of Informix's database software, its core business, increased 50%, making the Company the fastest growing supplier in that field. As a Wheat First Securities analyst concluded in a research report based on communications with White and Graham: The highlight of the quarter was the 50% growth reported in database licenses. While this figure is below what we had forecast (55%), it is still an excellent indicator of COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 35 -
the health of Informix's main line of business and, in our opinion, a good enough number to keep investors from overly focusing on the negative events that came out of the quarterly report. With the overall database market growing 30-35%, it is clear that Informix continues to take market share. Similarly, based on information obtained from defendants, an Alex. Brown & Sons, Inc. analyst reported: We believe that the company and its stock have good upside driven by: (1) continued sequential margin expansion; (2) strong new product cycle; (3) strength of major growth drivers, including data warehousing, the Internet/ Intranet, and complex data storage/management; (4) continued pull-through from packaged application vendors; and (5) the opportunity to leverage ongoing problems at rival Sybase. * * * We believe the above normal expense growth during the 1H (particularly hiring of consultants and sales people) is over and there will be sequential margin expansion in the 4Q. 54. In early November 1996, concerns about Informix's business surfaced following a user group meeting of Informix's main competitor, Oracle, which was attended by many securities analysts. As a result of negative comments about Informix's business made at the Oracle user conference, certain analysts reduced their earnings projections for the fourth quarter and expressed the belief that Informix's operating margins would be under pressure. To counter the negative comments by Oracle, defendants White and Graham held a conference call with analysts on November 13, 1996 to respond. In the conference call, defendants represented to analysts that Informix's fourth quarter revenues would be in the range of $270- $290 million, and the Company addressed concerns raised about the strength of its sales force. As a result of the conference call, Informix's stock price increased 10% on November 14, 1996. There COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 36 -
was no reasonable basis for defendants' representations that Informix's margins would improve and revenues would continue to grow, because defendants knew that they were being forced to give discounts and special incentives to close sales and that Informix was shipping more product to OEMs and the distributor/reseller channel than was being resold to end-users. 55. On or about November 14, 1996, defendants filed Informix's report on Form 10-Q for the quarter ended September 29, 1996, signed by defendants Graham and Blasing. This report contained the financial information previously contained in the press release of October 16, 1996. The report represented: "All significant adjustments, in the opinion of management, which are normal, recurring in nature and necessary for a fair presentation of the financial position and results of the operations of the Company, have been consistently recorded." The report also stated: Informix's operating income was affected negatively in the third quarter and the first nine months of 1996 as a result of operating expenses growing more rapidly than revenues, primarily in the North America region as Informix continues to invest heavily in personnel in the areas of sales, marketing and customer service, and research and development; and due to the integration expenses and fees associated with the acquisitions of Illustra . . . and Stanford Technology Group . . . . With regard to Informix's revenues, the report on Form 10-Q represented: The company derives revenues principally from licensing its software and providing technical product support and updates to customers. License revenues may involve a shipment of product by the Company or the granting of a license to a customer to manufacture products. . . . The Company's products are sold directly to end-user customers or through resellers, including original equipment manufacturers (OEMs), distributors, and application vendors. In the past couple of years, the Company's customer mix was decreasing in the distributor and hardware OEM channels in favor of the end user and COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 37 -
application vendor channels. However, this year, the Company expects this trend to shift towards a higher proportion of OEM sales as its strategy is now more focused on partnerships with several hardware vendors in order to utilize their sales forces, obtain access to their installed bases in certain industries and benefit from that consulting and systems integration organizations. The Company has recognized substantial net revenue from large software license agreements. Informix's results for the third quarter of 1996 and its statements regarding those results were false and misleading because the results were materially overstated in violation of GAAP due to Informix's improper revenue recognition as described in ¶¶69-80. 56. Between October 21, 1996 and November 19, 1996, defendants sold 212,000 shares of their Informix stock holdings for proceeds in excess of $4.5 million at prices as high as $24-7/8 per share, without disclosing the adverse information known to them about Informix's business and prospects, as is described herein. 57. On November 21, 1996, defendant White was reported in the media to have represented that Informix's new Universal Server would give Informix an 18-month technological lead over Informix's main competitor, Oracle. White represented that the Universal Server would "reinvent" the Company and would propel Informix past Oracle in the UNIX and NT database markets. 58. On December 3, 1996, Informix announced the availability of its Universal Server product, which was expected to be its growth driver for the future. 59. At the Montgomery Securities Technology Conference in early December, defendant Graham represented that the Company expected its operating margins to widen to about 20% in 1997 from an estimated 16% in 1996 because of the high costs incurred in 1996 in introducing its new Universal Server software and other COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 38 -
products. Graham also represented that Informix expected its Universal Server database to bring in a "substantial amount of revenue" in 1997 -- "more than a few percentage points of total" revenue. At the roll-out of the Universal Server at Database Expo, defendant White represented that Informix's Universal Server product gave them an 18-month head start over its competitors in the object-relational database market. There was no reasonable basis for defendants' representations that Informix's margins would improve and revenues would continue to grow, because defendants knew that they were being forced to give discounts and special incentives to close sales and that Informix was shipping more product to OEMs and the distributor/reseller channel than was being resold to end-users. 60. In late January 1997, Informix indicated to the media that it had realigned its channel sales and marketing organization and planned to bolster support to its VARs with a technical services group that would be unveiled in February. Informix's management indicated that it had recently stopped selling through Ingram Micro, and was focusing on technical distributors. 61. On February 4, 1997, Informix issued a press release prepared or reviewed by White and Blasing, announcing its financial results for the fourth quarter of its fiscal year 1996, ended December 31, 1996. The Company reported revenue of $270 million and income per share of $.22, compared with $219 million and $.23, respectively, for the fourth quarter of 1995. The report quoted defendant White as stating: "1996 was a good year, with database license revenues growing 48% over 1995. We continue to gain market share in our core database business . . . ." COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 39 -
62. While the fourth quarter results were weaker than the consensus estimates, securities analysts expected a weak quarter and so-called "whisper" estimates by Informix were approximately equal to those reported. Nonetheless, even Informix's reported results were materially overstated in violation of GAAP due to Informix's improper revenue recognition as described in ¶¶69-80. On February 5, 1997, Informix's senior management, including White, held a meeting with analysts, at which defendants represented that the Company's investments in 1996 had resulted in Informix being in a strong market position for 1997, with a solid pipeline of orders in Europe, Latin America and Asia. Defendants reiterated that they expected to increase margins to the 20% range in 1997. The Company represented that it had more $1-$5 million deals than ever in the pipeline. There was no reasonable basis for defendants' representations that Informix's margins would improve and revenues would continue to grow, because defendants knew that they were being forced to give discounts and special incentives to close sales and that Informix was shipping more product to OEMs and the distributor/reseller channel than was being resold to end-users, which would result in lower revenues in future quarters which would adversely affect margins. 63. Following the analyst meeting, in further communications with analysts, Informix, at White's direction, indicated that it expected sales in the first quarter of 1997 to be lower than in the fourth quarter of 1996 while expenses were expected to be higher. Informix indicated that overall expenses were up several million dollars sequentially despite the seasonal decline in commission and bonuses. Analysts generally lowered their earnings per share COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 40 -
estimates for the first half of 1997 as a result of these representations. As a result, Informix's stock price drifted lower. 64. At a Hambrecht & Quist investor conference in early- March, defendant White represented that Informix had 500-600 customers using Informix's Universal Server. White said that he saw the Internet triggering a big demand for databases. On March 17, 1997, in a meeting with a Furman Selz analyst, White represented that it was looking into expanding its share repurchase program, falsely indicating that he considered this Company's stock price to be undervalued. 65. On March 26, 1997, Reuters Financial Service reported that White had represented to it in a recent interview that Informix "aims to increase its revenue by 30 percent in 1997." 66. Finally, on April 1, 1997, Informix stunned the market by revealing that it expected its revenues for the first quarter, ended March 30, 1997, to be in the range of $130-$145 million, compared with $204 million in the year earlier period, and compared with $270 million in the fourth quarter of 1996. The Company revealed that as a result of the revenue shortfall, it expected to experience a substantial operating loss and net loss for the quarter. The release quoted defendant White as stating: "We saw weakness in all geographic regions, particularly in Europe. We failed to close a number of large transactions at the end of the quarter for reasons other than competition. In addition, with regard to sales of our UNIX relational database products, we may have lost momentum as a result of sales and marketing over-emphasis on emerging object-relational technology and the lack of corporate focus on our NT products and their price/performance benefits." COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 41 -
As a result of these revelations, Informix's stock price, which had already declined significantly as a result of Informix's reductions in projections for the quarter, plunged 30% from a close of $15-1/8 on March 31, 1997, to as low as $8-3/4 on April 1, 1997, before closing at $9-29/32 on huge volume of more than 24 million shares traded. The market's reaction to this announcement was harsh. A Cowen & Co. analyst described the announcement as "an unmitigated disaster," while a Montgomery Securities analyst called the announcement a "huge, huge mess." 67. Informix held a conference call to explain the quarterly results, but merely read a prepared script and refused to provide any additional details or to permit questions. Both The Wall Street Journal and The New York Times reported that the Company refused to provide an explanation for the stunning reversal on the advice of Informix's lawyers, "to avoid providing additional evidence for any shareholder suits that might be triggered by the announcement." 68. On March 31, 1997, Informix filed its report on Form 10-K for the fiscal year ended December 31, 1996. Informix mailed a version of a report on Form 10-K to analysts, but the report sent to analysts lacked the detail of the document filed with the SEC. The complete report on Form 10-K revealed in the "revenues" portion of the Management's Discussion and Analysis section that in 1996, the Company had experienced a higher proportion of sales through OEMs and other indirect sales channels as compared with prior years, representing nearly half of the Company's 1996 license revenue. The report further revealed: "The Company estimates that almost half of the licenses sold to these resellers in 1996 were COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 42 -
not resold to end-users prior to December 31, 1996." Inasmuch as $708 million of license revenue was recognized by Informix in 1996, this revelation indicated that as of the end of the year, $177 million of license sales had not been sold through to end-users and remained in the OEM or other reseller sales channels. This revelation indicated that the sales reported by the Company in 1996 were not indicative of actual demand for the Company's products. In addition, the report on Form 10-K revealed that Informix had recognized an additional $55 million in license revenues that constituted a barter type of transaction thus implying a lower quality of revenue than an actual sale and a source of revenue that would likely not be of a recurring nature. As these details became public, Informix's stock dropped again on April 10, 1997, to as low as $7-1/8 on huge volume of 23 million shares. FALSE FINANCIAL STATEMENTS 69. In order to overstate its revenues, net income and earnings per share during 1996, the defendants caused Informix to improperly report revenue from software license sales to distributors, resellers, and OEMs granting such customers rights to return and/or cancel license agreements where ultimate sale to end- users did not occur. Despite these contingencies, Informix recognized revenue from shipments and did not adequately reserve for expected returns and/or cancellations of licenses causing its financial results to be overstated during the interim and year-end 1996 periods, and causing such results to be presented in violation of GAAP. 70. GAAP are those principles recognized by the accounting profession as the conventions, rules and procedures necessary to COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 43 -
define accepted accounting practice at the particular time. Regulation S-X (17 C.F.R. §210.4-01(a)(1)) states that financial statements filed with the SEC which are not prepared in compliance with GAAP are presumed to be misleading and inaccurate, despite footnote or other disclosure. 71. On April 15, 1996, Informix reported revenues of $204 million, net income of $15.9 million and earnings per share of $.10 for the quarter ended March 31, 1996. On July 16, 1996, Informix reported revenues of $226 million, net income of $21.6 million and earnings per share of $.14 for the quarter ended June 30, 1996. On October 16, 1996, Informix reported revenues of $238 million, net income of $26.2 million and earnings per share of $.17 for the quarter ended September 29, 1996. Subsequent to reporting the aforementioned results, Informix filed reports on Form 10-Q with the SEC for each of the aforementioned quarters and included in its financial statements for the respective quarters the following statement: All significant adjustments, in the opinion of management, which are normal, recurring in nature and necessary for a fair presentation of the financial position and results of the operations of the Company have been consistently recorded. 72. On February 4, 1997, Informix reported its results for the fourth quarter and year-ended December 31, 1996. For the fourth quarter, Informix reported revenues of $270.8 million, net income of $34.1 million and earnings per share of $.22. For the year ended December 31, 1996, Informix reported revenues of $939 million, net income of $97.8 million, and earnings per share of $.63. COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 44 -
73. The Company's reported results for each of the four quarters and year ended December 31, 1996, and statements regarding those results, were false and misleading when made because the Company failed to comply with GAAP by improperly recognizing revenue from software licenses. 74. In early 1996, Informix significantly changed its marketing and sales policy and moved to a two-tier distribution channel wherein it began to use OEMs, distributors and resellers to a much greater extent than it had in past years. In conjunction with this, Informix began to ship or contract for a much greater amount of its product into the OEM, reseller or distribution channel than it had in the past. In order to induce OEMs, distributors, resellers and other customers to accept great quantities of its product, Informix granted such customers more favorable payment terms and a right to return, swap and/or cancel licenses if the resellers could not resell the license to end-users or did not bundle the software -- thereby reducing the risk that the OEMs, resellers or distributors had with respect to unsold product. Notwithstanding these contingencies, Informix did not defer revenue recognition and/or reserve for potential cancellations and/or returns of software licenses to reflect the contingent nature of these "sales." Such revenue recognition violated GAAP, which, as set forth in SOP 91-1, states: If, after delivery, there is significant uncertainty about customer acceptance of the software, license revenue should not be recognized until the uncertainty becomes insignificant. Revenues associated with software transactions for which there is no reasonable basis of estimating the degree of collectibility of related receivables should be accounted COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 45 -
for using either the installment method or the cost recovery method of accounting. SOP 91-1 also states: As part of their standard sales terms or as matters of practice, vendors may grant resellers rights to exchange unsold software for other software. Such exchange, including those referred to as "stock balancing arrangements," are returns and should be accounted for in conformity with FASB Statement No. 48, even if the vendors require the resellers to purchase additional software to exercise the exchange right. 75. FASB Statement No. 48 (revenue recognition where the right of return exists) specifies criteria for recognizing revenue on a sale in which a product may be returned, whether as a matter of contract or as a matter of existing practice, either by the ultimate customer or by a party who resells the product to others and requires that the amount of future returns can be reasonably estimated in order to recognize revenue. FASB Statement No. 48 also states: The ability to make a reasonable estimate of the amount of future returns depends on many factors and circumstances that will vary from one case to the next. However, the following factors may impair the ability to make a reasonable estimate: a. The susceptibility of the product to significant external factors, such as technological obsolescence or changes in demand b. Relatively long periods in which a particular product may be returned c. Absence of historical experience with similar types of sales of similar products, or inability to apply such experience because of changing circumstances, for example, changes in the selling enterprise's marketing policies or relationships with its customers d. Absence of a large volume of relatively homogeneous transactions COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 46 -
The existence of one or more of the above factors, in light of the significance of other factors, may not be sufficient to prevent making a reasonable estimate; likewise, other factors may preclude a reasonable estimate. 76. Because Informix's focus on OEMs and its two-tiered distribution program was new during 1996, Informix did not have the ability to adequately estimate returns and should have deferred revenue recognition from these transactions. For example, Informix did not have sufficient historical experience selling its product to a two-tiered distribution system and therefore, did not have the ability to estimate returns. Furthermore, because so much unsold product remained in the OEM/distribution/reseller channel, there was significant uncertainty about the acceptance of that product by these resellers and their customers. 77. Ultimately, Informix's improper revenue recognition adversely effected later results when the two-tiered distribution method was acknowledged to be a complete failure and OEMs, distributors and resellers began returning and/or cancelling millions of dollars worth of software license agreements. For example, in January 1997, Informix stopped selling through Ingram Micro, which in turn caused Ingram Micro to return unsold inventory in the first quarter of 1997. This contributed greatly to the huge decline in revenues during the first quarter of 1997. Note the following quarterly revenue chart: COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 47 -
Informix Corporation Quarterly Revenues
78. When Informix filed on March 31, 1997, its report on Form
10-K for 1996 it revealed for the first time that $177 million of
software still remained unsold in the OEM/reseller/ distribution
channel, out of its reported revenues of $939 million for 1996.
79. As a result of Informix's improper revenue recognition,
it was able to overstate its net income by at least $.05 per share
in each of the first two quarters of 1996, by $.06 per share in the
third quarter of 1996 and by $.07 per share in the fourth quarter
of 1996.
80. Due to these improprieties, the Company presented its
results for each quarter of 1996 in a manner which violated GAAP.
Further, the undisclosed adverse information concealed by
defendants during the Class Period is the type of information
which, because of SEC regulations, regulations of the national
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 48 -
stock exchanges and customary business practice, is expected by
investors and securities analysts to be disclosed and is known by
corporate officials and their legal and financial advisors to be
the type of information which is expected to be and must be
disclosed.
MANAGEMENT'S RESPONSIBILITY FOR INTERNAL
ACCOUNTING CONTROL AND FOR FINANCIAL REPORTING
81. Informix had the responsibility to maintain sufficient
accounting controls to accurately report its financial results. It
is well settled that the representations made by a company in its
financial statements and in other financial disclosures to the
public are the representations of that company's management.
Indeed, even, as in Informix's case, when a company issues audited
financial statements together with the report of that company's
independent auditors, that report always expressly provides that
"the financial statements are the responsibility of the company's
management."
82. To accomplish the objectives of accurately recording,
processing, summarizing and reporting financial data, a company
must establish an internal control structure. In that structure,
according to Appendix D to Statement on Auditing Standards No. 55,
Consideration of the Internal Control Structure in a Financial
Statement Audit ("SAS 55"), management should consider, among other
things, such objectives as (i) making certain that "[t]ransactions
are recorded as necessary . . . to permit preparation of financial
statements in conformity with generally accepted accounting
principles . . . and to maintain accountability for assets," and
(ii) making certain that "[t]he recorded accountability for assets
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 49 -
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences."
83. As described in SAS 55, the applicability and importance
of specific control environment factors, accounting system methods
and records and control procedures that an entity should establish
should be considered within the context of such criteria as an
entity's size, its organization and ownership characteristics, the
nature of its business, the diversity and complexity of its
operations, the entity's method of processing data, and its
applicable legal and regulatory requirements. In short, the larger
the entity, the more the nature of the entity's business is
complex, diverse and sophisticated, and the public ownership of the
entity customarily requires a sophisticated internal control
structure to ensure that transactions are accurately recorded and
that, prior to the public disclosure of any financial information,
such transactions are compared to the existing assets to eliminate
any discrepancies between the recorded and actual amounts.
84. According to SAS 55:
Establishing and maintaining an internal control
structure is an important management responsibility. To
provide reasonable assurance that an entity's objectives
will be achieved, the internal control structure should
be under ongoing supervision by management to determine
that it is operating as intended and that it is modified
as appropriate for changes in conditions.
85. When management permits a condition to exist in the
company's internal control structure such that
the design or operation of one or more of the internal
control structure elements does not reduce to a
relatively low level the risk that errors or
irregularities in amounts that would be material in
relation to the financial statements . . . may occur and
not be detected within a timely period by employees in
the normal course of performing their assigned functions,
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 50 -
that condition is defined by Statement on Auditing Standards No.
60, Communications of Internal Control Structure Related Matters
Noted in an Audit ("SAS 60"), as a "material weakness" in the
company's internal control structure.
STATUTORY SAFE HARBOR
86. The statutory safe harbor provided for forward-looking
statements under certain circumstances does not apply to any of the
allegedly false forward-looking statements pleaded in Complaint.
None of the forward-looking statements pleaded at ¶¶9, 11, 38-43,
45-49, 51-55 and 57-65 were sufficiently identified as a "forward-
looking statement" when made. Nor did meaningful cautionary
statements identifying important factors that could cause actual
results to differ materially from that in the forward-looking
statements accompany those forward-looking statements. To the
extent that the statutory safe harbor does apply to any forward-
looking statements pleaded in ¶¶9, 11, 38-43, 45-49, 51-55 and 57-
65, the defendants are liable for those false forward-looking
statements because at the time each of those forward-looking
statements was made the speaker actually knew the forward-looking
statement was false and the forward-looking statement was
authorized and/or approved by an executive officer of Informix who
actually knew that those statements were false when made.
INFORMIX'S BOILERPLATE WARNINGS
AND DISCLAIMERS DURING THE CLASS PERIOD
87. On or about March 31, 1996, Informix filed its Report on
Form 10-K for the year ended December 31, 1995. The report stated
in part:
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 51 -
Business Risks
Fluctuations in Quarterly Results. The Company's
operating results can vary substantially from period to
period. The timing and amount of the Company's license
revenues are subject to a number of factors that make
estimation of operation results prior to the end of a
quarter extremely uncertain. The Company has operated
historically with little or no backlog and, as a result,
license revenues in any quarter are dependent on con-
tracts entered into or orders booked and shipped in that
quarter. The Company's operating margins have generally
followed a historic pattern, with second half revenues
and operating margins being higher than those of the
preceding first half. The Company believes that this
pattern has been primarily related to customers' capital
spending cycles at the end of a calendar year as well as
to the Company's selling efforts, influenced by annual
sales incentive plans, at the end of the calendar year,
which is the end of the Company's fiscal year. Addition-
ally, as is common in the industry, a disproportionate
amount of the Company's license revenues is derived from
transactions that close in the last few weeks of a
quarter. The timing of closing large license agreements
also increases the risks of quarter-to-quarter fluctua-
tions and the uncertainty of estimating quarterly opera-
ting results. The Company's operating expenses are based
on projected annual and quarterly revenue levels, which
have been increasing at rates approaching the rate of
total revenue growth and are incurred approximately
ratably throughout each quarter. As a result, if pro-
jected revenues are not realized in the expected period,
the Company's operating results for that period would be
adversely affected as the operating expenses are rela-
tively fixed in the short term. Failure to achieve
revenue, earnings and other operating and financial
results as forecasted or anticipated by brokerage firm
analysts or industry analysts could result in an
immediate and adverse effect on the market price of the
Company's common stock. Further, the Company may not
learn of, or be able to confirm, revenue or earnings
shortfall until the end of each quarter, which could
result in an even more immediate and adverse effect on
the trading price of the Company's common stock.
* * *
Integration of Acquired Companies. The Company has
completed several acquisitions including the database
division of ASCII Corporation in Japan; distributors in
Germany, Korea and Malaysia; STG and more recently,
Illustra in the United States. The Company may acquire
other distributors, companies, products or technologies
in the future. There can be no assurance that these
acquisitions can be effectively integrated, that such
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 52 -
acquisitions will not result in costs and liabilities
that could adversely effect the Company's results of
operations and financial condition, or that the Company
will obtain the anticipated or desired benefits of such
acquisitions.
88. Similar boilerplate warnings of business risks were
included in Informix's reports on Form 10-Q for the quarters ended
March 31, June 30, and September 30, 1996. However, the warnings
in the reports on Forms 10-K and 10-Q were nothing but generic
statements of the kind of risks that affect any rapidly growing
manufacturer of high-tech products and contained no specific
factual disclosure of any of the adverse factors which were then
actually negatively impacting Informix's business as set forth in
¶16. The language in the business risk section of Informix's 1996
Form 10-Q's did not change in any meaningful or material way from
the same section in Informix's 1995 10-K filed with the SEC in
March 1995 (other than adding a section on management changes),
even though the state of Informix's business, and the risks
affecting it, materially changed for the worse over that time
period, including the barter transactions, the problems in the
distribution channel and the increasing complaints from reseller
customers. In fact, Informix omitted one of the most important
factors affecting its business, that of the large amount of unsold
product accumulating in the channel, which had the potential of
dramatically reducing future results and had resulted in Informix's
financial results being misstated.
DEFENDANTS' INSIDER SELLING
89. While Informix's insiders were issuing false and
misleading statements about Informix's business and finances, the
defendants sold 955,388 shares of the Informix stock they owned for
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 53 -
proceeds of about $22.1 million to profit from the artificial
inflation in Informix's stock price their false statements had
created. Notwithstanding their access to non-public information as
a result of their positions with the Company, the individual
defendants sold the following amounts of Informix shares at
artificially inflated prices throughout the Class Period while in
possession of material, non-public information:
PRICE PROCEEDS % OF
DATE SHARES PER FROM HOLDINGS
NAME SOLD SOLD SHARE SALE SOLD
---- ---- ------ ----- -------- --------
Alvarez 07/23/96 1,000 21.44 $21,440.00
07/23/96 4,000 21.44 $85,760.00
07/23/96 8,000 21.44 $171,520.00
07/23/96 30,000 21.44 $643,200.00
11/04/96 7,600 22.00 $167,200.00
------ -----------
50,600 $1,089,120.00 100%
====== =============
Blasing 08/08/96 1,500 25.88 $38,820.00
08/08/96 1,750 25.88 $45,290.00
08/16/96 319 25.25 $8,055.00
------ -----------
3,569 $92,165.00 100%
====== ==========
Coulter 08/08/96 5,000 25.75 $128,750.00
08/08/96 10,000 26.00 $260,000.00
08/08/96 15,000 25.88 $388,200.00
08/09/96 5,000 26.25 $131,250.00
08/09/96 5,000 26.50 $132,500.00
08/13/96 5,000 24.00 $120,000.00
------ -----------
45,000 $1,160,700.00 85%
====== =============
Dorf 08/09/96 20,000 26.00 $520,000.00 96%
Graham 04/24/96 10,000 26.19 $261,900.00
05/06/96 10,000 25.25 $252,500.00
07/23/96 10,000 21.75 $217,500.00
08/02/96 10,000 23.50 $235,000.00
08/05/96 10,000 24.13 $241,300.00
08/08/96 10,000 25.88 $258,800.00
08/16/96 10,000 25.25 $252,500.00
10/21/96 1,000 24.25 $24,250.00
10/21/96 9,000 24.13 $217,170.00
10/28/96 10,000 22.25 $222,500.00
11/01/96 10,000 22.13 $221,300.00
11/18/96 20,000 20.25 $405,000.00
02/06/97 10,000 19.75 $197,500.00
02/07/97 10,000 20.56 $205,600.00
------ -----------
140,000 $3,212,820.00 96%
======= =============
Hill 04/19/96 4,000 23.56 $94,240.00
04/23/96 2,000 26.31 $52,620.00
05/17/96 9,989 22.75 $227,250.00
07/19/96 5,000 23.31 $116,550.00
08/02/96 2,500 23.38 $58,450.00
08/06/96 2,500 24.00 $60,000.00
08/07/96 5,000 25.00 $125,000.00
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 54 -
08/16/96 2,500 25.38 $63,450.00
10/28/96 5,000 21.88 $109,400.00
11/05/96 5,000 22.19 $110,950.00
11/18/96 2,500 20.13 $50,325.00
11/18/96 7,500 20.13 $150,975.00
11/19/96 5,000 20.88 $104,400.00
02/10/97 10,000 20.75 $207,500.00
------ -----------
68,489 $1,531,110.00 98%
====== =============
Saranga 07/26/96 5,000 21.50 $107,500.00
07/26/96 10,000 21.00 $210,000.00
07/29/96 10,000 22.00 $220,000.00
08/01/96 10,000 22.75 $227,500.00
08/01/96 10,000 22.50 $225,000.00
08/06/96 20,000 25.00 $500,000.00
------ -----------
65,000 $1,490,000.00 97%
====== =============
Sommer 07/31/96 5,000 22.00 $110,000.00
08/01/96 5,000 22.75 $113,750.00
08/01/96 5,000 22.50 $112,500.00
08/01/96 10,000 23.00 $230,000.00
08/06/96 5,000 25.00 $125,000.00
08/15/96 5,000 25.88 $129,400.00
------ -----------
35,000 $820,650.00 97%
====== ===========
Stanley 05/03/96 5,000 26.00 $130,000.00
05/16/96 2,000 23.50 $47,000.00
05/16/96 5,000 23.50 $117,500.00
05/17/96 5,000 23.00 $115,000.00
08/02/96 15,000 23.63 $354,450.00
10/29/96 5,000 20.63 $103,150.00
10/31/96 5,000 22.00 $110,000.00
11/19/96 5,000 21.00 $105,000.00
------ -----------
47,000 $1,082,100.00 78%
====== =============
Stonebraker 04/23/96 5,000 25.67 $128,350.00
04/23/96 12,500 26.25 $328,125.00
04/23/96 15,000 25.67 $385,050.00
04/29/96 12,500 25.88 $323,500.00
04/30/96 2,000 26.15 $52,300.00
04/30/96 6,000 26.15 $156,900.00
05/01/96 12,500 26.00 $325,000.00
05/06/96 1,000 24.90 $24,900.00
05/06/96 3,000 24.90 $74,700.00
05/06/96 12,500 25.00 $312,500.00
05/07/96 1,000 24.78 $24,780.00
05/07/96 3,000 24.78 $74,340.00
05/15/96 1,000 23.15 $23,150.00
05/15/96 3,000 23.15 $69,450.00
05/16/96 1,000 23.90 $23,900.00
05/16/96 3,000 23.90 $71,700.00
05/17/96 1,500 23.15 $34,725.00
05/17/96 4,500 23.15 $104,175.00
07/31/96 3,000 22.00 $66,000.00
07/31/96 3,000 22.00 $66,000.00
08/01/96 7,000 23.00 $161,000.00
08/01/96 7,500 22.88 $171,600.00
08/02/96 5,000 23.88 $119,400.00
08/02/96 7,500 23.63 $177,225.00
08/05/96 3,000 24.50 $73,500.00
08/05/96 5,000 24.38 $121,900.00
08/06/96 1,000 24.50 $24,500.00
08/06/96 2,000 24.50 $49,000.00
08/06/96 3,000 24.25 $72,750.00
08/06/96 4,000 24.75 $99,000.00
08/06/96 5,000 24.00 $120,000.00
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 55 -
08/07/96 2,000 25.25 $50,500.00
08/07/96 2,000 25.63 $51,260.00
08/07/96 7,500 25.13 $188,475.00
08/08/96 4,000 26.00 $104,000.00
08/09/96 2,500 26.25 $65,625.00
08/09/96 5,000 26.00 $130,000.00
08/13/96 6,250 26.13 $163,313.00
08/14/96 6,250 25.88 $161,750.00
10/21/96 15,000 24.88 $373,200.00
10/23/96 7,500 23.00 $172,500.00
10/24/96 3,000 22.95 $68,850.00
10/25/96 7,500 22.88 $171,600.00
10/31/96 7,500 22.13 $165,975.00
10/31/96 7,500 21.63 $162,225.00
11/05/96 3,000 21.95 $65,850.00
11/06/96 3,000 22.50 $67,500.00
11/07/96 3,000 22.00 $66,000.00
11/14/96 3,000 22.95 $68,850.00
11/14/96 7,500 20.75 $155,625.00
11/15/96 3,000 21.70 $65,100.00
11/15/96 3,000 21.20 $63,600.00
11/15/96 3,500 21.45 $75,075.00
11/18/96 1,250 19.95 $24,937.50
11/18/96 1,500 19.95 $29,925.00
11/18/96 7,500 20.75 $155,625.00
02/10/97 3,750 20.63 $77,363.00
02/10/97 10,000 20.38 $203,800.00
02/11/97 3,750 20.25 $75,938.00
02/11/97 5,000 20.06 $100,300.00
02/12/97 3,000 19.50 $58,500.00
02/13/97 3,000 19.50 $58,500.00
02/14/97 3,000 18.75 $56,250.00
02/14/97 6,000 19.00 $114,000.00
02/20/97 10,000 18.25 $182,500.00
02/27/97 20,000 17.75 $355,000.00
02/28/97 5,000 17.75 $88,750.00
02/28/97 15,000 17.63 $264,450.00
------ -----------
366,250 $8,362,131,00 44%
======= =============
White 04/30/96 10,000 25.81 $258,100.00
05/07/96 10,000 25.00 $250,000.00
08/02/96 5,000 23.38 $116,900.00
08/02/96 15,000 23.50 $352,500.00
08/05/96 10,000 24.25 $242,500.00
08/09/96 10,000 26.25 $262,500.00
08/14/96 10,000 24.50 $245,000.00
11/06/96 10,000 22.50 $225,000.00
11/19/96 10,000 20.88 $208,800.00
------ -----------
90,000 $2,161,300.00 88%
====== =============
Winder 08/08/96 5,000 25.75 $128,750.00
08/09/96 5,000 26.50 $132,500.00
08/09/96 10,000 26.13 $261,300.00
08/12/96 10,000 24.88 $248,800.00
------ -----------
30,000 $771,350.00 70%
====== ===========
GRAND TOTALS 960,908 $22,293,446.00 64%
======= ==============
90. During the Class Period other top Informix executives
sold many thousands of shares of their Informix stock based on
inside information about the problems with Informix's business.
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 56 -
91. Sophisticated members of the investment community closely
monitor the stock transaction of corporate insiders in an effort to
ascertain insiders' sentiment regarding their company's prospects.
The Wall Street Journal and Barron's carry a weekly column and
other data on significant insider trading and several services
exist which publish information about stock sales by corporate
insiders.
CLAIM FOR RELIEF I
Section 10(b) Of The Exchange Act
And Rule 10b-5 Against All Defendants
92. Plaintiffs incorporate by reference ¶¶1-91.
93. Each of the defendants: (a) knew or had access to the
material, adverse non-public information about Informix's financial
results and then existing business conditions, which was not
disclosed; and (b) participated in drafting, reviewing and/or
approving the misleading statements, releases, reports and other
public representations of and about Informix.
94. During the Class Period, with knowledge of or reckless
disregard for the truth, defendants disseminated or approved the
false statements specified above, which were misleading in that
they contained misrepresentations and failed to disclose material
facts necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading.
95. Defendants have violated §10(b) of the Exchange Act and
Rule 10b-5 promulgated thereunder in that they: (a) employed
devices, schemes and artifices to defraud; (b) made untrue
statements of material facts or omitted to state material facts
necessary in order to make statements made, in light of the
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 57 -
circumstances under which they were made, not misleading; or (c)
engaged in acts, practices and a course of business that operated
as a fraud or deceit upon the purchasers of Informix stock during
the Class Period.
96. Plaintiffs and the Class have suffered damage in that, in
reliance on the integrity of the market, they paid artificially
inflated prices for Informix stock. Plaintiffs and the Class would
not have purchased Informix stock at the prices they paid, or at
all, if they had been aware that the market prices had been
artificially and falsely inflated by defendants' false and
misleading statements.
CLAIM FOR RELIEF II
Section 20(a) Of The Exchange Act
Against Defendants Informix, White And Graham
97. Plaintiffs incorporate by reference ¶¶1-96.
98. White and Graham acted as controlling persons of Informix
within the meaning of §20 of the Exchange Act. By reason of their
respective positions as Chairman of the Board and CEO, and Chief
Financial Officer of Informix, White and Graham had the power and
authority to cause Informix to engage in the wrongful conduct
complained of herein. Informix controlled each of the Individual
Defendants and all of its employees.
99. By reason of such wrongful conduct, Informix, White and
Graham are liable pursuant to §20(a) of the Exchange Act. As a
direct and proximate result of these defendants' wrongful conduct,
plaintiffs and the other members of the Class suffered damages in
connection with their purchases of Informix stock during the Class
Period.
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 58 -
CLAIM FOR RELIEF III
For Violation Of Section 20A Of The Exchange Act
Against The Individual Defendants
100. Plaintiffs incorporate by reference ¶¶1-96.
101. During the Class Period, each Individual Defendant
occupied a position that made him or her privy to non-public
information concerning Informix. Because of this access, each of
these defendants knew that the adverse facts specified herein were
being concealed and false and misleading statements were being
made. Notwithstanding their duty to refrain from selling Informix
stock while in the possession of material, non-public information
concerning Informix, the defendants sold some 960,908 shares of the
Company's stock, profiting from their fraudulent scheme. Plaintiff
Finkelstein purchased 2,000 shares contemporaneously with
defendants White's and Stonebraker's stock sales on November 6,
1996, plaintiff Finkelstein purchased 2,000 shares
contemporaneously with defendant Graham's stock sales on February
7, 1997 and plaintiff Finkelstein purchased 2,000 shares
contemporaneously with defendant Stonebraker's stock sales on
February 14, 1997.
102. Plaintiffs and all the other members of the Class who
purchased shares of Informix stock contemporaneously with the sales
of Informix stock by the Individual Defendants: (1) have suffered
substantial damages in that they paid artificially inflated prices
for Informix common stock as a result of the violations of §10(b)
and Rule 10b-5 herein described; and (2) would not have purchased
Informix stock at the prices they paid, or at all, if they had been
aware that the market prices had been artificially inflated by
defendants' false and misleading statements.
CLASS ALLEGATIONS
103. Plaintiffs bring this action as a class action pursuant
to Federal Rules of Civil Procedure 23(a) and 23(b)(3) on behalf of
all persons who purchased the stock of Informix during the Class
Period (the "Class"), except defendants, members of their immediate
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 59 -
families and any entity in which a defendant has a controlling
interest.
104. The members of the Class are so numerous that joinder of
all members is impracticable. Informix has more than 151 million
shares of stock outstanding. During the Class Period, millions of
shares of Informix stock were purchased by thousands of persons who
were damaged thereby.
105. Plaintiffs' claims are typical of the claims of the Class
because plaintiffs and the Class members sustained damages from
defendants' wrongful conduct.
106. Plaintiffs will adequately protect the interests of the
Class. Plaintiffs have retained counsel who are experienced and
competent in class action securities litigation. Plaintiffs have
no interests which are in conflict with those of the Class.
107. A class action is superior to other available methods for
the fair and efficient adjudication of this controversy.
108. Common questions of law and fact predominate over
questions which affect only individual members. Among the
questions of law and fact common to the Class are:
(a) Whether the federal securities laws were violated by
defendants' acts;
(b) Whether Informix's statements during the Class
Period misrepresented and/or omitted material facts;
(c) Whether defendants pursued the fraudulent scheme and
course of business complained of;
(d) Whether defendants acted intentionally or reck-
lessly;
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 60 -
(e) Whether the market price of Informix's stock was
artificially inflated due to the activities complained of; and
(f) The extent and measure of damage sustained by the
Class.
BASIS OF ALLEGATIONS
109. Plaintiffs have alleged the foregoing based upon the
investigation of their counsel, which included a review of
Informix's SEC filings, securities analysts reports and advisories
about the Company, press releases issued by the Company, media
reports about the Company and discussions with consultants, and
believe that substantial evidentiary support will exist for the
allegations set forth in this complaint after a reasonable
opportunity for discovery.
PRAYER FOR RELIEF
WHEREFORE, plaintiffs pray for judgment as follows:
1. Declaring this action to be a proper class action
pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil
Procedure on behalf of the Class defined herein;
2. Awarding plaintiffs and the members of the Class
compensatory damages;
3. Awarding plaintiffs and the members of the Class
pre-judgment and post-judgment interest, as well as reasonable
attorneys' fees, expert witness fees and other costs;
4. Awarding extraordinary, equitable and/or injunctive
relief as permitted by law, equity and the federal statutory
provisions sued hereunder, pursuant to Rules 64, 65 and any
appropriate state law remedies; and
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 61 -
5. Awarding such other relief as this Court may deem just
and proper.
JURY DEMAND
Plaintiffs demand a trial by jury.
DATED: May 14, 1997
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH
MARK SOLOMON
TRAVIS E. DOWNS, III
JAMES I. JACONETTE
/s/
______________________________
WILLIAM S. LERACH
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
CAMHY KARLINSKY & STEIN LLP
RONALD D. LEFTON
1740 Broadway, 16th Floor
New York, NY 10019-4315
Telephone: 212/977-6600
GARWIN, BRONZAFT, GERSTEIN
& FISHER, L.L.P.
SCOTT W. FISHER
1501 Broadway, Suite 1416
New York, NY 10036
Telephone: 212/398-0055
ELWOOD S. SIMON &
ASSOCIATES, P.C.
ELWOOD S. SIMON
355 S. Woodward Avenue
Suite 250
Birmingham, MI 48009
Telephone: 810/646-9730
GOLDSTEIN LITE & DEPALMA
ALLYN Z. LITE
ROBERT J. BERG
Two Gateway Center
12th Floor
Newark, NJ 07102-5003
Telephone: 201/623-3000
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 62 -
APPEL, CHITWOOD & HARLEY
JOHN HINTON, IV
1400 Resurgens Plaza
945 East Paces Ferry Road
Atlanta, GA 30326
Telephone: 404/266-1650
MUCH SHELIST FREED DENENBERG
AMENT BELL & RUBENSTEIN, P.C.
JOSEPH D. AMENT
200 North LaSalle Street
Suite 2100
Chicago, IL 60601-1095
Telephone: 312/346-3100
Attorneys for Plaintiffs
COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934 - 63 -
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
John Wehr ("Plaintiff") declares, as to the claims asserted
under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized its
filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative party
on behalf of the class, including providing testimony at deposition
and trial, if necessary.
4. Plaintiff's transaction(s) in the security that is the
subject of this action during the Class Period is/are as follows:
Price
Security Transaction Date Per Share
Common Stock Purchased 400 shares 01/23/97 $24.46
Common Stock Purchased 550 shares 02/05/97 $20.67
5. During the three years prior to the date of this
Certificate, Plaintiff has sought to serve or served as a repre-
sentative party for a class in the following actions filed under
the federal securities laws:
6. Plaintiff has sought to serve or served as a represen-
tative party for a class in the following actions filed subsequent
to December 22, 1995:
7. The Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the
Plaintiff's pro rata share of any recovery, except such reasonable
costs and expenses (including lost wages) directly relating to the
representation of the class as ordered or approved by the court.
I declare under penalty of perjury that the foregoing is true
and correct. Executed this 9th day of May, 1997, at
Wells Point, Texas.
/s/
_________________________________
JOHN WEHR
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
Theresa A. Greenfield and Scott H. Greenfield ("Plaintiffs")
declare, as to the claims asserted under the federal securities
laws, that:
1. Plaintiffs have reviewed the complaint and authorized its
filing.
2. Plaintiffs did not purchase the security that is the
subject of this action at the direction of plaintiffs' counsel or
in order to participate in this private action.
3. Plaintiffs are willing to serve as representative parties
on behalf of the class, including providing testimony at deposition
and trial, if necessary.
4. Plaintiffs' transaction(s) in the security that is the
subject of this action during the Class Period is/are as follows:
Price
Security Transaction Date Per Share
Common Stock Purchased 2500 shares 12/17/96 $21-7/8
5. During the three years prior to the date of this
Certificate, Plaintiffs have sought to serve or served as repre-
sentative parties for a class in the following actions filed under
the federal securities laws:
None
6. Plaintiffs have sought to serve or served as a represen-
tative parties for a class in the following actions filed
subsequent to December 22, 1995:
None
7. Plaintiffs will not accept any payment for serving as
representative parties on behalf of the class beyond the
Plaintiffs' pro rata share of any recovery, except such reasonable
costs and expenses (including lost wages) directly relating to the
representation of the class as ordered or approved by the court.
We declare under penalty of perjury that the foregoing is true
and correct. Executed this 9th day of May, 1997, at
New York, New York.
/s/
_________________________________
THERESA A. GREENFIELD
/s/
_________________________________
SCOTT H. GREENFIELD
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
JOHN WEHR, THERESA A. GREENFIELD and ) No. C 97-1801
SCOTT H. GREENFIELD, JOHN BLEYAERT, )
WILLIAM H. KATZ, ELENA MALUNIS and ) CLASS ACTION
GARY MALUNIS, and ABBEY CAPITAL )
PARTNERS, L.P., On Behalf of )
Themselves and All Others Similarly )
Situated, ) COMPLAINT FOR
) VIOLATION OF THE
Plaintiffs, ) SECURITIES ACT OF 1934
)
vs. )
)
INFORMIX CORPORATION, PHILLIP E. )
WHITE, HOWARD H. GRAHAM, MICHAEL R. )
STONEBRAKER, STEPHEN E. HILL, DAVID H. )
STANLEY, RONALD M. ALVAREZ, MIKE )
SARANGA, STEVEN R. SOMMER, DAVID )
KENNETH COULTER, KAREN BLASING, EDWIN )
C. WINDER and IRA H. DORF, ) Plaintiffs Demand A
) Trial By Jury
Defendants. )
_______________________________________)
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
JOHN BLEYAERT ("Plaintiff") declares, as to the claims asserted
under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized its
filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of plaintiff's counsel or
in order to participate in this private action arising under the
federal securities laws.
3. Plaintiff is willing to serve as a representative party
on behalf of the class, including providing testimony at deposition
and trial, if necessary.
4. During the proposed Class Period, plaintiff executed the
following transactions relating to the common stock of Informix
Software, Inc. ("Informix"):
Date Action Amount Aggregate
1/31/97 BOUGHT 150 SHARES $3,379.00
5. In the three years, plaintiff has not filed any other
action under the federal securities laws in which he has sought to
serve as a representative party on behalf of a class.
6. Plaintiff will not accept any payment for serving as
a representative party on behalf of a class, beyond plaintiff's
pro rata share of any recovery, except such reasonable costs and
expenses (including lost wages) directly relating to the
representation of the Class as ordered or approved by the Court.
I declare under penalty of perjury that the foregoing is true
and correct. Executed this 28 day of April, 1997.
/s/
_________________________________
JOHN BLEYAERT
2
CERTIFICATION OF NAMED PLAINTIFFS PURSUANT
TO FEDERAL SECURITIES LAWS RE INFORMIX CORP.
WILLIAM H. KATZ, ("Plaintiff") declares, as to the claims
asserted for breach of fiduciary duty, that:
1. Plaintiff has reviewed the complaint and authorized its
filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative party
on behalf of the class, including providing testimony at deposition
and trial, if necessary.
4. Plaintiff's transaction in the security that is the
subject of this action during the Class Period is as follows:
Security Transaction Date Net Price
-------- ----------- ---- ---------
500 Shares Purchase 11-29-96 $23-7/8 per share
500 Shares Sale 4-07-97 $ 8-7/8 per share
5. Plaintiff has not sought to serve as a class represen-
tative in any case under this Title of the federal securities laws
in the law three years.
6. Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the
Plaintiff's pro rata share of any recovery, except such reasonable
costs and expenses (including lost wages) directly relating to the
representation of the class as ordered or approved by the court.
I declare under penalty of perjury that the foregoing is true
and correct. Executed this 6th day of May, 1997, in Chicago.
/s/
_________________________________
William H. Katz
Subscribed to before me this
6th day of May, 1997
/s/
______________________
Notary Public
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
Elena Malunis and Gary Malunis ("Plaintiff") declares, as
to her claims asserted under the federal securities laws against
Informix Corporation, Phillip E. White, Howard H. Graham, Michael R.
Stonebraker, Stephen E. Hill, David H. Stanley, Ronald M. Alvarez,
Mike Saranga, Steven R. Sommer, David Kenneth Coulter, Karen
Blasing, Edwin C. Winder and Ira H. Dorf, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of Plaintiff's action at the direction of Plaintiff's
counsel or in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiff's transactions in the security that is the
subject of Plaintiff's action during the Class Period are as
follows:
Trade
Security Transaction Date Price
-------- ----------- ----- -----
Informix BOUGHT 300 SHARES 9/3/96 30.17820
5. Plaintiff has not sought to serve as a class
representative in any case in the last 3 years.
6. Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the Plaintiff's
pro rata share of any recovery, except such reasonable costs and
expenses (including lost wages) directly relating to the
representation of the class as ordered or approved by the court.
I declare under penalty of perjury that the foregoing is
true and correct. Executed this 6th day of May, 1997, in
Sleepy Hollow, New York 10591.
/s/
_________________________________
Elena Malunis
/s/
_________________________________
Gary P. Malunis
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
Abbey Capital Partners, L.P. ("Plaintiff") declares, as to the
claims asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized its
filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative party
on behalf of the class, including providing testimony at deposition
and trial, if necessary.
4. Plaintiff's transaction(s) in the security that is the
subject of this action during the Class Period is/are as follows:
Price
Security Transaction Date Per Share
-------- ----------- ---- ---------
Common Stock Purchased 3,000 shares 03/17/97 $17 3/8
5. During the three years prior to the date of this
Certificate, Plaintiff has sought to serve or served as a repre-
sentative party for a class in the following actions filed under
the federal securities laws:
None
6. Plaintiff has sought to serve or served as a represen-
tative party for a class in the following actions filed subsequent
to December 22, 1995:
None
7. The Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the
Plaintiff's pro rata share of any recovery, except such reasonable
costs and expenses (including lost wages) directly relating to the
representation of the class as ordered or approved by the court.
I declare under penalty of perjury that the foregoing is true
and correct. Executed this 12 day of May, 1997, at
New York, New York.
/s/
_________________________________
ANTHONY VIGNOLA
On Behalf of
Abbey Capital Partners, L.P.
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