EXPO 2000 filed an action against Informix Software GmbH (the Company’s German subsidiary) in the Hanover (Germany) district court in September 1998 seeking recovery of approximately $6.0 million, plus interest, for breach of a sponsorship contract signed in 1997. Informix filed a counterclaim for breach of contract and seeks recovery of approximately $3.1 million. During settlement negotiations prior to the filing of the action, EXPO 2000 stated that it would accept approximately $2.5 million to settle. In March 1999, a panel of three judges appointed by the court recommended a settlement pursuant to which EXPO 2000 and Informix would release the other from all claims. EXPO 2000 declined to accept the recommendation. In August 1999, the court entered a judgment against Informix in the amount of approximately $6.0 million, although approximately $2.1 million of judgment is conditioned upon the return to Informix by EXPO 2000 of certain software. Informix has filed an appeal. The Company has reserved $2.5 million for the expected outcome of the appeal.

On February 3, 2000, International Business Machines Corporation (“IBM”) filed an action against us in the United States District Court for the District of Delaware alleging infringement of six United States patents owned by IBM. The Informix products that IBM alleges infringe its patents are Informix Online Dynamic Server versions 5, 6 and 7, Informix SE version 6, Informix NewEra version 1, Informix NET, Informix STAR, Illustra Visual Information Retrieval, and Illustra Visual Intelligence Viewer. In its complaint, IBM seeks a permanent injunction against further alleged infringement, unspecified compensatory damages, unspecified treble damages, and interest, costs and attorneys’ fees. We strongly believe that the allegations in the complaint are without merit and intend to defend the action vigorously and to assert such counterclaims against IBM as may be appropriate.

From time to time, in the ordinary course of business, the Company is involved in various legal proceedings and claims. The Company does not believe that any of these proceedings and claims will have a material adverse effect on the Company’s business or financial condition.

In accordance with Statement of Financial Accounting Standards No. 121 (SFAS 121), “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,” the Company records impairment losses on long-lived assets used in its operations when events and circumstances indicate that the assets might be impaired and the estimated future undiscounted cash flows to be generated by those assets are less than the assets’ carrying amounts. During the first quarter of 1997, the Company’s Japanese subsidiary experienced a significant shortfall in business activity compared to historical levels. Accordingly, the Company evaluated the ongoing value of the subsidiary’s long-lived assets (primarily computer and other equipment) and goodwill. Based on this evaluation, the Company determined that the subsidiary’s assets had been impaired and wrote them down by $30.5 million to their estimated fair values. Fair value was determined using estimated future discounted cash flows and/or estimated resale values as appropriate.

In February 1997, the Company acquired CenterView Software (see Note 11) and, as a direct result, revised its database application tool business strategy to incorporate CenterView’s developed technology and “Data Director” product. This revision to the tools business strategy significantly altered the Company’s current and future marketing plans for its own NewEra family of application tools, including projected future NewEra product revenues. As a result, the Company reevaluated the net realizable value of its NewEra products and found it to be significantly below the net balance of related capitalized software development costs. Accordingly, the Company recorded a charge during the first quarter 1997 of $14.7 million to reduce the carrying value of these capitalized product development costs to the revised estimated net realizable value of the NewEra products.