UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(RULE 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

Filed by the Registrant þ

Filed by a Party Other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material under §240.14a-12

 

NETEZZA CORPORATION

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

o  No fee required

 

 

 

Common stock, par value $.001 per share, of Netezza Corporation

 

 

63,432,868 shares of Netezza common stock, 9,144,677 shares of Netezza common stock

underlying outstanding stock options and 791,375 shares of Netezza common stock subject to

settlement of restricted stock units, each outstanding as of September 27, 2010

 

Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it

was determined)

 

The filing fee was determined based on the sum of (a) 63,432,868 shares of Netezza common

stock multiplied by $27.00 per share; (b) 9,144,677 shares of Netezza common stock

underlying outstanding stock options with exercise prices less than $27.00 per share

multiplied by $20.7972 (which is the difference between $27.00 per share and the weighted

average exercise price per share); and (c) 791,375 shares of Netezza common stock subject to

settlement of restricted stock units multiplied by $27.00 per share. The filing fee was

determined by multiplying $0.00007130 by the sum of the preceding sentence.

 

$1,924,238,238

 

$137,198

 

identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form of Schedule and the date of its filing

 

Amount Previously Paid:

 

Form, Schedule or Registration Statement No.:

 

Filing Party:

 

Date Filed:

 

NETEZZA CORPORATION
26 Forest Street
Marlborough, Massachusetts 01752

 

October 12, 2010

 

Dear Stockholder:

 

You are cordially invited to attend a special meeting of stockholders of Netezza Corporation (“Netezza”) to be held on November 10, 2010, at 10:00 a.m., local time, at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109.

 

At the special meeting, you will be asked to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of September 19, 2010, by and among International Business Machines Corporation (“IBM”), Onyx Acquisition Corp., a wholly owned subsidiary of IBM, and Netezza, as such agreement may be amended from time to time. Pursuant to the merger agreement, Onyx Acquisition Corp. will merge with and into Netezza and as a result, under Delaware law, Netezza will become a wholly owned subsidiary of IBM. We are also asking that you grant the authority to vote your shares to adjourn the special meeting to a later date, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes in favor of adoption of the merger agreement at the time of the special meeting.

 

If the merger is completed, Netezza stockholders will be entitled to receive $27.00 in cash, without interest and less any applicable withholding taxes, for each share of Netezza common stock owned by them as of the date of the merger.

 

Our board of directors unanimously determined that the merger agreement and the terms and conditions of the merger and the merger agreement are fair to and advisable and in the best interests of Netezza and its stockholders. Our board of directors has unanimously approved the merger agreement, the merger and the other transactions contemplated thereby. Our board of directors unanimously recommends that you vote “FOR” the adoption of the merger agreement at the special meeting.

 

Our board of directors considered a number of factors in evaluating the transaction and consulted with our legal and financial advisors. The enclosed proxy statement provides detailed information about the merger agreement and the merger. We encourage you to read this proxy statement carefully in its entirety.

 

Your vote is very important, regardless of the number of shares you own.  The proposal to adopt the merger agreement must be approved by the holders of a majority of the outstanding shares of our common stock entitled to vote at the special meeting. Therefore, if you do not return your proxy card in the mail, submit a proxy via the Internet or telephone or attend the special meeting and vote in person, then your decision not to respond will have the same effect as if you voted “AGAINST” adoption of the merger agreement. Only stockholders who owned shares of Netezza common stock at the close of business on October 6, 2010, the record date for the special meeting, will be entitled to vote at the special meeting. To vote your shares, you may return your proxy card, submit a proxy via the Internet or telephone or attend the special meeting and vote in person, whichever is more convenient for you. Even if you plan to attend the meeting, we urge you to promptly submit a proxy for your shares via the Internet or telephone or by completing, signing, dating and returning the enclosed proxy card.

 

If you sign, date and return your proxy card or submit a proxy via the Internet or telephone without indicating how you wish to vote, your proxy will be voted “FOR” the adoption of the merger agreement and “FOR” the adjournment of the special meeting to a later date, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes in favor of adoption of the merger agreement at the time of the special meeting. If you fail to submit a proxy and are not present at the meeting, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting

 

Thank you for your continued support of Netezza.

 

Sincerely,

 

James Baum

President and Chief Executive Officer

 

This proxy statement is dated October 12, 2010 and is first being mailed to stockholders of Netezza on or about October 12, 2010.

 

NETEZZA CORPORATION

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT

 

To the Stockholders of Netezza Corporation:

 

Netezza Corporation, a Delaware corporation (“Netezza”), will hold a special meeting of stockholders at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, at 10:00 a.m., local time, on November 10, 2010, for the following purposes:

 

 

Netezza may also conduct such other business as may properly come before the special meeting, or any adjournment or postponement of the special meeting, by or at the direction of the board of directors. Only record holders of Netezza common stock at the close of business on October 6, 2010 are entitled to receive notice of, and will be entitled to vote at, the special meeting, including any adjournments or postponements of the special meeting. Your vote is important. The affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote at the special meeting is required to adopt the merger agreement. The affirmative vote of the holders of a majority in voting power of the shares of our common stock present or represented by proxy at the special meeting and voting on such matter is required to approve the proposal to adjourn the special meeting, provided that a quorum is present. If a quorum is not present at the special meeting, then the special meeting may be adjourned with the affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote on such matter.

 

Under Delaware law, if the merger is completed, holders of Netezza common stock who do not vote in favor of adoption of the merger agreement will have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery. In order to exercise your appraisal rights, you must submit a written demand for an appraisal of your shares prior to the stockholder vote on the merger agreement, not vote in favor of adoption of the merger agreement and comply with other Delaware law procedures explained in the accompanying proxy statement. See “The Merger — Appraisal Rights” beginning on page 40 of the proxy statement and Annex C to the proxy statement.

 

We urge you to complete, sign, date and return your proxy card as promptly as possible by mail or by faxing the card to the attention of Corey C. DuFresne at (508) 302-4787 whether or not you expect to attend the special meeting. If you are unable to attend in person and you properly complete, sign and return your proxy card, your shares will be voted at the special meeting in accordance with your proxy. You may also submit a proxy by telephone by calling (800) 652-8683 in the United States, US territories and Canada and (781) 575-2300 from outside these areas or through the Internet at www.investorvote.com/NZ using the control number on your proxy card. If your shares are held in “street name” by your broker or other nominee, only such broker or other nominee can vote your shares unless you obtain a valid legal proxy from such broker or nominee. You should follow the directions provided by your broker or nominee regarding how to instruct such broker or nominee to vote your shares.

 

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted “FOR” adoption of the merger agreement and “FOR” adjournment of the special meeting to a later date, if necessary or appropriate, to permit solicitations of additional proxies. If you fail to return your proxy card and do not submit your proxy via the Internet or by telephone, your shares will effectively be counted as a vote against adoption of the merger agreement, will not be counted for purposes of determining whether a quorum is present at the special meeting and will have no effect on the proposal to adjourn the special meeting, if necessary or appropriate. If you do attend the special meeting and wish to vote there in person, you may revoke a previously delivered proxy and vote in person. You may also revoke your proxy in the manner described in the enclosed proxy statement at any time before it has been voted at the special meeting.

Our board of directors unanimously recommends that you vote “FOR” adoption of the merger agreement and “FOR” adjournment of the special meeting to a later date, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes in favor of adoption of the merger agreement at the time of the special meeting.

 

The merger is described in the accompanying proxy statement, which we urge you to read carefully. A copy of the merger agreement is attached as Annex A to the proxy statement.

 

By Order of the Board of Directors,

 

Corey C. DuFresne

Vice President, General Counsel & Secretary

 

Marlborough, Massachusetts

October 12, 2010

 

 

 

 

NETEZZA CORPORATION
SPECIAL MEETING OF STOCKHOLDERS

TABLE OF CONTENTS

 

 

Annexes

 

 

The following Q&A is intended to address some commonly asked questions regarding the special meeting of stockholders and the merger. These questions and answers may not address all questions that may be important to you as a Netezza stockholder. We urge you to read carefully the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement.

 

Except as otherwise specifically noted in this proxy statement, “we,” “our,” “us” and similar words in this proxy statement refer to Netezza Corporation (with its subsidiaries). In addition, throughout this proxy statement, we refer to Netezza Corporation as “Netezza,” to Onyx Acquisition Corp. as “merger sub” and to International Business Machines Corporation as “IBM.”

 

The Special Meeting

 

 

The Proposed Merger

 

 

Voting and Proxy Procedures

 

 

 

 

 

Netezza Corporation

Attn: Investor Relations

26 Forest Street

Marlborough, Massachusetts 01752

(508) 382-8200

ir@netezza.com

 

or

 

Georgeson, Inc.

199 Water Street, 26th Floor

New York, NY 10038

Banks and Brokers Call (212) 440-9800

All others call Toll-Free (800) 509-0984

 

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the disclosures in this proxy statement. Any representation to the contrary is a criminal offense.

 

This proxy statement contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act that are based on our current expectations, assumptions, beliefs, estimates and projections about our company and our industry. The forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “plan,” “project,” “should” and similar expressions. Factors that may affect those forward-looking statements include, among other things:

 

 

We caution you that reliance on any forward-looking statement involves risks and uncertainties, and that although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions could be incorrect. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans and objectives or projected financial results referred to in any of the forward-looking statements. We assume no obligation to update the information in this proxy statement, except as otherwise required by law.

 

SUMMARY

 

The Companies (page 15)

 

Merger Consideration (page 49)

 

Treatment of Stock Options, Restricted Stock Units and Restricted Stock (page 49)

 

Market Prices and Dividend Data (page 11)

 

Material United States Federal Income Tax Consequences of the Merger (page 45)

 

Recommendation of Netezza’s Board of Directors and Reasons for the Merger (page 23)

 

Opinion of Netezza’s Financial Advisor (page 26)

 

The Special Meeting of Netezza’s Stockholders (page 12)

	•	adoption of the merger agreement, and
	•	adjournment of the special meeting to a later date, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes in favor of adoption of the merger agreement at the time of the special meeting.

 

Interests of Netezza’s Executive Officers and Directors in the Merger (page 33)

	•	the initial annual starting salaries will be: Mr. Baum: $400,000; Ms. Cotter: $215,000; Mr. Flaxman: $285,000; Mr. Scannell: $300,000 (increasing to $480,000, as described below) and Mr. Tacoma: $275,000. Messrs. Baum, Flaxman and Tacoma and Ms. Cotter will initially receive the same annual base salary and cash incentives as he or she is currently entitled to receive from Netezza until they transition to the IBM payroll (their “IBM Hire Date”). The transition arrangement with Mr. Scannell provides for a specified salary upon his IBM Hire Date that is higher than his current salary to take into account his ceasing to participate in a current Netezza cash incentive program (under which he will be paid amounts accrued through the IBM Hire Date);
	•	upon the closing of the merger, each executive officer will receive full vesting of such officer’s then unvested options granted under the 2000 stock incentive plan, in accordance with the terms of the merger agreement, and each executive officer other than Mr. Flaxman will receive an additional one year’s (20%) vesting of such officer’s then unvested options granted under the 2007 stock incentive plan, as is provided for under the terms of stock option agreements thereunder. The remaining portion of his or her then unvested options will be converted into options to acquire IBM stock and will continue to vest in accordance with their original vesting schedules, shortened by one year. Mr. Flaxman has waived this acceleration with respect to options granted under the 2007 stock incentive plan; his awards will continue to vest according to their regular vesting schedule;
	•	upon the closing of the merger, each executive officer other than Mr. Flaxman will receive an additional one year’s (25%) vesting of such officer’s then unvested RSUs (except for performance-based RSUs), as is provided for by the terms of the RSU award agreements. The remaining portion of his or her then unvested RSUs will be converted into the right to receive shares of IBM common stock on each subsequent vesting date of the RSUs. Mr. Flaxman has waived such acceleration; accordingly, such awards will continue to vest according to their regular vesting schedule. The general treatment of options and RSUs in the merger, including such awards held by our executive officers, is described below under “— Treatment of Options Outstanding Under Our Stock Plans” and “— Treatment of Restricted Stock Units Outstanding Under Our Stock Plans” beginning on page 44;

	•	subject to the execution of IBM’s standard release of claims, if an executive officer’s employment is terminated by IBM without “cause” (as such term is defined in the executive officer’s employment arrangement with IBM) or the executive officer resigns for “good reason” (as such term is defined in the executive officer’s employment arrangement with IBM), any options and RSUs held by such executive officer that are unvested as of such termination will vest in full as of such termination. If an executive officer’s employment terminates for any reason other than by IBM without “cause” or by the executive officer for “good reason,” such executive officer will forfeit any unvested options and RSUs. In addition, with respect to Mr. Scannell, as of the six-month anniversary of the closing of the merger and provided that the performance milestones specified in his transition arrangement are satisfied, any options and RSUs that remain unvested will vest in full as of such date;
	•	each of Messrs. Baum, Flaxman and Tacoma and Ms. Cotter will be entitled to participate in a retention program providing for potential cash payments following each of four six-month milestone periods through the second anniversary of the closing of the merger (or, for Mr. Flaxman, six six-month milestones and the third anniversary), subject to continued employment through the applicable payment dates and the achievement of specified milestones set forth in the employment arrangements. The following are the maximum aggregate amounts payable pursuant to this retention program: Mr. Baum — $3,000,000; Ms. Cotter — $500,000; Mr. Flaxman — $875,000; and Mr. Tacoma — $2,000,000. Mr. Scannell is entitled to participate in a transition program providing a cash payment of up to $408,250 on the six-month anniversary of the closing of the merger, subject to continued employment through the applicable payment date and the achievement of specified milestones described in his transition agreement;
	•	if any of the executive officers’ employment is terminated by IBM without “cause” (as each such term is defined in the executive officer’s employment arrangement with IBM) or as a result of the executive officer’s death or “disability” (as determined by IBM) prior to the second (or, for Mr. Flaxman, third) anniversary of the closing of the merger, the executive officer will be entitled to receive the retention payment described above for the then-applicable six-month milestone period, subject to the execution of IBM’s standard release of claims. If Mr. Scannell’s employment is terminated by IBM without “cause” (as such term is defined in Mr. Scannell’s employment arrangement with IBM) or as a result of Mr. Scannell’s death or “disability” (as determined by IBM) prior to the six-month anniversary of the closing of the merger, he will be entitled to the full amount of his cash payment under the transition program, subject to the execution of IBM’s standard release of claims.

 

Legal Proceedings Regarding the Merger (page 39)

 

Conditions to the Closing of the Merger (page 61)

	•	the adoption of the merger agreement by our stockholders;
	•	the expiration or termination of any waiting period applicable to the merger required under the HSR Act;
	•	the receipt of any other approval or the termination or expiration of any waiting period under any other applicable competition, merger control, antitrust or similar law that is applicable to the merger; and
	•	the absence of any temporary restraining order, preliminary or permanent injunction, or other judgment, order or decree issued by a court of competent jurisdiction or other legal restraint or prohibition that has the effect of preventing the consummation of the merger.

	•	each of our representations and warranties contained in the merger agreement is true and correct, to the extent required under the merger agreement, as of the date of the merger agreement and as of the closing date of the merger, as described below under the heading “The Merger Agreement — Conditions to the Closing of the Merger” beginning on page 61);
	•	our performance, in all material respects, of all obligations required to be performed by us under the merger agreement at or prior to the closing date of the merger;
	•	the absence of any claim, suit, action or proceeding brought or threatened by a governmental entity:

	•	challenging or seeking to restrain or prohibit the consummation of the merger or the other transactions contemplated by the merger agreement;
	•	seeking to prohibit or limit in any respect, or place conditions on, the ownership or operation by us, IBM or any of our or its respective affiliates of all or any portion of the business or assets or any product, or requiring any such party to dispose of, license or hold separate all or any portion of the business or assets or any product of us, IBM or any of our or its subsidiaries;
	•	seeking to impose limitations on the ability of IBM or any of its affiliates to acquire or hold, or exercise full rights of ownership of, our common stock or the common stock of the surviving corporation or any of IBM’s subsidiaries;
	•	seeking to prohibit IBM or any of its affiliates from effectively controlling any of the business or operations of us or our or IBM’s subsidiaries; or
	•	seeking to prevent us or our or IBM’s subsidiaries from operating our or their respective businesses in substantially the same manner as operated by us or them prior to the date of the merger agreement;

	•	the absence of any temporary restraining order, preliminary or permanent injunction or other judgment, order or decree issued by a court of competent jurisdiction that is reasonably likely to result, directly or indirectly, in any of the effects described in the immediate preceding condition;

	•	IBM shall have received evidence, in form and substance reasonably satisfactory to it, that IBM or we have obtained all material consents, approvals, authorizations, qualifications and orders of all governmental entities legally required to effect the merger; and
	•	a material adverse effect has not occurred with respect to us since the date of the merger agreement.

	•	the representations and warranties of IBM and merger sub contained in the merger agreement, taken as a whole, are true and correct, to the extent required under the merger agreement, as of the date of the merger agreement and as of the closing date of the merger, as described below under the heading “The Merger Agreement — Conditions to the Closing of the Merger” beginning on page 61; and
	•	IBM’s and merger sub’s performance, in all material respects, of all obligations required to be performed by them under the merger agreement at or prior to the closing date of the merger.

 

No Solicitation of Acquisition Proposals by Netezza (page 57)

	•	solicit, initiate or knowingly encourage, or take any other action to knowingly facilitate, any takeover proposal (as defined in the merger agreement and described below under the heading “The Merger Agreement — Covenants — Board Recommendation” beginning on page 58) or any inquiries or the making of any proposal that could reasonably be expected to lead to a takeover proposal; or
	•	enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person (or its representatives) any information knowingly with respect to, or otherwise cooperate with any person knowingly with respect to, any takeover proposal.

	•	furnish information to a person (and its representatives) making such a takeover proposal pursuant to a confidentiality agreement which contains confidentiality terms that are no less restrictive than those contained in the confidentiality agreement between us and IBM, provided that all such information has been provided, or is concurrently provided, to IBM; and
	•	participate in discussions or negotiations with, and only with, the person (and its representatives) making such takeover proposal regarding the takeover proposal.

 

Termination of the Merger Agreement (page 62)

	•	by our, IBM’s and merger sub’s mutual written consent;
	•	by either IBM or us if:

	•	the merger is not consummated by the date that is six months from the date of the merger agreement;

	•	any temporary restraining order, preliminary or permanent injunction, or other judgment, injunction, order or decree issued by a court of competent jurisdiction or other legal restraint or prohibition having the effect of preventing the consummation of the merger is in effect and has become final and nonappealable; or
	•	our stockholders do not adopt the merger agreement at the stockholders meeting (or at any adjournment or postponement thereof) that we have called and held for such purpose;

	•	by us if IBM breaches a representation or warranty or fails to perform a covenant or other agreement contained in the merger agreement so that the related closing conditions cannot be satisfied and the breach or failure to perform cannot be cured by IBM or merger sub within 30 business days after the breach or failure to perform, or if the breach or failure to perform is curable by that date, IBM or merger sub, as the case may be, does not commence to cure the breach or failure to perform within 10 business days after receipt of written notice from us and diligently pursue the cure thereafter; or
	•	by IBM if:

	•	we deliver a notice to IBM that our board of directors has withdrawn or modified its recommendation that the merger agreement or the merger or both are advisable in a manner adverse to IBM or merger sub, has publicly proposed to do so, or such an adverse recommendation change has occurred;
	•	we breach a representation or warranty or fail to perform a covenant or other agreement contained in the merger agreement so that the related closing conditions cannot be satisfied and the breach or failure to perform cannot be cured by us within 30 business days after the breach or failure to perform, or if the breach or failure to perform is curable by that date, we do not commence to cure the breach or failure to perform within 10 business days after receipt of written notice from IBM and diligently pursue the cure thereafter; or
	•	any legal restraint is in effect and has become final and nonappealable that has one of the effects set forth in the merger agreement and described below under the heading “The Merger Agreement — Termination of the Merger Agreement” beginning on page 62.

 

Termination Fee and Expenses (page 63)

	•	prior to the stockholders meeting, a takeover proposal has been made to us or our stockholders, or any person has announced an intention to make a takeover proposal, or a takeover proposal otherwise becomes known to us or generally known to our stockholders and thereafter:

	•	the merger agreement is terminated by either us or IBM either because the merger has not been consummated by the date that is six months from the date of the merger agreement or because our stockholders did not adopt the merger agreement at the stockholders meeting (or at any adjournment or postponement thereof) that we called and held for such purpose; and
	•	within 12 months after such termination of the merger agreement, either we or one of our subsidiaries enters into an acquisition agreement with respect to any takeover proposal or any takeover proposal is consummated (in which context, all references to 15% in the definition of “takeover proposal,” as described below under the heading “The Merger Agreement — Covenants — Board Recommendation” beginning on page 58 are deemed to be references to 40%); or

	•	IBM terminates the merger agreement because we deliver a notice to IBM that our board of directors has withdrawn or modified its recommendation that the merger agreement or the merger or both are advisable in a manner adverse to IBM or merger sub, has publicly proposed to do so, or such an adverse recommendation change has occurred.

 

Regulatory Matters (page 47)

 

Appraisal Rights (page 40)

 

Our common stock has been listed on the New York Stock Exchange, or NYSE, under the symbol “NZ” since April 9, 2009. Prior to April 9, 2009, our common stock was traded on NYSE Arca under the symbol “NZ” since our initial public offering on July 19, 2007. This table shows, for the periods indicated, the range of intraday high and low per share sales prices for our common stock as reported by the NYSE Arca with respect to the period February 1, 2008 through April 8, 2009 and by the NYSE since April 9, 2009.

 

 

The following table sets forth the closing price per share of our common stock, as reported by the NYSE on September 17, 2010, the last full trading day before the public announcement of the merger, and on October 8, 2010, the latest practicable trading day before the printing of this proxy statement:

 

 

You are encouraged to obtain current market quotations for our common stock in connection with voting your shares of common stock. If the merger is consummated, there will be no further market for our common stock and our common stock will be delisted from the NYSE and deregistered under the Securities Exchange Act.

 

We did not declare or pay any cash dividends on our common stock during the three most recent fiscal years. In the event that the merger is not consummated, we would expect to retain earnings, if any, to fund the development and growth of our business and would not anticipate paying cash dividends on our common stock in the foreseeable future. In such event, our payment of any future dividends would be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, cash needs and growth plans.

 

The enclosed proxy is solicited on behalf of the board of directors of Netezza for use at the special meeting of stockholders or at any adjournment or postponement thereof.

 

We will hold the special meeting at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, at 10:00 a.m., local time, on November 10, 2010.

 

At the special meeting, we will ask the holders of our common stock to adopt the merger agreement, as it may be amended from time to time, and, if there are not sufficient votes in favor of adoption of the merger agreement, to adjourn the special meeting to a later date, if necessary or appropriate, to solicit additional proxies.

 

Only holders of record of our common stock at the close of business on October 6, 2010, the record date, are entitled to notice of, and to vote at, the special meeting. On the record date, 63,542,595 shares of our common stock were issued and outstanding and held by approximately 139 holders of record. Holders of record of our common stock on the record date are entitled to one vote per share at the special meeting on the proposal to adopt the merger agreement and the proposal to adjourn the special meeting to a later date, if necessary or appropriate, to solicit additional proxies.

 

A quorum of stockholders is necessary to hold a valid special meeting. Under our by-laws, a quorum is present at a meeting if the holders of a majority in voting power of the shares of our common stock issued and outstanding and entitled to vote at the meeting are present in person or represented by proxy. In the event that a quorum is not present at the special meeting, it is expected that the special meeting will be adjourned to solicit additional proxies. For purposes of determining the presence of a quorum, abstentions will be counted as shares present and broker non-votes (where a broker or nominee does not exercise discretionary authority to vote on a matter), if any, will also be counted as shares present. If a quorum is not present at the special meeting, then the special meeting may be adjourned with the affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote on such matter. For purposes of a vote with respect to adjournment, abstentions and broker non-votes will have no effect on the matter.

 

The adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote at the special meeting. Adoption of the merger agreement is a condition to the closing of the merger.

 

Provided that a quorum is present, approval of the proposal to adjourn the special meeting to a later date, if necessary or appropriate, in order to solicit additional proxies from our stockholders requires the affirmative vote of the holders of a majority in voting power of the shares of our common stock present or represented by proxy at the special meeting and voting on such matter.

 

At the close of business on the record date, our directors and executive officers and their affiliates owned and were entitled to vote 1,931,675 shares of our common stock, which represented approximately 3.04% of the shares of our outstanding common stock on that date. We expect that these directors and executive officers will vote all of their shares of our common stock “FOR” adoption of the merger agreement and “FOR” the proposal to adjourn the special meeting to a later date, if necessary or appropriate, to solicit additional proxies.

 

If your shares are registered in your name, you may cause your shares to be voted at the special meeting by returning a signed proxy card or voting in person at the meeting. Additionally, you may submit a proxy authorizing the voting of your shares via the Internet at www.investorvote.com/NZ or by telephone by calling (800) 652-8683 in the United States, US territories or Canada and (781) 575-2300 from outside these areas. You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to submit a proxy via the Internet or telephone.

 

If your shares are registered in your name and you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the meeting. If your shares are registered in your name, you are encouraged to submit a proxy even if you plan to attend the special meeting in person.

 

Voting instructions are included on your proxy card. All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in accordance with the instructions of the stockholder. Properly executed proxies that do not contain voting instructions will be voted “FOR” the adoption of the merger agreement and “FOR” the proposal to adjourn the special meeting to a later date, if necessary or appropriate, to solicit additional proxies, provided that no proxy that is specifically marked “AGAINST” the proposal to adopt the merger agreement will be voted “FOR” the adjournment proposal unless it is specifically marked “FOR” the adjournment proposal.

 

If your shares are held in “street name” through a broker or other nominee, you may provide voting instructions by completing and returning the voting form provided by your broker or nominee or if such a service is provided, via the Internet or by telephone through your broker or nominee. To provide voting instructions via the Internet or telephone, you should follow the instructions on the voting form provided by your broker or nominee. If you plan to attend the special meeting, you will need a proxy from your broker or nominee in order to be given a ballot to vote the shares at the meeting. If you do not return your broker’s or nominee’s voting form, provide voting instructions via the Internet or telephone through your broker or nominee, if possible, or attend the special meeting and vote in person with a proxy from your broker or nominee, it will have the same effect as if you voted “AGAINST” the adoption of the merger agreement.

 

Any proxy you give pursuant to this solicitation may be revoked by you at any time before it is voted. Proxies may be revoked as follows:

 

If you have sent a proxy directly to Netezza, you may revoke it by:

 

 

If you have instructed a broker or nominee to vote your shares, you may revoke your proxy only by following the directions received from your broker or nominee to change those instructions.

 

Revocation of a proxy will not affect any vote taken prior to revocation. Attendance at the special meeting will not in itself constitute the revocation of a proxy; you must vote in person at the special meeting to revoke a previously delivered proxy.

 

Our board of directors has unanimously adopted, approved and declared advisable the merger agreement, the merger and the other transactions contemplated thereby, determined that the merger is in the best interests of Netezza and its stockholders and determined that the consideration to be paid to Netezza’s stockholders in the merger is fair to such stockholders. Our board of directors unanimously recommends that Netezza stockholders vote “FOR” the proposal to adopt the merger agreement and also unanimously recommends that stockholders vote “FOR” the proposal to adjourn the special meeting to a later date, if necessary or appropriate, to permit the solicitation of additional proxies in the event there are not sufficient votes in favor of adoption of the merger agreement at the time of the special meeting.

 

Stockholders that abstain from voting on a particular matter and shares held in “street name” by brokers or nominees who indicate on their proxies that they do not have (or choose not to exercise) discretionary authority to vote such shares as to a particular matter will not be counted as votes in favor of such matter. For purposes of determining the presence of a quorum, abstentions will be counted as shares present and broker non-votes (where a broker or nominee does not exercise discretionary authority to vote on a matter), if any, will also be counted as shares present. Abstentions and broker non-votes will have the same effect as votes against the adoption of the merger agreement and will have no effect on the proposal to adjourn the special meeting to a later date, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes in favor of adoption of the merger agreement at the time of the special meeting, provided that a quorum is present.

 

The expense of soliciting proxies in the enclosed form will be borne by Netezza. We have retained Georgeson Inc., a proxy solicitation firm, to solicit proxies in connection with the special meeting at a cost of approximately $9,000 plus expenses. We may reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may be solicited by certain of our directors, officers and employees, personally or by telephone, facsimile or other means of communication. No additional compensation will be paid for such services.

 

A list of our stockholders entitled to vote at the special meeting will be available for examination by any Netezza stockholder at the special meeting. For ten days prior to the special meeting, this stockholder list will be available for inspection by any stockholder for any purpose germane to the special meeting during ordinary business hours at our corporate offices located at 26 Forest Street, Marlborough, Massachusetts 01752.

 

Netezza Corporation is a global leader in data warehouse, analytic and monitoring appliances that dramatically simplify high-performance analytics across an extended enterprise. Netezza’s technology enables organizations to process enormous amounts of captured data at exceptional speed, providing a significant competitive and operational advantage in today’s data-intensive industries, including digital media, energy, financial services, government, health and life sciences, retail and telecommunications. Netezza is headquartered in Marlborough, Massachusetts and has offices in Northern Virginia, the United Kingdom, Germany, France, Poland, Japan, Korea, Australia and Singapore.

 

Netezza was incorporated in Delaware in 2000 and our principal executive offices are located at 26 Forest Street, Marlborough, Massachusetts 01752. Netezza’s website is located at http://www.netezza.com. Additional information regarding Netezza is contained in our filings with the Securities and Exchange Commission. See “Where You Can Find More Information” beginning on page 67.

 

IBM, a New York corporation, creates business value for clients and solves business problems through integrated solutions that leverage information technology and deep knowledge of business processes. IBM solutions typically create value by reducing a client’s operational costs or by enabling new capabilities that generate revenue. These solutions draw from an industry leading portfolio of consulting, delivery and implementation services, enterprise software, systems and financing.

 

IBM’s principal executive offices are located at New Orchard Road, Armonk, New York 10504 and its telephone number is (914) 499-1900. Additional information regarding IBM is contained in IBM’s filings with the Securities and Exchange Commission. See “Where You Can Find More Information” beginning on page 67.

 

Onyx Acquisition Corp., a Delaware corporation and wholly owned subsidiary of IBM, was organized solely for the purpose of entering into the merger agreement and completing the merger and the other transactions contemplated by the merger agreement. Merger sub’s principal executive offices are located at New Orchard Road, Armonk, New York, 10504 and its telephone number is (914) 499-1900. Merger sub has not conducted any business operations other than in connection with the transactions contemplated by the merger agreement.

 

Upon consummation of the merger, merger sub will cease to exist and Netezza will continue as the surviving corporation.

 

The following discussion summarizes the material terms of the merger. We urge you to read carefully the merger agreement, which is attached as Annex A to this proxy statement.

 

IBM has been one of our strategic partners for several years. IBM is currently our primary supplier with the current versions of our data warehouse appliances based on IBM blade hardware, and also provides support and warranty services to us and our customers. From time to time in the past, we and IBM had conversations with respect to strengthening our strategic partnership, including the possibility of establishing a reseller relationship.

 

On April 1, 2010, James Baum, our President and Chief Executive Officer, had dinner in North Salem, New York with Arvind Krishna, General Manager, Information Management, of the IBM Software Group. Messrs. Baum and Krishna discussed the market for data warehouse appliances, the synergies between Netezza’s and IBM’s products, and the possibility of Netezza and IBM entering into a reseller relationship. In the following weeks, Messrs. Baum and Krishna exchanged several emails regarding these topics.

 

On May 26, 2010, Mr. Baum held a follow-up meeting with Mr. Krishna at an IBM facility in Somers, New York. In the following weeks, Messrs. Baum and Krishna exchanged additional emails regarding partnership opportunities.

 

On June 12, 2010, Mr. Krishna contacted Mr. Baum to request a telephone call. During the call held later that day, Mr. Krishna expressed IBM’s interest in acquiring Netezza and provided a high-level explanation of the IBM acquisition process. Messrs. Baum and Krishna did not discuss Netezza’s valuation or a potential price at which IBM might be willing to acquire Netezza.

 

On June 21, 2010, Mr. Krishna introduced Mr. Baum to Archie Colburn, Managing Director of Corporate Development for IBM, and suggested that Messrs. Baum and Colburn proceed with discussions relating to IBM’s interest in acquiring Netezza. Later that day, Mr. Baum informed representatives of our outside legal counsel, Wilmer Cutler Pickering Hale and Dorr LLP, or WilmerHale, of IBM’s expression of interest and sought advice regarding the appropriate process to follow.

 

On June 23, 2010, Messrs. Baum and Colburn, along with Patrick J. Scannell, Jr., our Senior Vice President and Chief Financial Officer, met at our offices in Marlborough, Massachusetts. Messrs. Baum, Colburn and Scannell discussed the possible business combination of IBM and Netezza, including a discussion of IBM’s strategic interest in acquiring Netezza, IBM’s acquisition process and IBM’s need for an exclusivity period in which to conduct due diligence. These discussions were subject to a pre-existing confidentiality agreement between Netezza and IBM relating to the commercial relationship between the companies. At this meeting, the parties did not discuss Netezza’s valuation or a potential price at which IBM might be willing to acquire Netezza. Following the meeting, Mr. Baum informed Jitendra S. Saxena, the chairman of our board of directors, and several other directors of the possible interest of IBM in acquiring Netezza.

 

Later on June 23, 2010, IBM provided us with a proposed form of confidentiality agreement in anticipation of additional discussions and diligence regarding Netezza.

 

On June 25, 2010, our board of directors held a special meeting at which the directors discussed the possible interest of IBM in acquiring Netezza. Mr. Baum summarized recent discussions with IBM, including the meeting held on June 23, 2010 with Mr. Colburn, and reported that IBM had proposed that the companies enter into a new confidentiality agreement to permit acquisition discussions to proceed. Mr. Scannell led a discussion relating to the need for and identification of possible financial advisors in connection with discussions relating to a possible strategic transaction. Representatives of WilmerHale reviewed the fiduciary duties of the directors in connection with the consideration of a possible strategic transaction and related matters. Members of our management also reviewed Netezza’s business and prospects, including an analysis of the competitive landscape facing Netezza. Following discussion, our board of directors instructed management to continue to explore discussions with IBM regarding a possible strategic transaction.

On June 28, 2010, at a special meeting of our board of directors, Mr. Baum led a further discussion regarding a possible strategic transaction with IBM, and representatives of WilmerHale reviewed the fiduciary duties of the directors. Following discussion, our board of directors authorized management to negotiate and enter into a confidentiality agreement with IBM relating to discussions regarding a possible strategic transaction and instructed management to indicate to IBM that a substantial premium to the then current market price of our common stock would be required in light of Netezza’s recent and prospective financial results. After our directors and management identified and discussed a number of possible financial advisors to assist us in connection with discussions relating to a possible strategic transaction, our board of directors authorized management to engage Qatalyst as our financial advisor and to enter into an engagement letter with Qatalyst. The board selected Qatalyst based on Qatalyst’s qualifications, expertise, reputation and knowledge of our business and industry.

 

Following the June 28, 2010 board meeting, Mr. Scannell informed a representative of Qatalyst of Qatalyst’s selection as our financial advisor subject to the execution of a mutually agreeable engagement letter. On July 12, 2010, following negotiations with Qatalyst, an engagement letter was signed by Netezza and Qatalyst.

 

On July 1, 2010, following negotiations, Netezza and IBM entered into a confidentiality agreement containing suitable provisions for continued acquisition discussions.

 

Between July 1 and July 6, 2010, members of our management discussed with representatives of Qatalyst possible responses and approaches to IBM’s indication of interest in acquiring Netezza and the process for proceeding with discussions with IBM.

 

On July 6, 2010, our board of directors held a special meeting to discuss a possible strategic transaction with IBM and related matters. At the meeting, Mr. Scannell reviewed our historical financial results and management’s preliminary forecasts, and the board instructed management to revise the forecasts to address the questions and issues discussed during the meeting. Representatives of Qatalyst reviewed with the board Netezza’s strategic landscape, information regarding trading in our common stock, preliminary financial analyses for Netezza, IBM’s acquisition history, a summary of our stockholder and takeover defense profile, trading and operating statistics of selected comparable companies, and additional information regarding recent acquisition activity in the technology sector. Our board of directors then discussed, with input from representatives of Qatalyst and WilmerHale, the process of engaging IBM in discussions relating to a possible strategic transaction.

 

On July 8, 2010, our board of directors held a special meeting to discuss a possible strategic transaction with IBM and related matters. At the meeting, our board of directors reviewed management’s revised financial forecasts and indicated that they were satisfied with them. Mr. Baum provided an update on discussions with Mr. Colburn. Following discussion of the advisability of establishing a special committee to facilitate the evaluation and consideration of a possible strategic transaction, including input from representatives of WilmerHale, the board determined that establishing a special committee would be desirable and requested that Mr. Saxena canvass the members of the board and recommend the composition of such a special committee at the board’s next meeting.

 

Between July 8 and July 15, 2010, Mr. Saxena spoke with each member of our board of directors to discuss each director’s interest and availability to serve on the special committee and elicited input from each director on the composition of the special committee.

 

Later on July 8, 2010, Mr. Colburn called Mr. Baum. In the call, Mr. Colburn indicated that IBM had retained UBS Investment Bank to undertake a valuation of Netezza based on our management’s financial forecasts, and that IBM planned to base its proposed acquisition price range on the UBS valuation and would not suggest an acquisition price to Netezza until UBS had completed its valuation.

 

On July 9, 2010, Messrs. Baum and Scannell spoke with representatives of UBS Investment Bank regarding management’s financial forecasts for Netezza that had been reviewed with our board of directors on July 8, 2010.

On July 13, 2010, members of our management spoke further with representatives of UBS Investment Bank regarding financial diligence matters.

 

On July 13 and 14, 2010, members of our management discussed preparations for diligence review of Netezza by IBM or other potential acquirers, including the establishment of an electronic data room to facilitate the diligence process, and received input on diligence planning from representatives of Qatalyst and WilmerHale.

 

On July 15, 2010, our board of directors held a special meeting to discuss a possible strategic transaction with IBM and related matters. At the meeting, Messrs. Baum and Scannell reviewed their discussions with UBS Investment Bank regarding management’s financial forecasts for Netezza. Mr. Baum provided an update on his discussions with Mr. Colburn. Representatives of Qatalyst reviewed a number of considerations relating to continuing to engage in discussions with IBM, including the possible effect on our stock price of our fiscal second quarter earnings announcement scheduled for August 26, 2010; the advisability of determining the interest of other potential acquirers; alternatives for contacting other potential acquirers; IBM’s likely views regarding a potential competitive process relating to an acquisition of Netezza; and IBM’s desire to enter into exclusive negotiations with Netezza relating to a possible strategic transaction. The directors then discussed the characteristics of other companies that might potentially be interested in a strategic transaction with Netezza but did not identify specific companies to approach at that time. During the discussion, representatives of WilmerHale reviewed the fiduciary duties of the directors. Based on his conversations with the members of our board of directors, Mr. Saxena then recommended, and the board of directors authorized, the formation of a special committee, consisting of Jitendra S. Saxena (Chairman), Paul J. Ferri, Peter Gyenes and Edward J. Zander, to facilitate the evaluation and consideration of a possible strategic transaction, including a possible acquisition by IBM, with authority to approve any such transaction reserved to the full board of directors.

 

Later on July 15, 2010, Mr. Colburn called Mr. Baum and indicated that IBM was prepared to make a written offer to acquire Netezza for $20.00 to $21.00 per share in cash, subject to execution of an exclusivity agreement.

 

Also on July 15, 2010, Mr. Colburn called Mr. Gyenes, whom Mr. Colburn knew because Mr. Gyenes had been the Chief Executive Officer of Ascential Software when it was acquired by IBM in 2005. During the call, Mr. Colburn indicated that IBM was taking its potential acquisition of Netezza very seriously and that IBM had based its proposed acquisition price range on the valuation of Netezza performed by UBS Investment Bank with the intention of avoiding extended price negotiations with Netezza.

 

On July 16, 2010, the special committee held its first meeting. Representatives of Qatalyst reviewed Qatalyst’s preliminary financial analyses of Netezza based in part on our management’s financial forecasts for Netezza, after which the members of the special committee discussed, together with representatives of Qatalyst, Netezza’s potential valuation. Representatives of Qatalyst then reviewed a list of 12 potential acquirers (including IBM) of Netezza that Qatalyst believed may be likely to have an interest in a potential strategic transaction with Netezza based on the product scope and mix, potential strategic fit with Netezza, financial resources and acquisition history of each such potential acquirer. The special committee discussed the characteristics and likely possible interest in a strategic transaction with Netezza of each of these potential acquirers, including the reasons for Qatalyst’s assessment of each such company’s likelihood of interest. The members of the special committee then discussed strategy with respect to pricing discussions with IBM. Following discussion and WilmerHale’s review of the fiduciary duties of directors, the special committee determined to recommend to the full board of directors that it instruct Qatalyst to approach the three companies — Company A, Company B and Company C — that the special committee believed, after consultation with Qatalyst, had (along with IBM) the highest likelihood of interest in a potential strategic transaction with Netezza. The special committee also determined to recommend to the board that management be authorized to propose to IBM a cash acquisition price of $25.00 per share.

 

On July 17, 2010, our board of directors held a special meeting to consider and act upon the special committee’s recommendations. Mr. Saxena summarized the special committee’s discussions regarding valuation and the process and criteria used by the special committee to select Company A, Company B and Company C. Representatives of Qatalyst reviewed strategies for maximizing an acquisition price for Netezza

and discussed with the board the characteristics and likely possible interest in a strategic transaction of Company A, Company B and Company C. Following discussion, the board of directors approved the special committee’s recommendations and instructed Qatalyst to approach Company A, Company B and Company C regarding possible interest in a potential strategic transaction with Netezza and authorized management to propose to IBM a cash acquisition price of $25.00 per share.

 

On July 19, 2010, as instructed by our board of directors, Qatalyst contacted Company B and Company C to solicit interest in a potential strategic transaction with Netezza. On July 22, 2010, Company B and Company C each informed Qatalyst that it was not interested in pursuing a strategic transaction with Netezza at that time.

 

On July 19 and July 20, 2010, as instructed by our board of directors, Qatalyst contacted Company A to solicit interest in a potential strategic transaction with Netezza. Company A expressed preliminary interest in a potential strategic transaction with Netezza and proposed that the companies enter into a confidentiality agreement. After negotiations, Netezza and Company A entered into a confidentiality agreement on July 24, 2010.

 

On July 20, 2010, Mr. Baum called Mr. Colburn to propose a cash acquisition price of $25.00 per share. In response, Mr. Colburn indicated that an acquisition price of $20.00 to $21.00 per share was a more appropriate range in light of the Netezza valuation performed for IBM by UBS Investment Bank and further indicated that any written offer from IBM would be conditioned on execution of an exclusivity agreement within a set time period.

 

On July 26, 2010, following receipt of a diligence request list from Company A, representatives of our management and Qatalyst held a diligence meeting with representatives of Company A at a hotel near Company A’s offices. In this meeting, the parties discussed technical, customer and market diligence but did not discuss Netezza’s valuation or a potential price at which Company A might be willing to acquire Netezza. On July 27, 2010, representatives of Qatalyst held a conference call with representatives of Company A to obtain an update from Company A on the status of its diligence.

 

On July 26 and July 27, 2010, Messrs. Baum and Colburn had further discussions regarding the proposed acquisition price and IBM’s related request for an exclusivity agreement. Following the discussion on July 27, 2010, IBM provided us with a proposed form of exclusivity agreement.

 

On July 27, 2010, the special committee held an update meeting. Mr. Baum summarized his recent discussions with Mr. Colburn and expressed his view, based on those discussions, that IBM was unlikely to agree to a cash acquisition price of $25.00 per share but may be willing to make a written offer to acquire Netezza for $23.00 per share, subject to the requirement that we enter into an exclusivity agreement with IBM. Mr. Baum provided a summary of management’s discussions and due diligence review with representatives of Company A and reported that Company A had indicated that it would inform Netezza within the next business day if it determined to proceed with discussions for a possible strategic transaction. Representatives of Qatalyst then discussed strategic considerations regarding discussions with IBM and Company A, including an assessment of the prospects of Company A continuing discussions with Netezza, and informed the special committee that each of Company B and Company C had informed Qatalyst that it was not interested in pursuing a strategic transaction with Netezza at that time. Mr. Baum then reviewed the terms of the exclusivity agreement proposed by IBM, and representatives of WilmerHale reviewed potential implications of entering into an exclusivity arrangement with IBM and the ability of the directors to satisfy their fiduciary duties relating to a strategic transaction. Following discussion, the special committee determined to convene a meeting of the full board of directors on July 29, 2010 to provide an update on discussions with Company A and to consider whether to authorize an exclusive negotiation process with IBM.

 

On July 28, 2010, representatives of Company A informed Qatalyst that it had not determined whether it wished to proceed with discussions for a possible strategic transaction with Netezza and that it would be difficult for Company A to obtain sufficient internal support to proceed with any such discussions.

Also on July 28, 2010, Mr. Baum called Mr. Colburn to further discuss a possible acquisition price. Messrs. Baum and Colburn also discussed the key terms of the proposed exclusivity agreement, and Mr. Baum indicated that the duration requested by IBM was unacceptable.

 

On July 29, 2010, our board of directors held a special meeting to discuss a possible strategic transaction with IBM and related matters. Mr. Baum updated the board on the status of discussions with IBM. Representatives of Qatalyst and Mr. Baum expressed their shared view that IBM was unlikely to agree to an acquisition price of $25.00 per share but may be willing to move forward with discussions to acquire Netezza for $23.00 per share. Representatives of Qatalyst also informed the board that each of Company B and Company C had informed Qatalyst that it was not interested in pursuing a strategic transaction with Netezza at that time. Following Mr. Baum’s summary of management’s discussions and due diligence review with representatives of Company A, the board discussed the likelihood that Company A would proceed with discussions for a possible strategic transaction with Netezza, including several factors that pointed towards hesitation on the part of Company A to move forward with such discussions, and determined that Company A was unlikely, or unable, to proceed at that time with a possible strategic transaction with Netezza. Representatives of Qatalyst and WilmerHale reviewed the terms of the exclusivity agreement proposed by IBM, including the restrictions on our ability to solicit or respond to competing proposals. Mr. Baum then led a discussion of the price at which Netezza would be prepared to proceed with exclusive discussions with IBM and the possibility that IBM would terminate discussions for the potential transaction in the absence of an exclusivity agreement. After further discussion, which included recognition that Qatalyst had already contacted, on behalf of Netezza, the parties that the board had determined were the most likely to be interested in pursuing a strategic transaction with Netezza and consideration of the possible effect on our stock price of our fiscal second quarter earnings announcement scheduled for August 26, 2010, the board authorized management to negotiate and enter into an exclusivity agreement with IBM regarding negotiations for a possible strategic transaction, provided that the acquisition price was at least $23.00 per share and the duration of the exclusivity period was acceptable. The board also authorized Qatalyst to contact Company A to attempt to determine whether Company A was interested in proceeding with a possible strategic transaction with Netezza at that time.

 

Between July 29 and August 3, 2010, we negotiated the acquisition price and other terms contained in the proposed exclusivity agreement with IBM.

 

On July 30, 2010, representatives of Qatalyst called a representative of Company A and left a voice message to obtain an update on whether Company A was interested in proceeding with discussions for a possible strategic transaction with Netezza. On August 2, 2010, a representative of Company A informed Qatalyst that it was not interested in proceeding with discussions for a possible strategic transaction with Netezza at that time. Later on August 2, 2010, Qatalyst informed Mr. Baum of Company A’s decision, and Mr. Baum informed the other members of our board of directors the next day.

 

On August 3, 2010, we and IBM entered into an agreement under which we agreed to negotiate exclusively with IBM with respect to a possible strategic transaction. This exclusivity was terminable by us on or after September 28, 2010 and subject to earlier termination if IBM were to reduce its offer below $23.00 per share. On August 2, 2010, the closing price of our common stock on the NYSE was $15.50 per share, and the average closing price of our common stock on the NYSE over the 90 and 60 trading day periods ending on August 2, 2010 was $13.76 per share and $13.87 per share, respectively.

 

Following receipt of a diligence request list from IBM on August 4, 2010, members of our management discussed the diligence process with representatives of IBM. Thereafter, and continuing until execution of the definitive merger agreement on September 19, 2010, IBM conducted legal, financial and business diligence on Netezza, including review of documents we placed in the electronic data room and in-person meetings between various representatives of Netezza and IBM held at a conference center in Waltham, Massachusetts on August 19, 20, 23 and 24, 2010.

 

From time to time between August 4 and September 1, 2010, Messrs. Baum and Colburn discussed the progress of due diligence and the issues that would need to be addressed before IBM would be willing to propose a definitive merger agreement for its possible acquisition of Netezza.

On August 25, 2010, at a regularly scheduled meeting of our board of directors, Mr. Baum updated the board on the status of IBM’s due diligence review of Netezza. Representatives of Qatalyst reported that Company A had informed Qatalyst on August 2, 2010 that it was not interested in pursuing a strategic transaction with Netezza at that time and confirmed that there had been no further communications from Company A, Company B or Company C regarding a possible strategic transaction with Netezza. Representatives of Qatalyst and WilmerHale then led a discussion of the timing and process for a possible strategic transaction with IBM, including due diligence, the negotiation of a merger agreement relating to the transaction and possible management retention discussions.

 

After the close of trading on August 26, 2010, we announced our financial results for our fiscal second quarter ended July 31, 2010 and updated our financial guidance for the full fiscal year. On August 27, 2010, the closing price of our common stock on the NYSE was $19.87 per share, compared to $14.92 per share on August 26, 2010.

 

On September 1, 2010, Cravath Swaine & Moore LLP, legal counsel to IBM, sent to WilmerHale an initial draft of a definitive merger agreement, and a representative of IBM called Mr. Baum to discuss executive employment and retention arrangements. Thereafter, we and IBM, and our respective legal counsel, negotiated the terms of the draft merger agreement and the executive employment and retention arrangements. On September 13, 2010, we authorized the retention, at our expense (not to exceed $20,000), of special employment counsel to advise our executives regarding the terms of the employment and retention arrangements offered to them by IBM.

 

On September 8, 2010, the special committee held a meeting to discuss the status of our potential acquisition by IBM. Mr. Baum provided an update on IBM’s continuing due diligence review. Representatives of WilmerHale reviewed the key terms of IBM’s draft merger agreement. Representatives of Qatalyst reviewed recent trading in our common stock, noting that it had traded above $20.00 per share for the past week and was now trading in the vicinity of $24.00 per share amid market speculation based on recent and anticipated takeover activity in our industry. Following discussions among the special committee members at the meeting and on the following day, the special committee instructed Mr. Baum to seek a price of $27.00 per share from IBM, reflecting the special committee’s assessment of Netezza’s prospects, intrinsic value and strategic value to IBM in the context of recent trading activity and acquisition activity in Netezza’s industry, and based on the expectation that IBM would address the remaining unresolved issues with the terms of the draft merger agreement.

 

On September 10, 2010, Mr. Baum called Mr. Colburn to communicate the special committee’s position. Mr. Colburn did not respond substantively during the call.

 

On September 13, 2010, Mr. Colburn called Mr. Baum to indicate that he was working toward an internal consensus within IBM on an acquisition price, on the assumption that negotiations would be concluded and the transaction announced by the morning of September 20, 2010.

 

On September 14, 2010, Messrs. Baum, Scannell and Colburn, together with legal counsel to Netezza and IBM, held a conference call to discuss certain unresolved issues with the terms of the draft merger agreement.

 

On September 15, 2010, Mr. Colburn called Mr. Baum to communicate that IBM would agree to a cash acquisition price of $27.00 per share.

 

On September 16, 2010, the special committee held a meeting to discuss the status of our potential acquisition by IBM. Mr. Baum provided an update on the status of negotiations with IBM. Representatives of WilmerHale summarized the significant unresolved issues in the current draft of the merger agreement and reviewed the fiduciary duties of the directors. The members of the special committee, along with representatives of WilmerHale and Qatalyst, then discussed IBM’s requirement of a provision that would obligate Netezza to submit the merger agreement for adoption by Netezza’s stockholders even if our board of directors had withdrawn its recommendation to our stockholders to adopt the merger agreement based upon receipt of a superior offer from a third party, and the amount of the termination fee payable by Netezza in the event that the merger agreement was terminated in specified circumstances. During this discussion, the representatives of Qatalyst expressed the view that these provisions would not, as a practical matter, prevent an interested third

party from submitting an offer to acquire Netezza that could lead to a superior proposal. Qatalyst’s representatives then reported to the board that Qatalyst had recently received an unsolicited communication from Company A indicating that Company A remained uninterested in pursuing a strategic transaction with Netezza and noted that, despite widespread market speculation relating to the possible takeover of Netezza, no inquiries or other indications of interest had been received from Company B or Company C or from any other parties potentially interested in a strategic transaction with Netezza. Following further discussion, the special committee determined that Netezza should seek to enter into a definitive merger agreement with IBM rather than to terminate exclusivity with IBM on September 28, 2010 and thereafter to attempt to obtain a higher price from Company A, Company B, Company C or another party. The special committee then directed Mr. Gyenes, on behalf of the special committee, to inform Mr. Colburn that Netezza was unwilling to proceed with a transaction on the presently proposed terms and to seek a reduction in the termination fee and, if possible, an increase in the price per share and/or further modification of the provision obligating Netezza to submit the merger agreement for adoption by Netezza’s stockholders even if our board of directors had withdrawn its recommendation to our stockholders to adopt the merger agreement based upon receipt of a superior offer from a third party so as to permit Netezza to terminate the merger agreement in such circumstances upon payment of a termination fee.

 

Later on September 16, 2010, Mr. Gyenes called Mr. Colburn to communicate the special committee’s position to Mr. Colburn. In response, Mr. Colburn indicated that IBM would not increase the price above $27.00 per share and would not make the requested modifications to the termination provisions of the merger agreement, but would be willing to further reduce the amount of the termination fee. Mr. Colburn emphasized that IBM had gone to great lengths to satisfy Netezza on the price and other transaction terms and that a further increase in the price, and any further deviations from the proposed termination provisions, would not be possible.

 

On September 17, 2010, the special committee held a meeting to receive an update on the status of the remaining unresolved points in the proposed merger agreement. Mr. Gyenes summarized his discussion with Mr. Colburn. Representatives of WilmerHale summarized the operation of the proposed provision that would obligate Netezza to submit the merger agreement for adoption by Netezza’s stockholders even if our board of directors had withdrawn its recommendation to our stockholders to adopt the merger agreement based upon receipt of a superior offer from a third party, and summarized the advice provided by Delaware special counsel regarding this provision and the amount of the termination fee. Representatives of Qatalyst then provided an analysis of the termination fees contained in similar public company acquisitions previously completed by IBM and in other similar transactions involving other acquirers. After discussion, the special committee instructed a representative of Qatalyst, on behalf of the special committee, to inform Mr. Colburn that the special committee was prepared to recommend to our board of directors that Netezza proceed with the transaction on the then proposed terms if a lower termination fee could be agreed upon.

 

Later on September 17, 2010, a representative of Qatalyst called Mr. Colburn. After negotiations, the Qatalyst representative (acting on the authorization of the special committee) and Mr. Colburn agreed on a termination fee of $56 million.

 

On September 19, 2010, our board of directors held a special meeting to consider and vote upon the proposed merger agreement with IBM, which had been previously distributed to the directors. Our management made a presentation regarding Netezza’s prospects as an independent company and the reasons for the merger. Representatives of WilmerHale reviewed the fiduciary duties of the directors and the terms of the proposed merger agreement. Representatives of Qatalyst summarized the process undertaken, prior to entering into the exclusivity agreement with IBM, to identify and solicit indications of interest from the parties most likely to be interested in pursuing a strategic transaction with Netezza. Qatalyst’s representatives reported to the board that Qatalyst had recently received an unsolicited communication from Company A indicating that Company A remained uninterested in pursuing a strategic transaction with Netezza and noted that, despite widespread market speculation relating to the possible takeover of Netezza, no inquiries or other indications of interest had been received from Company B or Company C or from any other parties potentially interested in a strategic transaction with Netezza. Representatives of Qatalyst then presented its financial analyses of the proposed merger and rendered to the board of directors its oral opinion, subsequently confirmed in writing as

of September 19, 2010 that, as of such date and based upon and subject to the various assumptions, limitations and qualifications set forth in its written opinion, the consideration to be received by the holders of shares of Netezza common stock, other than IBM or any affiliate of IBM, pursuant to the merger agreement was fair, from a financial point of view, to such holders. The full text of the opinion of Qatalyst, dated as of September 19, 2010, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Qatalyst in rendering its opinion, is attached as Annex B to this proxy statement. Discussion of the proposed transaction then ensued, during which the board took into account the fact that Netezza had pressed IBM to increase the merger consideration above $27.00 per share but that IBM had been unwilling to do so; the possibility that IBM might terminate discussions if Netezza continued to insist on an increase in the acquisition price; and the possibility that, if Netezza were not to combine with IBM at this time, IBM would acquire another company in the industry and, in such event, there would be less likelihood that IBM would be an interested acquirer of Netezza in the future. After further review and discussion, the special committee then recommended that the full board of directors approve the merger agreement and related matters, and our board of directors then resolved to approve the merger agreement and related matters and resolved to recommend that our stockholders adopt the merger agreement, which is attached as Annex A to this proxy statement.

 

Following the adjournment of the meeting of our board of directors on September 19, 2010, the parties signed the merger agreement. The signing of the merger agreement was publicly announced on September 20, 2010, prior to the opening of trading of our common stock on the NYSE.

 

At a meeting of our board of directors on September 19, 2010, our board of directors unanimously adopted, approved and declared advisable the merger agreement, the merger and the other transactions contemplated thereby, determined that the merger is in the best interests of Netezza and its stockholders and determined that the consideration to be paid to Netezza’s stockholders in the merger is fair to such stockholders. Our board of directors unanimously recommends that you vote “FOR” the adoption of the merger agreement and “FOR” the proposal to adjourn the special meeting to a later date, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes in favor of adoption of the merger agreement at the time of the special meeting.

 

In the course of reaching its decision to approve the merger agreement, to declare the merger agreement and the merger advisable and in the best interests of Netezza and its stockholders, to declare the consideration to be paid to Netezza’s stockholders in the merger fair to such stockholders and to recommend that Netezza’s stockholders vote to adopt the merger agreement, our board of directors consulted with our senior management and our financial advisor, Qatalyst. Our board of directors also consulted with outside legal counsel regarding its fiduciary duties and the terms of the merger agreement and related matters. The following discussion includes the material reasons and factors considered by our board of directors in making its recommendation, but is not, and is not intended to be, exhaustive:

 

Merger Consideration.  Our board of directors considered the following information with respect to the merger consideration to be received by Netezza’s stockholders:

 

 

 

Prospects in Remaining Independent.  Our board of directors considered the possibility of continuing to operate Netezza as an independent public company, including the perceived risks and uncertainties of remaining an independent public company. In considering the alternative of pursuing growth as an independent company, our board of directors considered the following factors:

 

 

Potential Alternative Acquisition by IBM.  Our board of directors considered the possibility that, if we were not to combine with IBM at this time, IBM would acquire another company in the industry and, in such event, there would be less likelihood that IBM would be an interested acquirer of us in the future.

 

Absence of Other Acquisition Interest.  Following receipt of the initial proposed terms for the merger from IBM, our board of directors, with the assistance of Qatalyst, considered other potential acquirers and solicited interest from other parties that were considered those most likely to be interested in a possible business combination with Netezza. In approving the proposed merger with IBM, our board of directors considered the fact that these inquiries did not result in any other proposals to acquire Netezza and the fact that, despite widespread market speculation relating to the possible takeover of Netezza prior to the announcement of the merger, no inquiries or other indications of interest had been received from the other parties initially contacted by Qatalyst at the instruction of our board of directors or from any other parties potentially interested in acquiring Netezza.

 

Opinion of Qatalyst.  Our board of directors considered the financial analyses presented by representatives of Qatalyst, as well as the opinion of Qatalyst as of September 19, 2010 that, as of the date of the opinion, and subject to and based upon the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken in such opinion, the consideration to be received by the holders of shares of Netezza common stock, other than IBM or any affiliate of IBM, pursuant to the merger agreement was fair, from a financial point of view, to such holders, as more fully described below in the section entitled “— Opinion of Netezza’s Financial Advisor” beginning on page 26.

 

Financial Forecasts.  Our board of directors considered the financial forecasts prepared by our management and summarized below under “— Financial Forecasts” beginning on page 31. These financial forecasts, which form a part of the Netezza Projections described below in the section entitled “— Opinion of Netezza’s Financial Advisor” beginning on page 26, were also provided to Qatalyst for purposes of its analyses and the opinion described in the preceding paragraph.

Terms of the Merger Agreement.  Our board of directors considered the terms and conditions of the merger agreement and the course of negotiations thereof, including:

 

 

In the course of its deliberations, our board of directors also considered a variety of risks and factors weighing against the merger, including:

 

Risks of Announcement and Closing.  Our board of directors considered:

 

 

Limitations on Netezza’s Business.  Our board of directors considered the potential limitations on Netezza’s pursuit of business opportunities due to pre-closing covenants in the merger agreement whereby Netezza agreed that it will carry on its business in the ordinary course of business consistent with past practice, and subject to specified exceptions, will not take certain actions related to the conduct of its business without the prior written consent of IBM.

Cash Transaction.  Our board of directors considered that the merger consideration is cash and, as a result, our stockholders will forego any potential future increase in our value that might result from our possible growth, and that income realized as a result of the merger generally will be taxable to our stockholders.

 

Possibility of Alternative Acquirers.  Our board of directors considered the possibility that the $56 million termination fee payable to IBM under the circumstances set forth in the merger agreement and the provision that would obligate Netezza to submit the merger agreement for adoption by Netezza’s stockholders even if our board of directors withdraws its recommendation to our stockholders to adopt the merger agreement based upon receipt of a superior offer from a third party might discourage a competing proposal to acquire Netezza or reduce the price of any such proposal, and concluded that they would not.

 

Interests of Directors and Officers.  Our board of directors considered the interests that certain of our directors and executive officers may have with respect to the merger in addition to their interests as Netezza stockholders generally, as are described in “— Interests of Netezza’s Executive Officers and Directors in the Merger” on page 33.

 

The foregoing discussion is not intended to be exhaustive, but we believe it addresses the material information and principal factors considered by our board of directors in its consideration of the merger.

 

In light of the variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, our board of directors did not find it practicable to, and did not, quantify or otherwise attempt to assign relative weights to the various factors considered in reaching its determination, and individual directors may have given different weight to different factors. In addition, except as specifically noted above, our board of directors did not reach any specific conclusion with respect to any of the factors or reasons considered. Instead, our board of directors conducted an overall analysis of the factors and reasons described above and determined that, in the aggregate, the potential benefits considered outweighed the potential risks or possible negative consequences of approving the merger agreement and accordingly recommends that our stockholders vote “FOR” the adoption of the merger agreement.

 

Netezza retained Qatalyst to act as its financial advisor in connection with a potential strategic transaction. Netezza selected Qatalyst based on Qatalyst’s qualifications, expertise, reputation and knowledge of the business and affairs of Netezza and the industry in which it operates. As financial advisor to Netezza, on September 19, 2010, Qatalyst rendered to our board of directors its written opinion that, as of that date and based upon and subject to the various assumptions, limitations and qualifications set forth in its written opinion, the consideration to be received by the holders of shares of Netezza common stock, other than IBM or any affiliate of IBM, pursuant to the merger agreement was fair, from a financial point of view, to such holders.

 

The full text of Qatalyst’s written opinion, dated September 19, 2010, to our board of directors is attached to this proxy statement as Annex B and is incorporated into this proxy statement by reference. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Qatalyst in rendering its opinion. You should read the entire opinion carefully in its entirety. Qatalyst’s opinion was provided to our board of directors and addressed only the fairness, as of the date of the opinion and from a financial point of view, of the consideration to be received by the holders of shares of Netezza common stock, other than IBM or any affiliate of IBM, pursuant to the merger agreement. It does not address any other aspect of the merger and does not constitute a recommendation to any stockholder of Netezza as to how to vote or act on any other matter and does not in any manner address the prices at which Netezza common stock will trade at any time. The summary of Qatalyst’s opinion set forth below is qualified in its entirety by reference to the full text of the opinion.

 

In arriving at its opinion, Qatalyst reviewed the merger agreement and certain publicly available financial statements and other business and financial information of Netezza. Qatalyst also reviewed certain financial projections and operating data prepared by the management of Netezza for the fiscal years ending January 31,

2011, 2012 and 2013, and at the request of Qatalyst, management of Netezza provided certain financial projections for the fiscal years ending January 31, 2014, 2015 and 2016 of Netezza, all of which are collectively referred to as the “Netezza Projections.” Additionally, Qatalyst discussed the past and current operations and financial condition and the prospects of Netezza with senior executives of Netezza. Qatalyst also reviewed the historical market prices and trading activity for Netezza common stock and compared the financial performance of Netezza and the prices and trading activity of Netezza common stock with that of certain other publicly traded companies comparable with Netezza and its securities. In addition, Qatalyst reviewed the financial terms, to the extent publicly available, of selected acquisition transactions and performed such other analyses, reviewed such other information and considered such other factors as it deemed appropriate.

 

In arriving at its opinion, Qatalyst assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to, or discussed with, it by Netezza. With respect to the Netezza Projections, Qatalyst was advised by the management of Netezza, and Qatalyst assumed, that the Netezza Projections had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Netezza of the future financial performance of Netezza and other matters covered thereby. Qatalyst assumed that the merger would be consummated in accordance with the terms set forth in the merger agreement, without any modification or delay. In addition, Qatalyst assumed that in connection with the receipt of all the necessary approvals of the proposed merger, no delays, limitations, conditions or restrictions would be imposed that could have an adverse effect on Netezza or the contemplated benefits expected to be derived in the proposed merger. Qatalyst did not make any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Netezza, nor was it furnished with any such evaluation or appraisal. In addition, Qatalyst relied, without independent verification, upon the assessments of the management of Netezza as to the existing and future technology and products of Netezza and the risks associated with such technology and products.

 

Qatalyst’s opinion was approved by its opinion committee in accordance with its customary practice. Qatalyst’s opinion does not constitute a recommendation as to how any holder of shares of Netezza common stock should vote with respect to the merger or any other matter and does not in any manner address the prices at which Netezza common stock will trade at any time.

 

Qatalyst’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, the date the opinion was rendered. Events occurring after the date of the opinion may affect Qatalyst’s opinion and the assumptions used in preparing it, and Qatalyst has not assumed any obligation to update, revise or reaffirm its opinion. Qatalyst’s opinion did not address the underlying business decision of Netezza to engage in the merger, or the relative merits of the merger as compared to any strategic alternatives that may have been available to Netezza. Qatalyst’s opinion was limited to the fairness, from a financial point of view, of the consideration to be received by the holders of shares of Netezza common stock, other than IBM or any affiliate of IBM, pursuant to the merger agreement, and Qatalyst expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of Netezza’s officers, directors or employees, or any class of such persons, relative to such consideration.

 

In accordance with customary investment banking practice, Qatalyst employed generally accepted valuation methods in reaching its opinion. The following is a summary of the material financial analyses undertaken by Qatalyst in connection with rendering its opinion dated September 19, 2010. The analyses described below must be considered as a whole; considering any portion of such analyses and of the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Qatalyst’s opinion. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by Qatalyst, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Qatalyst’s financial analyses.

In performing its analysis of Netezza, Qatalyst relied upon, among other things, certain publicly available Wall Street analyst estimates for Netezza (the “Street Projections,”) and the Netezza Projections, provided to Qatalyst by management, and reviewed and discussed with our board of directors for use in connection with its evaluation of the merger (and Qatalyst’s performance of its analysis and rendering of its opinion in connection with the merger). Netezza does not publicly disclose internal management projections of the type provided to our board of directors and Qatalyst in connection with our board of directors’ and Qatalyst’s analysis of the merger, and such projections were prepared in connection with the merger and were not prepared with a view toward public disclosure. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections.

 

Illustrative Discounted Cash Flow Analysis.  Qatalyst performed an illustrative discounted cash flow analysis, which is designed to imply a potential value of a company by calculating the net present value of estimated future cash flows of the company. Qatalyst calculated ranges of implied equity values per share for Netezza based on discounted cash flow analyses utilizing the Netezza Projections for the second half of fiscal year 2011 through fiscal year 2016. Qatalyst calculated the net present value of unlevered free cash flows for Netezza for the second half of fiscal year 2011 through fiscal year 2015 and calculated the terminal value at the end of fiscal year 2015 by applying a range of multiples of 15.0x to 25.0x to Netezza’s estimated fiscal year 2016 net operating profits after taxes. These terminal values were then discounted to present values using weighted average costs of capital ranging from 10.0% to 14.0%. Qatalyst then applied a dilution factor of 8.8% to illustrate the net dilution to current stockholders due to the net effect of projected future equity compensation grants by Netezza. Based on the calculations set forth above, this analysis implied a range for Netezza common stock of approximately $14.95 to $25.28 per share.

 

Selected Companies Analysis.  Qatalyst compared selected financial information and public markets multiples for Netezza with publicly available information and public market multiples for selected high growth systems companies and data management companies. The companies used in this comparison included those companies listed below and were selected because they are publicly traded companies with operating or financial characteristics that, for purposes of this analysis, may have similarities with Netezza:

 

High Growth Systems Companies:

 

 

Data Management Companies:

 

 

Based upon equity research analyst consensus estimates for calendar year 2011 of $0.47 earnings per share and using the closing prices as of August 13, 2010 (the last trading day before the announcement that 3PAR Inc. had entered a definitive agreement to be acquired by Dell Inc. for $18.00 per share) and as of

September 17, 2010 for shares of the selected companies, Qatalyst calculated the price per share as a multiple of the estimated earnings per share for each of the selected companies (the “CY11E P/E Multiples”).

 

Below is a summary of the median CY11E P/E Multiples of the selected companies:

 

 

Based on the analysis of the CY11E P/E Multiples for selected companies noted above (giving greater weight to the companies Qatalyst deemed to be more relevant due to, among other things, their profitability and growth characteristics), Qatalyst selected a representative CY11E P/E Multiples range of 30.0x to 40.0x for the selected companies and applied this range to Netezza’s estimated calendar year 2011 earnings per share based on the Netezza Projections and the Street Projections. Based on the calculations set forth above, this analysis implied a range for Netezza common stock of approximately $17.70 to $23.60 based on the Netezza Projections, and approximately $13.99 to $18.65 based on the Street Projections.

 

No company included in the selected company analysis is identical to Netezza. In evaluating the selected companies, Qatalyst made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters. Many of these matters are beyond the control of Netezza, such as the impact of competition on the business of Netezza and the industry in general, industry growth and the absence of any material adverse change in the financial condition and prospects of Netezza or the industry or in the financial markets in general. Mathematical analysis, such as determining the arithmetic mean or median, or the high or low, is not in itself a meaningful method of using selected company data.

 

Selected Transaction Analysis.  Qatalyst compared the multiples paid in 17 transactions from March 2005 through September 2010 involving public and private data management companies and high growth systems companies with a transaction value in excess of $1.0 billion. These transactions are listed below:

 

For each of the transactions listed above, where available, Qatalyst reviewed, among other things, the following ratios:

 

 

Below is a summary of the mean and median of the multiples for the selected transactions:

 

 

Based on the analysis of the relevant metrics for selected transactions noted above (giving greater weight to certain of the transactions noted above that Qatalyst considered to be more comparable to the proposed merger), Qatalyst selected a representative Price/NTM EPS Multiples range of 45.0x to 75.0x and a representative EV/NTM Revenue Multiples range of 5.0x to 6.0x for the transactions and applied these ranges of multiples to the relevant Netezza financial metric. Based on the calculations set forth above, this analysis implied a range for Netezza common stock of approximately $14.85 to $24.75 utilizing the Price/NTM EPS Multiples based on Street Projections of $0.33 per share, and approximately $20.86 to $24.46 utilizing the EV/NTM Revenue Multiples based on Street Projections of $263 million.

 

No company or transaction utilized in the selected transactions analysis is identical to Netezza or the Merger. In evaluating the selected transactions, Qatalyst made judgments and assumptions with regard to general business, market and financial conditions and other matters, many of which are beyond the control of Netezza, such as the impact of competition on the business of Netezza or the industry generally, industry growth and the absence of any adverse material change in the financial condition of Netezza or the industry or in the financial markets in general, which could affect the public trading value of the companies and the aggregate value of the transactions to which they are being compared.

 

  Miscellaneous

 

In connection with the review of the merger by our board of directors, Qatalyst performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Qatalyst considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Qatalyst believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Qatalyst may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Qatalyst’s view of the actual value of Netezza. In performing its analyses, Qatalyst made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Netezza. Any estimates contained in Qatalyst’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

 

Qatalyst conducted the analyses described above solely as part of its analysis of the fairness, from a financial point of view, of the consideration to be received by the holders of shares of Netezza common stock, other than IBM or any affiliate of IBM, pursuant to the merger agreement, and in connection with the rendering of its opinion to our board of directors. These analyses do not purport to be appraisals or to reflect the prices at which shares of Netezza common stock might actually trade.

 

Qatalyst’s opinion, including its presentation to our board of directors, was one of many factors taken into consideration by our board of directors in deciding to approve the merger agreement. Consequently, the

analyses as described above should not be viewed as determinative of the opinion of our board of directors with respect to the merger consideration or of whether our board of directors would have been willing to agree to a different merger consideration. The merger consideration was determined through arm’s-length negotiations between Netezza and IBM and was approved by our board of directors. Qatalyst provided advice to Netezza during these negotiations. Qatalyst did not, however, recommend any specific merger consideration to Netezza or that any specific merger consideration constituted the only appropriate consideration for the merger.

 

Qatalyst provides investment banking and other services to a wide range of corporations and individuals, domestically and offshore, from which conflicting interests or duties may arise. In the ordinary course of these activities, affiliates of Qatalyst may at any time hold long or short positions, and may trade or otherwise effect transactions in debt or equity securities or loans of Netezza, IBM or their respective affiliates. During the two-year period prior to the date of Qatalyst’s opinion, no material relationship existed between Qatalyst and its affiliates and Netezza or IBM pursuant to which Netezza or IBM provided compensation to Qatalyst or its affiliates; however Qatalyst and its affiliates may in the future provide investment banking and other financial services to Netezza or IBM and their respective affiliates for which it would expect to receive compensation.

 

Under the terms of its engagement letter, Qatalyst provided Netezza with financial advisory services in connection with the transaction. Pursuant to the engagement letter, Netezza has agreed to pay Qatalyst, upon closing of the transaction, a transaction fee that is expected to be approximately $17.0 million based on the aggregate value of the transaction at announcement. The transaction fee is contingent upon the consummation of the proposed merger and is payable at the time of the closing of the merger. The engagement letter also provides that Qatalyst will receive a $2.25 million fee, of which $250,000 is payable upon execution of the engagement letter and the remainder is payable upon rendering its opinion to the Netezza board of directors and which is not contingent on the consummation of the proposed merger but will be fully credited against the transaction fee if the merger is completed. Netezza has also agreed to reimburse Qatalyst for its expenses incurred in performing its services. In addition, Netezza has agreed to indemnify Qatalyst and its affiliates, their respective members, directors, officers, partners, agents and employees and any person controlling Qatalyst or any of its affiliates against certain liabilities and expenses related to or arising out of Qatalyst’s engagement.

 

Our management made available to IBM certain non-public business and financial information about Netezza as a stand-alone company, including financial forecasts for the fiscal years ending January 31, 2011, 2012, and 2013. These forecasts did not give effect to the merger. The financial forecasts were based on numerous assumptions made by our management, including assumed annual growth rates with respect to product revenue, assumed annual renewal rates with respect to maintenance contracts and assumed rates of our product and service margins.

 

The adjustments to net income and diluted earnings per share in the forecasts excluded all stock-based compensation expense. Adjusted net income and adjusted diluted earnings per share are non-GAAP measures that are used by management as supplemental financial measurements to evaluate our operational trends and should not be considered as alternatives to net income or diluted earnings per share as indicators of our operating performance. Adjusted net income and adjusted diluted earnings per share are not defined under GAAP and, accordingly, they may not be comparable measurements to those used by other companies.

A summary of the financial forecasts for Netezza’s 2011 through 2013 fiscal years made available to IBM is as follows:

 

 

Netezza’s financial forecasts presented above were reviewed with our board of directors and were used by Qatalyst in connection with its financial analysis of the merger consideration.

 

In conjunction with its role as our financial advisor, Qatalyst reviewed and discussed with us our management’s financial forecasts summarized above for the fiscal years ending January 31, 2011, 2012 and 2013, including an update of our Adjusted Diluted Earnings Per Share for the fiscal year ending January 31, 2011 to $0.38, based on our actual second quarter financial results. At the request of Qatalyst, our management also provided unlevered free cash flow forecasts for the second half of the fiscal year ending January 31, 2011 and for the fiscal years ending January 31, 2012 and 2013, as well as certain financial forecasts for the fiscal years ending January 31, 2014, 2015 and 2016. These forecasts, which form a part of the Netezza Projections described below in the section entitled “— Opinion of Netezza’s Financial Advisor” beginning on page 26, were then used by Qatalyst in connection with its financial analysis of the merger consideration as described above but were not made available to IBM. A summary of the resulting financial forecasts for Netezza’s fiscal years ending January 31, 2014, 2015 and 2016 is as follows:

 

 

Forecasted unlevered free cash flows were negative $5 million for the second half of the fiscal year ending January 31, 2011, $26 million for the fiscal year ending January 31, 2012 and $41 million for the fiscal year ending January 31, 2013.

 

The financial forecasts shown above are included in this proxy statement to provide our stockholders access to certain nonpublic information considered by our board of directors during its evaluation of the merger, provided to Qatalyst in connection with its opinion to our board of directors, as more fully described in the section entitled ‘‘— Opinion of Netezza’s Financial Advisor” beginning on page 26, and provided to IBM for the purpose of allowing it to evaluate the merger. The inclusion of this information should not be regarded as an indication to any stockholder that our board of directors or any other recipient of this information considered, or now considers, it to be predictive of actual future results, and they should not be relied on as such. The forecasts reflect numerous estimates and assumptions with respect to industry performance, general business, economic, regulatory, market and financial conditions, as well as matters specific to our business, all of which are difficult to predict and many of which are beyond our control. As a result, there can be no assurance that the forecasted results will be realized or that actual results will not be significantly higher or lower than such forecasts. As the forecasts cover multiple years, such information by its nature becomes less predictive with each successive year. Also, the economic and business environments can and do change quickly, which adds a significant level of unpredictability, unreliability and execution risk. These factors create significant doubt as to whether the forecasts for fiscal years 2011 and beyond are likely to be achieved. As a result, the forecasts are not necessarily indicative of future results. In addition, our management prepared the forecasts prior to the execution of the merger agreement and, accordingly, the

forecasts do not reflect the effects of the merger, which may cause results to differ materially. Accordingly, readers of this proxy statement are cautioned not to place undue reliance on the financial forecasts.

 

The financial forecasts stated above were prepared for internal use in connection with the merger and not with a view toward public disclosure or toward complying with generally accepted accounting principles in the United States, or GAAP, the published guidelines of the Securities and Exchange Commission regarding forecasts or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The forecasts included in this proxy statement were prepared by, and are the responsibility of, our management. We do not assume any responsibility to update these forecasts. Neither our independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the financial forecasts contained herein, nor have they expressed any opinion or any other form of assurance on such forecasts or their achievability, and assume no responsibility for, and disclaim any association with, the financial forecasts. Furthermore, the financial forecasts do not take into account any circumstances or events occurring after the date the forecasts were prepared that were unforeseen by our management at the time of preparation. We have made publicly available our actual results of operations for the quarter ended July 31, 2010. Our stockholders should review our Quarterly Report on Form 10-Q for the quarter ended July 31, 2010 to obtain this information. See “Where You Can Find More Information” on page 67.

 

None of Netezza or our affiliates, advisors, officers, directors or representatives has made or makes any representation to any stockholder or other person regarding the ultimate performance of Netezza compared to the information contained in the forecasts or that forecasted results will be achieved.

 

BY INCLUDING IN THIS PROXY STATEMENT A SUMMARY OF ITS INTERNAL FINANCIAL FORECASTS, NETEZZA UNDERTAKES NO OBLIGATIONS TO UPDATE, OR PUBLICLY DISCLOSE ANY UPDATE TO, THESE FINANCIAL FORECASTS TO REFLECT CIRCUMSTANCES OR EVENTS, INCLUDING UNANTICIPATED EVENTS, THAT MAY HAVE OCCURRED OR THAT MAY OCCUR AFTER THE PREPARATION OF THESE FORECASTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE FINANCIAL FORECASTS ARE SHOWN TO BE IN ERROR OR CHANGE.

 

When considering the recommendation of our board of directors, you should be aware that members of our board of directors and our executive officers have interests in the merger in addition to their interests as Netezza stockholders generally, pursuant to certain arrangements between such directors and executive officers and Netezza and, in the case of certain of our executive officers, pursuant to employment arrangements with IBM effective as of the closing of the merger. These interests are described below and may be different from, or in conflict with, your interests as a Netezza stockholder. The members of our board of directors were aware of the material facts as to these additional interests, and considered them, when they approved the merger agreement.

 

Overview

 

Prior to our entering into the merger agreement, each of our executive officers was party to an executive retention agreement with Netezza pursuant to which each executive officer would be entitled, subject to the execution of a release, to certain payments and benefits (as described below) in the event of a termination of such executive officer’s employment by Netezza or its successor without “cause” or by the executive officer for “good reason,” each following a “change in control” (each such term as defined in the executive retention agreements). The merger will constitute a change-in-control and IBM will constitute Netezza’s successor under each executive retention agreement.

 

Each of Messrs. James Baum, David Flaxman, Patrick J. Scannell, Jr., Ray Tacoma and Ms. Patricia Cotter have entered into employment arrangements with IBM, effective upon the closing of the merger. These employment arrangements will supersede and replace the executive retention agreements, and the executive officers will not be entitled to any of the benefits provided under such agreements.

The employment arrangements with IBM will be effective upon the closing of the merger and will provide certain retention or severance payments and equity compensation benefits to such executive officers. Mr. Scannell’s employment arrangement with IBM provides for certain transition compensation and preserves his acceleration of one year’s vesting of equity compensation as a result of the merger.

 

In addition, Messrs. Baum, Scannell and Tacoma have entered into new non-competition and non-solicitation agreements with IBM that, effective upon the closing of the merger, will supersede and replace the non-competition and non-solicitation arrangements with Netezza by which they are currently bound. Mr. Flaxman and Ms. Cotter will continue to be bound by their current non-competition and non-solicitation arrangements, as well as by restrictive covenant obligations under IBM’s customary arrangements with each of its employees.

 

Our non-employee directors and certain of our executive officers are entitled to certain other payments and benefits in connection with the merger, as described below in “Other Compensation and Benefit Arrangements.”

 

Under the terms of the merger agreement, all unvested options under the 2000 stock incentive plan will vest in full upon closing of the merger. Under the terms of the award agreements granted under the 2007 stock incentive plan, the executive officers other than Mr. Flaxman will receive one year’s accelerated vesting of any unvested options or time-based RSUs. Mr. Flaxman has waived his right to such acceleration of awards granted under the 2007 stock incentive plan; accordingly, such awards will continue to vest according to their original vesting schedule. The March 2010 performance-based RSUs received by Messrs. Baum, Flaxman, Scannell and Tacoma and Ms. Cotter will be converted as described below under “— Treatment of Restricted Stock Units Outstanding Under Our Stock Plans” beginning on page 44.

 

Netezza Executive Retention Agreements

 

Agreements with Executives

 

In March 2007, we entered into executive retention agreements with each of Messrs. Baum, Scannell and Tacoma and Ms. Cotter, and in November 2009, we entered into an executive retention agreement with Mr. Flaxman. Under these agreements, if the executive officer’s employment is terminated, and in the case of Mr. Flaxman his employment is terminated following a “change in control” (as defined in his agreement) of Netezza, by Netezza without “cause” or by the executive officer for “good reason,” then the executive officer would receive for a one-year period following termination of employment:

 

 

In addition, under the executive retention agreements if, following a “change in control” (as defined in the agreements) of our company, the executive’s employment is terminated by the acquiring company without cause or by the executive for good reason, all outstanding stock options, restricted stock or similar equity awards held by him or her will become vested in full.

 

The merger will constitute a change in control and IBM will constitute our successor under the executive retention agreements.

 

IBM Employment Arrangements

 

Each of Messrs. Baum, Flaxman, Scannell and Tacoma and Ms. Patricia Cotter has entered into an employment arrangement with IBM that is conditioned upon the closing of the merger and the executive officer’s continued employment with Netezza through the closing of the merger. Upon closing of the merger and the effectiveness of these employment arrangements, the executive retention agreements entered into between Netezza and these executive officers will terminate, and the executive officers will no longer be entitled to any payments or benefits under such agreements. In addition, Mr. Flaxman will not be entitled to

any extra acceleration of vesting of equity-based awards under the generally applicable terms of the option and RSU awards granted under our 2007 stock incentive plan as a result of the merger. Each executive officer’s employment by IBM will be “at will” and may be terminated at any time for any reason, subject to the obligations described below and applicable law.

 

Salary.  The employment arrangements between IBM and each of Messrs. Baum, Flaxman and Tacoma and Ms. Cotter provide that the base salary and cash incentives that each executive officer will be entitled to receive from IBM upon their transition to the IBM payroll (their “IBM Hire Date”) will be the same as the base salary and cash incentives that each was entitled to receive from Netezza prior to their IBM Hire Date. Upon the IBM Hire Date, their salaries and cash incentives will be determined under IBM’s normal procedures but will not be set below the current levels of base salary and target incentives during their respective two-year (three-year for Mr. Flaxman) retention periods established by the retention payments described in Retention Program below. The transition arrangement between IBM and Mr. Scannell provides for a cashout of certain incentives earned through the IBM Hire Date and an increased salary beginning on his IBM Hire Date to account for his ceasing to participate in a current cash incentive program. Under their employment arrangements with IBM, the executive officers initially will receive the following annual base salaries: Mr. Baum — $400,000; Ms. Cotter — $215,000; Mr. Flaxman — $285,000; Mr. Scannell — $300,000, increasing to $480,000 on his IBM Hire Date; and Mr. Tacoma — $275,000.

 

Treatment of Netezza Equity Awards.  The employment and transition arrangements between IBM and each of the executive officers provide for acceleration of equity-based awards that is no more favorable than the acceleration provided under the merger agreement, option and RSU award agreements and the executive retention agreements. Pursuant to such employment arrangements, upon the closing of the merger, each executive officer will receive full accelerated vesting of his or her then unvested options granted under the 2000 stock incentive plan, one year’s (20%) accelerated vesting of such executive officer’s then unvested options granted under the 2007 stock incentive plan, and the remaining portion of such executive officer’s then unvested options will be converted into options to acquire IBM stock and will continue to vest in accordance with such options’ original vesting schedules, shortened by one year. In addition, pursuant to these employment arrangements, upon the closing of the merger, each executive officer will receive one year’s (25%) accelerated vesting of his or her then unvested RSUs (other than performance-based RSUs), and the portions of his or her then unvested RSUs will be converted into the right to receive shares of IBM common stock on each subsequent vesting date of the RSUs. Mr. Flaxman has waived such acceleration with respect to his options and RSUs granted under the 2007 stock incentive plan; accordingly, these awards will continue on their regular vesting schedule. The general treatment of options and RSUs in the merger, including options and RSUs held by our executive officers, is described below under “— Treatment of Options Outstanding Under Our Stock Plans” and “— Treatment of Restricted Stock Units Outstanding Under Our Stock Plans” beginning on page 44.

 

Subject to the execution of IBM’s standard release of claims, if an executive officer’s employment is terminated by IBM without “cause” or resigns for “good reason” (each such term as defined in the executive officer’s employment arrangement with IBM) any options and RSUs held by such executive officer that are unvested as of such termination will vest in full as of such termination. If an executive officer’s employment terminates for any reason other than by IBM without “cause” or by the executive officer for “good reason,” such executive officer will forfeit any unvested options and RSUs. In addition, with respect to Mr. Scannell, any options or RSUs that remain unvested as of the six-month anniversary of the closing of the merger will vest or be paid in full as of such date, subject to the satisfaction of the performance milestones specified in his transition arrangement.

 

Retention Program.  Under the terms of the employment arrangements between IBM and each of Messrs. Baum, Flaxman and Tacoma and Ms. Cotter, each such executive officer will be entitled to participate in a retention program pursuant to which each such executive officer will be eligible to receive cash payments following each of four six-month milestone periods through the second anniversary (or, for Mr. Flaxman, six six-month milestones and the third anniversary) of the closing of the merger, subject to continued employment through the applicable payment dates and the achievement of specified milestones set forth in the employment arrangements. The following are the maximum aggregate amounts payable pursuant to this retention program:

Mr. Baum — $3,000,000; Ms. Cotter — $500,000; Mr. Flaxman — $875,000; and Mr. Tacoma — $2,000,000. If the employment of any of the executive officers is terminated by IBM without “cause” (as defined in the executive officer’s employment arrangement with IBM) or as a result of the executive officer’s death or “disability” (as determined by IBM) prior to the second (or, for Mr. Flaxman, third) anniversary of the closing of the merger, the executive officer will be entitled to receive the retention payment for the then-applicable six-month milestone period, subject to the execution of IBM’s standard release of claims.

 

Transition Program.  Under the terms of the transition arrangement between IBM and Mr. Scannell, Mr. Scannell will be entitled to participate in a transition program pursuant to which he will be entitled to receive a cash payment equal to up to $408,250 on the six-month anniversary of the closing of the merger, subject to continued employment through the applicable payment date and the achievement of specified performance milestones set forth in his transition arrangement. If Mr. Scannell’s employment is terminated by IBM without “cause” or as a result of his death or “disability” (as determined by IBM) prior to the six-month anniversary of the closing of the merger, he will be entitled to the full amount of his cash payment under the transition program, subject to the execution of IBM’s standard release of claims.

 

In each of these employment arrangements, “Good Reason” is defined as without the executive officer’s consent, (1) a material reduction (i.e., at least 15 percent) in his or her annual base salary as in effect on the date of the employment arrangements or (2) a relocation of the executive officer’s principal place of employment at least 30 miles farther away from his or her residence as of the effective date of the employment arrangements.

 

Non-Competition Agreements

 

Each of Messrs. Baum, Scannell and Tacoma has executed a related noncompetition agreement, which provides that following the closing of the merger and the executive officer’s termination of employment with IBM, the executive officer will be subject to lengthened restrictive covenants that generally prohibit the executive officer, in any capacity, directly or indirectly, from participating or engaging in business with respect to designing, developing, testing, integrating, distributing, delivering, providing, marketing, licensing or selling software, hardware, technology, or services (including but not limited to consulting services) to facilitate relational database, database acceleration, database compression, data warehousing, advanced analytics and/or analytic databases, in-database applications, integrated business appliances, geospatial database and/or analytics. The noncompetition periods run during each such executive officer’s employment with IBM or its subsidiaries or affiliates and for a specified time period thereafter. Each noncompetition agreement also includes restrictions on solicitation of clients, customers, employees and independent contractors and certain no-hire restrictions during the effectiveness of the noncompetition provisions. This agreement supplements and takes precedence over but does not supersede the restrictive covenants contained in the executive’s current arrangements with Netezza and IBM.

 

Each of Ms. Cotter and Mr. Flaxman will continue to be bound by the terms of his or her existing noncompetition agreement with Netezza, each of which provides for restrictions during the one-year period after his or her employment ends.

 

Each executive officer will also enter into IBM’s customary restrictive covenant agreements, effective upon each executive officer’s IBM Hire Date.

 

Other Compensation and Benefit Arrangements

 

Treatment of Certain Performance-Based Restricted Stock Units

 

Messrs. Baum, Flaxman, Scannell and Tacoma and Ms. Cotter received performance-based RSUs in March 2010. The merger agreement provides that the shares subject to such RSUs will be determined using an assumed adjusted operating income result at 143% of target and an assumed revenue result (for the full fiscal year) of 150% of target and then converted into RSUs with respect to IBM common stock; however, the converted RSUs will provide that the revenue component (and the resulting number of converted RSUs paid

out) can be adjusted downwards after January 31, 2011 based on actual revenue for the full fiscal year but not below the number due at 100% of target.

 

Treatment of Equity Awards Held by Our Non-Employee Directors

 

The merger agreement provides that all stock options, RSUs and restricted stock, whether vested or unvested, held by our non-employee directors will be cashed out in the merger as though fully vested. The general treatment of options and RSUs in the merger, including such awards held by our directors, is described below under “— Treatment of Options Outstanding Under Our Stock Plans” and “— Treatment of Restricted Stock Units Outstanding Under Our Stock Plans” beginning on page 44.

 

Compensation Summary

 

The following table sets forth the following cash compensation for each of our executive officers:

 

 

 

The table below sets forth, as of September 27, 2010, for each of our directors and executive officers, the number of stock options with vesting that will accelerate, pursuant to the terms of the executive officer’s award agreements and employment arrangement with IBM, in the case of persons listed below other than non-employee directors, at the closing of the merger and the dollar value of such accelerated stock options, as well as the number of all vested and unvested stock options held (including stock options with vesting that will accelerate at the closing of the merger) and the dollar value of all such vested and unvested stock options held. The table below does not take into account any additional acceleration of vesting of options that could occur upon termination of employment under specified circumstances pursuant to the employment arrangements with IBM.

 

 

 

 

The table below sets forth, as of September 27, 2010, for each of our directors and executive officers, the number of RSUs with vesting accelerating, pursuant to the terms of the executive officer’s employment arrangement with IBM, in the case of persons listed below other than non-employee directors, at the closing of the merger and the dollar value of such RSUs, as well as the number of all RSUs held (inclusive of those vesting at the closing of the merger) and the dollar value of all such RSUs held. The table below does not take into account any additional acceleration of vesting of RSUs that could occur upon termination of employment under certain specified circumstances pursuant to the employment arrangements with IBM nor the value of the performance-based RSUs from March 2010.

 

 

 

 

The table below sets forth, as of September 27, 2010, for each of our directors, the number of shares of restricted stock whose vesting will accelerate at the closing of the merger and the dollar value of such shares. No executive officers hold unvested shares of restricted stock.

 

 

 

 

Since the announcement of the merger, we and our directors were named as defendants in four putative class actions brought by Netezza stockholders. The first, which names IBM as an additional defendant, was filed on September 21, 2010, in the Court of Chancery of the State of Delaware and is captioned Anthony Kolton v. Netezza Corporation, et al., C.A. No, 5836. The second, which names us, certain of our directors, certain of our officers and IBM as defendants, was filed on September 22, 2010, in the Middlesex Superior Court of the

Commonwealth of Massachusetts and is captioned Adam Walker v. Netezza Corporation, et al., C.A. No. 10-3583. The third, which names us, our directors and a former director as defendants, is captioned Oklahoma Law Enforcement Retirement System v. Netezza Corporation, et al., C.A. No., 1:10 cv 11644-JLT and was filed on September 27, 2010 in the United States District Court of the District of Massachusetts. The fourth, which names us, our directors and IBM as defendants, was filed on September 29, 2010, in the Court of Chancery of the State of Delaware and is captioned Erste-Sparinvest KAG v. Netezza Corporation, et al., C.A. No. 5858.

 

The four actions, purportedly brought on behalf of a class of our stockholders, generally allege that our directors purportedly breached their fiduciary duties in connection with the proposed merger by failing to maximize shareholder value and obtain the best financial terms. On October 5, 2010, the Erste-Sparinvest KAG plaintiff amended its complaint to further allege that we failed to disclose material information concerning the proposed merger, and on October 6, 2010, the Erste-Sparinvest KAG plaintiff filed a motion for expedited proceedings and a motion for preliminary injunction. All of the complaints include requests for declaratory, injunctive and other equitable relief, including to enjoin us and IBM from consummating the merger, in addition to fees and costs. We believe that the claims are without merit.

 

On October 1, 2010 and October 4, 2010, we filed motions to stay the proceedings in the United States District Court for the District of Massachusetts and the Middlesex Superior Court for the Commonwealth of Massachusetts, respectively, pending final judgment of the matters in the Court of Chancery of the State of Delaware. On October 8, 2010, the Kolton and Erste-Sparinvest KAG plaintiffs submitted to the Court a proposed order consolidating for all purposes their two actions in the Court of Chancery of the State of Delaware (and advised the Court that the defendants do not oppose consolidation).

 

 

If you do not vote for the adoption of the merger agreement at the special meeting and otherwise comply with the applicable statutory procedures of Section 262 of the DGCL, summarized herein, you may be entitled to appraisal rights under Section 262 of the DGCL. In order to exercise and perfect appraisal rights, a record holder of our common stock must follow the steps prescribed in Section 262 of the DGCL and summarized below properly and in a timely manner.

 

Section 262 of the DGCL is reprinted in its entirety as Annex C to this proxy statement. Set forth below is a summary description of Section 262 of the DGCL. The following summary describes the material aspects of Section 262 of the DGCL, and the law relating to appraisal rights and is qualified in its entirety by reference to Annex C. All references in Section 262 and this summary to “stockholder” are to the record holder of the shares of our common stock immediately prior to the effective time of the merger as to which appraisal rights are asserted. Failure to comply strictly with the procedures set forth in Section 262 of the DGCL will result in the loss of appraisal rights.

 

ANY NETEZZA STOCKHOLDER WHO WISHES TO EXERCISE APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE HIS, HER OR ITS RIGHT TO DO SO SHOULD REVIEW ANNEX C CAREFULLY AND SHOULD CONSULT HIS, HER OR ITS LEGAL ADVISOR, AS FAILURE TO TIMELY COMPLY WITH THE PROCEDURES SET FORTH THEREIN WILL RESULT IN THE LOSS OF SUCH RIGHTS.

 

Under the DGCL, holders of our common stock who follow the procedures set forth in Section 262 of the DGCL will be entitled to have their shares appraised by the Delaware Court of Chancery, or the Delaware Court, and to receive payment in cash of the “fair value” of those shares, exclusive of any element of value arising from the accomplishment or expectation of the merger.

 

Under Section 262 of the DGCL, where a merger agreement relating to a proposed merger is to be submitted for adoption at a meeting of stockholders, as in the case of the special meeting, the corporation, not less than 20 days prior to such meeting, must notify each of its stockholders who was a stockholder on the record date with respect to shares for which appraisal rights are available, that appraisal rights are so available, and must include in each such notice a copy of Section 262 of the DGCL. This proxy statement constitutes such notice to the holders of our common stock and Section 262 of the DGCL is attached to this proxy statement as Annex C. Any stockholder who wishes to exercise such appraisal rights or who wishes to preserve his right to do so should review the following discussion and Annex C carefully and should consult his, her or

its legal advisor, because failure to timely and properly comply with the procedures specified will result in the loss of appraisal rights under the DGCL.

 

If you wish to exercise appraisal rights you must not vote for the adoption of the merger agreement and must deliver to Netezza, before the vote on the proposal to adopt the merger agreement, a written demand for appraisal of your shares of our common stock. If you sign and return a proxy card or vote by submitting a proxy by telephone, through the Internet or by fax, without expressly directing that your shares of our common stock be voted against the adoption of the merger agreement, you will effectively waive your appraisal rights because such shares represented by the proxy will be voted for the adoption of the merger agreement. Accordingly, if you desire to exercise and perfect appraisal rights with respect to any of your shares of common stock, you must either refrain from executing and returning the enclosed proxy card and from voting in person or by submitting a proxy by telephone, through the Internet or by fax, in favor of the proposal to adopt the merger agreement or check either the “against” or the “abstain” box next to the proposal on such card or vote in person or by submitting a proxy by telephone, through the Internet or by fax, against the proposal or register in person an abstention with respect thereto. A vote or proxy against the adoption of the merger agreement will not, in and of itself, constitute a demand for appraisal.

 

A demand for appraisal will be sufficient if it reasonably informs Netezza of the identity of the stockholder and that such stockholder intends thereby to demand appraisal of such stockholder’s shares of common stock. This written demand for appraisal must be separate from any proxy or vote abstaining from or voting against the adoption of the merger agreement. If you wish to exercise your appraisal rights you must be the record holder of such shares of our common stock on the date the written demand for appraisal is made and you must continue to hold such shares through the effective time of the merger. Accordingly, a stockholder who is the record holder of shares of common stock on the date the written demand for appraisal is made, but who thereafter transfers such shares prior to the effective time of the merger, will lose any right to appraisal in respect of such shares.

 

Only a holder of record of shares of our common stock on October 6, 2010, the record date for the special meeting, is entitled to assert appraisal rights for such shares of our common stock registered in that holder’s name. A demand for appraisal should be executed by or on behalf of the holder of record, fully and correctly, as the holder’s name appears on the stock certificates and must state that such person intends thereby to demand appraisal of his, her or its shares. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand for appraisal should be made in that capacity, and if the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including one for two or more joint owners, may execute the demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for such owner or owners.

 

A record holder such as a broker who holds shares as nominee for several beneficial owners may exercise appraisal rights with respect to the shares of our common stock held for one or more beneficial owners while not exercising such rights with respect to the shares held for other beneficial owners; in such case, the written demand should set forth the number of shares as to which appraisal is sought. Where the number of shares of our common stock is not expressly stated, the demand will be presumed to cover all shares held in the name of the record owner. If you hold your shares in brokerage accounts or other nominee forms and wish to exercise your appraisal rights, you are urged to consult with your broker to determine the appropriate procedures for the making of a demand for appraisal.

 

All written demands for appraisal of shares must be mailed or delivered to: Netezza Corporation, 26 Forest Street, Marlborough, Massachusetts 01752, Attention: Corey C. DuFresne, Secretary.

 

Within ten days after the effective time of the merger, we will notify each stockholder of the effective time of the merger who properly asserted appraisal rights under Section 262 and has not voted for the adoption of the merger agreement. Within 120 days after the effective time of the merger, but not thereafter, we or any stockholder who has complied with the statutory requirements summarized above may commence an appraisal proceeding by filing a petition in the Delaware Court demanding a determination of the fair value of the

shares held by such stockholder. If no such petition is filed, appraisal rights will be lost for all stockholders who had previously demanded appraisal of their shares. We are not under any obligation, and we have no present intention, to file a petition with respect to appraisal of the value of the shares. Accordingly, if you wish to exercise your appraisal rights, you should regard it as your obligation to take all steps necessary to perfect your appraisal rights in the manner prescribed in Section 262 of the DGCL.

 

Within 120 days after the effective time of the merger, any stockholder who has complied with the provisions of Section 262 of the DGCL will be entitled, upon written request, to receive from us a statement setting forth the aggregate number of shares of our common stock not voted in favor of adoption of the merger agreement and with respect to which demands for appraisal were received by us, and the number of holders of such shares. Such statement must be mailed within ten days after the written request therefor has been received by us or within ten days after expiration of the period for delivery of appraisal demands, whichever is later. A person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file an appraisal petition or request from us the statement described in this paragraph.

 

If a petition for an appraisal is timely filed and a copy thereof served upon us, we will then be obligated, within 20 days after such service, to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of the stockholders who have demanded appraisal of their shares and with whom agreements as to the value of their shares have not been reached. After notice to the stockholders as required by the Delaware Court, the Delaware Court is empowered to conduct a hearing on such petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court may require the stockholders who demanded appraisal rights of our shares of common stock to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceeding; and if any stockholder fails to comply with such direction, the Delaware Court may dismiss the proceedings as to such stockholder.

 

After the Delaware Court determines which stockholders are entitled to appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Delaware Court, including any rules specifically governing appraisal proceedings. Through such proceeding the Delaware Court shall determine the fair value of the shares exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Delaware Court shall take into account all relevant factors. Unless the Delaware Court in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment. If you are considering seeking appraisal, you should be aware that the fair value of your shares as determined under Section 262 of the DGCL could be more than, the same as or less than the consideration you are entitled to receive pursuant to the merger agreement if you did not seek appraisal of your shares and that investment banking opinions as to the fairness from a financial point of view of the consideration payable in a merger are not necessarily opinions as to fair value under Section 262 of the DGCL.

 

The Delaware Court will direct the payment of the fair value of the shares of our common stock to those stockholders who have perfected appraisal rights, together with interest, if any. The Delaware Court will determine the amount of interest, if any, to be paid on the amounts to be received by persons whose shares of our common stock have been appraised. The costs of the action (which do not include attorneys’ or expert fees or expenses) may be determined by the Delaware Court and taxed upon the parties as the Delaware Court deems equitable. The Delaware Court may also order that all or a portion of the expenses incurred by any stockholder in connection with an appraisal, including without limitation reasonable attorneys’ fees and the fees and expenses of experts utilized in the appraisal proceeding, be charged pro rata against the value of all of the shares entitled to appraisal. In the absence of such determination or assessment, each party bears its own expenses.

Any stockholder who has duly demanded and perfected an appraisal in compliance with Section 262 of the DGCL will not, after the effective time of the merger, be entitled to vote his or her shares for any purpose or be entitled to the payment of dividends or other distributions thereon, except dividends or other distributions payable to holders of record of shares of our common stock as of a date prior to the effective time of the merger.

 

At any time within 60 days after the effective time of the merger, any stockholder will have the right to withdraw his or her demand for appraisal and to accept the cash payment for his or her shares pursuant to the merger agreement. After this period, a stockholder may withdraw his or her demand for appraisal only with our written consent. If no petition for appraisal is filed with the Delaware Court within 120 days after the effective time of the merger, a stockholder’s right to appraisal will cease and he or she will be entitled to receive the cash payment for his or her shares pursuant to the merger agreement, as if he or she had not demanded appraisal of his or her shares. No petition timely filed in the Delaware Court demanding appraisal will be dismissed as to any stockholder without the approval of the Delaware Court, and such approval may be conditioned on such terms as the Delaware Court deems just; provided, however, that any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the merger consideration offered pursuant to the merger agreement within 60 days after the effective date of the merger.

 

If you properly demand appraisal of your shares of our common stock under Section 262 and you fail to perfect, or effectively withdraw or lose, your right to appraisal, as provided in the DGCL, your shares will be converted into the right to receive the consideration receivable with respect to such shares in accordance with the merger agreement. You will fail to perfect, or effectively lose or withdraw, your right to appraisal if, among other things, no petition for appraisal is filed within 120 days after the effective time of the merger, or if you deliver to us a written withdrawal of your demand for appraisal. Any such attempt to withdraw an appraisal demand more than 60 days after the effective time of the merger will require our written approval.

 

If you desire to exercise your appraisal rights, you must not vote for the adoption of the merger agreement and must strictly comply with the procedures set forth in Section 262 of the DGCL.

 

Failure to take any required step in connection with the exercise of appraisal rights will result in the termination or waiver of such rights.

 

THE PROCESS OF DEMANDING AND EXERCISING APPRAISAL RIGHTS REQUIRES STRICT COMPLIANCE WITH TECHNICAL PREREQUISITES. THOSE INDIVIDUALS OR ENTITIES WISHING TO EXERCISE THEIR APPRAISAL RIGHTS SHOULD CONSULT WITH THEIR OWN LEGAL COUNSEL IN CONNECTION WITH COMPLIANCE UNDER SECTION 262 OF THE DGCL. TO THE EXTENT THERE ARE ANY INCONSISTENCIES BETWEEN THE FOREGOING SUMMARY AND SECTION 262 OF THE DGCL, THE DGCL SHALL GOVERN.

 

At the effective time of the merger, each outstanding option to acquire our common stock granted under our 2000 stock incentive plan, granted under our 2007 stock incentive plan to the extent vested (or vesting in connection with the merger), or held by any of our or our subsidiaries’ non-employee directors, consultants or independent contractors immediately before the effective time of the merger will be canceled and converted into the right to receive an amount, in cash, without interest and less any applicable withholding taxes, equal to the product of (a) the number of shares of our common stock that are subject to the option, and (b) the excess, if any, of $27.00 per share over the exercise price per share of the common stock subject to such option.

 

Each outstanding option to acquire our common stock under our 2007 stock incentive plan not being canceled in the manner described in the prior paragraph will be converted at the effective time of the merger into an option to acquire shares of common stock of IBM. The converted option will be subject to substantially the same terms and conditions as were applicable to the option prior to the conversion, with the vesting period shortened by one year or six months in connection with the merger and other than with respect to

exercisability prior to vesting or the ability to pay the exercise price by tendering previously owned shares of Netezza common stock. The number of shares of IBM common stock subject to the converted option and the converted option’s exercise price per share will be determined as follows: the number of shares of IBM common stock subject to the option will be equal to the product of (a) the number of shares of Netezza common stock subject to the option and (b) the exchange ratio described below, rounded down to the nearest whole IBM share. The exercise price per share of the converted option will be equal to the quotient of (a) the per share exercise price for the shares of Netezza common stock otherwise purchasable pursuant to such option and (b) the exchange ratio, rounded up to the nearest whole cent. The exchange ratio is a fraction equal to $27.00 divided by the average closing price per share of IBM common stock on the NYSE Composite Transactions Tape on the 20 trading days immediately prior to the closing of the merger.

 

The option award agreements granted under our 2000 stock incentive plan and 2007 stock incentive plan provide for one year’s accelerated vesting in the event of an acquisition of Netezza, unless the optionholder has been employed by Netezza for less than one year as of the date of the acquisition, in which case the option will accelerate only with respect to six months. The merger will constitute an acquisition for this purpose. Options granted under the 2000 stock incentive plan have a four-year vesting cycle, so would, absent the terms of the merger agreement, accelerate with respect to 25% of the total number of shares subject to the option, or, for optionholders employed for less than one year, 12.5% of the total number of shares subject to the option. Under the merger agreement, options under the 2000 stock incentive plan will be canceled and paid out as provided above without regard to whether the options have vested. Options granted under the 2007 stock incentive plan have a five-year vesting cycle, so will accelerate with respect to 20% of the total number of shares subject to the option, or, for optionholders employed for less than one year, 10% of the total number of shares subject to the option.

 

At the effective time of the merger, each outstanding RSU to the extent vested (or vesting in connection with the merger) or held by any of our or our subsidiaries’ non-employee directors, consultants or independent contractors immediately before the effective time of the merger, will be canceled and converted at the effective time of the merger into the right to receive shortly after closing of the merger, an amount in cash equal to the product of (a) the number of shares of Netezza common stock subject to such RSU and $27.00 per share. Any outstanding RSU not canceled as described above will be converted at the effective time of the merger into an RSU, subject to substantially the same terms and conditions as were applicable to the RSU prior to conversion, with the vesting period shortened by one year or six months in connection with the merger. The number of shares of IBM common stock will be equal to the product of (a) the number of shares of Netezza common stock subject to the RSU and (b) the exchange ratio, rounded down to the nearest whole share.

 

The agreements for RSUs with time-based vesting criteria provide for one year’s accelerated vesting in the event of an acquisition of Netezza, unless the holder of the RSU has been employed by us for less than one year as of the date of the acquisition, in which case the option will accelerate only as to six months. RSUs have a four-year vesting cycle, so will accelerate with respect to 25% of the total number of shares subject to the RSU, or, for holders employed for less than one year, 12.5% of the total number of shares subject to the RSU. The merger will constitute an acquisition for this purpose.

 

Our named executive officers received performance-based RSUs in March 2010. These grants provided for payment of a number of shares, one half of which were to be determined based on the satisfaction of adjusted operating income targets for the fiscal year ending January 31, 2011 and the other half of which were to be determined based on the satisfaction of revenue targets for the same period. The parties agreed that it would be difficult to measure adjusted operating income separately for our operations after the closing of the merger and, accordingly, agreed to determine the first half of the performance-based RSUs using an assumed adjusted operating income at 143% of target. The parties further agreed to convert the other half of the RSUs using an initial assumption that the revenue for the fiscal year ending January 31, 2011 will be achieved at 150% of target, subject to reduction (but not below 100% of target) based on the actual revenue results for the operations through January 31, 2011. The agreements for RSUs with performance-based vesting do not provide for acceleration in the event of an acquisition of Netezza.

 

At the effective time of the merger, each share of Netezza restricted stock will be converted into the right to receive $27.00.

 

Each of our executive officers has entered into an employment or transition agreement with IBM, described in the section “Interests of Netezza’s Executive Officers and Directors in the Merger” on page 33, which, in some cases, provide for a different treatment of the officers’ equity awards.

 

The merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware or at such later time as is agreed upon by IBM and us and specified in such certificate of merger. The filing of the certificate of merger will occur as soon as practicable on or after the closing, which will take place on a date to be specified by IBM, merger sub and us and which will be no later than the second business day after satisfaction or waiver of the conditions to the closing of the merger set forth in the merger agreement and described in this proxy statement, unless IBM and we agree to hold the closing at a different time. We currently anticipate the merger to be completed in the fourth quarter of calendar year 2010.

 

If the merger is completed, our common stock will be delisted from and will no longer be traded on the NYSE and will be deregistered under the Securities Exchange Act. Following the closing of the merger, we will no longer be an independent public company.

 

The following discussion summarizes the material U.S. federal income tax consequences of the merger to holders of Netezza common stock. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, the U.S. Treasury Regulations promulgated thereunder and judicial and administrative rulings, all as in effect as of the date of this proxy statement and all of which are subject to change or varying interpretation, possibly with retroactive effect. Any such changes could affect the accuracy of the statements and conclusions set forth herein.

 

This discussion assumes that holders of Netezza common stock hold their shares as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a holder of Netezza common stock in light of such holder’s particular circumstances, nor does it discuss the special considerations applicable to holders of our common stock subject to special treatment under the U.S. federal income tax laws, such as, for example, financial institutions or broker-dealers, mutual funds, partnerships or other pass-through entities and their partners or members, tax-exempt organizations, insurance companies, dealers in securities or foreign currencies, traders in securities who elect mark-to-market method of accounting, controlled foreign corporations, passive foreign investment companies, U.S. expatriates, holders who acquired their Netezza common stock through the exercise of options or otherwise as compensation, holders who hold their Netezza common stock as part of a hedge, straddle, constructive sale or conversion transaction, U.S. holders whose functional currency is not the U.S. dollar, and holders who exercise appraisal rights. This discussion does not address any aspect of foreign, state, local, alternative minimum, estate, gift or other tax law that may be applicable to a U.S. holder.

 

We intend this discussion to provide only a general summary of the material U.S. federal income tax consequences of the merger to holders of Netezza common stock. We do not intend it to be a complete analysis or description of all potential U.S. federal income tax consequences of the merger. The U.S. federal income tax laws are complex and subject to varying interpretation. Accordingly, the Internal Revenue Service may not agree with the tax consequences described in this proxy statement.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Netezza common stock, the tax treatment of a partner in such partnership generally will depend on the status of the partner and activities of the partnership. If you are a partner of a partnership holding Netezza common stock, you should consult your own tax advisor.

 

All holders should consult their own tax advisor to determine the particular tax consequences to them (including the application and effect of any state, local or foreign income and other tax laws) of the receipt of cash in exchange for shares of Netezza common stock pursuant to the merger.

 

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Netezza common stock that is, for U.S. federal income tax purposes:

 

 

A “non-U.S. holder” is a beneficial owner (other than a partnership) of Netezza common stock that is not a U.S. holder.

 

U.S. Holders

 

The conversion of shares of Netezza common stock into cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. A U.S. holder generally will recognize gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received pursuant to the merger and such U.S. holder’s adjusted tax basis in the shares converted into cash pursuant to the merger. Such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if the holder’s holding period for such shares exceeds one year as of the date of the merger. Long-term capital gains for certain non-corporate U.S. holders, including individuals, are generally eligible for a reduced rate of federal income taxation. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of Netezza common stock at different times or different prices, such U.S. holder must determine its tax basis, holding period, and gain or loss separately with respect to each block of Netezza common stock.

 

A U.S. holder may, under certain circumstances, be subject to information reporting and backup withholding at the applicable rate (currently, 28%) with respect to the cash received pursuant to the merger, unless such holder properly establishes an exemption or provides its correct tax identification number and otherwise complies with the applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules can be refunded or credited against a payee’s U.S. federal income tax liability, if any, provided that such U.S. holder furnishes the required information to the Internal Revenue Service in a timely manner.

 

Non-U.S. Holders

 

Any gain recognized on the receipt of cash pursuant to the merger by a non-U.S. holder generally will not be subject to U.S. federal income tax unless:

 

 

 

A non-U.S. holder will be subject to information reporting and, in certain circumstances, backup withholding (currently, at a rate of 28%) will apply with respect to the cash received by such holder pursuant to the merger, unless such non-U.S. holder certifies under penalties of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the holder is a United States person as defined under the Code) or such holder otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a non-U.S. holder’s U.S. federal income tax liability, if any.

 

Appraisal Rights

 

Under specified circumstances a holder may be entitled to appraisal rights in connection with the merger. If a holder of Netezza common stock receives cash pursuant to the exercise of appraisal rights, such holder generally will recognize gain or loss, measured by the difference between the cash received and such holder’s tax basis in such stock. Interest, if any, awarded in an appraisal proceeding by a court would be included in such holder’s income as ordinary income for U.S. federal income tax purposes. Holders of Netezza common stock who exercise appraisal rights are urged to consult their own tax advisors.

 

THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX CONSEQUENCES RELEVANT TO NETEZZA STOCKHOLDERS. THE TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE PARTICULAR CIRCUMSTANCES OF EACH STOCKHOLDER. YOU SHOULD CONSULT YOUR TAX ADVISOR CONCERNING THE FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES OF THE MERGER TO YOU.

 

HSR Act

 

The closing of the merger is subject to expiration or termination of the applicable waiting periods under the HSR Act and the rules thereunder. Under the HSR Act and the rules thereunder, the merger may not be completed unless certain information has been furnished to the Antitrust Division of the U.S. Department of Justice and to the Federal Trade Commission and applicable waiting periods expire or are terminated. The HSR Act requires the parties to observe a 30-day waiting period (the “initial waiting period”), during which time the merger may not be consummated, unless that initial waiting period is terminated early. If, before the expiration of the initial waiting period, the Antitrust Division of the U.S. Department of Justice or the Federal Trade Commission issues a request for additional information, the parties may not consummate the transaction until 30 days after Netezza and IBM have each substantially complied with such request for additional information (unless this period is shortened pursuant to a grant of earlier termination). IBM and Netezza filed their respective notification and report forms pursuant to the HSR Act with the Antitrust Division of the

Department of Justice and the Federal Trade Commission on September 30, 2010, and each requested early termination of the waiting period.

 

At any time before the effective time of the merger, the Federal Trade Commission, the Antitrust Division of the U.S. Department of Justice, state attorneys general, or private parties can file suit under the antitrust laws to enjoin consummation of the merger or to impose conditions on the merger. There can be no assurance that the merger will not be challenged on antitrust grounds or, if such a challenge is made, that the challenge will not be successful.

 

Other Jurisdictions

 

The completion of the merger is also subject to comparable notifications and review under the antitrust laws of various foreign jurisdictions, including Italy. Netezza and/or IBM have filed or intend to file notifications with the appropriate governmental entities, including in Italy. Some of these jurisdictions do not require regulatory approval, consent or agreement prior to completing the merger. With respect to any jurisdiction that does require regulatory approval, consent or agreement prior to completing the merger, Netezza and IBM expect to observe the applicable waiting periods prior to completing the merger. It is possible that any of the governmental entities with which notifications are filed may seek, as conditions for granting approval of the merger, various regulatory concessions. There can be no assurance that Netezza and IBM will be able or willing to satisfy or comply with these conditions.

 

The following summary describes certain material provisions of the merger agreement. This summary is not complete and is qualified in its entirety by reference to the complete text of the merger agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. We urge you to read carefully the merger agreement in its entirety because this summary may not contain all the information about the merger agreement that is important to you.

 

The merger agreement and the following description have been included to provide you with information regarding the terms of the merger agreement. It is not intended to provide any other factual information about Netezza or IBM. Such information can be found elsewhere in this proxy statement and in the other public filings we and IBM make with the SEC, which are available, without charge, at http://www.sec.gov.

 

The representations and warranties described below and included in the merger agreement were made for the purposes of the merger agreement by Netezza and IBM to each other as of specific dates. The assertions embodied in those representations and warranties were made solely for purposes of the merger agreement and may be subject to important qualifications and limitations agreed to by Netezza and IBM in connection with negotiating the terms of that agreement. Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to stockholders, or may have been made for the purpose of allocating risk between Netezza and IBM rather than establishing the matters addressed by such representations and warranties as facts. The merger agreement is described in this proxy statement and included as Annex A only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding Netezza and IBM or their respective businesses.

 

Subject to the terms and conditions of the merger agreement and in accordance with Delaware law, at the effective time of the merger, merger sub, a wholly owned subsidiary of IBM and a party to the merger agreement, will merge with and into us. We will survive the merger as a wholly owned subsidiary of IBM and the separate corporate existence of merger sub will cease.

 

The merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware or at such later time as is agreed upon by IBM and us and specified in the certificate of merger. The filing of the certificate of merger will occur as soon as practicable on or after the date of closing, which will take place on a date to be specified by IBM, merger sub and us and which will be no later than the second business day after satisfaction or waiver of the conditions to the closing of the merger set forth in the merger agreement and described in this proxy statement, or at such other time as is agreed upon by IBM and us. Although we expect to complete the merger as soon as possible following the special meeting of our stockholders (if our stockholders adopt the merger agreement), we cannot specify when or assure that we and IBM will satisfy or waive all of the conditions to the closing of the merger. See “— Conditions to the Closing of the Merger” beginning on page 61.

 

The merger agreement provides that each share of our common stock outstanding immediately prior to the effective time of the merger (other than shares held by us as treasury stock, IBM, merger sub or by holders properly exercising appraisal rights under Delaware law) will be converted at the effective time of the merger into the right to receive $27.00 in cash, without interest and less any applicable withholding taxes.

 

If any of our stockholders perfect appraisal rights with respect to any of our shares of common stock, then we will treat those shares as described under “The Merger — Appraisal Rights” beginning on page 40.

 

Stock Options

 

At the effective time of the merger, each outstanding option to acquire Netezza common stock granted under our 2000 stock incentive plan, granted under our 2007 stock incentive plan to the extent vested (or vesting in connection with the merger), or held by any of our or our subsidiaries’ non-employee directors, consultants or independent contractors immediately before the effective time of the merger will be canceled and converted into the right to receive shortly after closing an amount, in cash, without interest and less any applicable withholding taxes, equal to the product of:

 

 

Each outstanding option to acquire Netezza common stock under the 2007 stock incentive plan not being canceled in the manner described in the preceding paragraph will be converted into an option to acquire, subject to substantially the same terms and conditions applicable to that option prior to the effective time of the merger, a number of shares of IBM common stock equal to the product of the following, rounded down to the nearest whole share of IBM common stock:

 

 

The exchange ratio is a fraction, the numerator of which is the merger consideration of $27.00 per share and the denominator of which is the average closing price per share of the common stock of IBM on the New York Stock Exchange Composite Transactions Tape on the 20 trading days immediately prior to the closing date of the merger. The exercise price per share of common stock of IBM as of immediately following such conversion will be equal to the quotient of (a) the per share exercise price for the shares of our common stock otherwise purchasable pursuant to such option and (b) the exchange ratio, rounded up to the nearest whole cent.

The option award agreements granted under our 2000 stock incentive plan and 2007 stock incentive plan provide for specified accelerated vesting (in most cases, one year’s acceleration) in the event of an acquisition of Netezza. The merger will constitute an acquisition for this purpose. Under the merger agreement, the vesting of all option awards under the 2000 stock incentive plan accelerates in full as of the effective time of the merger.

 

Restricted Stock Units

 

At the effective time of the merger, each outstanding RSU to the extent vested (or vesting in connection with the merger) or held by any of our or our subsidiaries’ non-employee directors, consultants or independent contractors immediately before the effective time of the merger, will be canceled and converted into the right to receive an amount in cash equal to the product of:

 

 

Any outstanding RSU not canceled as described above will be converted at the effective time of the merger into an RSU, subject to substantially the same terms and conditions as were applicable to the RSU prior to the conversion, with respect to a number of shares of IBM common stock equal to the product of the following, rounded down to the nearest whole share:

 

 

The number of performance-based RSUs, which were granted in the fiscal year ending January 31, 2011, to be converted into RSUs with respect to shares of IBM common stock will be determined using an assumed adjusted operating income result of 143% of target and an assumed revenue result (for the full fiscal year) of 150% of target, but the converted performance-based RSUs will provide that the revenue component (and the resulting number of converted RSUs) can be adjusted downward after January 31, 2011 based on actual revenue for the full fiscal year but not below the number due at 100% of target.

 

The RSU award agreements, except for the RSU award agreements with performance-based vesting criteria, granted under our 2007 stock incentive plan provide for specified accelerated vesting (in most cases, one year’s acceleration) in the event of an acquisition of Netezza. The merger will constitute an acquisition for this purpose. The RSU award agreements with performance-based vesting criteria do not provide for acceleration upon the closing of the merger.

 

Restricted Stock

 

Each share of Netezza restricted stock will be converted at the effective time of the merger into the right to receive $27.00.

 

Arrangements with Netezza’s Executive Officers

 

Each of our executive officers has entered into an employment or transition agreement with IBM, described in the section “Interests of Netezza’s Executive Officers and Directors in the Merger” on page 33, which, in some cases, provide for a different treatment of the officer’s equity awards.

 

Prior to the effective time of the merger, IBM will designate a paying agent and, from time to time after the effective time of the merger, IBM will make available to the paying agent funds in amounts as necessary for the payment of the merger consideration.

 

As soon as reasonably practicable after the effective time of the merger, the paying agent will mail to each person who was a holder of record of our common stock immediately prior to the effective time of the merger a letter of transmittal containing instructions for exchanging certificates representing such shares of our

common stock. Such letter of transmittal will be accompanied by a substitute IRS Form W-9 or the applicable IRS Form W-8. After the effective time of the merger, each holder of a certificate previously representing such shares of our common stock will, upon surrender to the paying agent of a certificate, together with a properly completed letter of transmittal, be entitled to receive the merger consideration of $27.00 in cash, less any applicable withholding taxes, for each share of our common stock represented by such certificate.

 

No interest will be paid or shall accrue on the cash payable upon surrender of any such certificate. The cash paid upon surrender of any such certificate will be deemed to have been paid in full satisfaction of all rights pertaining to the shares of our common stock formerly represented by such certificate.

 

If any such certificate has been lost, stolen, defaced or destroyed, the paying agent or the surviving corporation, as the case may be, will pay the merger consideration with respect to each share of our common stock formerly represented by such certificate upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen, defaced or destroyed and, if required by the surviving corporation, the posting by such person of a bond in an amount as the surviving corporation may direct as indemnity against any claim that may be made against the surviving corporation with respect to such certificate.

 

At any time following the six-month anniversary of the closing date of the merger, the surviving corporation may require the paying agent to deliver to it any funds previously made available to the paying agent that have not been disbursed to holders of certificates that formerly represented shares of our common stock. After that time, stockholders will no longer be able to receive the merger consideration from the paying agent. Instead, they will be required to seek to obtain the merger consideration from IBM and the surviving corporation only, and in so doing will be treated as general creditors with respect to the payment of any such merger consideration, without any interest thereon.

 

The merger agreement provides that merger sub’s directors and officers immediately prior to the effective time of the merger will be the directors and officers, respectively, of the surviving corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

 

We have made a number of representations and warranties to IBM and merger sub in the merger agreement regarding aspects of our business and other matters pertinent to the merger. The topics covered by these representations and warranties include the following:

 

 

 

 

 

 

Some of our representations and warranties are qualified by a material adverse effect standard. The merger agreement provides that a material adverse effect is any state of facts, change, development, event, effect, condition or occurrence that, individually or in the aggregate, is reasonably likely to result in a material adverse effect on the business, assets, properties, financial condition or results of operations of us and our subsidiaries, taken as a whole, provided that none of the following will be deemed either alone or in combination to constitute, and none of the following will be taken into account in determining whether there has been or would be, a material adverse effect:

 

 

 

IBM and merger sub have made a number of representations and warranties to us regarding various matters pertinent to the merger. The topics covered by these representations and warranties include the following:

 

 

The representations and warranties of each of the parties to the merger agreement will expire upon the consummation of the merger.

 

Conduct of Our Business Prior to the Merger

 

In the merger agreement, we have agreed that before the effective time of the merger, subject to certain exceptions, we will, and will cause each of our subsidiaries to, carry on our and their respective businesses in the ordinary course consistent with past practice and use commercially reasonable efforts to comply with all applicable laws and, to the extent consistent therewith, use commercially reasonable efforts to keep available the services of present officers, software developers and other employees, to preserve assets and technology and relationships with customers, suppliers, licensors, licensees, distributors and others having material business dealings with us and our subsidiaries and to maintain franchises, rights and permits.

 

In addition, we have agreed, with specified exceptions, to various restrictions, including restrictions on our and our subsidiaries’ ability to:

 

 

 

 

 

 

No Solicitation of Acquisition Proposals

 

We have agreed that we will not, and will not authorize or permit any of our subsidiaries to, nor will we authorize or permit any of our or our subsidiaries’ directors, officers or employees or any of our or their investment bankers, attorneys, accountants or other advisors or representatives to, directly or indirectly:

 

 

Despite these general prohibitions, at any time prior to the adoption of the merger agreement by our stockholders and subject to the conditions described below, we may, and may permit and authorize our subsidiaries and our and our subsidiaries’ representatives to:

 

 

We may only take these actions if:

 

 

 

 

Board Recommendation

 

The merger agreement provides that neither our board of directors nor any committee of our board will, or will agree or resolve to:

 

 

Notwithstanding the terms above or any other term in the merger agreement to the contrary, subject to the conditions described below, our board of directors may, at any time prior to the adoption of the merger agreement by our stockholders, in response to a superior proposal or an intervening event (as defined in the merger agreement and as described below under this heading), effect an adverse recommendation change. Our board of directors may only effect an adverse recommendation change if:

 

 

The covenant in the merger agreement generally prohibiting us from soliciting takeover proposals does not prevent us from complying with Rule 14d-9 and 14e-2(a) promulgated under the Securities Exchange Act or from making any disclosure to our stockholders if our board of directors determines in good faith that failure to so disclose would be inconsistent with applicable law; provided, however, that in no event will we or our board of directors take, agree or resolve to take any action with respect to an adverse recommendation change that is prohibited by the merger agreement.

 

A “takeover proposal” means (a) any inquiry relating to or that could reasonably be expected to lead to, or (b) any proposal or offer from any person (other than IBM or merger sub or their affiliates) for, in one or a series of transactions, any merger, consolidation, business combination, recapitalization, liquidation or dissolution involving us or any direct or indirect acquisition, including by way of merger, consolidation, tender offer, exchange offer, stock acquisition, asset acquisition or similar transaction, of:

 

 

A “superior proposal” means any binding bona fide written offer of any person (other than IBM or merger sub or their affiliates) which did not result from a breach of the non-solicitation covenants contained in the merger agreement and that, if consummated, would result in such person or its stockholders acquiring:

 

 

which offer, in the good faith judgment of our board of directors, after consulting with a financial advisor of national reputation and outside legal counsel, (i) provides consideration which is more favorable to our stockholders than the consideration provided in the merger (taking into account all of the terms and conditions of such offer and the merger agreement (including any binding changes to the terms of the merger agreement proposed by IBM in response to such superior proposal or otherwise)) and (ii) is reasonably capable of being completed, taking into account all financial, legal, regulatory and other aspects of such proposal.

 

An “intervening event” is an event, circumstance, fact or other information unknown to our board of directors as of the date of the merger agreement which becomes known before our stockholders adopt the merger agreement provided that it does not include the receipt, existence or terms of a takeover proposal or any matter relating to a takeover proposal or any consequence of a takeover proposal.

 

We have agreed, subject to any applicable legal restraints, to convene and hold a stockholders meeting, for the purpose of the adoption of the merger agreement by our stockholders, on the 30th calendar day (or first business day thereafter) immediately following the date of mailing of the definitive proxy statement to our stockholders. Notwithstanding the foregoing, we may:

 

 

We are required to hold the stockholders meeting regardless of whether our board of directors determines prior to the date of such meeting that the merger agreement is no longer advisable, recommends that our stockholders reject the merger agreement or makes any other adverse recommendation change. Further, our obligation to hold the stockholders meeting will not be affected by the commencement, public proposal, public disclosure or communication to us or any other person of any takeover proposal.

 

We, IBM and merger sub have each agreed to use reasonable best efforts to take, or cause to be taken, all actions that are necessary, proper or advisable to consummate the merger, including using reasonable best efforts to accomplish the following:

 

 

However, IBM is not required to agree to, or offer to, divest or hold separate, or enter into any licensing, business restriction or similar arrangement with respect to, any assets or any portion of its or its subsidiaries’ businesses and we have also agreed not to agree to, or offer to, divest or hold separate or enter into any such arrangement with respect to our or our subsidiaries’ assets or any portion of our or our subsidiaries’ businesses without the prior written consent of IBM. Furthermore, IBM and its subsidiaries are not obligated to litigate or participate in the litigation of any suit, claim, action or proceeding brought by any governmental entity which:

 

 

Our, IBM’s and merger sub’s obligations to effect the merger are subject to the satisfaction or waiver of the following conditions:

 

 

IBM’s and merger sub’s obligations to effect the merger are further subject to the satisfaction by us or waiver by them of the following conditions:

 

 

 

 

 

Our obligations to effect the merger are subject to the further satisfaction by IBM and/or merger sub or waiver by us of the following conditions:

 

 

The merger agreement may be terminated under the following circumstances:

 

 

 

 

 

 

Each party will generally pay its own fees and expenses in connection with the merger agreement and the transactions contemplated by the merger agreement, whether or not the merger is consummated.

 

We will be required to pay a termination fee of $56 million to IBM if:

 

 

 

 

At the effective time of the merger and without further action, the surviving corporation will assume, and IBM will cause the surviving corporation to comply with and honor, all rights to indemnification, advancement of expenses and exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the merger existing in favor of our and our subsidiaries’ current or former directors or officers as provided in our and their respective certificates of incorporation or bylaws (or comparable organizational documents) and any indemnification or other agreements as in effect on the date of the merger agreement.

 

In the event the surviving corporation consolidates with or merges into another entity and is not the continuing or surviving entity of such consolidation or merger or transfers all or substantially all of its properties and assets to another entity, or if IBM dissolves the surviving corporation, IBM will cause the successors and assigns of the surviving corporation to assume these obligations and to comply with and honor the indemnification and other obligations set forth above.

IBM will obtain or will cause to be obtained as of the effective time of the merger a “tail” insurance policy with a claims period of six years from the effective time of the merger with respect to directors’ and officers’ liability insurance covering those persons who were, as of the date of the merger agreement, covered by our directors’ and officers’ liability insurance policy, for acts or omissions occurring prior to the effective time of the merger, on terms that are no less favorable than our policies in effect on the date of the merger agreement. Prior to the closing of the merger, IBM will prepay such insurance for the six-year period, but in no event will IBM or the surviving corporation be required to pay, with respect to the entire six-year period following the effective time of the merger, premiums for insurance which in the aggregate exceed 300% of the aggregate premiums paid by us for the period from July 19, 2010 to, and including, July 18, 2011.

 

 

Except as would violate applicable law or securities exchange rules, we and IBM have agreed to consult with each other prior to making any press release or other public statements with respect to the merger.

 

Except as would violate applicable law, we have agreed to give prompt notice to IBM in writing upon our obtaining knowledge of:

 

 

IBM has agreed to promptly notify us in writing upon IBM obtaining knowledge of the occurrence of any matter or event that has caused, or that is reasonably likely to result in, the inability to satisfy any of the conditions to our obligation to consummate the merger.

 

We have also agreed to provide IBM with the opportunity to participate in the defense, at its own cost, of any litigation against us or our board of directors related to the merger or the other transactions contemplated by the merger agreement. While we have not agreed to give IBM the right to direct the defense of any such litigation, we have agreed to obtain the prior written consent of IBM prior to settling or satisfying any such claim.

 

 

We, IBM and merger sub may amend the merger agreement at any time prior to the closing of the merger. However, after the adoption of the merger agreement by our stockholders, no amendment can be made that by law requires approval by our stockholders without obtaining such approval.

 

We, IBM or merger sub may extend the time for performance of any of the obligations or other acts of the other parties under the merger agreement, waive any inaccuracies in another party’s representations and warranties and waive compliance with any of the agreements or conditions contained in the merger agreement. However, after the adoption of the merger agreement by our stockholders, no waiver can be provided that by law requires approval by our stockholders without obtaining such approval.

 

The following table sets forth information with respect to the beneficial ownership of our common stock as of September 27, 2010 (or such other date as indicated) for:

 

 

We know of no person, entity or group who beneficially owns more than 5% of our outstanding common stock.

 

Beneficial ownership is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by footnote, to our knowledge, the persons and entities named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to applicable community property laws. Securities that may be beneficially acquired within 60 days of September 27, 2010, including shares subject to options exercisable within 60 days of September 27, 2010, and RSUs vesting within 60 days of September 27, 2010, are deemed to be beneficially owned by the person or entity holding such securities for the purpose of computing ownership of such person or entity, but are not treated as outstanding for the purpose of computing the ownership of any other person or entity. The information as to beneficial ownership presented below table does not take into account any accelerated vesting that may occur in connection with the closing of the merger. The applicable percentages of beneficial ownership are based on 63,432,868 shares of common stock outstanding as of September 27, 2010.

 

Unless otherwise indicated, the address of each of the individuals named below is: c/o Netezza Corporation, 26 Forest Street, Marlborough, Massachusetts 01752.

 

 

 

 

 

At this time, we know of no other matters to be submitted at the special meeting. If any other matters properly come before the special meeting, it is the intention of the persons described in the enclosed proxy card to vote the shares they represent as our board of directors may recommend.

 

It is important that your shares be represented at the special meeting, regardless of the number of shares which you hold. Therefore, we urge you to complete, sign, date and return the accompanying proxy card as promptly as possible in the postage-prepaid envelope enclosed for that purpose or to submit a proxy via the Internet or telephone.

 

As permitted by the Securities Exchange Act, only one copy of this proxy statement is being delivered to stockholders residing at the same address, unless our stockholders have notified us of their desire to receive multiple copies of the proxy statement. This is known as householding. We will promptly deliver, upon oral or written request, a separate copy of this proxy statement to any stockholder residing at a shared address to which only one copy was mailed. Requests for additional copies of this proxy statement, or requests to receive multiple or single copies of proxy statements at a shared address in the future, should be directed to: Netezza Corporation, 26 Forest Street, Marlborough, Massachusetts 01752, Attention: Investor Relations, Secretary, (508) 382-8200.

 

If the merger is completed, there will be no public participation in any future meetings of stockholders of Netezza. However, if the merger is not completed, Netezza’s public stockholders will continue to be entitled to attend and participate in our stockholders meetings. If the merger is not completed, any proposal that a stockholder wishes to be considered for inclusion in our proxy statement and proxy card for our 2011 annual meeting of stockholders must comply with the requirements of Rule 14a-8 under the Securities Exchange Act and must be submitted to our Secretary, Corey C. DuFresne, at our address set forth in the notice appearing before this proxy statement by January 7, 2011.

 

If a stockholder wishes to make a proposal at the 2011 Annual Meeting (other than a proposal to be included in our proxy statement pursuant to Rule 14a-8) that relates to any matter other than nomination of directors, the stockholder’s notice must be received in writing by our Secretary at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary of the 2010 Annual Meeting, so no earlier than February 11, 2011 or later than March 13, 2011. However, in the event that the date of the 2011 Annual Meeting is advanced by more than 20 days, or delayed by more than 60 days, from the first anniversary of the 2010 Annual Meeting, so to a date before May 22, 2011 or after August 10, 2011, a stockholder’s notice must be received not earlier than the 120th day prior to such Annual Meeting and not later than the close of business on the later of (A) the 90th day prior to such Annual Meeting and (B) the tenth day following the day on which notice of the date of such Annual Meeting was mailed or public disclosure of the date of such Annual Meeting was made, whichever occurs first. Our by-laws specify the information the notice should contain to be effective. If a stockholder wishes to nominate a director candidate directly for election by the stockholders at the 2011 Annual Meeting (rather than proposing such director nominee to the nominating and corporate governance committee), the stockholder nominating a candidate or

candidates must provide notice to us not less than 90 days nor more than 120 days prior to the first anniversary of the 2010 Annual Meeting, so no earlier than February 11, 2011 or later than March 13, 2011. However, in the event that the date of the 2011 Annual Meeting is advanced by more than 20 days, or delayed by more than 60 days, from the first anniversary of the 2010 Annual Meeting, so to a date before May 22, 2011 or after August 10, 2011, a stockholder’s notice must be received not earlier than the 120th day prior to such Annual Meeting and not later than the close of business on the later of (A) the 90th day prior to such Annual Meeting and (B) the tenth day following the day on which notice of the date of such Annual Meeting was mailed or public disclosure of the date of such Annual Meeting was made, whichever occurs first. Our by-laws specify the information the notice for the director nomination should contain to be effective.

 

We are subject to the informational requirements of the Securities Exchange Act, and file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read our SEC filings through the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy any document we file with the SEC at its public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room.

 

You may obtain any of the documents we file with the SEC, without charge, by requesting them in writing or by telephone from us at the following address:

 

Netezza Corporation
26 Forest Street
Marlborough, Massachusetts 01752
Attention: Investor Relations
Telephone: (508) 382-8200

 

If you would like to request documents from us, please do so by November 2, 2010, to receive them before the special meeting. If you request any documents from us, we will mail them to you by first class mail, or another equally prompt method, promptly after we receive your request.

 

If you have any questions about this proxy statement, the special meeting or the merger or need assistance with voting procedures, you should contact:

 

Netezza Corporation
Telephone: (508) 382-8200
or
Georgeson, Inc.

199 Water Street, 26th Floor

New York, NY 10038

Banks and Brokers Call (212) 440-9800

All others call Toll-Free (800) 509-0984

 

You should not send in your Netezza stock certificates until you receive the transmittal materials from the paying agent. Our record stockholders who have further questions about their share certificates or the exchange of our common stock for cash should contact the paying agent.

You should rely only on the information contained in this proxy statement to vote on the proposals described herein. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated October 12, 2010. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date (or as of an earlier date if so indicated in this proxy statement). Neither the mailing of this proxy statement to stockholders nor the issuance of cash in the merger creates any implication to the contrary. This proxy statement does not constitute a solicitation of a proxy in any jurisdiction where, or to or from any person to whom, it is unlawful to make a proxy solicitation.

 

Your vote is important. You may vote by returning the enclosed proxy card, submitting a proxy via the Internet or telephone or attending the special meeting and voting in person.

Annex A

 

 

AGREEMENT AND PLAN OF MERGER
Among
INTERNATIONAL BUSINESS MACHINES CORPORATION
ONYX ACQUISITION CORP.
and
NETEZZA CORPORATION
Dated as of September 19, 2010

 

 

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