-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, hLCoGQoB1xJKLQFsXJph2i89g2PRJEmlwZSRcnHVClOkc92PpYh5RqSU70dFPxTL kiNyZCmkTBgfDRIN+5Qpqg== 0000950112-95-001636.txt : 19950615 0000950112-95-001636.hdr.sgml : 19950615 ACCESSION NUMBER: 0000950112-95-001636 CONFORMED SUBMISSION TYPE: SC 14F1 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950614 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: LOTUS DEVELOPMENT CORP CENTRAL INDEX KEY: 0000711761 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 042757702 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14F1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-35911 FILM NUMBER: 95547053 BUSINESS ADDRESS: STREET 1: 55 CAMBRIDGE PWY CITY: CAMBRIDGE STATE: MA ZIP: 02142 BUSINESS PHONE: 6175778500 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LOTUS DEVELOPMENT CORP CENTRAL INDEX KEY: 0000711761 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 042757702 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14F1 BUSINESS ADDRESS: STREET 1: 55 CAMBRIDGE PWY CITY: CAMBRIDGE STATE: MA ZIP: 02142 BUSINESS PHONE: 6175778500 SC 14F1 1 LOTUS DEVELOPMENT CORPORATION INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER GENERAL This Information Statement is being mailed on or about June 14, 1995, with the Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") of Lotus Development Corporation (the "Company") with respect to the Offer to Purchase dated June 6, 1995 (as supplemented, the "Offer to Purchase") of White Acquisition Corp. (the "Purchaser"). The Purchaser is offering to purchase all outstanding shares of Common Stock, par value $.01 per share (the "Common Stock") of the Company, together with the associated preferred share purchase rights, at a price of $64 per share, net to the Seller in cash (the "Offer"). The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of June 11, 1995 (the "Merger Agreement"), by and among International Business Machines Corporation ("IBM"), the Purchaser and the Company. You are receiving this Information Statement in connection with the possible election of persons designated by the Purchaser (the "Purchaser Designees") to a majority of the seats on the Board of Directors (the "Board") of the Company pursuant to the Merger Agreement. The Merger Agreement is more fully described under Item 3 of the Schedule 14D-9, to which this Information Statement is attached. Capitalized terms used and not defined herein have the meanings assigned to them in the Schedule 14D-9. The information with respect to the Purchaser Designees (as defined below) has been supplied to the Company by the Purchaser and IBM for inclusion herein, and the Company assumes no responsibility for the accuracy or completeness of such information. This Information Statement is required by Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1 thereunder. You are urged to read this Information Statement carefully. You are not, however, required to take any action. THE PURCHASER DESIGNEES Pursuant to the Merger Agreement and subject to compliance with applicable law, upon the Purchaser's acceptance for payment of, and payment for, Shares pursuant to the Offer, the Purchaser will be entitled to designate such number of directors on the Board (the "Purchaser Designees") as will constitute a majority of such directors. The foregoing notwithstanding, the Merger Agreement further provides that at least two directors who were directors of the Company as of the date of the Merger Agreement and who are not officers of the Company (such two directors, the "Independent Directors") shall continue to serve on the Board until the effectiveness of the Merger. The Company has agreed to take all action necessary to effect the election of the Purchaser Designees to the Board, and in connection therewith the Company will promptly, at the option of IBM, either increase the size of the Board or obtain the resignation of such number of its current directors as is necessary to enable the Purchaser Designees to be elected to the Board as provided above. The Purchaser has informed the Company that it will choose the Purchaser Designees from the list of persons set forth in the following table. The following table sets forth the name, age, present principal occupation or employment and five-year employment history for each of the persons who may be designated by the Purchaser as the Purchaser Designees. The business address of each such person is International Business Machines Corporation, Old Orchard Road, Armonk, NY 10504 and each such person is a citizen of the United States, other than John M. Thompson, who is a citizen of Canada.
POSITION WITH IBM; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND AGE 5-YEAR EMPLOYMENT HISTORY; DIRECTORSHIPS - ------------------------------ ------------------------------------------------------------ Louis V. Gerstner, Jr. (53)... Chairman of the Board and Chief Executive Officer of IBM since 1993. From 1989 until joining IBM in 1993, he was Chairman of the Board and Chief Executive Officer of RJR Nabisco Holdings Corp. He is a director of Bristol-Myers Squibb Company and The New York Times Company. Mr. Gerstner is a member of the Board of Lincoln Center for the Performing Arts and Vice Chairman of the Board of the New American School Development Corp. Mr. Gerstner is also a member of The Council on Foreign Relations and a Board member of The America/China Society and The Japan Society. Jerome B. York (56)........... Senior Vice President and Chief Financial Officer of IBM since 1993 and a director since 1995. From 1979 until joining IBM in 1993, he served in a number of executive positions at Chrysler Corporation, including Executive Vice President--Finance and Chief Financial Officer from 1990 to 1993 and Vice President and Controller from 1989 to 1990. He also served as a director of Chrysler from 1992 to 1993. Lawrence R. Ricciardi (54).... Senior Vice President and General Counsel of IBM since 1995. Mr. Ricciardi was President and General Counsel of RJR Nabisco Holdings Corp. from 1993 to 1995, Co-Chairman and Chief Executive Officer and General Counsel from March to May 1993, and Executive Vice President and General Counsel from 1989 to 1993. John M. Thompson (52)......... Senior Vice President and Group Executive of IBM and Chairman, IBM Canada, since 1994. Mr. Thompson was IBM Senior Vice President and Group Executive and Chairman, IBM Canada, from 1993 to 1994; IBM Senior Vice President and General Manager, Applications Business Systems and Chairman, IBM Canada, 1993; IBM Vice President and General Manager, Applications Business Systems and Chairman, IBM Canada, from 1991 to 1993; IBM Vice President, Corporate Marketing and Services and Chairman, IBM Canada, 1991; IBM Vice President and Chairman, IBM Canada, from 1990 to 1991; and IBM Vice President, Chairman and Chief Executive Officer, Americas Group, from 1989 to 1990. Mr. Thompson is a director of The Toronto-Dominion Bank.
The Purchaser has advised the Company that to the best knowledge of the Purchaser, none of the Purchaser Designees currently is a director of, or holds any position with, the Company, and except as disclosed in the Offer to Purchase, none of the Purchaser Designees beneficially owns any securities (or rights to acquire any securities) of the Company or has been involved in any transactions with the Company or any of its directors, executive officers or affiliates that are required to be disclosed pursuant to the rules of the Commission, except as may be disclosed in the Offer to Purchase. The Purchaser has also informed the Company that certain Purchaser Designees and/or their respective associates may also be directors or officers of other companies and organizations that have engaged in transactions with the Company or its subsidiaries in the ordinary course of business since January 1, 1994, and that the Purchaser believes that the interest of such persons in such transactions is not of material significance. The Purchaser has advised the Company that each of the persons listed in the table above has consented to act as a director, and that none of such persons has during the last five years been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was, or is, subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. It is expected that the Purchaser Designees may assume office at any time following the purchase by the 2 Purchaser of the specified minimum number of shares pursuant to the Offer, and that upon assuming office, the Purchaser Designees will thereafter constitute a majority of the Board. CERTAIN INFORMATION CONCERNING THE COMPANY The shares of Common Stock constitute the only class of voting securities of the Company. As of June 1, 1995, there were 46,793,696 shares of Common Stock outstanding. Each share of Common Stock entitles its record holder to one vote. Stockholders of the Company do not have cumulative voting rights. The Board currently consists of six members. THE CURRENT MEMBERS OF THE BOARD AND EXECUTIVE OFFICERS OF THE COMPANY To the extent the Board will consist of persons who are not Purchaser Designees, the Board is expected to continue to consist of those persons who are currently directors of the Company who do not resign. The following table sets forth the name, age and business address of each current director, the year in which such director first became a director of the Company, the principal occupation of such director during the past five years and any other directorships held, as of June 1, 1995, by such director in any company subject to the reporting requirements of the Exchange Act or in any company registered as an investment company under the Investment Company Act of 1940, as amended.
YEAR IN WHICH NOMINEE FIRST NAME, AGE AND BUSINESS BECAME PRINCIPAL OCCUPATION ADDRESS DIRECTOR DURING PAST 5 YEARS DIRECTORSHIPS - -------------------------- ------- -------------------------- -------------------------- Jim P. Manzi (43)......... 1984 Chairman of the Board of None c/o Lotus Development the Company (1986 to Corporation present); President and 55 Cambridge Parkway Director of the Company Cambridge, MA 02142 (1984 to present) Richard S. Braddock 1992 Partner (1994 to present), Eastman Kodak Company; (53)...................... Clayton, Dubilier & Rice, True North Communications Clayton, Dubilier & Rice, Inc.; Chief Executive Inc. Inc. Officer (1993), Medco 126 East 56th Street Containment Services, Inc. New York, NY 10022 (health care related services company); President and Chief Operating Officer (1990-1992), Citicorp and Citibank, N.A. (bank and financial services companies) Elaine L. Chao (42)....... 1994 President and Chief Dole Food Company c/o United Way of America Executive Officer (1992 to 701 North Fairfax Street present), United Way of Alexandria, VA 22314 America; Director (1991-1992), Peace Corps; Deputy Secretary (1989-1991), United States Department of Transportation William H. Gray III 1994 President and Chief Chase Manhattan Corp.; (53)...................... Executive Officer MBIA Corp.; Prudential c/o United Negro College (1991--present), United Insurance Corp. of Fund Negro College Fund; America; Rockwell Int'l 700 13th Street, N.W. Congressman, 2nd District Corp.; Union Pacific Suite 1180 Pennsylvania (1979-1991), Corp.; Warner Lambert Washington, DC 20005 U.S. House of Corp.; and Westinghouse Representatives Corp.
3
YEAR IN WHICH NOMINEE FIRST NAME, AGE AND BUSINESS BECAME PRINCIPAL OCCUPATION ADDRESS DIRECTOR DURING PAST 5 YEARS DIRECTORSHIPS - -------------------------- ------- -------------------------- -------------------------- Michael E. Porter (48).... 1993 Professor (1973-present), Alpha Beta Technologies, c/o Harvard Business Harvard Business School Inc.; Parametric School Technology Corporation Aldrich Building, Room 200 Soldiers Field Road Boston, MA 02163 Henri A. Termeer (49)..... 1993 Chairman, President and Abiomed Inc.; AutoImmune c/o Genzyme Corporation Chief Executive Officer Inc.; Hambrecht & Quist One Kendall Square (1988-- present), Genzyme Health Care Investors, Cambridge, MA 02139 Corporation Inc.; Hambrecht & Quist Life Sciences; IG Laboratories, Inc.; Xenova Corp.; Genzyme Corp.; Genzyme Transgenics; and Neozyme II Corp.
EXECUTIVE OFFICERS OF THE COMPANY The executive officers of the Company as of June 1, 1995 are:
NAME AGE POSITION - ------------------------------------------ ---- ------------------------------------------ Jim P. Manzi.............................. 43 Chairman of the Board, President and Chief Executive Officer Kc Branscomb.............................. 39 Senior Vice President, Business Development Edwin J. Gillis........................... 46 Senior Vice President, Finance and Operations and Chief Financial Officer John B. Landry............................ 47 Senior Vice President, Communications Business Group and Chief Technology Officer Ilene H. Lang............................. 51 Senior Vice President, Desktop Business Group June L. Rokoff............................ 45 Senior Vice President, Worldwide Services Group Robert K. Weiler.......................... 44 Senior Vice President, Worldwide Sales and Marketing
Mr. Manzi has served as President since October 1984 and was named Chief Executive Officer in April 1986. In July 1986, he was appointed Chairman of the Board upon the resignation of the former Chairman and founder of the Company, Mitchell Kapor. Mr. Manzi joined the Company in May 1983 as Director of Corporate Marketing and was named Vice President of Marketing and Sales in September 1983. Ms. Branscomb joined the Company in October 1992 as Senior Vice President of Business Development. From November 1991 until joining the Company, Ms. Branscomb was the Chief Executive Officer of IntelliCorp, Inc. She had previously held the position of Chief Operating Officer since late 1988. Prior to joining IntelliCorp, Ms. Branscomb was Senior Vice President of Sales and Marketing at Aion Corporation, founding Principal and Vice President of Metaphor Computer Systems and a consultant with the Boston Consulting Group Inc. Mr. Gillis joined the Company in July 1991 as Senior Vice President of Finance and Administration and Chief Financial Officer and, in February 1994, Mr. Gillis was named Senior Vice President of Finance and Operations and Chief Financial Officer. Mr. Gillis came to the Company after 15 years at 4 Coopers and Lybrand, an international accounting and consulting firm, where he was a partner and served as chairman of the software industry group. Mr. Landry joined the Company in December 1991 as Senior Vice President of Software Development and Chief Technology Officer and, in October 1994, Mr. Landry was named Senior Vice President of the Communications Business Group and Chief Technology Officer. From December 1990 until joining the Company, Mr. Landry was Executive Vice President and Chief Technology Officer of Dun & Bradstreet Software. Prior to joining Dun & Bradstreet, Mr. Landry was Chairman and Chief Executive Officer of Agility Systems, Inc., which he formed in September 1989. Previously, he served as executive vice president and a member of the Board of Directors of Cullinet Software. Mr. Landry joined Cullinet Software in 1987 when it acquired Distribution Management Systems where he was Chairman. Ms. Lang joined the Company in 1993 as Vice President of International Product Development, and was named Senior Vice President of the Desktop Business Group in October 1994. Prior to joining the Company, Ms. Lang was interim Chief Operating Officer of the Industrial Technology Institute. Previously, Ms. Lang served as President of Adelie Corporation, and held senior management positions at Ontos, Inc. and Symbolics, Inc. Ms. Rokoff was named Senior Vice President of Worldwide Services in October 1994. She had previously held the positions of Senior Vice President of Development since May 1992, Senior Vice President of the Consulting and Information Services Group since November 1991 and Vice President of the Communications and Information Services Group since June 1990. Ms. Rokoff came to the Company in 1986 as Director of Development for the Information Services Division. She has held several executive positions since joining the Company including Vice President of the Graphics and Information Management Group and general manager of both the Workstation Products Group and 1-2-3 Release 3.0. Mr. Weiler joined the Company in 1991 as Senior Vice President of Sales and Marketing, and was named Senior Vice President of the North American Business Group in November 1991. In October 1994, Mr. Weiler was named Senior Vice President of Worldwide Sales and Marketing. From 1989 until joining the Company, Mr. Weiler was President and Chief Operating Officer of Interleaf, Inc. Prior to joining Interleaf, Mr. Weiler served as Executive Vice President of North American Sales and Client Service of Cullinet Software before being appointed President and Chief Operating Officer. Mr. Weiler joined Cullinet in 1987 when it acquired Distribution Management Systems where he was President and Chief Operating Officer. PRINCIPAL HOLDERS OF VOTING SECURITIES SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table sets forth, as of May 5, 1995, the name and address of each person who, to the knowledge of the Company, owned beneficially (as defined in Rule 13d-3 under the Exchange Act) more than 5% of the shares of the outstanding Common Stock, the number of shares owned by each such person and the percentage of the outstanding shares of Common Stock represented thereby. The information below with respect to beneficial ownership is based upon information filed with the 5 Securities and Exchange Commission ("SEC") pursuant to Sections 13(d) or 13(g) of the Exchange Act and furnished to the Company by the respective stockholders.
AMOUNT AND NATURE OF PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS - --------------------------------------------------------------- -------------------- ---------- The Capital Group Companies, Inc............................... 2,630,000(1) 5.51% 333 South Hope Street Los Angeles, CA 90071 FMR Corp....................................................... 4,320,274(2) 9.03% 82 Devonshire Street Boston, MA 02109 Manning and Napier Advisors, Inc............................... 3,241,506(3) 6.80% 1100 Charles Square Rochester, NY 14604 Metropolitan Life Insurance Company............................ 3,561,300(4) 7.46% One Madison Avenue New York, NY 10010 State Street Research & Management Company..................... 3,537,500(5) 7.41% One Financial Center Boston, MA 02111
- ------------ (1) Represents shares held by Capital Research and Management Company, a registered investment adviser ("CRMC") and an operating subsidiary of The Capital Group Companies, Inc. To the Company's knowledge, as of May 5, 1995, CRMC exercised sole investment discretion with respect to all of such shares, all of which were owned by various institutional investors. CRMC had no voting power with respect to such shares and disclaims beneficial ownership of such shares. The Company has been informed that as of June 12, 1995 CRMC beneficially owned less than 5% of the shares of Common Stock then outstanding. (2) A Schedule 13(g) dated May 4, 1995 indicates that this amount represents shares beneficially owned by (i) FMR Corp. through its wholly owned subsidiaries, Fidelity Management & Research Company, a registered investment adviser ("Fidelity"), and Fidelity Management Trust Company, a bank ("FMTC"), (ii) certain investment companies (including the Fidelity Magellan Fund) for which Fidelity serves as investment adviser (the "Fidelity Funds") and (iii) Edward C. Johnson 3d, as Chairman of FMR Corp., and through certain members of his family and family trusts by virtue of their controlling interest as a group in the voting stock of FMR Corp. The Schedule 13(g) dated May 4, 1995 indicates that the Fidelity Magellan Fund beneficially owned 3,800,390 shares or 7.94% of the shares of Common Stock outstanding as of such date. As of such date, FMTC was the beneficial owner of 109,190 shares or .23% of the shares of Common Stock outstanding as a result of its serving as investment manager of institutional account(s). Mr. Johnson and FMR Corp., through its control of Fidelity, and the Fidelity Funds each had sole dispositive power with respect to the 6,793,974 shares owned by the Fidelity Funds. Mr. Johnson and FMR Corp., through its control of FMTC, had sole dispositive power over 24,590 shares and sole voting power with respect to 10,390 of these shares and no voting power with respect to 14,200 shares owned by institutional accounts managed by FMTC. Neither FMR Corp. nor Mr. Johnson had the sole power to vote or direct the voting of the shares owned directly by the Fidelity Funds, which power resided with the Fidelity Funds' Board of Trustees. The Company has been informed that as of June 12, 1995, FMR Corp. beneficially owned 3,500,000 shares of Common Stock, which represents 7.48% of the shares of Common Stock outstanding as of such date. (3) A Schedule 13(g) dated February 1, 1995 indicates that the beneficial owner, a registered investment adviser, possessed sole voting power with respect to 3,170,281 of such shares and sole dispositive power with respect to all such shares. (4) A Schedule 13(g) dated February 9, 1995 indicates that the beneficial owner, a registered investment adviser and insurance company, possessed sole voting power with respect to 3,430,700 of such shares and sole dispositive power with respect to all such shares. The Company has been informed that as of June 12, 1995, the beneficial owner beneficially owned less than 5% of the shares of Common Stock then outstanding. (Footnotes continued on following page) 6 (Footnotes continued from preceding page) (5) A Schedule 13(g) dated February 13, 1995 indicates that the beneficial owner, a registered investment adviser, possessed sole voting power with respect to 3,407,100 of such shares and sole dispositive power with respect to all such shares. The Company has been informed that as of June 12, 1995, the beneficial owner beneficially owned less than 5% of the shares of Common Stock then outstanding. SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth, as of June 1, 1995, for each of (i) each member of the Board of Directors, the Company's Chief Executive Officer ("CEO") and each of the next four most highly compensated executive officers of the Company and (ii) all directors and executive officers as a group the number of shares and percentage of outstanding Common Stock of the Company beneficially owned.
POSITIONS AND OFFICES AMOUNT AND NATURE OF NAME WITH THE COMPANY BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS - ------------------------ --------------------------------- ------------------------ ---------------- Jim P. Manzi............ Chairman of the Board, President 1,220,656(2) 2.61% and Chief Executive Officer Richard S. Braddock..... Director 8,000(3) * Elaine L. Chao.......... Director 2,500(4) * William H. Gray III..... Director 2,500(5) * Michael E. Porter....... Director 11,916(6) * Henri A. Termeer........ Director 7,916(7) * Edwin J. Gillis......... Senior Vice President--Finance 119,755(8) * and Operations and Chief Financial Officer John B. Landry.......... Senior Vice President-- 28,744(9) * Communications, Development and Chief Technology Officer June L. Rokoff.......... Senior Vice President-- Worldwide 86,369(10) * Services Group Robert K. Weiler........ Senior Vice President-- Worldwide 73,935(11) * Sales and Marketing All directors and executive officers as a group (13 persons).............. 1,630,253(12) 3.48%
- ------------ * Less than 1% (1) Except where expressly stated otherwise, each named person possesses sole voting and investment power with respect to the shares. (2) Includes 26,201 shares held in the Jim P. Manzi 1993 Irrevocable Trust for the benefit of Mr. Manzi's children. Includes 50,000 shares that Mr. Manzi has the right to acquire within 60 days of June 1, 1995 by the exercise of stock options. (3) Includes 7,500 shares that Mr. Braddock has the right to acquire within 60 days of June 1, 1995 by the exercise of stock options. (4) Includes 2,500 shares that Ms. Chao has the right to acquire within 60 days of June 1, 1995 by the exercise of stock options. (5) Includes 2,500 shares that Mr. Gray has the right to acquire within 60 days of June 1, 1995 by the exercise of stock options. (Footnotes continued on following page) 7 (Footnotes continued from preceding page) (6) Includes 7,916 shares that Mr. Porter has the right to acquire within 60 days of June 1, 1995 by the exercise of stock options. (7) Includes 7,916 shares that Mr. Termeer has the right to acquire within 60 days of June 1, 1995 by the exercise of stock options. (8) Includes 115,937 shares that Mr. Gillis has the right to acquire within 60 days of June 1, 1995 by the exercise of stock options. Includes 2568 shares held in trust for the benefit of Mr. Gillis under the Company's 401k and Profit Sharing Plan. (9) Includes 11,174 shares that Mr. Landry has the right to acquire within 60 days of June 1, 1995 by the exercise of stock options. Includes 8 shares held in trust for the benefit of Mr. Landry under the Company's 401k and Profit Sharing Plan and 1,200 shares over which Mr. Landry exercises investment discretion as custodian of such shares held for the benefit of his minor children. (10) Includes 69,375 shares that Ms. Rokoff has the right to acquire within 60 days of June 1, 1995 by the exercise of stock options. Includes 7,244 shares held in trust for the benefit of Ms. Rokoff under the Company's 401k and Profit Sharing Plan. (11) Includes 72,437 shares that Mr. Weiler has the right to acquire within 60 days of June 1, 1995 by the exercise of stock options. (12) Includes 421,130 shares that directors and executive officers of the Company have the right to acquire within 60 days of June 1, 1995 by the exercise of stock options and 8,463 shares of Common Stock held in trust by the Company's Profit Sharing and 401k Plan as described above. EXECUTIVE COMPENSATION AND OTHER INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS SUMMARY COMPENSATION The following table sets forth information concerning the cash and noncash compensation in each of the last three fiscal years for the Company's CEO and the next four most highly compensated executive officers.
ANNUAL LONG TERM ALL OTHER COMPENSATION (1) COMPENSATION COMPENSATION ----------------------- ------------ ------------ NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) ($)(2) - ----------------------------------------- ---- ---------- --------- ------------ ------------ Jim P. Manzi............................. 1994 650,000 227,500 200,000 31,800 Chairman of the Board and President 1993 650,000 650,000 40,000 35,046 1992 650,000 0 0 34,214 Edwin J. Gillis.......................... 1994 325,000 113,750 100,000 17,100 Chief Financial Officer and Senior Vice 1993 275,000 275,000 17,500 18,597 President--Finance and Operations 1992 275,000 0 50,000 23,805 John B. Landry........................... 1994 325,000 113,750 100,000 18,150 Senior Vice President--Communications 1993 325,000 325,000 12,500 28,325 Development and Chief Technology 1992 325,000 182,000(3) 0 26,889 Officer June L. Rokoff........................... 1994 325,000 113,750 100,000 18,150 Senior Vice President--Worldwide 1993 325,000 325,000 25,000 19,771 Services Group 1992 307,400 0 65,000 19,945 Robert K. Weiler......................... 1994 350,963 120,313 100,000 18,695 Senior Vice President--Worldwide Sales 1993 325,000 325,000 17,500 19,771 and Marketing 1992 325,000 0 0 24,688
- ------------ (1) Does not include perquisites or other personal benefits in any year for which the aggregate amount was less than the lesser of either $50,000 or 10 percent of the total annual salary and bonus for the executive officer in that year. (2) Includes amounts credited to the account of the executive officer for those years in which he or she served in such capacity in connection with (i) the profit sharing feature of the Company's Profit Sharing and 401k Plan, (ii) the Company's Defined Contribution Restoration Plan and (iii) the 8 Company matching contribution under the savings feature of the Profit Sharing and 401k Plan as follows:
DEFINED CONTRIBUTION PROFIT SHARING RESTORATION 401K MATCHING NAME YEAR AMOUNT ($) PLAN ($) CONTRIBUTION ($) - ------------------------------------------- ---- -------------- ------------ ---------------- Manzi...................................... 1994 3,150 24,150 4,500 1993 11,084 19,465 4,497 1992 7,781 22,069 4,364 Gillis..................................... 1994 3,150 9,450 4,500 1993 11,084 3,016 4,497 1992 7,781 11,660 4,364 Landry..................................... 1994 3,150 10,500 4,500 1993 11,084 12,744 4,497 1992 7,781 14,744 4,364 Rokoff..................................... 1994 3,150 10,500 4,500 1993 11,084 4,190 4,497 1992 7,781 7,800 4,364 Weiler..................................... 1994 3,150 11,045 4,500 1993 11,084 4,190 4,497 1992 7,781 12,543 4,364
- ------------ (3) Represents payment by the Company related to Mr. Landry's prior employment for cash and other compensation that he had foregone by joining the Company. OPTION GRANTS IN LAST FISCAL YEAR The following table sets forth information concerning individual stock option grants made to the Company's CEO and each of the Company's next four most highly compensated executive officers during fiscal 1994.
INDIVIDUAL GRANTS (1) ---------------------------------------------------- POTENTIAL REALIZABLE VALUE AT ASSUMED PERCENT OF ANNUAL RATES OF TOTAL STOCK PRICE OPTIONS APPRECIATION GRANTED TO FOR OPTION TERM (2) OPTIONS EMPLOYEES IN EXERCISE --------------------- GRANTED FISCAL YEAR PRICE 5% 10% NAME (#) (%) ($/SH) EXPIRATION DATE ($) ($) - ------------------------------- ------- ------------ -------- ---------------- --------- --------- Jim P. Manzi................... 200,000 5.06 64.5 January 25, 2001 2,226,330 8,048,709 Edwin J. Gillis................ 100,000 2.53 64.5 January 25, 2001 1,113,165 4,024,354 John B. Landry................. 100,000 2.53 64.5 January 25, 2001 1,113,165 4,024,354 June L. Rokoff................. 100,000 2.53 64.5 January 25, 2001 1,113,165 4,024,354 Robert K. Weiler............... 100,000 2.53 64.5 January 25, 2001 1,113,165 4,024,354
- ------------ (1) All options described above are "premium" options granted at a per share exercise price 20% above the fair market value of a share of Common Stock on the date of grant. The options are non-qualified stock options, have a seven year term and vest over three years beginning on the 25th month following the date of grant and thereafter in equal monthly installments over the succeeding 35 months. (2) Calculation of potential realizable values are based on theoretical rates of return required to be disclosed by the SEC and may or may not accurately reflect or predict the actual value of the stock options. 9 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES The following table sets forth information concerning each exercise of stock options by the CEO and each of the Company's next four most highly compensated executive officers during fiscal 1994 and the value of unexercised options at the end of that fiscal year.
UNEXERCISED NUMBER OF VALUE OF UNEXERCISED IN-THE-MONEY SHARES OPTIONS AT FISCAL OPTIONS AT FISCAL ACQUIRED YEAR-END YEAR-END(1) ON VALUE EXERCISABLE/ EXERCISABLE/ EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE NAME (#) ($) (#) ($) - -------------------------------------- -------- --------- ----------------- ------------------ Jim P. Manzi.......................... 21,250 674,688 44,166/233,333 914,883/669,785 Edwin J. Gillis....................... 10,000 421,563 98,385/165,364 961,704/1,047,808 John B. Landry........................ 40,500 1,522,063 40,489/144,010 848,605/915,064 June L. Rokoff........................ 21,250 772,188 46,979/164,270 675,635/925,284 Robert K. Weiler...................... 15,000 643,125 43,385/152,864 949,517/1,168,121
- ------------ (1) Based on the closing price on the NASDAQ National Market System for a share of Common Stock on December 31, 1994 of $41.00. PENSION PLAN In 1985, the Company established the Lotus Development Corporation Pension Plan (the "Pension Plan") for the purpose of assisting its employees in meeting the needs of retirement. In 1992, the Company determined that its Profit Sharing and 401k Plan could provide adequate retirement assistance to employees and, effective June 1, 1992, suspended the Pension Plan. While all benefits accrued under the Pension Plan through May 31, 1992 have become fully vested, no further benefits have accrued to employees after that date. On May 2, 1995, the Board of Directors of the Company voted to terminate the Lotus Development Corporation Pension Plan (the "Pension Plan") effective July 15, 1995 or such later date as is practical and consistent with applicable legal requirements. Benefits under the Pension Plan are based on an average of the participant's highest consecutive 36 months of total annual compensation during the last 72 months of service ("Final Average Compensation"). The monthly benefit payable upon normal retirement in the form of a single life annuity is computed as follows: 1/12th of 1.5% of Final Average Compensation is multiplied by the participant's total number of years of service at June 1, 1992 up to no more than 35 years. From that result is subtracted the monthly value of the annuity that could be acquired (on specified actuarial assumptions) with the amount of Company profit sharing contributions for the participant's account for 1990 and subsequent years accumulated with a deemed interest return. The table below sets forth the estimated annual benefits payable upon normal retirement under the Pension Plan formula to employees in the specified average salary and years of service classifications: YEARS OF SERVICE ------------------------ REMUNERATION 5 10 - ------------ ------ ------- $ 25,000 $1,875 $ 3,750 50,000 3,750 7,500 75,000 5,625 11,250 100,000 7,500 15,000 125,000 9,375 18,750 150,000 11,250 22,500 175,000 13,125 26,250 200,000 15,000 30,000 228,886* 17,165 34,330 - ------------ * The maximum permitted salary recognized under the Internal Revenue Code of 1986, as amended (the "Code") as in effect in 1992. 10 As of June 1, 1992, the date on which the accrual of future benefits was suspended, Mr. Manzi had eight years, Mr. Landry had less than one year, Ms. Rokoff had seven years, Mr. Gillis had less than one year and Mr. Weiler had one year of service under the Pension Plan. OTHER BENEFIT PLANS The Company currently provides certain benefits to its eligible employees (including its executive officers) through the benefit plans described below: 1992 Stock Option Plan. The Company maintains the Lotus Development Corporation 1992 Stock Option Plan (the "1992 Stock Option Plan") to attract and retain the best available personnel for positions of substantial responsibility and to provide additional incentives to certain employees and consultants to contribute to the success of the Company. The 1992 Stock Option Plan is administered by a committee of the Board of Directors that consists of independent directors. Stock options granted under the plan may not be granted at less than fair market value on the date of grant. At the annual meeting of the Company held on May 2, 1995, the stockholders approved an increase in the number of Shares for which options may be granted under the 1992 Stock Option Plan from 6,000,000 to 12,000,000 Shares. The committee of the Board of Directors that administers the Company's stock option plans, in accordance with the terms of such plans, has accelerated the vesting and exercisability of all options outstanding under such plans, conditioned upon the acceptance for payment by the Purchaser of the Minimum Number of Shares (as defined in the Offer Documents). Employee Stock Purchase Plan. The Company maintains the Employee Stock Purchase Plan (the "Employee Plan") to provide incentive and to encourage ownership of Common Stock by all eligible employees of the Company and its subsidiaries. Employees of the Company may participate in the Employee Plan by authorizing payroll deductions over a six month period, with the proceeds being used to purchase shares of Common Stock for the participant at a discounted price. The Employee Plan is intended to be an "employee stock purchase plan" under Section 423 of the Code. Profit Sharing Plan and 401k Plan. The Company's Profit Sharing and 401k Plan (the "Plan") provides savings options to eligible U.S. employees of the Company through deferment of a portion of their compensation. Participants may elect to defer 2% to 12% of their compensation into the Plan and may also elect to contribute up to an additional 10% of their compensation on a non-deferred basis; provided that the combination of deferred and non-deferred contributions cannot exceed 12% of annual compensation. The Company also makes matching contributions equal to a percentage of the participant's biweekly deferred contributions. Under the Plan, an annual discretionary profit sharing contribution by the Company based on a percentage of operating profit is allocated to the accounts of all participants, who do not themselves make any profit sharing contribution. The level of Company profit sharing and matching contributions is set annually by the Board of Directors. The Plan is administered by a committee appointed by the Board of Directors. Each participant's contributions to the Plan are held in trust by a bank trustee and are invested in certain investment funds in accordance with the participant's instructions. The Plan is intended to be a qualified plan under Section 401(k) of the Code. Defined Restoration Plan. The Company adopted the Defined Contribution Restoration Plan to provide supplemental retirement benefits to employees, who because of limitations imposed by the law on benefits under tax qualified plans, would receive less than the full benefits to which they would have otherwise been entitled under the Company's qualified retirement plan. Under the Defined Contribution Restoration Plan, a participant's account is credited each year with the amount by which his or her profit sharing allocation under the Company's Profit Sharing and 401k Plan, calculated without consideration of the limitations imposed under the Code, exceeds the amounts permitted under the 11 Code. The Company's funding policy is to pay these supplemental benefits directly to participants as they become due. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Company's executive compensation program is administered by the Compensation Committee of the Board (the "Committee"). The Committee, which is composed of two independent directors, makes recommendations to the Board on the three key components of the Company's executive compensation program, base salary, annual incentive awards and longterm incentives. Compensation Policies for Executive Officers. The Company's executive compensation program is designed to attract and retain fully qualified executives in the highly competitive high technology marketplace. The levels of executive compensation established by the Committee are designed to be consistent with those available to other executives in similarly sized corporations. The Committee establishes individual compensation awards based on the contribution the executive has made in attaining the Company's short term and strategic performance objectives as well as the executive's anticipated future contribution. The Company's executive compensation program consists primarily of the following integrated components: 1. Base Salary--which is designed to compensate executives competitively within the industry and marketplace. 2. Annual Incentives--which provide a direct link between executive compensation and annual Company performance against predetermined measures. 3. Long Term Incentives--which consist of stock options that link management decision making with long-term Company performance and shareholder interests. Base Salary. Base salary levels for executive officers of the Company are reviewed annually by the Compensation Committee. The Committee's current policy is to target base salaries at the mid-range of the market and to maintain the combined amount of base salary and annual incentives within the upper quartile of the market based on independent nationally-recognized surveys and competitive analyses of companies whose gross revenues fall within the same range as those of the Company. The surveys from which this market comparison is drawn include data from over 400 major manufacturing and service companies and from over 300 high technology companies of various sizes. The surveys include, but are not limited to, data from all industries represented in the Standard and Poor's 500 High Technology Composite Index, i.e., Computer Software & Services, Communication Equipment/Manufacturers, Computer Systems, Aerospace/Defense, Electronics (Instrumentation, Defense and Semiconductors) and Office Equipment and Supplies. The High Technology Composite Index is the "line of business index" used in the stock performance graph set forth below. See "Performance Graph--Cumulative Five-Year Return" below. Annual Incentives. All executive officers participate in an Executive Incentive Program, which compensates officers in the form of annual cash bonuses. Awards under this program are based on the attainment of four specific Company performance measures established by the Compensation Committee at the beginning of the fiscal year. These performance measurements are keyed to management's annual operating plan and are based on the achievement of targeted (i) operating profit, (ii) revenue growth, (iii) revenue per employee and (iv) expense per employee. As Company performance for fiscal 1994 did not meet the targeted measures, the Executive Incentive bonuses actually paid were below targeted amounts. Long Term Incentives. The Company provides long term incentives through its Amended and Restated 1983 Nonqualified Stock Option Plan and its 1992 Stock Option Plan. The purpose of these plans is to create a direct link between compensation and the long-term performance of the Company. Stock options under these plans are granted at or above fair market value and vest in installments, 12 generally over four years. Options granted before January 1, 1993 have a five year term and options granted on or after that date have a seven year term. The Company makes its annual grant of options to its employees, including its executive officers, in January, to enable the Company to more closely link option grants to individual contribution and Company performance. When recommending option awards for an executive officer, the Committee considers (i) the executive's current contribution to Company performance, (ii) the anticipated contribution in meeting the Company's long-term strategic performance goals and (iii) industry practices and norms. Because the receipt of value by an executive officer under a stock option is dependent upon an increase in the price of the Company's Common Stock, this portion of the executives' compensation is directly aligned with an increase in shareholder value. In 1994, the Company adopted a "premium" stock option program for the CEO, the executive officers and certain other officers of the Company. The program is designed to enhance the link between the participant's compensation and the long-term performance of the Company and assist in the retention of each participant. Under this program participants receive options to purchase Common Stock under the 1992 Stock Option Plan at 20% above fair market value. Options granted under this program have a seven year term and vest over three years beginning in the 25th month following the date of grant and thereafter in equal monthly installments over the succeeding 35 months. In January 1995, the Company granted "premium" options to purchase the following number of shares of Common Stock to the CEO and the next four most highly compensated executive officers at an exercise price of $48.60 per share: Mr. Manzi--100,000; Mr. Landry--50,000; Ms. Rokoff--50,000; Mr. Gillis--50,000; and Mr. Weiler--50,000. CEO COMPENSATION Base Salary. The CEO's salary is positioned competitively to the mid-range of the marketplace, as determined through comparison of surveys and competitive analyses in the manner described above. The CEO has not received a base salary increase since January 1990. Incentive Compensation. The annual Executive Incentive Program is designed to reward the CEO based on the Company's performance. The CEO's annual bonus payable under this Program is determined using the same four measurements employed in determining the annual incentive awards for executive officers described above. These performance measurement targets are set and approved by the Committee annually. The CEO's maximum potential annual incentive award under this program is 150% of base salary. As Company performance for fiscal 1994 did not meet three of the four measurement targets, the CEO's Executive Incentive bonus for 1994 was below the targeted amount. Long-Term Incentive. In January 1995, the CEO received a "premium" option grant as described above. Consistent with the Committee's considerations for awards under this plan, the award was based on the anticipated contribution of the CEO to the attainment of the Company's long-term strategic performance. Based upon its assessment of the industry surveys described above, the Committee believes that the awarding of this grant is within the scope of the marketplace for executives of similarly sized companies. Respectfully submitted by the Compensation Committee, Richard S. Braddock, Chairman Henri Termeer 13 COMPENSATION OF DIRECTORS All Directors, with the exception of Mr. Manzi, received an annual retainer of $24,000 for the fiscal year ended December 31, 1994, together with reimbursement of expenses incurred in attending meetings of the Board of Directors. On January 1, 1995, Mr. Braddock, Ms. Chao, Mr. Gray, Mr. Porter and Mr. Termeer were each granted an option to acquire 10,000 shares of Common Stock at an exercise price of $40.50 per share, which price was equal to the market value of the Company's Common Stock on the first business day following that date, pursuant to the Company's 1986 Stock Option Plan for Non-Employee Directors. In addition, in accordance with such plan, Mr. Gray and Ms. Chao were each granted options to purchase 10,000 shares of Common Stock at an exercise price of $55.625 and $31.00, respectively, (the market value of such shares on the date of grant) in connection with their election to the Board of Directors. Effective May 9, 1995, the Company entered into a Consulting Agreement dated May 9, 1995 (as amended and restated, the "Consulting Agreement") with Richard S. Braddock, a member of the Company's Board of Directors, pursuant to which Mr. Braddock agreed to assist the Company's senior management in a major effort to reorganize the Company into separate business units and in related restructuring and cost reduction activities. Under the terms of the Consulting Agreement, Mr. Braddock would not receive cash compensation under most circumstances, but would instead receive stock options so that his remuneration would be tied to an increase in stockholder value. Mr. Braddock agreed to devote at least 50% of his professional time and effort on a monthly basis to the benefit of the Company through December 31, 1995, and up to 10% of his professional time on such matters thereafter (the "Service Requirement"). Pursuant to the Consulting Agreement, Mr. Braddock was granted options to purchase up to 130,000 Shares (the "Braddock Option") at a purchase price of $31.75 per Share (the fair market value of the Common Stock on May 9, 1995), subject to the terms of an Option Agreement dated May 9, 1995 (the "Braddock Option Agreement") and to the further terms of the 1992 Plan. Under the terms of the Braddock Option Agreement, the Braddock Option would become exercisable for up to approximately 90,500 Shares on November 10, 1995 if the Service Requirement was satisfied and for up to an additional 39,500 Shares in approximately 10,000 Share increments if the Service Requirement continued to be satisfied through March 1, 1996. The Braddock Option was subject to acceleration of exercise at the discretion of the Stock Option Committee of the Company's Board of Directors on the same basis as other options granted under the 1992 Plan, but would terminate if a "Change in Control" (as defined in the Consulting Agreement) occurred prior to November 9, 1995. The Offer and the Merger would constitute a Change in Control under the Consulting Agreement. Under the terms of the Consulting Agreement, upon a Change in Control Mr. Braddock agreed to devote at least 50% of his professional time to assisting the chief executive officer of the Company in coordinating the transition issues associated with the Change in Control through December 31, 1995 and up to 10% of his professional time to such matters through the twenty-fourth month after the Change in Control. For his consulting services after a Change in Control (and in lieu of the stock-based compensation described above), Mr. Braddock will be entitled to receive up to $2,925,000 over a period of up to twenty-four months. The Consulting Agreement also includes provisions under which Mr. Braddock will receive payments sufficient to compensate him for any excise taxes imposed pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (as well as any related interest or penalties) on any payments made pursuant to the Consulting Agreement or the Braddock Option Agreement. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During 1994, Messrs. Aldo Papone, Chester A. Siuda, Richard S. Braddock and Henri A. Termeer each served on the Compensation Committee of the Board. Messrs. Papone and Siuda each declined to 14 stand for re-election to the Board at the Company's 1994 Annual Meeting of Shareholders in May 1994. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Section 16(a) of the Exchange Act requires the Company's directors, its executive (and certain other) officers, and any persons who are beneficial owners of more than ten percent of the Common Stock to report their initial ownership of Common Stock and any subsequent changes in that ownership to the Commission. Specific due dates for such reports have been established, and the Company is required to disclose in this Information Statement any failure to file such reports by such date during fiscal 1994. Based solely upon a review of the forms furnished to the Company pursuant to the rules under the Exchange Act, all Section 16(a) filing requirements during fiscal 1994 were complied with except as follows: Mr. Porter made one late filing reporting the purchase of 500 shares of Common Stock that was required to be filed in 1994 on Form 4 under Section 16(a) of the Exchange Act. Mr. Porter subsequently reported this transaction. PERFORMANCE GRAPH The following indexed graph indicates the Company's total return to its shareholders for the past five year period ended December 31, 1994 as compared to the total return over such period for the Standard & Poor's 500 Composite Index and the Standard & Poor's High Tech Composite Index. This graph assumes a $100 investment at the beginning of the five-year period and the reinvestment of all dividends. (Pursuant to Item 304 of Regulation S-T, the Company has submitted the Performance Graph under cover of Form SE.) CUMULATIVE FIVE-YEAR TOTAL RETURN 1989 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- ---- S&P 500 $ 100 $ 96.89 $126.42 $136.05 $149.76 $151.74 High Tech Composite $ 100 $102.12 $116.50 $121.31 $149.22 $173.92 Lotus $ 100 $ 64.52 $ 84.68 $ 63.31 $177.42 $132.26 15 BOARD MEETINGS AND COMMITTEES The Board of Directors is currently comprised of Jim P. Manzi, Richard S. Braddock, Elaine L. Chao, William H. Gray III, Michael E. Porter and Henri A. Termeer. The Board met six times during the year ended December 31, 1994. The Board has a Compensation Committee, which establishes and reviews compensation of senior management and which consists of Messrs. Braddock and Termeer. The Compensation Committee met once during 1994. The Board also has an Audit Committee which oversees actions taken by the Company's independent auditors and reviews the Company's internal controls, consisting of Mr. Porter and Ms. Chao. The Audit Committee met twice during 1994. CERTAIN TRANSACTIONS In 1994, the Company paid fees for legal services of approximately $2,790,188 to O'Sullivan Graev & Karabell, the law firm of which Lawrence G. Graev is a member. Mr. Graev served as a member of the Board until May 1994. The Company's Profit Sharing and 401k Plan invests in a number of investment funds at the direction of its participants. During 1994, the Profit Sharing and 401k Plan invested in the Fixed Income Fund, which is managed by Fidelity Management Trust Company, and in the Fidelity Magellan Fund and the Fidelity Equity Income Funds, which are managed by Fidelity Management & Research Company. Both Fidelity Management Trust Company and Fidelity Management & Research Company are wholly owned subsidiaries of FMR Corp., which, as of December 31, 1994, beneficially owned greater than 5% of the outstanding Common Stock of the Company. See "Principal Holders of Voting Securities" above and "Other Benefit Plans--Profit Sharing and 401k Plan" above. June 13, 1995 16 -----END PRIVACY-ENHANCED MESSAGE-----