<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT / / FILED BY A PARTY OTHER THAN THE REGISTRANT
/ /
- - - --------------------------------------------------------------------------------
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-111(c) or Rule 14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
WANG LABORATORIES, INC.
(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):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- - - --------------------------------------------------------------------------------
<PAGE> 2
WANG LABORATORIES, INC.
600 TECHNOLOGY PARK DRIVE
BILLERICA, MASSACHUSETTS 01821
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
ON TUESDAY, NOVEMBER 26, 1996
The Annual Meeting of Stockholders of Wang Laboratories, Inc. (the
"Company") will be held at The Sheraton Boston Hotel & Towers, 39 Dalton Street,
Boston, Massachusetts on Tuesday, November 26, 1996 at 10:00 a.m., local time,
to consider and act upon the following matters:
1. To elect three Class III Directors, each to serve for a three-year term.
2. To approve an amendment to the Company's Certificate of Incorporation to
remove the restriction on issuing nonvoting securities.
3. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the current fiscal year.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on October 1, 1996 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors,
ALBERT A. NOTINI, Secretary
Billerica, Massachusetts
October , 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY IS
MAILED IN THE UNITED STATES.
<PAGE> 3
WANG LABORATORIES, INC.
600 TECHNOLOGY PARK DRIVE
BILLERICA, MASSACHUSETTS 01821
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON NOVEMBER 26, 1996
INTRODUCTION
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Wang Laboratories, Inc. (the "Company") for
use at the Annual Meeting of Stockholders to be held on November 26, 1996, and
at any adjournment of that meeting. All proxies will be voted in accordance with
the stockholders' instructions, and if no choice is specified, the proxies will
be voted in favor of the matters set forth in the accompanying Notice of
Meeting. Any proxy may be revoked by a stockholder at any time before its
exercise by delivery of written revocation or a subsequently dated proxy to the
Secretary of the Company or by voting in person at the Annual Meeting.
The Company's Annual Report for the fiscal year ended June 30, 1996
("Fiscal 1996") was mailed to stockholders, along with these proxy materials, on
or about October , 1996.
QUORUM REQUIREMENT
At the close of business on October 1, 1996, the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding and entitled to vote an aggregate of shares of
Common Stock of the Company, 2,875,000 Depositary Shares (the "Depositary
Shares") each representing one one-twentieth (1/20) of a share (or a total of
143,750 shares) of 6 1/2% Series B Cumulative Convertible Preferred Stock of the
Company ("6 1/2% Preferred Stock") and 90,000 shares of 4 1/2% Series A
Cumulative Convertible Preferred Stock ("4 1/2% Preferred Stock"), constituting
all of the outstanding voting stock of the Company. This total excludes
approximately shares of Common Stock held for distribution to creditors by the
distribution agent under the Company's reorganization plan dated September 20,
1993 (the "Reorganization Plan") under Chapter 11 of the U.S. Bankruptcy Code,
as the Reorganization Plan provides that these shares may not be voted by any
party and shall not be considered outstanding for voting purposes until
distributed pursuant to the Reorganization Plan. Holders of Common Stock, the
6 1/2% Preferred Stock and the 4 1/2% Preferred Stock are entitled to one vote
per share. Each holder of Depositary Shares is entitled to exercise the voting
rights relating to the number of shares of 6 1/2% Preferred Stock represented by
such Depositary Shares.
The holders of a majority of the votes represented by the shares of Common
Stock, 6 1/2% Preferred Stock and 4 1/2% Preferred Stock outstanding and
entitled to vote at the Annual Meeting shall constitute a quorum for the
transaction of business at the Annual Meeting. Shares of Common Stock, 6 1/2%
Preferred Stock and 4 1/2% Preferred Stock represented in person or by proxy
(including shares which abstain or otherwise do not vote with respect to one or
more of the matters presented for stockholder approval) will be counted for
purposes of determining whether a quorum is present at the Annual Meeting.
VOTES REQUIRED
The affirmative vote of the holders of shares representing a plurality of
the votes cast by the holders of the Common Stock, 6 1/2% Preferred Stock and
4 1/2% Preferred Stock is required for the election of Directors. The
<PAGE> 4
affirmative vote of the holders of shares representing a majority of votes
represented by shares of the Common Stock, 6 1/2% Preferred Stock and 4 1/2%
Preferred Stock outstanding on the record date is required for the approval of
the amendment to the Company's Certificate of Incorporation. The affirmative
vote of the holders of shares representing a majority of votes represented by
the shares of Common Stock, 6 1/2% Preferred Stock and 4 1/2% Preferred Stock
present and entitled to vote at the meeting on the matter is required for the
ratification of the selection of Ernst & Young LLP as the Company's independent
auditors for the current fiscal year.
Shares which abstain from voting as to a particular matter will not be
counted as votes in favor of such matter, but will be counted as shares
represented and entitled to vote on such matter. Accordingly, an abstention from
voting on a matter has the same effect as a vote against the matter (except with
respect to the election of directors as to which abstentions have no effect).
Shares held in street name by brokers and nominees who indicate on their proxy
that they do not have discretionary authority to vote such shares as to a
particular matter will not be counted as votes in favor of such matter and also
will not be counted as shares represented and entitled to vote on such matter.
Accordingly, a "broker non-vote" on a matter that requires the affirmative vote
of the holders of shares representing a certain percentage of votes represented
by the shares present and entitled to vote on a matter, such as the election of
directors and the ratification of independent accountants, has no effect on the
voting on such matter. However, a "broker non-vote" on a matter that requires
the affirmative vote of the holders of shares representing a certain percentage
of the votes represented by outstanding shares, such as the proposed amendment
to the Company's Certificate of Incorporation, has the same effect as a vote
against the matter.
2
<PAGE> 5
BENEFICIAL OWNERSHIP OF VOTING STOCK
<TABLE>
The following table sets forth the beneficial ownership of the Company's
Common Stock, 6 1/2% Preferred Stock and 4 1/2% Preferred Stock as of September
30, 1996 (i) by each person who is known by the Company to beneficially own more
than 5% of the outstanding shares of either the common or preferred class of the
Company's stock, (ii) by each Director and nominee for Director, (iii) by each
of the executive officers named in the Summary Compensation Table set forth
under the caption "Executive Compensation" below (the "Named Executives"), and
(iv) by all current Directors and executive officers as a group.
<CAPTION>
6 1/2% PREFERRED STOCK 4 1/2% PREFERRED STOCK
COMMON STOCK ---------------------------- -----------------------------
---------------------------- PERCENTAGE OF PERCENTAGE OF
NUMBER OF PERCENTAGE OF NUMBER OF OUTSTANDING NUMBER OF OUTSTANDING
SHARES OUTSTANDING SHARES 6 1/2% SHARES 4 1/2%
BENEFICIALLY COMMON BENEFICIALLY PREFERRED BENEFICIALLY PREFERRED
BENEFICIAL OWNER OWNED(1) STOCK(2) OWNED(1)(3) STOCK(3) OWNED(1) STOCK
- - - ---------------------------------- ------------ ------------- ----------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
5% Stockholders
FMR Corp.(4)...................... 4,861,706 16,980 11.8% -- --
Fidelity Investments
82 Devonshire Street
Boston, MA 02109
Chase Manhattan Bank, N.A......... -- -- 19,830 13.8 -- --
One Chase Manhattan Plaza
New York, NY 10081
Bankers Trust Company............. -- -- 17,315 12.0 -- --
c/o BT Services Tennessee, Inc.
Pension Trust Services
648 Grassmare Park Drive
Nashville, TN 37211
SSB -- Custodian.................. -- -- 14,765 10.0 -- --
Quincy Securities Processing
Boston, MA 02105
Bank of New York.................. -- -- 12,500 8.7 -- --
925 Patterson Plank Road
Secaucus, NJ 07094
Boston Safe Deposit & Trust Co.... -- -- 12,415 8.6 -- --
c/o Mellon Bank N.A.
Three Mellon Bank Center
Pittsburgh, PA 15259
Directors/Nominees
David A. Boucher(5)............... 11,120 * -- -- -- --
Michael W. Brown(6)............... -- -- -- -- 90,000 100%
Marcia J. Hooper(7)............... 2,210 * -- -- -- --
Joseph J. Kroger(8)............... 3,710 * -- -- -- --
Raymond C. Kurzweil(7)............ 2,210 * -- -- -- --
Axel J. Leblois(7)................ 2,210 * -- -- -- --
Paul E. Tsongas(9)................ 10,124 * -- -- -- --
Joseph M. Tucci(10)............... 401,222 -- -- -- --
Frederick A. Wang(11)............. 62,486 * -- -- -- --
Other Named Executives
Donald P. Casey (12).............. 216,852 -- -- -- --
Franklyn A. Caine (13)............ 278,843 -- -- -- --
William P. Ferry (14)............. 111,580 -- -- -- --
Jeremiah J.J. van Vuuren(15)...... 112,990 -- -- -- --
All Directors, nominees for
Director and executive officers
as a group (13 persons)(16)..... 1,213,347 -- -- 90,000 100%
<FN>
- - - ---------------
* Less than 1%
(1) Each person has sole investment and voting power with respect to the shares
indicated as beneficially owned, except as otherwise noted. The inclusion
herein of any shares as beneficially owned does not constitute an admission
of beneficial ownership. In accordance with Securities and Exchange
Commission rules, each person listed is deemed to beneficially own any
shares issuable upon the exercise of stock options or warrants held by him
or her that are currently exercisable or exercisable within 60 days after
</TABLE>
3
<PAGE> 6
September 30, 1996; and any reference in these footnotes to options or
warrants refers only to such options or warrants.
(2) Number of shares deemed outstanding includes shares outstanding as
of September 30, 1996, plus any shares subject to outstanding stock options
or warrants held by the person or entity in question.
(3) Represents the number of shares of 6 1/2% Preferred Stock deemed
beneficially owned and outstanding as represented by Depositary Shares as
of September 30, 1996.
(4) Includes 4,647,886 shares of Common Stock and 16,550 shares of 6 1/2%
Preferred Stock beneficially owned by Fidelity Management and Research
Company as result of its serving as investment advisor to various
investment companies; and 213,758 shares of Common Stock, 16,550 shares of
6 1/2% Preferred Stock and 62 shares of Common Stock subject to outstanding
stock warrants beneficially owned by Fidelity Management Trust Company as a
result of its serving as trustee or managing agent for various private
investment accounts. The number of shares of 6 1/2% Preferred Stock
reported as being beneficially owned by FMR, Corp. may also be included in
the number of shares reported as being beneficially owned by one or more of
the entities identified in the table as holders of 5% or more of the
Company's 6 1/2% Preferred Stock. Based upon information provided to the
Company by the stockholder as of July 31, 1996.
(5) Consists of 11,120 shares subject to outstanding stock options.
(6) Consists of 90,000 shares of 4 1/2% Preferred Stock held by Microsoft
Corporation of which Mr. Brown is Chief Financial Officer and as to which
shares Mr. Brown disclaims beneficial ownership.
(7) Consists of 2,210 shares subject to outstanding stock options.
(8) Includes 2,210 shares subject to outstanding stock options.
(9) Consists of 10,120 shares subject to outstanding stock options and 4 shares
subject to outstanding stock warrants.
(10) Includes 360,960 shares subject to outstanding stock options and 2,500
shares subject to outstanding stock warrants.
(11) Consists of 11,120 shares subject to outstanding stock options and 51,366
shares subject to outstanding stock warrants.
(12) Includes 203,640 shares subject to outstanding stock options and 6,833
shares subject to outstanding stock warrants.
(13) Consists of 278,760 shares subject to outstanding stock options and 83
shares subject to outstanding stock warrants.
(14) Includes 110,330 shares subject to outstanding stock options and 1,250
shares subject to outstanding stock warrants.
(15) Includes 112,940 shares subject to outstanding stock options.
(16) Includes 1,205,620 shares subject to outstanding stock options and 61,953
shares subject to outstanding stock warrants.
4
<PAGE> 7
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with
members of each class holding office for staggered three-year terms. There are
currently three Class I Directors, whose terms expire at the Annual Meeting of
Stockholders for Fiscal 1997, three Class II Directors, whose terms expire at
the Annual Meeting of Stockholders for Fiscal 1998, and three Class III
Directors, whose terms expire at this Annual Meeting of Stockholders (in all
cases subject to the election and qualification of their successors or to their
earlier death, resignation or removal).
The persons named in the enclosed proxy will vote to elect David A.
Boucher, Michael W. Brown and Axel J. Leblois as Class III Directors, unless
authority to vote for the election of any or all of the nominees is withheld by
marking the proxy to that effect. Messrs. Boucher, Brown and Leblois are
currently Class III Directors of the Company. All of the nominees have indicated
their willingness to serve, if elected, but if any should be unable or unwilling
to stand for election, proxies may be voted for a substitute nominee designated
by the Board of Directors.
DIRECTORS OF THE COMPANY
Set forth below are the names and certain information with respect to each
Director of the Company, including the three nominees for Class III Directors.
Class III Directors (nominated for terms expiring at the Annual Meeting for
Fiscal 1999):
DAVID A. BOUCHER DIRECTOR SINCE OCTOBER 1993; AGE 46
Mr. Boucher has been Managing Director and General Partner of Applied
Technology, a venture capital firm specializing in early-stage information
industry companies since January 1993. From September 1992 to June 1994 he was
President and Chief Executive Officer of Ticker Research, Inc., a development
stage medical technology company engaged in research in nuclear magnetic
resonance imaging. From 1981 to 1991 Mr. Boucher was President and Chief
Executive Officer of Interleaf, Inc., a software company. He is currently
Chairman of the Board of Directors of Interleaf, Inc. and a director of
Reflection Technology, Inc., Market Knowledge, Inc., Pervasive Software, Inc.,
XTRA On-line, Inc. and Human Code, Inc.
MICHAEL W. BROWN DIRECTOR SINCE APRIL 1996; AGE 50
Mr. Brown is currently Chief Financial Officer of Microsoft Corporation, a
computer software corporation. He joined Microsoft in 1989 as treasurer and was
appointed to Chief Financial Officer in 1994. Prior to joining Microsoft, Mr.
Brown was a managing partner of Deloitte & Touche LLP, a public accounting firm.
Mr. Brown is currently a director of The Nasdaq Stock Market.
AXEL J. LEBLOIS DIRECTOR SINCE JANUARY 1995; AGE 48
Mr. Leblois has been Chairman of World Times, Inc., a publishing firm since
1995. From 1991 to 1995 he was President and Chief Executive Officer of Bull HN
Information Systems, Inc., a worldwide information technology company providing
integrated computer services and solutions. From 1983 to 1991 Mr. Leblois held
various positions with International Data Group, a worldwide supplier of
information technology, including Vice Chairman of the Executive Committee, and
Chairman and Chief Executive Officer of its affiliate, International Data
Corporation.
5
<PAGE> 8
Class II Directors (holding terms expiring at the Annual Meeting for Fiscal
1998):
MARCIA J. HOOPER DIRECTOR SINCE NOVEMBER 1995; AGE 42
Ms. Hooper is currently a Vice President of Advent International
Corporation, an international venture management company. From 1994 through
April 1996 she served as General Partner of Viking Capital Limited Partnership,
a venture capital firm. From January through July 1994 she served as President
of Claybrook Capital. From 1985 to 1993 Ms. Hooper served as a General Partner
of three venture capital funds of Ampersand Ventures. She is a director of
PolyMedica Industries, Inc.
JOSEPH J. KROGER DIRECTOR SINCE JUNE 1995; AGE 62
Mr. Kroger is a private business consultant. From 1990 until 1993 he served
as President and Chief Executive Officer of Decision Data Corporation, a
computer services company. He is currently a director of Astea International
Corp.
PAUL E. TSONGAS DIRECTOR SINCE JANUARY 1985; AGE 55
Mr. Tsongas is a partner in the Boston law firm of Foley, Hoag & Eliot. He
was of counsel with that firm from 1989 through 1991, and previously had been a
partner until 1989. He is a director of The Shawmut Bank, N.A., Thermo Fibertek
Corporation, Boston Edison Company and Thermo Power, Inc.
Class I Directors (holding office for term expiring at the Annual Meeting for
Fiscal 1997):
JOSEPH M. TUCCI DIRECTOR SINCE OCTOBER 1993; AGE 49
Mr. Tucci joined the Company in August 1990 as Executive Vice President,
Operations, was elected President and Chief Executive Officer in January 1993,
and Chairman of the Board and Chief Executive Officer in October 1993.
Previously, he had served as an executive with Unisys Corporation, a computer
company, from 1983 to August 1990, most recently as President, U.S. Information
Systems.
RAYMOND C. KURZWEIL DIRECTOR SINCE OCTOBER 1993; AGE 48
Mr. Kurzweil is founder, Chief Technology Officer and Director of Kurzweil
Applied Intelligence, Inc., a speech recognition technology company. He was the
principal developer of the first omni-font optical character recognition
technology in 1976, the first print-to-speech reading machine for the blind in
1976, and the first commercially-marketed large vocabulary speech recognition
technology in 1987.
FREDERICK A. WANG DIRECTOR SINCE OCTOBER 1981; AGE 46
Mr. Wang is President and Chief Executive Officer of Archive Technologies
Corporation, Inc., a start-up company collecting and providing access to
multi-vendor technology specifications and information to the designers,
installers, systems integrators and maintainers of integrated data, telephone
and video communication systems. Prior to 1996, Mr. Wang served as President of
the Company from 1986 to 1989 and Chief Operating Officer from 1987 to 1989. He
had been employed by the Company from 1972 to 1989 and had also served as
Treasurer, Chief Development Officer and Executive Vice President of
Manufacturing.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Finance and Audit Committee of the Board of
Directors, which reviews the finances and cash position, financing arrangements
and financing strategies of the Company, recommends the engagement of the
Company's independent auditors, reviews the arrangements for the scope of the
annual
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<PAGE> 9
audit, reviews the activities and recommendations of the Company's internal
audit group, reviews comments made by the independent auditors with respect to
internal controls and the consideration given or the corrective action taken by
management, and reviews internal accounting procedures and controls with the
Company's finance and accounting staff. The members of the Finance and Audit
Committee are David A. Boucher (Chairman), Marcia J. Hooper and Frederick A.
Wang and, with respect to financial but not audit matters, Joseph M. Tucci. The
Finance and Audit Committee met seven times during Fiscal 1996.
The Company has a standing Organization, Compensation and Nominating
Committee of the Board of Directors, which reviews proposals by management and
approves compensation, bonuses, benefits, stock options and grants under plans
for Directors, corporate officers and certain other officers. This Committee
also oversees administration of the Company's incentive plans as they affect
officers, Directors and certain key employees, and advises the Board on
management resources and organization, executive selection and development and
succession planning. This Committee also recommends to the Board of Directors
nominees to be acted upon at stockholder meetings, and reviews the
qualifications of, and makes recommendations to the Board concerning, candidates
to fill Board vacancies that may occur during the year. The Committee is also
responsible for overseeing Company policies on issues of public significance,
including environmental matters and health and safety matters. Currently, the
members of the Organization, Compensation and Nominating Committee are Paul E.
Tsongas (Chairman), Joseph J. Kroger and Frederick A. Wang. The Organization,
Compensation and Nominating Committee met seven times during Fiscal 1996.
The Company has a standing Strategy and Technology Committee of the Board
of Directors, which addresses the Company's patent and intellectual property
strategy, as well as technology acquisitions and long-term plans. The members of
the Strategy and Technology Committee are Raymond C. Kurzweil (Chairman), David
A. Boucher, Marcia J. Hooper, Joseph J. Kroger, Axel J. Leblois and Joseph M.
Tucci. The Strategy and Technology Committee met three times during Fiscal 1996.
The Board of Directors met nine times during Fiscal 1996. Each Director
attended at least 75% of the meetings of the Board and the committees on which
he or she then served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Frederick A. Wang currently serves on the Company's Organization,
Compensation and Nominating Committee. Mr. Wang served as President of the
Company from 1986 to 1989 and Chief Operating Officer from 1987 to 1989. He had
been employed by the Company since 1972 and had also served as Treasurer, Chief
Development Officer and Executive Vice President of Manufacturing.
COMPENSATION OF DIRECTORS
The director who is employed by the Company is not paid Director fees.
Directors who are not employed by the Company, except for Michael W. Brown,
receive an annual fee of $20,000 plus a fee of $1,000 for each meeting attended.
The members of each Committee receive an annual fee of $1,500, plus a fee of
$1,000 for each Committee meeting attended. Mr. Brown waived all directors fees
and option grants pursuant to the policies of Microsoft Corporation.
In September 1995 under the Company's 1995 Director Stock Option Plan, each
of the then current directors of the Company, other than Mr. Tucci, received an
option to purchase 6,500 shares of Common Stock. These options have an exercise
price of $18.05 per share and become exercisable as to 34%, 33% and 33% of the
shares covered thereby on September 30, 1996, September 30, 1997 and September
30, 1998 provided the optionee continues to serve as a director of the Company.
Following her election to the Board of Directors in November 1995, Ms. Hooper
received an option to purchase 6,500 shares of Common Stock. Ms. Hooper's option
has an exercise price of $16.20 per share and becomes exercisable as to 34%, 33%
and
7
<PAGE> 10
33% of the shares covered thereby on November 21, 1996, November 21, 1997 and
November 21, 1998 provided she continues to serve as a director of the Company.
Raymond C. Kurzweil had been retained as a technical advisor by the
Official Committee of Unsecured Creditors in the Company's Chapter 11 proceeding
and, in that capacity, had reviewed the technology and intellectual property of
the Company. Through this review the Company's patent portfolio was identified
as one of the Company's important assets. After joining the Company's Board of
Directors in October 1993, Mr. Kurzweil agreed to continue his work with the
Company's patent portfolio and entered into a technical consulting agreement
with the Company effective October 1993. This agreement currently provides for
compensation at the rate of $375.00 per hour, not to exceed an average of
$15,000 per month, plus the reimbursement of expenses. The agreement was
approved by the Board of Directors and is subject to the Board's periodic
review. The agreement is terminable upon 30 days notice by either party.
In July 1994, the Board of Directors adopted a policy prohibiting
non-employee Directors from receiving compensation from the Company other than
in their capacity as Directors, absent extraordinary circumstances. The Board
has determined that extraordinary circumstances warrant the continuation of the
arrangement with Mr. Kurzweil upon the terms described above.
EXECUTIVE COMPENSATION
Summary Compensation
<TABLE>
The following Summary Compensation Table sets forth certain information
concerning the compensation for each of the last three fiscal years of the
Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers during Fiscal 1996 (the "Named Executives").
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
SECURITIES ALL OTHER
FISCAL ANNUAL COMPENSATION(1) UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(2) ($)
- - - -------------------------------------- ------ --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Joseph M. Tucci....................... 1996 551,250 400,000(3) 148,500 49,773(4)
Chairman of the Board and 1995 510,000 360,000 190,000 83,421
Chief Executive Officer 1994 350,000 298,000 200,000 511,174
Donald P. Casey....................... 1996 350,000 178,834(5) 87,750 35,476(6)
President and Chief Technology 1995 350,000 160,000 125,000 94,838
Officer 1994 350,000 277,000 200,000 485,940
Franklyn A. Caine..................... 1996 325,000(9) 198,000(7) 81,000 30,885(8)
Executive Vice President and Chief 1995 285,625 185,000 300,000 14,177
Financial Officer
William P. Ferry...................... 1996 296,667 200,000(10) 74,250 19,530(11)
Senior Vice President, and 1995 275,625 162,000 50,000 32,962
President, Customer Service 1994 250,000 176,600 60,000 49,685
Business
Jeremiah J.J. van Vuuren(12).......... 1996 263,075(15) 210,000(13) 87,750 34,265(14)
Senior Vice President, and 1995 273,105 172,000 65,000 30,429
President, Wang International 1994 214,063 128,438 75,000 19,086
</TABLE>
- - - ---------------
(1) Other compensation in the form of perquisites and other personal benefits
has been omitted, in accordance with the rules of the Securities and
Exchange Commission, as the aggregate amount of such perquisites and other
personal benefits constituted less than the lesser of $50,000 or 10% of the
total annual salary and bonus for each executive officer in each fiscal
year covered.
(2) Includes long-term incentive options granted under the Company's Employees'
Stock Incentive Plan.
8
<PAGE> 11
(3) Fiscal 1996 bonus consists of $400,000 paid under the Company's executive
bonus program. Fiscal 1995 bonus consists of $360,000 paid under the
Company's executive bonus program. Fiscal 1994 bonus consists of $231,000
paid under the Company's executive bonus program and $67,000 paid in
accordance with the requirements of Mr. Tucci's employment agreement.
(4) All other compensation for Fiscal 1996 consists of (i) $33,900 in
contributions by the Company under its retirement savings plans, (ii)
$8,402 in premiums paid by the Company on a group term life insurance life
insurance policy for the benefit of Mr. Tucci, and (iii) $7,471 consisting
of imputed income as a result of the 3% promissory note from Mr. Tucci. All
other compensation for Fiscal 1995 consists of (i) $21,373 in contributions
by the Company under its retirement savings plans, (ii) $5,226 in premiums
paid by the Company on a group term life insurance policy for the benefit
of Mr. Tucci, (iii) $17,122 consisting of imputed income as a result of the
3% promissory note from Mr. Tucci to the Company, and (iv) $39,700, which
represents the fair market value, as of the date of confirmation of the
Reorganization Plan (the date on which he became contractually entitled to
receive the shares), of the shares of Common Stock and warrants issued to
Mr. Tucci in December 1994. All other compensation for Fiscal 1994 consists
of (i) $15,479 in contributions by the Company under its retirement savings
plans, (ii) $3,048 in premiums paid by the Company on a group term life
insurance policy for the benefit of Mr. Tucci, (iii) $400,000, which
represents the fair market value, as of the date of confirmation of the
Reorganization Plan (the date on which he became contractually entitled to
receive the shares), of the 54,422 shares of Common Stock issued to Mr.
Tucci in December 1993 in accordance with the requirements of his
employment agreement, and (iv) $90,647 in Common Stock and a $2,000 cash
payment received as a creditor of the Company (as a result of the Company's
rejection in its Chapter 11 proceeding of his pre-Chapter 11 employment
agreement) under the terms of the Reorganization Plan.
(5) Fiscal 1996 bonus consists of $178,834 paid under the Company's executive
bonus program. Fiscal 1995 bonus consists of $160,000 paid under the
Company's executive bonus program. Fiscal 1994 bonus consists of $210,000
paid under the Company's executive bonus program and $67,000 paid in
accordance with the requirements of Mr. Casey's employment agreement.
(6) All other compensation for Fiscal 1996 consists of (i) $21,612 in
contributions by the Company under its retirement savings plans, (ii)
$6,586 in premiums paid by the Company on a group term life insurance
policy for the benefit of Mr. Casey and (iii) $7,278 consisting of imputed
income as a result of the 3% promissory note from Mr. Casey. All other
compensation for Fiscal 1995 consists of (i) $19,355 in contributions by
the Company under its retirement savings plans, (ii) $5,722 in premiums
paid by the Company on a group term life insurance policy for the benefit
of Mr. Casey, (iii) $16,674 consisting of imputed income as a result of the
3% promissory note from Mr. Casey to the Company, and (iv) $53,087, which
represents the fair market value, as of the date of confirmation of the
Reorganization Plan (the date on which he became contractually entitled to
receive the shares), of the shares of Common Stock and warrants issued to
Mr. Casey in December 1994. All other compensation for Fiscal 1994 consists
of (i) $10,012 in contributions by the Company under its retirement savings
plans, (ii) $3,594 in premiums paid by the Company on a group term life
insurance policy for the benefit of Mr. Casey, (iii) $400,000, which
represents the fair market value, as of the date of confirmation of the
Reorganization Plan (the date on which he became contractually entitled to
receive the shares), of the 54,422 shares of Common Stock issued to Mr.
Casey in December 1993 in accordance with the requirements of his
employment agreement, and (iv) $70,334 in Common Stock and a $2,000 cash
payment received as a creditor of the Company (as a result of the Company's
rejection in its Chapter 11 proceeding of his pre-Chapter 11 employment
agreement) under the terms of the Reorganization Plan.
(7) Fiscal 1996 bonus consists of $198,000 paid under the Company's executive
bonus program. Fiscal 1995 bonus consists of $102,500 paid under the
Company's executive bonus program and $82,500 paid in accordance with the
requirements of Mr. Caine's employment agreement.
9
<PAGE> 12
(8) All other compensation for Fiscal 1996 consists of (i) $18,225 in
contributions by the Company under its retirement savings plans, (ii)
$6,367 in premiums paid by the Company to Mr. Caine in lieu of payments on
a group term life insurance policy for the benefit of Mr. Caine and (iii)
$6,293 in relocation costs. All other compensation for Fiscal 1995 consists
of (i) $11,283 in contributions by the Company under its retirement savings
plans and (ii) $2,894 in premiums paid by the Company to Mr. Caine in lieu
of payments on a group term life insurance policy for the benefit of Mr.
Caine.
(9) Mr. Caine joined the Company on August 15, 1994 and, therefore, did not
receive compensation for all of Fiscal 1995.
(10) Fiscal 1996 bonus consists of $200,000 paid under the Company's executive
bonus program. Fiscal 1995 bonus consists of $162,000 paid under the
Company's executive bonus program. Fiscal 1994 bonus consists of $110,000
paid under the Company's executive bonus program and $66,600 paid under the
Company's Employee Retention Program.
(11) All other compensation for Fiscal 1996 consists of (i) $17,110 in
contributions by the Company under its retirement savings plans and (ii)
$2,420 in premiums paid by the Company on a group term life insurance life
insurance policy for the benefit of Mr. Ferry. All other compensation for
Fiscal 1995 consists of (i) $14,593 in contributions by the Company under
its retirement savings plans, (ii) $2,099 in premiums paid by the Company
on a group term life insurance policy for the benefit of Mr. Ferry and
(iii) $16,270, which represents the fair market value, as of the date of
confirmation of the Reorganization Plan (the date on which he became
contractually entitled to receive the shares), of the shares of Common
Stock and warrants issued to Mr. Ferry in December 1994. All other
compensation for Fiscal 1994 consists of (i) $7,614 in contributions by the
Company under its retirement savings plans, (ii) $1,022 in premiums paid by
the Company on a group term life insurance policy for the benefit of Mr.
Ferry and (iii) $41,049 in Common Stock received as a creditor of the
Company (as a result of the Company's rejection in its Chapter 11
proceeding of his pre-Chapter 11 employment agreement) under the terms of
the Reorganization Plan.
(12) All compensation paid to Mr. van Vuuren is reported in US Dollars although
it is paid in UKL. The currency conversion rate used was $1.5475 per UKL,
$1.6065 per UKL and $1.51103 per UKL for Fiscal 1996, 1995 and 1994,
respectively. The conversion rates used were those rates published by
Reuters New Service on the last day of June of each year.
(13) Fiscal 1996 bonus consists of $210,000 paid under the Company's executive
bonus program. Fiscal 1995 bonus consists of $172,000 paid under the
Company's executive bonus program. Fiscal 1994 bonus consists of $128,438
paid under the Company's executive bonus program.
(14) All other compensation for Fiscal 1996 consists of (i) $19,474 in
contributions by the Company under its retirement savings plans, and (ii)
$14,791 in premiums paid by the Company on a group term life insurance life
insurance policy for the benefit of Mr. van Vuuren. All other compensation
for Fiscal 1995 consists of (i) $18,343 in contributions by the Company
under its retirement savings plans and (ii) $12,086 in premiums paid by the
Company on a group term life insurance policy for the benefit of Mr. van
Vuuren. All other compensation for Fiscal 1994 consists of (i) $10,703 in
contributions by the Company under its retirement savings plans, and (ii)
$8,383 in premiums paid by the Company on a group term life insurance
policy for the benefit of Mr. van Vuuren.
(15) Mr. van Vuuren joined the Company on September 1, 1993 and, therefore, did
not receive compensation for all of Fiscal 1994.
10
<PAGE> 13
Option Grants
<TABLE>
The following table sets forth certain information concerning grants of
stock options during Fiscal 1996 to each of the Named Executives.
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
--------------------------------------------------------------------- AT ASSUMED ANNUAL RATES
PERCENT OF OF STOCK PRICE
TOTAL APPRECIATION FOR OPTION
NUMBER OF OPTIONS GRANTED TERMS(2)
SECURITIES UNDERLYING TO EMPLOYEES EXERCISE PRICE EXPIRATION ---------------------------
NAME OPTIONS GRANTED(#) IN FISCAL YEAR ($)(1) DATE 5%($) 10%($)
- - - -------------------------- --------------------- --------------- -------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Tucci........... 99,000(3) 5.5 15.00 9/27/05 933,909 2,366,708
49,500(4) 2.7 15.00 9/27/05 466,954 1,183,354
Donald P. Casey........... 58,500(3) 3.2 15.00 9/27/05 551,855 1,398,509
29,250(4) 1.6 15.00 9/27/05 275,928 699,255
Franklyn A. Caine......... 54,000(3) 3.0 15.00 9/27/05 509,405 1,290,931
27,000(4) 1.5 15.00 9/27/05 254,702 645,466
William P. Ferry.......... 49,500(3) 2.7 15.00 9/27/05 466,954 1,183,354
24,750(4) 1.4 15.00 9/27/05 233,477 591,677
Jeremiah J.J. van
Vuuren.................. 58,500(3) 3.2 15.00 9/27/05 551,855 1,398,509
29,250(4) 1.6 15.00 9/27/05 275,928 699,255
<FN>
- - - ---------------
(1) The exercise price per share of each option is equal to the fair market
value per share of Common Stock on the date of grant.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. The gains shown are net of the option exercise price, but
do not include deductions for taxes or other expenses associated with the
exercise of the option or the sale of the underlying shares. The actual
gains, if any, on the stock option exercises will depend on the future
performance of the Common Stock, the optionholder's continued employment
through the option period, and the date on which the options are exercised
and the underlying shares are sold.
(3) Each option (i) became exercisable as to 34% of the underlying shares on
September 27, 1996, and becomes exercisable as to 33% of the underlying
shares on September 27, 1997 and as to 33% of the underlying shares on
September 27, 1998 and (ii) generally terminates 30 days after the
termination of the optionee's employment with the Company (but in no event
after the expiration date).
(4) Each long-term incentive option (collectively, the "LTI Options") does not
vest until the average daily closing price of the Company's Common Stock for
twenty (20) consecutive days as reported in the Wall Street Journal is equal
to or greater than $25.00 per share (the "Vesting Condition"). In the event
that the Vesting Condition has not been satisfied, all LTI Options will vest
in full five (5) years from the date of grant. In addition, the LTI Options
are only exercisable from and after September 30, 1997, providing the
Vesting Condition first has been satisfied.
</TABLE>
11
<PAGE> 14
Option Exercises and Holdings
<TABLE>
The following table sets forth certain information concerning the number
and value of unexercised options held by each of the Named Executives on June
30, 1996.
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR END(#)(1) AT FISCAL YEAR END($)(2)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE(#) REALIZED(1)($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - - --------------------------------- --------------- --------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Joseph M. Tucci.................. -- -- 198,600/339,900 1,980,400/$2,182,538
Donald P. Casey.................. 100,000 $1,690,000 76,500/236,250 678,725/1,657,556
Franklyn A. Caine................ -- -- 161,400/219,600 1,665,315/1,533,060
William P. Ferry................. -- -- 57,200/127,050 578,055/738,664
Jeremiah J. J. van Vuuren........ 15,300 168,683 46,850/155,400 434,419/914,850
<FN>
- - - ---------------
(1) Based on the fair market value of the Common Stock on the date of exercise
less the option exercise price.
(2) Based on the fair market value of the Common Stock on June 30, 1996
($18.875), less the option exercise price.
</TABLE>
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
In March 1993, the Company entered into an employment agreement with Mr.
Tucci. Mr. Tucci's agreement, as amended in April 1995, November 1995 and May
1996, extends indefinitely and provides for a base salary of $350,000 for Fiscal
1994, $510,000 for Fiscal 1995 and $555,000 thereafter, subject to further
adjustment by the Board of Directors. The agreement provides for
performance-based bonuses to be determined by the Board of Directors to be
targeted at 60% of annual base salary at 100% of targeted performance and 80% of
annual base salary at 120% of targeted performance. The agreement also provides
for the payment of a severance benefit of up to three times Mr. Tucci's
anticipated base salary and bonus, which would be payable under certain
enumerated circumstances (including employment termination by the Company, an
adverse change in job responsibilities, an adverse change in compensation, or
the resignation of the executive following a significant relocation).
In March 1993, the Company entered into an employment agreement with Mr.
Casey. Mr. Casey's agreement, as amended in April 1995 and July 1996, extends
through June 1998 and provides for an annual base salary of $350,000. The
agreement provides for performance-based bonuses to be determined by the Board
of Directors and targeted at 60% of annual base salary. Under his employment
agreement Mr. Casey will receive severance compensation in an amount equal to 18
months of base salary plus bonus, with an amount equal to six months salary and
bonus payable in a lump sum and the balance payable over a 12-month period, if
Mr. Casey's employment is involuntarily terminated other than for cause or if
Mr. Casey resigns under certain specified circumstances. Severance payments
would be offset by the compensation Mr. Casey received from a new employer
during such 12-month period.
In June 1994, the Company entered into an employment agreement with Mr.
Caine pursuant to which the Company agreed to employ him as Executive Vice
President and Chief Financial Officer of the Company. Mr. Caine's agreement, as
amended in November 1995 and May 16, 1996, extends through December 1998. Under
the agreement, the Company agreed to pay Mr. Caine an annual base salary of
$325,000. Mr. Caine is also eligible to participate in a yearly bonus plan
targeted at 50% of annual base salary based upon on his performance against
goals specified in the bonus plan. Under his employment agreement Mr. Caine will
receive severance compensation in an amount equal to 18 months of base salary
plus bonus, with an amount
12
<PAGE> 15
equal to six months salary and target bonus payable in a lump sum and the
balance payable over a 12-month period, if Mr. Caine's employment is
involuntarily terminated other than for cause or if Mr. Caine resigns under
certain specified circumstances. Severance payments would be offset by the
compensation Mr. Caine received from a new employer during such 12-month period.
The Company entered into an employment agreement with Mr. Ferry in December
1993 pursuant to which the Company agreed to employ Mr. Ferry initially as a
Senior Vice President and Officer of the Company. Mr. Ferry's agreement, as
amended in November 1995, extends through December 1998. Under the terms of the
agreement, Mr. Ferry's base salary for Fiscal 1996 was $300,000 and he was
eligible to receive a target annual bonus of 50% of his annual base salary based
upon his performance against goals specified in the bonus plan. Under his
employment agreement Mr. Ferry will receive severance compensation equal to his
base salary plus target bonus, payable over a 12-month period, if his employment
is involuntarily terminated other than for cause, death or disability, or if he
resigns under certain specified circumstances. Severance payments would be
offset by the compensation he received from a new employer during such 12-month
period.
The Company entered into an employment agreement with Mr. van Vuuren in May
1993 pursuant to which the Company agreed to employ him as a Senior Vice
President of the Company and General Manager of the Company's European
Operations. Under the terms of the agreement, Mr. van Vuuren's base salary for
Fiscal 1996 was $263,075. Mr. van Vuuren is also eligible to participate in a
yearly bonus plan targeted at a percentage of his base salary depending on his
performance against goals specified in the bonus plan. The agreement provides
that, if he is dismissed for any reason, other than for a gross misconduct or
violation of the Company's Employee Code of Conduct, Mr. van Vuuren will receive
severance compensation in an amount equal to 15 months of base salary to be paid
over a 15-month period.
The Company is a party to contingent severance compensation agreements
("Severance Agreements") with twelve executive officers (including Messrs.
Tucci, Casey, Caine, Ferry and van Vuuren) which would become operative
following a "change in control" of the Company, as defined in the Severance
Agreements. The Company believes that these agreements will better ensure the
retention of those officers and enable them to devote their full attention and
energies to the Company's business without the distractions that might arise in
the circumstances addressed in the agreements. The Severance Agreements continue
in effect while the executive is employed by the Company for a period of three
years, automatically renew for additional one year terms and remain in effect
for 36 months after the month in which a change in control occurs. If the
executive's employment is terminated following a change in control, the
executive would become entitled to various benefits under the Severance
Agreement, including (in lieu of a payment under any other severance plan or
agreement) a lump sum severance payment equal to 2.99 times the average annual
compensation received by the executive for the two previous years, unless the
executive's employment were terminated (i) because of death or disability, (ii)
by the Company for cause, or (iii) by the executive without "good reason," as
defined in the Severance Agreements.
The Severance Agreements for each of Messrs. Tucci, Casey, Caine and Ferry
provide that in the event the total payments to the executive under the
agreement are subject in whole or in part to the excise tax (the "Excise Tax")
imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), the Company will pay the executive an additional amount in the form of
a gross-up payment such that the net amount retained by the executive after
payment of the Excise Tax on the total payments and any federal, state and local
income taxes on the gross-up payment equals the total payments the executive
would have received absent the Excise Tax. The Severance Agreement for Mr. van
Vuuren provides that the lump sum payment would be subject to reduction to the
extent that any payment (whether under the Severance Agreement or otherwise) to
Mr. van Vuuren were subject to the Excise Tax imposed under Section 4999 of the
Code if such reduction would result in a greater after-tax payment to Mr. van
Vuuren.
13
<PAGE> 16
CERTAIN TRANSACTIONS
On June 20, 1994, Messrs. Tucci and Casey recognized income, for tax
purposes, in the amount of $777,624 and $757,112, respectively, as a result of
their receipt of (i) 54,422 shares of Common Stock pursuant to the terms of the
Reorganization Plan and their employment agreements and (ii) additional shares
of Common Stock as part of the distribution to creditors under the
Reorganization Plan. Messrs. Tucci and Casey incurred an estimated tax liability
of $355,071 and $345,807, respectively, most of which was payable on June 21,
1994 under federal and Massachusetts income tax withholding rules. All of this
income recognized by Messrs. Tucci and Casey was received by them in the form of
Common Stock (rather than cash) and, due to federal securities law restrictions,
Messrs. Tucci and Casey were restricted from selling any of such Common Stock in
order to satisfy their tax liability. Accordingly, on June 21, 1994 the Company
made a loan to Mr. Tucci in the amount of $355,071 and a loan to Mr. Casey in
the amount of $345,807. Each of these loans (i) was scheduled to be paid in two
equal principal installments (together with accrued interest) on June 21, 1995
and June 21, 1996, (ii) bears interest at an annual rate of 3.0% from and after
December 1, 1994 (which date was chosen on the assumption that Messrs. Tucci and
Casey would have an opportunity to sell some of their Common Stock by such
date), (iii) was initially secured by a pledge of Common Stock of the Company
(37,500 shares in the case of Mr. Tucci and 36,520 in the case of Mr. Casey)
having a value as of the date of the loan of 133% of the loan amount, (iv) was
originally scheduled to be repaid with the proceeds of any sale by Messrs. Tucci
or Casey of the pledged shares and (v) is a non-recourse obligation of Messrs.
Tucci and Casey.
At the meeting of the Organization, Compensation and Nominating Committee
on September 27, 1995, the Committee (i) reduced the number of shares of Common
Stock subject to the pledge to 33,592 shares in the case of Mr. Tucci and 32,307
shares in the case of Mr. Casey which shares had a value as of September 27,
1995 of at least 133% of the loan amount, and (ii) modified the schedule for
payments to be made by Messrs. Tucci and Casey under each of their respective
promissory notes to four equal principal installments (together with accrued
interest) on February 28, 1996, August 31, 1996, February 28, 1997 and June 30,
1997.
At the meeting of the Organization, Compensation and Nominating Committee
in February 1996, the Committee reviewed the repayment terms of Mr. Tucci's
promissory note and Mr. Tucci's desire to repay the loan installment which
matured in February 1996 through the sale of a portion of the Common Stock which
is collateral for the obligation. The Company respectfully declined Mr. Tucci's
offer on the grounds that the Company was engaged in the private placement of
the 6 1/2% Preferred Stock, and according to the advice of its financial
advisors, a sale of shares by Mr. Tucci at such time might have a negative
impact on such placement. In recognition of its refusal to accept Mr. Tucci's
offer of payment, the Committee at its meeting on April 24, 1996 reduced the
collateral securing the payment on the loan that matured in February 1996 to the
number of shares which, when valued at the closing price of the Company's Common
Stock on February 27, 1996 ($23.875), would have been sufficient to make the
February installment payment, including accrued interest, and agreed to permit
Mr. Tucci to deliver such shares to the Company in satisfaction of such payment
at the next "window period" (i.e. a period in which executives of the Company
are not prohibited from buying or selling Company securities.) With respect to
future installment payments, in order to balance (i) the interests of the
Company's stockholders by safeguarding the Company's ability to participate
successfully in the equity markets in connection with any future acquisitions or
financings and (ii) the rights of Mr. Tucci, the Committee agreed to review Mr.
Tucci's repayment obligations on a payment by payment basis. The review of Mr.
Tucci's August 1996 payment was deferred until such time as the Company had
completed the acquisition of INET, Inc. In May 1996, Mr. Casey repaid his loan
in full to the Company.
Since April 1995, the Company and Microsoft Corporation ("Microsoft") have
maintained a world-wide multi-year technical, service and marketing alliance
pursuant to which the Company acts as Microsoft's
14
<PAGE> 17
preferred vendor of imaging and workflow systems and as an authorized provider
of end-user support services for Microsoft products. Since April 1996, Michael
W. Brown, the Chief Financial Officer of Microsoft, has been a director of the
Company.
As part of the Reorganization Plan, the previous obligations of the Company
to indemnify its former Directors, officers and employees pursuant to its
corporate charter, by-laws and policy of providing employee indemnification, and
applicable state law and agreements in respect of claims based on acts or
omissions related to such persons' service with, for or on behalf of the Company
have been retained and remain unaffected by the Chapter 11 case. Consequently,
the Company is obliged to indemnify each current or former Director or executive
officer in the various legal proceedings relating to the Company's predecessor
Massachusetts corporation.
REPORT OF ORGANIZATION, COMPENSATION AND NOMINATING COMMITTEE ON EXECUTIVE
COMPENSATION
The Company's executive compensation program is administered by the
Organization, Compensation and Nominating Committee of the Board of Directors
(the "Committee"), which was established in October 1993. The Committee is
comprised entirely of non-employee Directors.
The Committee seeks to achieve two broad goals in determining executive
compensation and establishing executive compensation programs. First, the
Committee seeks to compensate executives in a manner that enables the Company to
attract and retain executives whose services are critical to the success of the
Company. Second, the Committee seeks to provide incentive for, and reward, the
attainment of objectives that inure to the benefit of the Company and its
stockholders. The Company's Fiscal 1996 executive compensation consisted of
three principal elements: salary, bonuses and stock option grants.
In establishing base salaries for executive officers, the Committee
considers the salaries of executives at other companies whose business and/or
financial situation is similar to that of the Company, as well as the particular
executive's level of achievement and responsibility and the historic salary
levels of the executive. Many of the executive officers (including some of the
Named Executives) of the Company are parties to employment agreements that fix
the executive's annual base salary during the term of the agreement. The
Committee believes that the execution of these employment agreements was
necessary to help retain and motivate those key executives whose continued
services are critical to the Company's future success. The Committee believes
that the salary levels established for the executives are appropriate, based on
the factors described above.
The Committee's philosophy is to tie a significant portion of the
compensation of executive officers to the attainment of corporate and individual
goals, thus aligning the objectives and rewards of Company executives with those
of the stockholders of the Company. For Fiscal 1996, bonuses paid to executives
consisted of payments made under the Company's executive bonus program, which
provided for the payment of bonuses to executives based on a combination of
individual, business unit and corporate performance. Under this program, each
executive was assigned a target bonus and a set of corporate, business unit and
individual objectives. Each executive was paid a percentage of his target bonus
based upon the degree to which established objectives were attained. The target
bonus for the Company's executive officers ranged from 40% to 60% of the
executive's base salary, and in some cases was established by the terms of the
executive's employment agreement. In the case of each of Mr. Tucci and Mr.
Caine, 20% of his bonus was based upon the attainment by the Company of its
consolidated operating profit objective, 10% was based upon the attainment by
the Company of its consolidated cashflow from operations objective, 10% was
based upon the attainment by the Company of its worldwide software revenue
objective, 10% was based upon the attainment by the Company of its worldwide
client server services revenue objective, 10% was based upon the achievement of
certain diversity goals and 40% was based upon the achievement of certain goals
relating to individual
15
<PAGE> 18
performance and responsibility. In the case of Mr. Casey, 20% of his bonus was
based upon the attainment by the Company of its consolidated operating profit
objective, 10% was based upon the attainment by the Company of its consolidated
cashflow from operations objective, 10% was based upon the attainment by the
Company of its worldwide software revenue objective, 52.5% was based upon the
achievement by his business unit of certain other financial performance
objectives and 7.5% was based upon the attainment of certain goals relating to
individual performance and responsibility. In the case of Mr. Ferry, 20% of his
bonus was based upon the attainment by the Company of its consolidated operating
profit objective, 10% was based upon the attainment by the Company of its
consolidated cashflow from operations objective, 10% was based upon the
attainment by the Company of its worldwide software revenue objective, 50% was
based upon the achievement by his business unit of certain other financial
performance objectives and 10% was based upon the attainment of certain goals
relating to individual performance and responsibility. In the case of Mr. van
Vuuren, 20% of his bonus was based upon the attainment by the Company of its
consolidated operating profit objective, 10% was based upon the attainment by
the Company of its consolidated cashflow from operations objective, 10% was
based upon the attainment by the Company of its worldwide software revenue
objective and 60% was based upon the achievement by his business unit of certain
other financial performance objectives. The actual bonuses paid to the executive
officers ranged from 74% to 144% of their target bonus. The $400,000 bonus paid
to Mr. Tucci represented 120% of his target bonus.
The Committee uses stock options as a significant element of the
compensation package of the executive officers because they provide an incentive
to executives to maximize stockholder value. Stock options reward the executives
only to the extent that stockholders also benefit, and the vesting of the
options (the options become exercisable in installments over a three-year
period) serves as a means of retaining these executives. The size of stock
option grants to executive officers depends upon a number of factors, including
new hires of executives, the executive's contribution to the Company, the
executives' current stock and option holdings and such other factors as the
Committee deems relevant.
Under Section 162(m) of the Code, certain executive compensation in excess
of $1 million paid to the five most highly-paid executives of the Company is not
deductible by the Company for federal income tax purposes unless the
compensation is awarded under a performance-based plan approved by the
stockholders of the Company. The Committee intends to structure the award of
stock options to executive officers so that they comply with the
performance-based requirements of Section 162(m), and may in the future decide
to submit other executive compensation plans for stockholder approval.
ORGANIZATION, COMPENSATION AND NOMINATING COMMITTEE
Paul E. Tsongas, Chairman
Joseph J. Kroger
Frederick A. Wang
16
<PAGE> 19
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Common Stock of the Company from December 16, 1993 (the date the Common Stock of
the reorganized Company commenced public trading) through June 30, 1996 with the
cumulative total return during this period of (i) Standard & Poor's 500
Composite Index and (ii) the High Technology Composite Index. This graph assumes
the investment of $100 on December 16, 1993 in the Company's Common Stock, the
Standard & Poor's 500 Composite Index and the High Technology Composite Index
and assumes dividends are reinvested.
<TABLE>
WANG LABORATORIES, INC.
Stock Performance Graph
<CAPTION>
Wang
Measurement Period Laboratories, S&P 500 Hi Tech
(Fiscal Year Covered) Inc. Composite Composite
--------------------- ------------- --------- ---------
<S> <C> <C> <C>
12/16/93.................... 100 100 100
6/28/96.................... 124.79 144.74 183.53
</TABLE>
17
<PAGE> 20
PROPOSAL TO AMEND COMPANY'S CERTIFICATE OF INCORPORATION
On September 25, 1996, the Board of Directors of the Company adopted,
subject to stockholder approval, an amendment to the Company's Certificate of
Incorporation (the "Certificate") which removes the sentence "Notwithstanding
the foregoing, the Corporation shall not issue any non-voting securities." from
the third paragraph of Article Fourth of the Certificate (the "Amendment"). This
prohibition on issuing non-voting securities was mandated by the terms of the
U.S. Bankruptcy Code due to the Company's Chapter 11 proceedings.
The Board of Directors believes that the Amendment will bring the
provisions of the Certificate authorizing the issuance of preferred stock into
conformity with the typical terms of such provisions and, by adding the ability
to include a non-voting feature, increase the ability of the Company to respond
flexibly in tailoring future issuances of preferred stock to facilitate
financings, acquisitions or other corporate transactions. Consequently, the
Board of Directors believes that the Amendment is in the best interests of the
Company and its stockholders and recommends a vote in favor of this proposal.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Ernst & Young LLP as the
Company's independent auditors for the current fiscal year. Ernst & Young LLP
has served as the independent auditors for the Company (or its predecessor
Massachusetts corporation) since 1980. Although stockholder approval of the
Board of Directors' selection of Ernst & Young LLP is not required by law, the
Board of Directors believes that it is advisable to give stockholders an
opportunity to ratify this selection. If this proposal is not approved at the
Annual Meeting, the Board of Directors may reconsider its selection.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so and will also be available to respond to appropriate questions from
stockholders.
OTHER MATTERS
MATTERS TO BE CONSIDERED AT THE MEETING
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly presented
to the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their judgment
on such matters. Stockholders should be aware that the Company's By-laws (a copy
of which is available upon request to the Secretary of the Company) contain
provisions requiring certain advance notice from a stockholder who wishes to
bring business before the Annual Meeting.
SOLICITATION OF PROXIES
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's Directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. Kissel-Blake Inc. has been engaged by the
Company to solicit proxies on behalf of the Company. For these services, the
Company will pay Kissel-Blake a fee of $5,000.00 plus reimbursement of
out-of-pocket expenses. Brokers, custodians and fiduciaries will be requested to
forward proxy soliciting material to the owners of stock held in their names,
and the Company will reimburse them for their out-of-pocket expenses in this
connection.
18
<PAGE> 21
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Annual Meeting of
Stockholders for Fiscal 1997 must be received by the Company at its principal
office not later than [120 days prior to the anniversary of the 1996 mailing]
for inclusion in the proxy statement for that meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of reports filed by "reporting persons" of the
Company under Section 16(a) of the Securities Exchange Act of 1934, as amended
("Section 16(a)"), the Company believes that during Fiscal 1996 all filings
required to be made by reporting persons were timely made in accordance with the
requirements of Section 16(a).
By Order of the Board of Directors,
ALBERT A. NOTINI,
Secretary
October , 1996
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
19
<PAGE> 22
WANG LABORATORIES, INC.
ANNUAL MEETING OF STOCKHOLDERS -- NOVEMBER 26, 1996
The undersigned, having received notice of the meeting and management's
proxy statement therefor, and revoking all prior proxies, hereby appoint(s)
Albert A. Notini and John A. Burgess, and each of them (with full power of
substitution), as proxies of the undersigned to attend the Annual Meeting of
Stockholders of Wang Laboratories, Inc. (the "Company") to be held on Tuesday,
November 26, 1996 and any adjourned sessions thereof, and there to vote and act
upon the following matters in respect of all shares of capital stock of the
Company which the undersigned would be entitled to vote or act upon, with all
powers the undersigned would possess if personally present.
Attendance of the undersigned at the meeting or at any adjourned session
thereof will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate thereat the intention of the undersigned to vote said
shares in person. If the undersigned hold(s) any of the shares of the Company in
a fiduciary, custodial or joint capacity or capacities, this proxy is signed by
the undersigned in every such capacity as well as individually.
IN THEIR DISCRETION, THE NAMED PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, OR ANY ADJOURNMENT
THEREOF.
1. To elect the following individuals as Class III Directors:
<TABLE>
<S> <C> <C>
DAVID A. BOUCHER / / FOR / / WITHHOLD AUTHORITY
MICHAEL W. BROWN / / FOR / / WITHHOLD AUTHORITY
AXEL J. LEBLOIS / / FOR / / WITHHOLD AUTHORITY
</TABLE>
2. To approve the amendment to the Company's Certificate of Incorporation:
/ / FOR / / AGAINST / / ABSTAIN
(Continued on other side)
<PAGE> 23
(Continued from other side)
3. To ratify the selection of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending June 30, 1997.
/ / FOR / / AGAINST / / ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO ANY ELECTION TO OFFICE OR
PROPOSAL SPECIFIED ABOVE, THIS PROXY WILL BE VOTED FOR SUCH ELECTION TO OFFICE
OR PROPOSAL.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
DATED:__________________________, 1996
______________________________________
SIGNATURE(S)
PLEASE SIGN NAME(S) EXACTLY AS
APPEARING HEREON. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR OR
OTHER FIDUCIARY, PLEASE GIVE YOUR FULL
TITLE AS SUCH. JOINT OWNERS SHOULD
EACH SIGN PERSONALLY. IF A
CORPORATION, SIGN IN FULL CORPORATE
NAME, BY AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME, BY AUTHORIZED
PERSON.
