<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 [X] 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 sec.240.14a-11(c) or sec.240.14a-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)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] 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:
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<PAGE> 2
WANG LABORATORIES, INC.
290 CONCORD ROAD
BILLERICA, MASSACHUSETTS 01821
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
ON TUESDAY, NOVEMBER 24, 1998
The Annual Meeting of Stockholders of Wang Laboratories, Inc. (the
"Company") will be held at the Radisson Heritage Hotel, 10 Independence Drive,
Chelmsford, Massachusetts on Tuesday, November 24, 1998 at 10:00 a.m., local
time, to consider and act upon the following matters:
1. To elect three Class II Directors, each to serve for a three-year
term.
2. To approve the Amendment and Restatement of the Director Stock
Option Plan.
3. To approve an Amended and Restated Certificate of Incorporation
which would (i) change the name of the Company from "Wang
Laboratories, Inc." to "Wang Global Corporation", (ii) increase
the aggregate number of shares of Common Stock that the Company is
authorized to issue from 100 million to 200 million, and (iii)
eliminate certain obsolete provisions related to restrictions on
the transfer of Common Stock.
4. To approve the issuance of additional shares of Common Stock to
Ing. C. Olivetti & Co. S.p.A. ("Olivetti") in connection with the
acquisition by the Company of the Services and Solutions Business
of Olivetti ("Olsy") on March 17, 1998.
5. 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, 1998 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 , 1998
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.
290 CONCORD ROAD
BILLERICA, MASSACHUSETTS 01821
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON NOVEMBER 24, 1998
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" or
"Wang") for use at the Annual Meeting of Stockholders ("Annual Meeting") to be
held on November 24, 1998, 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, 1998
("Fiscal 1998") was mailed to stockholders, along with these proxy materials, on
or about October , 1998.
QUORUM REQUIREMENT
At the close of business on October 1, 1998, 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 13,220 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 shares representing 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 the 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 approval of the Amendment and Restatement of the Director Stock
Option Plan. The affirmative vote of the holders of shares representing a
majority of the 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, excluding the shares currently held by Ing. C. Olivetti &
Co. S.p.A. ("Olivetti"), is required for the approval of the issuance of
additional shares of Common Stock to Olivetti. The affirmative vote of the
holders of shares representing a majority of the votes represented by the
holders of Common Stock, 6 1/2% Preferred Stock and 4 1/2% Preferred Stock
outstanding on the record date is required for approval of the Amended and
Restated Certificate of Incorporation.
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 the votes
represented by the shares present and entitled to vote on a matter, such as the
matters presented at this Annual Meeting, has no effect on the voting on such
matter. However, because shares represented by "broker non-votes" are considered
outstanding shares, "broker non-votes" with respect to a matter that requires
the affirmative vote of a certain percentage of the outstanding shares (such as
approval of the Amended and Restated Certificate of Incorporation) will have the
same effect as a vote against the matter.
BENEFICIAL OWNERSHIP OF VOTING STOCK
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 August 31,
1998 (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 any 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.
<TABLE>
<CAPTION>
COMMON STOCK 6 1/2% PREFERRED STOCK 4 1/2% PREFERRED STOCK
---------------------------- ------------------------------- -------------------------------
NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF
SHARES OUTSTANDING SHARES OUTSTANDING SHARES OUTSTANDING
BENEFICIALLY COMMON BENEFICIALLY 6 1/2% PREFERRED BENEFICIALLY 4 1/2% PREFERRED
BENEFICIAL OWNER OWNED(1) STOCK(2) OWNED(1)(3) STOCK(3) OWNED(1) STOCK
---------------- ------------ ------------- ------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
5% STOCKHOLDERS
Ing. C. Olivetti & Co. S.p.A.
Via Jervis 77
Ivrea 10015 Italy.............. 7,250,000 15.70% -- -- -- --
FMR Corp.(4)
82 Devonshire Street
Boston, Massachusetts 02109.... 5,042,934 11.92% -- -- -- --
Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, California 94403.... 4,739,600 10.26% -- -- -- --
Boston Partners Asset
Management L.P.
One Financial Center
43rd Floor
Boston, Massachusetts 02111.... 3,671,855 7.95% -- -- -- --
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
COMMON STOCK 6 1/2% PREFERRED STOCK 4 1/2% PREFERRED STOCK
---------------------------- ------------------------------- -------------------------------
NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF
SHARES OUTSTANDING SHARES OUTSTANDING SHARES OUTSTANDING
BENEFICIALLY COMMON BENEFICIALLY 6 1/2% PREFERRED BENEFICIALLY 4 1/2% PREFERRED
BENEFICIAL OWNER OWNED(1) STOCK(2) OWNED(1)(3) STOCK(3) OWNED(1) STOCK
---------------- ------------ ------------- ------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Iridian Asset Management LLC
276 Post Road West
Westport, Connecticut 06880.... 2,947,700 6.38% -- -- -- --
Janus Capital Corporation
100 Fillmore Street
Denver, Colorado 80206......... 2,800,075 6.06% -- -- -- --
Lipper & Company, Inc.
101 Park Avenue, 6th Floor
New York, New York 10178....... -- -- 27,134 18.87% -- --
Microsoft Corporation
Microsoft Way
Redmond, Washington 98052...... -- -- -- -- 90,000 100%
DIRECTORS/NOMINEES
David A. Boucher(5)............ 29,565 * -- -- -- --
Michael W. Brown(6)............ 2,210 * -- -- -- --
Roberto Colaninno(7)........... 7,250,000 15.70% -- -- -- --
Sergio Erede................... -- -- -- -- -- --
Marcia J. Hooper(8)............ 10,920 * -- -- -- --
Joseph J. Kroger(9)............ 14,565 * -- -- -- --
Raymond C. Kurzweil(10)........ 15,210 * -- -- -- --
Axel J. Leblois(11)............ 13,065 * -- -- -- --
Joseph M. Tucci(12)............ 1,124,410 2.39% -- -- -- --
Frederick A. Wang(13).......... 68,394 * -- -- -- --
John P. White.................. -- -- -- -- -- --
OTHER NAMED EXECUTIVES
Jose Ofman(14)................. 78,233 * -- -- -- --
Jeremiah J.J. van Vuuren(15)... 231,468 * -- -- -- --
Donald P. Casey(16)............ 215,722 *
Franklyn A. Caine(17).......... 437,013 * -- -- -- --
All Directors, nominees for
Director and executive
officers as a group (21
persons)(18)................. 10,087,161 20.69% -- -- -- --
</TABLE>
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* 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. The reported beneficial ownership of Common Stock
or preferred stock by each 5% stockholder is based on a Schedule 13G filed
by such holder or on the records of the Company's transfer agent. 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 August 31, 1998; and any
reference in these footnotes to options or warrants refers only to such
options or warrants.
(2) Number of shares deemed outstanding includes 46,189,773 shares outstanding
as of August 31, 1998, 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 August 31, 1998.
3
<PAGE> 6
(4) Includes 4,439,508 shares of Common Stock beneficially owned by Fidelity
Management and Research Company as result of its serving as investment
advisor to various investment companies; and 603,425 shares of Common Stock
beneficially owned by Fidelity Management Trust Company as a result of its
serving as trustee or managing agent for various private investment
accounts. Based upon information provided to the Company by the stockholder
as of February 18, 1998.
(5) Consists of 29,565 shares subject to outstanding stock options.
(6) Consists of 2,210 shares subject to outstanding stock options.
(7) Consists of 7,250,000 shares of Common Stock held by Olivetti of which Mr.
Colaninno is Chief Executive Officer and as to which shares Mr. Colaninno
disclaims beneficial ownership.
(8) Consists of 10,920 shares subject to outstanding stock option.
(9) Consists of 13,065 shares subject to outstanding stock options and 1,500
shares held outright.
(10) Consists of 15,210 shares subject to outstanding stock options.
(11) Consists of 13,065 shares subject to outstanding stock options.
(12) Consists of 897,499 shares subject to outstanding stock options, 224,411
shares held outright and 2,500 shares subject to outstanding stock
warrants.
(13) Consists of 29,565 shares subject to outstanding stock options, 2,463
shares held outright and 36,366 shares subject to outstanding stock
warrants.
(14) Consists of 75,000 shares subject to outstanding stock options and 3,233
shares held outright.
(15) Includes 226,344 shares subject to outstanding stock options and 5,124
shares held outright.
(16) Includes 198,744 shares subject to outstanding stock options, 10,142 shares
held outright, 3 shares held pursuant to the Company's 401(k) Plan and
6,833 shares subject to outstanding stock warrants.
(17) Includes 434,499 shares subject to outstanding stock options, 2,514 shares
held outright and 83 shares subject to outstanding stock warrants.
(18) Includes 2,556,086 shares subject to outstanding stock options, 7,485,282
shares held outright, 11 shares held pursuant to the Company's 401(k) Plan
and 45,782 shares subject to outstanding stock warrants.
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 four Class I Directors, whose terms expire at the Annual Meeting of
Stockholders for Calendar Year 1999, three Class II Directors, whose terms
expire at this Annual Meeting of Stockholders, and four Class III Directors,
whose terms expire at the Annual Meeting of Stockholders for the interim period
ending December 31, 1998 (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 Marcia J.
Hooper, Joseph J. Kroger and John P. White as Class II Directors, unless
authority to vote for the election of any or all of the nominees is withheld by
marking the proxy to that effect. Ms. Hooper, Mr. Kroger and Dr. White are
currently Class II 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.
4
<PAGE> 7
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 II Directors.
Class I Directors (holding terms expiring at the Annual Meeting for Calendar
Year 1999):
ROBERTO COLANINNO DIRECTOR SINCE MARCH 1998; AGE 55
Mr. Colaninno has been Chief Executive Officer of Olivetti since September
1996. Since 1981, Mr. Colaninno has been founder and Executive Vice President of
Sogefi S.p.A., a leading international manufacturer of automobile components,
and since 1971 he has been Chairman of Fiaam, another Italian automobile
components company. Mr Colaninno is also Vice Chairman of Omnitel Pronto Italia,
a mobile telephone service provider, and Chairman of Oliman, a joint venture
between Olivetti and Mannesmann AG of Germany. Mr. Colaninno also serves as a
Director and member of the Chairman's Committee of Banca Agricola Mantovana, a
member of the governing body of Confindustria, the Italian industrialists'
association, and Vice Chairman of Federlombarda, the federation of
industrialists in Lombardy, Italy.
RAYMOND C. KURZWEIL DIRECTOR SINCE OCTOBER 1993; AGE 50
Mr. Kurzweil is founder and Chief Technology Officer of Kurzweil Applied
Intelligence, Inc. which since June, 1997 has been a subsidiary of Lernout &
Hauspie, a speech and language technology company. He is also founder and Chief
Executive Officer of Kurzweil Educational Systems, Inc., an educational software
company. He was the principal developer of technology for the first omnifont
optical character recognition device, the first print-to-speech reading machine
for the blind, the first music synthesizer that could recreate acoustic
instruments and the first commercially-marketed large vocabulary speech
recognition device. He is a director of Medical Manager Corp.
JOSEPH M. TUCCI DIRECTOR SINCE OCTOBER 1993; AGE 51
Mr. Tucci joined the Company in August 1990 as Executive Vice President,
Operations, was elected President and Chief Executive Officer in January 1993,
Chairman of the Board in October 1993 and was reaffirmed as President in June
1998.
FREDERICK A. WANG DIRECTOR SINCE OCTOBER 1981; AGE 48
Mr. Wang has been President and Chief Executive Officer of The athink
Group, a start-up company involved with internet web publishing since 1997 and
was President and Chief Executive Officer of Archive Technologies Corporation,
Inc., the predecessor company of The athink Group since 1996. Mr. Wang was a
private business consultant from 1990 to 1996 and 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.
Class II Directors (nominated for terms expiring at the Annual Meeting for
Calendar Year 2000):
MARCIA J. HOOPER DIRECTOR SINCE NOVEMBER 1995; AGE 44
Ms. Hooper has been a Partner of Advent International Corporation, a
private equity management company since 1996. 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. and Interleaf, Inc.
5
<PAGE> 8
JOSEPH J. KROGER DIRECTOR SINCE JUNE 1995; AGE 64
Mr. Kroger, formerly Vice Chairman of the Board of Unisys Corporation, has
been a private business consultant since 1993. 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.
JOHN P. WHITE DIRECTOR SINCE DECEMBER 1997; AGE 61
Dr. White has been a senior partner at Global Technology Partners, LLC, a
private investment company, and has served as a senior fellow at the Rand
Corporation, a research corporation, since 1997. From June 1995 through July
1997, he served as the U.S. Deputy Secretary of Defense. He was the Director of
the Center for Business and Government at the John F. Kennedy School of
Government, Harvard University, from January 1993 through June 1995. From 1988
to 1992 he was General Manager of the Integration and Systems Product Divisions
and Vice President of Eastman Kodak Company. From October 1993 until June 1995,
Dr. White served as a Director of the Company.
Class III Directors (holding terms expiring at the Annual Meeting for the
interim period ending December 31, 1998):
DAVID A. BOUCHER DIRECTOR SINCE OCTOBER 1993; AGE 48
Mr. Boucher has been Managing Director and General Partner of Applied
Technology, a venture capital firm specializing in early-stage information
industry companies, since 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 a director of
Interleaf, Inc., Pervasive Software, Inc., and several privately held companies.
MICHAEL W. BROWN DIRECTOR SINCE APRIL 1996; AGE 52
Mr. Brown, until his retirement in July 1997, served as Chief Financial
Officer of Microsoft Corporation. He joined Microsoft in 1989 as Treasurer and
was appointed 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 a director of The Nasdaq Stock Market, Inc. and Citrix Systems,
Inc.
SERGIO EREDE DIRECTOR SINCE MARCH 1998; AGE 58
Mr. Erede has been an attorney in private practice with the firm of Erede e
Associati of Milan, Italy since 1969 and is counsel to Olivetti. Before entering
private practice, Mr. Erede was manager of the legal department of IBM Italia
S.pA. for four years. Prior to that he worked for one year at each of the law
firms of Sullivan and Cromwell in New York, NY and Hale and Dorr LLP in Boston,
MA. He is a director of Marzotto S.p.A. and Hugo Boss AG, textile concerns,
Editoriale L'Espresso S.p.A. and La Reppublica S.p.A., publishers, Manuli Rubber
Industries S.p.A., Conoto S.p.A., and Interpump S.p.A., manufacturers, Gruppo GS
S.p.A., a retailer, and food and restaurant concerns Parmalat S.p.A. and
Autogrill S.p.A.
AXEL J. LEBLOIS DIRECTOR SINCE JANUARY 1995; AGE 50
Mr. Leblois has been Chairman of World Times, Inc., a publishing firm,
since 1995 and Chief Executive Officer of Executrain Inc, a global computer
training company, since 1997. 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
6
<PAGE> 9
affiliate, International Data Corporation. He is a director of Peritus Software
Services, Inc. and Boston Private Bank.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Finance and Audit Committee of the Board of
Directors, which reviews the Company's financial condition and operating
results, cash position, financing arrangements and financing strategies,
recommends the engagement of the Company's independent auditors and reviews the
arrangements for the scope of the annual audit. In addition, the Finance and
Audit Committee reviews the activities and recommendations of the Company's
audit group, reviews comments made by the independent auditors with respect to
internal controls and management's response, reviews internal accounting
procedures and controls with the Company's finance and accounting staff and
monitors the Company's compliance programs. The members of the Finance and Audit
Committee are David A. Boucher (Chairman), Michael W. Brown, Sergio Erede,
Marcia J. Hooper, Joseph J. Kroger, and John P. White. The Finance and Audit
Committee met six times during Fiscal 1998.
The Company has a standing Organization, Compensation and Nominating
Committee of the Board of Directors, which reviews and approves proposals by
management concerning compensation, bonuses, benefits, stock options and stock
grants under plans for directors, corporate officers and employees of the
Company. 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 considers
suggestions from stockholders and other sources regarding possible candidates
for directors. Such suggestions, together with appropriate biographical
information, should be submitted to the Secretary of the Company. The Committee
is also responsible for overseeing Company policies on issues of public
significance, including charitable contributions and community relations. The
members of the Organization, Compensation and Nominating Committee are Joseph J.
Kroger (Chairman), Roberto Colaninno, Marcia J. Hooper and Axel J. Leblois. The
Organization, Compensation and Nominating Committee met eight times during
Fiscal 1998.
The Board of Directors met eleven times during Fiscal 1998. Except for John
P. White, each current Director attended at least 75% of the meetings of the
Board and the Committees on which he or she then served. Dr. White attended
71.4% of the meetings of the Board and the Committees on which he then served.
COMPENSATION OF DIRECTORS
The director who is employed by the Company or is employed by a stockholder
of the Company is not paid director fees. Directors who are not employed by the
Company or employed by a stockholder of the Company 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.
In September 1997, 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 $20.367 per share and became exercisable as to 34% of the
shares covered thereby on September 30, 1998, and will become exercisable as to
33% and 33% of the shares covered thereby on September 30, 1999 and September
30, 2000, respectively, provided the optionee continues to serve as a director
of the Company.
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<PAGE> 10
In December 1997, under the Company's 1995 Director Stock Option Plan, Dr.
White received an option to purchase 6,500 shares of Common Stock. This option
has an exercise price of $22.77 per share and becomes exercisable as to 34%, 33%
and 33% of the shares covered thereby on December 23, 1998, December 23, 1999
and December 23, 2000, respectively, provided the optionee continues to serve as
a director of the Company.
In March 1998, under the Company's 1995 Director Stock Option Plan, Mr.
Erede received an option to purchase 6,500 shares of Common Stock. This option
has an exercise price of $25.18 per share and becomes exercisable as to 34%, 33%
and 33% of the shares covered thereby on March 25, 1999, March 25, 2000 and
March 25, 2001, respectively, provided the optionee 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 provided for
compensation at the rate of $375.00 per hour, not to exceed an average of
$15,000 per month, plus the reimbursement of expenses. The agreement was
approved by the Board of Directors and is subject to the Board's periodic
review. The agreement is terminable upon 30 days' notice by either party. The
Company no longer compensates Mr. Kurzweil under this agreement.
In July 1994, the Board of Directors adopted a policy prohibiting
non-employee directors from receiving compensation from the Company other than
in their capacity as directors, absent extraordinary circumstances.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who are beneficial owners of more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership with the Securities and Exchange Commission ("SEC"). Officers,
directors and greater than 10% beneficial owners are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms that they file. To
the Company's knowledge, based solely on the review of the copies of reports
furnished to Company, and written representations that no other reports were
required during the fiscal year ended June 30, 1998, all Section 16(a) filing
requirements applicable to such persons were satisfied.
8
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following Summary Compensation Table sets forth certain information
concerning the compensation for each of the last three fiscal years of the
Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers during Fiscal 1998 (the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM COMPENSATION
COMPENSATION(1) AWARDS
------------------------------ ----------------------------
RESTRICTED SECURITIES
FISCAL STOCK AWARDS UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#)(2) OPTIONS(#)(3) COMPENSATION($)
--------------------------- ------ --------- -------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Tucci.................. 1998 750,000 356,250(4)(5) -- -- 70,100(6)
Chairman of the Board, President 1997 652,030 4,693,750 230,000 465,000 443,783
and Chief Executive Officer 1996 551,250 400,000 -- 148,500 49,773
Jose Ofman....................... 1998 395,000 106,875(7)(4) -- -- 138,016(8)
President and Chief Operating 1997 102,403(9) -- 50,000 300,000 17,607
Officer, Americas
Jeremiah J.J. van Vuuren(10)..... 1998 396,988 106,875(11)(4) -- 40,000 76,770(12)
President and Chief Operating 1997 371,963 196,247 25,000 120,000 41,261
Officer, International 1996 263,075 210,000 -- 87,750 34,265
Donald P. Casey.................. 1998 350,000 99,750(13)(4) -- 45,000 30,128(14)
Chief Technology Officer and 1997 350,000 178,834 -- 45,000 25,665
President, U.S. Services 1996 350,000 178,834 -- 87,750 35,476
Franklyn A. Caine................ 1998 350,000 83,125(15)(4) -- 50,000 21,560(16)
Executive Vice President and 1997 331,618 565,000 15,000 75,000 96,797
Chief Financial Officer 1996 325,000 198,000 -- 81,000 30,885
</TABLE>
- ---------------
(1) Other compensation in the form of perquisites and other personal benefits
has been omitted, in accordance with the rules of the SEC, 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) Restricted stock awards of 230,000, 50,000, 25,000 and 15,000 shares were
granted to Messrs. Tucci, Ofman, van Vuuren and Caine, respectively. The
restricted stock issued to Mr. Tucci vested 50% on March 26, 1998 and will
vest the remaining 50% on March 26, 1999. The restricted stock issued to
Mr. Ofman will vest 33% on each of March 26, 1999, 2000 and 2001. The
restricted stock issued to each of Messrs. Caine and van Vuuren will vest
100% on March 26, 1999. Based on the closing price of the Common Stock on
June 30, 1998, the restricted stock award to Mr. Tucci had a value of
$5,850,625, the restricted stock award to Mr. Ofman had a value of
$1,271,875, the restricted stock award to Mr. van Vuuren had a value of
$635,937.50 and the restricted stock award to Mr. Caine, had a value of
$381,562.50.
(3) Consists of long-term incentive options granted under the Company's
Employees' Stock Incentive Plan or an individual stock incentive plan in
the case of Mr. Ofman.
(4) A six month short-term incentive bonus plan for executive covering the
period July 1, 1997 through December 31, 1997 (the "Interim STIP") was
approved by the Company's Organization, Compensation and Nominating
Committee. The Interim STIP required that all senior executives of the
Company receive and accept bonus owed to them for the period July 1997
through December 1997 to be paid in shares of Common Stock valued at the
closing price of the Common Stock on The Nasdaq Stock Market as of June 30,
1997 which was $21.3125. See "Report of Organization, Compensation and
Nominating Committee on Executive Compensation."
9
<PAGE> 12
(5) Fiscal 1998 bonus consists of $356,250 in Common Stock issued under the
Interim STIP. Fiscal 1997 bonus includes a $4,000,000 special retention
bonus and $693,750 paid under the Company's executive bonus program. Fiscal
1996 bonus consists of $400,000 paid under the Company's executive bonus
program.
(6) All other compensation for Fiscal 1998 consists of (i) $60,000 in
contributions by the Company under its retirement savings plans and (ii)
$10,100 in premiums paid by the Company on a group term life insurance
policy for the benefit of Mr. Tucci. All other compensation for Fiscal 1997
consists of (i) $47,014 in contributions by the Company under its
retirement savings plans, (ii) $9,256 in premiums paid by the Company on a
group term life insurance policy for the benefit of Mr. Tucci and (iii)
$387,513 relating to the waiver by the Company of both the principal and
accrued interest under Mr. Tucci's 3% promissory note. 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 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.
(7) Fiscal 1998 bonus consists of $106,875 in Common Stock issued under the
Interim STIP.
(8) All other compensation for Fiscal 1998 consists of (i) $12,000 in
contributions by the Company under its retirement savings plans, (ii)
$14,946 in premiums paid by the Company on a group term life insurance
policy for the benefit of Mr. Ofman and (iii) $111,070 in relocation costs.
All other compensation for Fiscal 1997 consists of (i) $3,736 in premiums
paid by the Company on a group term life insurance policy for the benefit
of Mr. Ofman and (iii) $13,871 in relocation costs.
(9) Mr. Ofman joined the Company on March 26, 1997, and therefore, did not
receive compensation for all of Fiscal 1997.
(10) All compensation paid to Mr. van Vuuren is reported in US Dollars although
it is paid in UKL. The currency conversion rate used was $1.666 per UKL,
$1.665 per UKL, and $1.5475 per UKL, for Fiscal 1998, 1997 and 1996,
respectively. The conversion rates used were those rates published by
Reuters News Service on the last day of June of each year.
(11) Fiscal 1998 bonus consists of $106,875 in Common Stock issued under the
Interim STIP. Fiscal 1997 bonus consists of $196,247 paid under the
Company's executive bonus program. Fiscal 1996 bonus consists of $210,000
paid under the Company's executive bonus program.
(12) All other compensation for Fiscal 1998 consists of (i) $26,907 in
contributions by the Company under its retirement savings plans, (ii)
$18,076 in premiums paid by the Company on a group term life insurance
policy for the benefit of Mr. van Vuuren and (iii) $31,787 in a car
allowance. All other compensation for Fiscal 1997 consists of (i) $23,351
in contributions by the Company under its retirement savings plans and (ii)
$17,910 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
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.
(13) Fiscal 1998 bonus consists of $99,750 in Common Stock issued under Interim
STIP. Fiscal 1997 bonus consists of $178,834 paid under the Company's
executive bonus program. Fiscal 1996 bonus consists of $178,834 paid under
the Company's executive bonus program.
(14) All other compensation for Fiscal 1998 consists of (i) $22,400 in
contributions by the Company under its retirement savings plans and (ii)
$7,728 in premiums paid by the Company on a group term life insurance
policy for the benefit of Mr. Casey. All other compensation for Fiscal 1997
consists of (i) $16,996 in contributions by the Company under its
retirement savings plans and (ii) $8,669 in
10
<PAGE> 13
premiums paid by the Company on a group term life insurance policy for the
benefit of Mr. Casey. 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 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.
(15) Fiscal 1998 bonus consists of $83,125 in Common Stock issued under the
Interim STIP. Fiscal 1997 bonus consists of a special retention bonus of
$400,000 and $165,000 paid under the Company's executive bonus program.
Fiscal 1996 bonus consists of $198,000 paid under the Company's executive
bonus program.
(16) All other compensation for Fiscal 1998 consists of $21,560 in contributions
by the Company under its retirement savings plans. All other compensation
for Fiscal 1997 consists of (i) $20,271 in contributions by the Company
under its retirement savings plans and (ii) $76,526 in relocation costs.
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)
$6,293 in relocation costs.
OPTION GRANTS
The following table sets forth certain information concerning grants of
stock options during Fiscal 1998 to each of the Named Executives.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED ANNUAL
------------------------------------------------------------- RATES OF STOCK PRICE
NUMBER OF PERCENT OF TOTAL APPRECIATION FOR OPTION
SECURITIES OPTIONS GRANTED EXERCISE TERM(2)
UNDERLYING TO EMPLOYEES PRICE EXPIRATION -----------------------
NAME OPTIONS GRANTED(#) IN FISCAL YEAR ($)(1) DATE 5%($) 10%($)
---- ------------------ ---------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Tucci............ -- -- -- -- -- --
Jose Ofman................. -- -- -- -- -- --
Jeremiah J.J. van Vuuren... 40,000(3) 1.8 21.875 11/30/04 297,584 675,116
Donald P. Casey............ 45,000(3) 2.1 21.875 11/30/04 334,782 759,505
Franklyn A. Caine.......... 50,000(3) 2.3 21.875 11/30/04 371,980 843,895
</TABLE>
- ---------------
(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 price 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) will become exercisable as to 25% of the underlying shares
on each December 1, 1998, December 1, 1999, December 1, 2000 and December
30, 2001 and (ii) generally terminates 30 days after
11
<PAGE> 14
the termination of the optionee's employment with the Company (but in no
event after the expiration date).
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information concerning option
exercises during Fiscal 1998 by each of the Named Executives and the number and
value of unexercised options held by each of the Named Executives on June 30,
1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR END(#) 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........... -- -- 831,829/171,671 9,675,505/1,294,526
Jose Ofman................ -- -- 75,000/225,000 539,063/1,617,188
Jeremiah J. J. van
Vuuren.................. -- -- 265,450/ 71,800 2,500,390/ 687,557
Donald P. Casey........... 110,000 2,047,625 232,900/ 59,850 2,344,734/ 554,795
Franklyn A. Caine......... -- -- 400,180/105,820 5,766,888/ 614,487
</TABLE>
- ---------------
(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, 1998
($25.4375), less the option exercise price.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
In February 1997, the Company entered into an amended and restated
employment agreement ("Restated Agreement") with Mr. Tucci. The Restated
Agreement provides for an annual base salary of $750,000 and an annual
performance bonus targeted at 100% of the base salary with a bonus payment of at
least $500,000 for Fiscal 1997. The Restated Agreement also provided for a
special retention payment of $4,000,000 on or about March 24, 1997. The Restated
Agreement provided for Mr. Tucci to be granted a restricted stock award of
230,000 shares of Common Stock and an LTI Option grant of 365,000 shares of
Common Stock in 1997. The Restated Agreement forgives all amounts due to the
Company under that certain Non-Negotiable Secured Promissory Note dated as of
June 21, 1994 delivered by Mr. Tucci to the Company as amended, in the original
principal amount of $355,071 and releases to Mr. Tucci all shares of the
Company's Common Stock held as collateral for such loan. Finally, the Restated
Agreement provides for the payment of a severance benefit of $4,500,000, payable
in a lump sum equal to $1,500,000 and the balance over a 12-month period,
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 1997, the Company entered into an employment agreement with Mr.
Ofman pursuant to which the Company agreed to employ him as President and Chief
Operating Officer, Americas of the Company. Mr. Ofman's agreement extends
through March 2000. Under the agreement, the Company agreed to pay Mr. Ofman an
annual base salary of $375,000. The agreement also provided for annual
performance-based bonuses to be determined by the Board of Directors targeted at
60% of annual base salary for achieving 100% of his performance goals and an
over-achievement opportunity of an additional 40% of his annual base salary for
exceeding such performance targets, at the discretion of the Board of Directors.
He will also receive
12
<PAGE> 15
payments in the amount of $400,000 each, if and when the market price of the
Company's Common Stock averages $34.00, $39.00 and $44.00 per share respectively
over twenty consecutive trading days. Under the agreement, Mr. Ofman received a
restricted stock award of 50,000 shares of Common Stock and an option grant of
300,000 shares of Common Stock in 1997. Under his employment agreement Mr. Ofman
will receive severance compensation equal to 18 months of base pay plus the
target bonus at 100% performance if Mr. Ofman's employment is involuntarily
terminated other than for cause or if Mr. Ofman experiences an adverse change in
job responsibilities. Severance payments would be offset by the compensation Mr.
Ofman received from a new employer during such 18-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. The agreement, as amended in March 1997, specifies Mr. van Vuuren's
position as President and Chief Operating Officer, International Operations.
Under the terms of the agreement, as amended, Mr. van Vuuren's base salary for
Fiscal 1997 was $325,000 plus a supplemental amount of $50,000 subject to
deferral at the option of Mr. van Vuuren. Mr. van Vuuren is also eligible to
participate in a yearly bonus plan targeted at 60% of his base salary based on
his performance against goals specified in the bonus plan. He will also receive
payments in the amount of $400,000 each, if and when the market price of the
Company's Common Stock averages $34.00, $39.00 and $44.00 per share respectively
over twenty consecutive trading days. The agreement provides that, if he is
dismissed for any reason, other than for gross misconduct or violation of the
Company's Employee Code of Conduct, Mr. van Vuuren will receive severance
compensation equal to 18 months of base and supplemental salary to be paid over
an 18-month period. Severance payments would be offset by compensation received
from a new employer during such 18-month period. In March 1997, Mr. van Vuuren
received a restricted stock grant for 25,000 shares of Common Stock and an LTI
Option grant in the amount of 60,000 shares of Common Stock in 1997.
In March 1993, the Company entered into an employment agreement with Mr.
Casey. The agreement, as amended in April 1995 and July 1996, extended through
July 1998 and provided for an annual base salary of $350,000. The agreement also
provided for annual performance-based bonuses to be determined by the Board of
Directors targeted at 60% of annual base. Under his employment agreement Mr.
Casey will receive severance compensation in an amount equal to 18 months base
salary plus bonus, with an amount equal to six months salary and bonus payable
in a lump sum and the balance 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, May 1996 and March 1997, extends through December
1998. Under the agreement, the Company agreed to pay Mr. Caine an annual base
salary of $325,000 for Fiscal 1996 and $350,000 for Fiscal 1997, subject to
further annual adjustment by the Board of Directors. Mr. Caine is also eligible
to participate in a yearly bonus plan targeted at 50% of his 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 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. In March 1997, Mr.
Caine received a restricted stock award of 15,000 shares of Common Stock, an LTI
Option grant of 25,000 shares of Common Stock and a special retention bonus
payment from the Company in the amount of
13
<PAGE> 16
$400,000 in 1997. This bonus is repayable in full to the Company in cash if Mr.
Caine voluntarily terminates his employment with the Company for convenience
prior to September 26, 1998.
The Company is a party to contingent severance compensation agreements
("Severance Agreements") with nine executive officers (including Messrs. Tucci,
Ofman, van Vuuren, Casey and Caine) 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 was 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 and Caine 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 was 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.
CERTAIN TRANSACTIONS
Since April 1995, the Company and Microsoft Corporation ("Microsoft") have
maintained a worldwide technical, service and marketing alliance pursuant to
which the Company acts as an authorized provider of end-user support services
for Microsoft products. On March 23, 1998, the Company and Microsoft announced
an expansion of their strategic alliance. The Company will significantly extend
its services capacity by training and certifying 2,500 professionals as
Microsoft Certified Systems Engineers and Microsoft Certified Solution
Developers. In addition, the Company will open two Centers of Excellence, one in
Billerica and one in Italy. Under the terms of the agreement, Microsoft will
fund the costs associated with the program through an interest-free loan. These
costs are expected to approximate $25 million over the next three years. The
loan will be repaid in equal installments over five years, with the first
payment due in 2001. Since April 1996, Michael W. Brown, the Chief Financial
Officer of Microsoft until July 1997, 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. On May 12, 1998, the Court issued an order (1)
authorizing the final distribution of the remaining shares to holders; and (2)
closing the Chapter 11 case.
14
<PAGE> 17
AGREEMENTS AMONG STOCKHOLDERS - OLIVETTI AGREEMENTS
On March 17, 1998, the Company completed the purchase of Olsy, the
wholly-owned information technology solutions and service subsidiary of Olivetti
(the "Acquisition"). In connection with the Acquisition, the Company entered
into a Stock Purchase Agreement by and among Olivetti, the Company, Wang
Nederland BV, Olivetti Sistemas E Servicios Limitada and Olivetti do Brasil S.A.
(the "Stock Purchase Agreement"), pursuant to which the Company paid Olivetti
$68.6 million in cash; issued 7,250,000 shares of Common Stock (and agreed to
issue an additional 1,500,000 shares of Common Stock if approved by the
stockholders of the Company (the "Additional Issuance")) with a value of $146.8
million at the time of closing; issued 5,000,000 stock appreciation rights
("SARs") which give Olivetti value for the increase in the market price of the
Company's Common Stock above $30.00 per share at any time from March 2001 to
March 2005 and are redeemable in cash or Common Stock at the Company's election;
and agreed to pay an additional amount (an "earnout") of up to $56.0 million
payable in the year 2000, subject to meeting mutually-agreed performance targets
for the calendar years 1998 and 1999 (see "Proposal To Issue Additional Shares
of Common Stock to Olivetti"). The purchase price for Olsy is subject to certain
purchase price adjustments to be determined by the parties.
Pursuant to the Stock Purchase Agreement, the Company entered into a
Stockholders Agreement with Olivetti (the "Stockholders Agreement"). The
Stockholders Agreement sets forth agreements among the parties relating to the
ownership of and the voting and transferability of the Common Stock and other
matters. In the Stockholders Agreement, the Company agreed to increase its Board
of Directors by two (2) members and to nominate Mr. Colaninno and Mr. Erede as
Class I and Class III directors, respectively (the "Olivetti Directors"), and to
appoint one such Olivetti Director to each of the Company's standing Committees
(including the Finance and Audit Committee and the Organization, Compensation
and Nominating Committee). The Company also agreed to recommend future Olivetti
nominees for one or two director positions, depending on the ownership interest
of Olivetti in the Company, for as long as Olivetti holds at least 33% of the
original number of shares of Common Stock held by it as a result of the
Acquisition.
In addition, the Stockholders Agreement prohibits Olivetti from directly or
indirectly transferring its shares of Common Stock, except to majority-owned
Olivetti affiliates that agree to be bound by the terms of the agreement, until
the later of three (3) years or an Early Termination Event. "Early Termination
Event" is defined to mean (i) failure of the Company to cause an Olivetti
nominee to be appointed to the Board or a Committee; (ii) a breach of the
Stockholders Agreement by the Company; or (iii) the sale, lease, transfer or
other disposition of all or substantially all of the assets of the Company. The
Stockholders Agreement also provides that Olivetti is entitled to certain demand
and participation ("piggyback") registration rights with respect to the shares
of Common Stock issued to Olivetti as part of the purchase price of Olsy.
Pursuant to the Agreement, after the earlier of (i) an Early Termination Event
or (ii) the third anniversary following the Acquisition, Olivetti or its
transferee is entitled to one demand registration with respect to its shares of
the Company's Common Stock, subject to certain registration priorities and
postponement rights of the Company. In addition, Olivetti would be entitled to
piggyback registration in connection with any registration of securities by the
Company (whether or not for its own account) on a form which may be used for
registration of the Common Stock held by Olivetti. Olivetti's priority rights,
however, would not extend to a primary registration on behalf of the Company
relating to mergers, acquisitions, exchange offers, subscription offers, stock
option plans or similar benefit plans.
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.
15
<PAGE> 18
The Committee seeks to achieve two broad goals in determining executive
compensation and establishing executive compensation programs. First, the
Committee seeks to implement compensation programs which are designed to align
the interest of the Company's executive officers with those of the Company's
stockholders by providing incentives for, and rewarding, the attainment of
Company financial and operational objectives. Second, the Committee seeks to
compensate its executives in a manner that enables the Company to attract and
retain executives whose services are critical to the success of the Company. The
Committee implements its goals through a combination of base salary, variable
short-term compensation, stock options, long-term incentive plans and health and
welfare benefit plans.
In establishing total compensation for executive officers, the Committee
considers the compensation profiles of executives at other companies that have a
business and/or financial situation similar to that of the Company, the cost to
replace the executive, the particular executive's level of achievement and
responsibility with the Company, the importance of the executive to the
Company's success, unique characteristics of the Company and its business and
the executive's historic compensation levels. Many of the executive officers
(including each of the Named Executives) of the Company are parties to
employment agreements that establish a minimum annual base salary and target
annual bonus during the term of the agreement. The Committee believes that such
employment agreements are necessary to retain and motivate those key executives
whose continued services are critical to the Company's future success and are
consistent with similar agreements in the industry generally. The Committee
believes that the compensation levels established for the executives are
appropriate, based on the factors described above.
For the six-month period from July 1, 1997 through December 31, 1997 (the
"Interim Period"), the Committee adopted a pro-rata six-month short term
incentive bonus plan for executives, in lieu of the annual plan which would have
applied in part to the Interim Period (the "Interim STIP"). The Interim STIP was
established in anticipation of the Company changing its fiscal year end from
June 30 to December 31, a change which was announced on August 5, 1998. The
Committee determined that it was in the best interest of the Company for all
executive compensation plans to be measured on a twelve month calendar basis
beginning January 1, 1998. In designing the Interim STIP, the Committee tied
individual payouts to achievement of specific financial measures. The targets
included Company revenue, earnings before income taxes, depreciation and
amortization, selling, general and administrative costs and percentage gross
margin. In addition, in order to further align the interests of the Company's
executive officers with the interests of the Company's stockholders, the
Committee required that the CEO and all executives directly reporting to the CEO
(including each of the Named Executives), accept their bonuses under the Interim
STIP in the form of shares of the Company's Common Stock. Thus, the cash bonus
to which each of such executives were entitled was exchanged for shares of
Common Stock calculated by dividing the amount of the bonus by the closing price
of the Common Stock on June 30, 1997 ($21.3125). The Committee considered this
exchange to be critical to its goal of tying the variable short-term
compensation of executive officers to the risks and opportunities inherent in
the performance of the Company measured by the value of its Common Stock in the
market.
The Committee uses stock options as an important element of the
compensation package of the executive officers, including the Named Executives,
because they are designed to align the interest of the Company's executives with
those of the Company's stockholders. Those options granted during Fiscal 1998
vest over four years, and therefore, mature fully only after the executive has
remained with the Company for a significant period of time. The size of the
stock option grants to executive officers depend upon a number of factors,
including new hires of executives, the executive's contribution to the Company,
the executive's current stock and stock option holdings and such other factors
as the Committee deems relevant. In Fiscal 1998, three out of the five Named
Executives received grants of stock options under the Company's stock option
plan. Messrs. van Vuuren, Casey and Caine received an option for 40,000, 45,000
and 50,000 shares of Common
16
<PAGE> 19
Stock, respectively. These grants represented 1.8%, 2.1% and 2.3% of the total
options granted to employees during the fiscal year.
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 continue 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
Joseph J. Kroger, Chairman
Roberto Colaninno
Marcia J. Hooper
Axel J. Leblois
17
<PAGE> 20
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, 1998 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.
[WANG LABORATORIES, INC.
Stock Performance Graph]
<TABLE>
<CAPTION>
Wang S&P 500 HiTech Composite
Laboratories, Inc. Composite Index Index
<S> <C> <C> <C>
12/16/93 100.00 100.00 100.00
6/30/94 75.83 95.88 100.47
6/30/95 108.26 117.57 158.11
6/30/96 124.79 144.74 185.02
6/30/97 140.91 191.03 286.48
6/30/98 168.18 244.71 383.45
</TABLE>
PROPOSAL TO APPROVE THE AMENDMENT AND RESTATEMENT
OF THE DIRECTOR STOCK OPTION PLAN
On July 23, 1998, the Board of Directors adopted, subject to stockholder
approval, an amendment to and restatement of the Company's 1995 Director Stock
Option Plan, including a change in the name of the Plan to the Director
Compensation and Stock Option Plan (as amended and restated, the "Plan") and an
increase by 200,000 shares of Common Stock in the number of shares available for
issuance under the Plan. The purpose of the Plan is to encourage ownership of
stock of the Company by directors, whose continued services are essential to the
Company's future progress, and to provide them with an incentive to continue as
directors of the Company. The Board of Directors of the Company believes that
the Plan will enhance the ability of the Company to attract and retain qualified
directors and will provide further incentive to directors as a result of their
equity interest in the Company.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE APPROVAL OF THE
AMENDMENT TO AND RESTATEMENT OF THE PLAN ARE IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
18
<PAGE> 21
SUMMARY OF THE PLAN
The following description of certain features of the Plan is intended to be
a summary only. The summary is qualified in its entirety by the full text of the
Plan.
Subject to adjustment for stock splits, stock dividends and other similar
events, the total number of shares of Common Stock that can be issued under the
Plan is 440,000 shares. Under certain circumstances, awards which expire, are
forfeited or cancelled without delivery of shares of Common Stock will be
available for future grants under the Plan. Shares issued under the Plan may be
authorized but unissued shares, treasury shares or shares acquired in the market
for the account of the participant. Only non-employee directors of the Company
who are paid fees for service on the Board of Directors or a committee thereof
("non-employee directors") are eligible to receive awards under the Plan. The
Company currently has 10 non-employee directors (which number may change in the
future). All options granted under the Plan are non-qualified stock options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"). Through August 31, 1998, options to purchase
201,500 shares had been granted under the Plan and options to purchase or awards
for an additional 64,500 shares were available to be granted under the Plan.
The Plan provides for (i) the grant of shares of Common Stock subject to
risk of forfeiture and restrictions on transfer for a specified period
("Restricted Stock"), (ii) the grant of rights to receive shares of Common Stock
upon settlement subject to risk of forfeiture and restrictions on transfer for a
specified period ("Restricted Stock Units"), and (iii) the grant of
non-qualified stock options to purchase Common Stock. Awards of Restricted
Stock, Restricted Stock Units and options may be granted under the Plan to non-
employee directors in accordance with policies established from time to time by
the Board of Directors.
Restricted Stock and Restricted Stock Units
The Plan provides for the payment of annual retainer fees and meeting fees
payable to a director in his or her capacity as a director for service on the
Board of Directors and committees thereof, to be paid to non-employee directors
in the form of awards of Restricted Stock or Restricted Stock Units, in
accordance with policies established from time to time by the Board of
Directors.
Under the initial policy of the Board of Directors for the grant of
Restricted Stock and Restricted Stock Units under the Plan, on the date of each
annual meeting of stockholders at which directors are elected, each non-employee
director, in lieu of the payment in cash of such director's annual Board fees
and meeting fees, if any, shall be granted an award of shares of Restricted
Stock or Restricted Stock Units, at such director's election, equal to the sum
of such fees divided by the fair market value of the Common Stock as determined
in accordance with the terms of the Plan. Unless otherwise determined by the
Board of Directors, (i) an award of Restricted Stock or Restricted Stock Units
shall vest and not be subject to forfeiture (A) at the close of business on the
day preceding the annual meeting of stockholders in the third year following the
year of grant of such award, (B) upon a "change in control" of the Company (as
defined in the Plan) or (C) upon termination of the director's service due to
death, disability or retirement at or after age 60, and (ii) an award of
Restricted Stock or Restricted Stock Units shall be forfeited upon the
termination of the director's service.
Stock Options
Under the initial policy of the Board of Directors for the grant of options
under the Plan, non-employee directors shall receive (i) on the date of each
annual meeting at which a director is automatically granted Restricted Stock or
Restricted Stock Units pursuant to the Plan, an automatic grant of an option to
purchase a number of shares of Common Stock equal to two times the number of
shares of Restricted Stock and Restricted Stock Units granted to the director on
such date (a "Performance Option"), and (ii) an automatic
19
<PAGE> 22
grant of an option to purchase 6,500 shares of Common Stock (A) on the date a
participant is first elected or appointed as a director (an "Initial Option")
and (B) on March 31 of each year, if such director attended at least 75% of the
total number of Board of Directors meetings and meetings of Board committees on
which he or she then served, held during the preceding fiscal year (an "Annual
Option"), provided that an Annual Option shall not be granted to a director who
was granted an Initial Option during the preceding three months. The exercise
price of each option granted under the Plan shall equal the fair market value of
the Common Stock on the date of grant as determined in accordance with the terms
of the Plan.
Unless otherwise determined by the Board of Directors, each Performance
Option shall vest and become fully exercisable on the earlier of (i) the day
prior to the date of the annual meeting of stockholders in the seventh year
after the date of grant and (ii) the earliest date, following the date of grant,
on which the market price of the Common Stock equals or exceeds an amount equal
to 1.667 times the exercise price of the option. In the event of a "change in
control" of the Company (as defined in the Plan) or termination of the
participant's service as a director due to his or her death, disability or
retirement at or after age 60, all outstanding Performance Options will
immediately vest and become fully exercisable.
Unless otherwise determined by the Board of Directors, each Initial Option
and Annual Option shall vest and become exercisable as to one-third of the
shares subject to such Option on each of the first three anniversaries of the
date of grant, provided the participant continues to serve as a director on such
dates or no longer serves as director due to termination of his or her service
at or after age 60. In the event of a "change in control" of the Company (as
defined in the Plan) unless otherwise determined by the Board of Directors or
specified in the Option grant instrument or termination of the participant's
service as a director due to his or her death or disability, all outstanding
Initial Options and Annual Options will immediately vest and become fully
exercisable.
Deferred Shares and Deferral Accounts
The Plan provides that the Board of Directors may adopt compensation
policies which permit non-employee directors to elect to be paid fees in respect
of service as a director in the form of rights to receive shares of Common Stock
upon settlement and not subject to risk of forfeiture ("Deferred Shares").
A participant may elect to defer receipt of retainer fees or other director
compensation in the form of Deferred Shares. In that event, a number of Deferred
Shares equal to the aggregate amount of such fees divided by the fair market
value of the Common Stock, as determined in accordance with the terms of the
Plan, shall be credited to such director's deferral account. The Plan also
permits a participant to defer receipt of Common Stock to be received upon the
exercise of options granted under the Plan, if the exercise price of such
options is paid by surrender of shares of Common Stock. Deferral accounts shall
be settled, with respect to securities not subject to risk of forfeiture, at
such future time as the participant shall elect by notice to the Company.
Amendments and Termination
The Board of Directors may at any time amend, suspend, discontinue or
terminate the Plan, provided that, without the consent of a participant, no
action shall materially and adversely affect the rights of such participant with
respect to any rights to payment of amounts credited to such participant's
account. In addition, amendment or alteration of the Plan shall be subject to
stockholder approval if required by law or the rules of any stock exchange on
which the Common Stock may then be listed.
20
<PAGE> 23
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to options granted under the
Plan and with respect to the sale of Common Stock acquired under the Plan.
Restricted Stock. A participant will not recognize taxable income upon the
grant of a Restricted Stock award unless the participant makes an election under
Section 83(b) of the Code (a "Section 83(b) Election"). If the participant makes
a Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary compensation income, for the year in which
the award is granted, in an amount equal to the difference between the fair
market value of the Common Stock at the time the award is granted and the
purchase price paid for the Common Stock. If a Section 83(b) Election is not
made, then the participant will recognize ordinary compensation income, at the
time that the forfeiture provisions or restrictions on transfer lapse, in an
amount equal to the difference between the fair market value of the Common Stock
at the time of such lapse and the original purchase price paid for the Common
Stock. The participant will have a tax basis in the Common Stock acquired equal
to the sum of the price paid and the amount of ordinary compensation income
recognized.
Upon the disposition of the Common Stock acquired pursuant to a Restricted
Stock award, the participant will recognize a capital gain or loss in an amount
equal to the difference between the sale price of the Common Stock and the
participant's tax basis in the Common Stock. This capital gain or loss will be a
long-term capital gain or loss if the shares are held for more than one year.
For this purpose, the holding period shall begin just after the date on which
the forfeiture provisions or restrictions lapse if a Section 83(b) Election is
not made, or just after the award is granted if a Section 83(b) Election is
made.
Restricted Stock Units and Deferred Shares. A participant will not
recognize taxable income upon the grant of a Restricted Stock Unit or the credit
of Deferred Shares under the Plan. Instead, a participant generally will
recognize as ordinary compensation income the fair market value of any Common
Stock delivered in accordance with the terms of the Restricted Stock Unit or
Deferred Shares.
Upon selling any Common Stock received by a participant under the terms of
a Restricted Stock Unit or Deferred Shares, the participant generally will
recognize a capital gain or loss in an amount equal to the difference between
the sale price of the Common Stock and the participant's tax basis in the Common
Stock. This capital gain or loss will be a long-term capital gain or loss if the
participant has held the Common Stock for more than one year prior to the date
of the sale.
Stock Options. A participant will not recognize taxable income upon the
grant of an option under the Plan. Nevertheless, a participant generally will
recognize ordinary compensation income upon the exercise of the option in an
amount equal to the excess of the fair market value of the Common Stock acquired
through the exercise of the option (the "Option Stock") on the exercise date
over the exercise price.
A participant will have a tax basis for any Option Stock equal to the
exercise price plus any income recognized with respect to the option. Upon
selling Option Stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the Option
Stock and the participant's tax basis in the Option Stock. This capital gain or
loss will be a long-term capital gain or loss if the participant has held the
Option Stock for more than one year prior to the date of the sale and will be a
short-term capital gain or loss if the participant has held the Option Stock for
a shorter period.
Deferral of Certain Option Stock. Under certain circumstances, the Plan
permits a participant to exercise a stock option by delivering to the Company
Common Stock having a fair market value equal in amount to the exercise price,
and elect to convert a portion of the shares of Common Stock deliverable upon
exercise of the stock option into Deferred Shares. The use of this method of
exercise allows a participant to exercise a stock option without incurring any
immediate income taxes. The participant's tax basis in any shares of Common
Stock delivered to the Company to exercise an option generally will be carried
over to an equal
21
<PAGE> 24
number of shares of Common Stock acquired upon exercising the option. A
participant may elect to receive Deferred Shares for any shares in excess of the
number of shares surrendered to exercise the option.
Tax Consequences to the Company. The grant of an option under the Plan
will have no tax consequences to the Company. The Company generally will be
entitled to a business-expense deduction, however, with respect to any ordinary
compensation income recognized by a participant under the Plan.
22
<PAGE> 25
PROPOSAL TO APPROVE AN
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors has determined that it is advisable and in the best
interests of the stockholders of the Company to amend and restate the Company's
Certificate of Incorporation to (i) change the name of the Company from "Wang
Laboratories, Inc." to "Wang Global Corporation", (ii) increase the aggregate
number of shares of Common Stock that the Company is authorized to issue from
100 million to 200 million, and (iii) eliminate certain obsolete provisions
related to restrictions on the transfer of Common Stock.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE APPROVAL OF AN
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION IS IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL.
Change Name to Wang Global Corporation. The Board of Directors recommends
that the Company's name be changed from "Wang Laboratories, Inc." to "Wang
Global Corporation". The Board of Directors believes the new name reflects the
Company's increased global scope and focus of its operations which has resulted
from its acquisition of Olsy.
Increase Number of Authorized Shares of Common Stock. The Board of
Directors recommends that the number of authorized shares of Common Stock of the
Company be increased from 100,000,000 shares to 200,000,000 shares.
The Company is currently authorized to issue 105,000,000 shares of stock,
consisting of 100,000,000 shares of Common Stock, par value $0.01 per share, and
5,000,000 shares of preferred stock, par value of $0.01 per share (the
"Preferred Stock"). As of August 31, 1998, 46,189,773 shares of Common Stock
were outstanding, 6,959,603 shares of Common Stock were reserved for issuance
under the Company's stock option and stock benefit plans and arrangements,
4,056,793 shares of Common Stock were reserved for issuance upon conversion of
outstanding 6 1/2% Preferred Stock and 4 1/2% Preferred Stock, 7,500,000 shares
of Common Stock were reserved for issuance under the Company's outstanding
warrants, 16,666,667 shares of Common Stock were reserved for issuance under the
Company's Inter-company Convertible Instruments and 1,500,000 shares of Common
Stock were reserved for issuance (subject to stockholder approval) in connection
with the Olsy Acquisition. An indeterminate number of shares of Common Stock is
required for the conversion of the Company's Series C Junior Participating
Preferred Stock pursuant to the Company's Rights Plan. The additional Common
Stock to be authorized by adoption of the amendment would have rights identical
to the currently outstanding Common Stock of the Company. Holders of Common
Stock have no preemptive rights with respect to any shares which may be issued
in the future. Adoption of the proposed amendment and issuance of the Common
Stock would not affect the rights of the holders of currently outstanding Common
Stock of the Company, except for effects incidental to increasing the number of
shares of the Company's Common Stock outstanding.
Although at present the Board of Directors has no specific plans to issue
the additional shares of Common Stock that would be authorized under the
amendment (other than the shares of Common Stock reserved for issuance, as
described above), it desires to have such shares available to provide additional
flexibility for business and financial purposes in the future. Subject to the
requirements and limitations of the Nasdaq National Market, the additional
shares may be used, without further stockholder approval, for various purposes
including, without limitation, acquisitions, mergers or similar transactions,
financings, stock dividends, establishing strategic relationships or providing
equity incentives to employees, consultants, officers or directors.
Eliminate Obsolete Provisions. The Certificate of Incorporation contains
certain obsolete provisions related to restrictions on the transfer of Common
Stock which were implemented in order to preserve certain
23
<PAGE> 26
net operating loss carryovers, capital loss carryovers and tax credit carryovers
to which the Company was entitled pursuant to the Internal Revenue Code of 1986,
as amended. These restrictions on transfer, by their terms, ceased to apply on
December 15, 1995. The Amendment and Restated Certificate of Incorporation would
eliminate the provisions related to such restrictions on transfer of Common
Stock.
If the stockholders approve the amendments described above and the
restatement of the Certificate of Incorporation, the Company will file, shortly
following such stockholder approval, an Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware.
Under Delaware law, stockholders are not entitled to dissenter's rights
with respect to the proposed amendment and restatement of the Certificate of
Incorporation.
PROPOSAL TO ISSUE ADDITIONAL SHARES OF COMMON STOCK TO OLIVETTI
The Board of Directors has determined that it is advisable and in the best
interests of the stockholders of the Company to approve the issuance of
1,500,000 shares of Common Stock to Olivetti in connection with the acquisition
by the Company of Olsy on March 17, 1998 (the "Additional Issuance").
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE APPROVAL OF THE
ADDITIONAL ISSUANCE IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS
AND RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
THE ACQUISITION
On March 17, 1998, the Company completed the purchase of Olsy, the
wholly-owned information technology solutions and service subsidiary of
Olivetti, except for Olivetti Corporation of Japan which was not completed until
April 7, 1998 (collectively, the "Acquisition"). The Company also acquired a
19.9% interest in Olivetti Ricerca, the Italian consortium supplying research
and development services to both the IT and telecom sectors. Olsy's revenues for
the calendar year ended December 31, 1997 were approximately $2.4 billion, at
then-current foreign currency exchange rates.
In consideration for Olsy and pursuant to a Stock Purchase Agreement dated
February 28, 1998, as amended on March 17, 1998, by and among Olivetti, the
Company, Wang Nederland BV, Olivetti Sistemas E Servicios Limitada and Olivetti
do Brasil S.A. (the "Stock Purchase Agreement"), pursuant to which the Company
paid Olivetti $68.6 million in cash; issued 7,250,000 shares of Common Stock
(and agreed to issue an additional 1,500,000 shares of Common Stock if approved
by the stockholders of the Company (the "Additional Issuance")) with a value of
$146.8 million at the time of closing; issued 5,000,000 stock appreciation
rights ("SARs") which give Olivetti value for the increase in the market price
of the Company's Common Stock above $30.00 per share at any time from March 2001
to March 2005 and are redeemable in cash or Common Stock at the Company's
election; and agreed to pay an additional amount (an "earnout") of up to $56.0
million payable in the year 2000, subject to meeting mutually-agreed performance
targets for the calendar years 1998 and 1999. The purchase price for Olsy is
subject to certain purchase price adjustments to be determined by the parties.
Under the rules of the Nasdaq National Market, the Company must obtain
stockholder approval prior to the issuance of Common Stock, or securities
convertible into or exercisable for Common Stock if (a) the issuance of such
securities is in connection with the acquisition of the stock or assets of
another company and (b) either (i) the Common Stock to be issued in the
transaction will have upon its issuance voting power equal to or in excess of
20% of the voting power of the issuer's Common Stock outstanding before such
issuance or (ii) the number of shares of Common Stock to be issued is or will be
equal to or in excess of 20% of the number of shares of Common Stock outstanding
before such issuance. Accordingly, prior to the Additional Issuance, the Company
must obtain approval from its stockholders, because the shares of Common
24
<PAGE> 27
Stock paid at the closing, together with the Additional Issuance will represent
more than 20% of the voting power of its Common Stock or more than 20% of the
number of shares of Common Stock outstanding prior to such Additional Issuance.
If the Additional Issuance is not approved by the Company stockholders on
or prior to December 15, 1998, the Company is obligated to pay to Olivetti an
amount in cash equal to the Fair Market Value of the Common Stock on December
15, 1998 multiplied by 1,500,000. "Fair Market Value" means the average of the
daily Current Market Prices (average of the reported closing bid and ask prices
on such day) of a share of Common Stock during the ten (10) consecutive trading
days immediately prior to December 15, 1998.
The purchase was accounted for using the purchase method of accounting in
accordance with Accounting Principles Board No. 16, "Business Combinations"
("APB 16"). The Acquisition was a taxable transaction.
The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol ("WANG"). The high and low sales prices as of February 27, 1998 (the
day preceding the initial announcement of the Acquisition) were $28.375 and
$26.9375, respectively.
STOCKHOLDERS ARE NOT BEING ASKED TO APPROVE THE ACQUISITION. A FAILURE OF
THE COMPANY'S STOCKHOLDERS TO APPROVE THE ADDITIONAL ISSUANCE WILL NOT HAVE ANY
EFFECT ON THE ACQUISITION.
WANG
Wang is a leading global network and desktop integration and services
company. With annual revenues of approximately $1.3 billion (prior to the
Acquisition), the Company provides a comprehensive range of information
technology ("IT") services and solutions including network and desktop design
and integration, security and management, help desk, maintenance, resale and
installation of IT and communications equipment, warranty support, procurement,
electronic commerce and customer contact solutions for financial services
institutions. The Company's customers include banking and other financial
institutions, insurance companies, governments and their affiliates and
commercial enterprises.
The executive offices of Wang are located at 290 Concord Road, Billerica,
Massachusetts 01821.
Reasons for the Acquisition
The Company believes that the combination of Olsy and the Company will
contribute to the attainment of certain strategic goals. By virtue of the
Acquisition, the Company has expanded its presence in key European and Asian
markets through the addition of Olsy's strong local operations. The merger of
the two businesses' operations and expertise has resulted in a new company, Wang
Global, capable of providing clients with global IT solutions and services. The
Acquisition created an IT services company that ranks among the leaders in
desktop services in Europe and the world. The combined company is implementing
its networked technology solutions and life cycle services strategy on a global
scale, leveraging the long-term business relationships of both the Company and
Olsy, including Olsy's customers in banking and other vertical markets.
Customers are also benefiting from the combined organization's relationships
with major software and hardware providers, including present strategic partners
Cisco Systems, Dell and Microsoft.
OLSY
Business. Olivetti Solutions ("Olsy"), an integrated business unit of the
Olivetti Group, including the combined systems and services business of Olivetti
Solutions, S.p.A. and its subsidiaries together with Olivetti Corporation of
Japan and Olsy do Brasil S.A. Olsy is a provider of IT solutions and services to
the Italian, European and global market. Olsy's primary geographical markets
outside Italy are Great Britain, Nether-
25
<PAGE> 28
lands, France, Belgium, North America and Japan. Olsy delivers solutions and
services based on open computing standards, distributed client server
architectures and network infrastructures to customers, principally in the
banking, public authority, utility and retail sectors. The solutions range from
the development of the initial computing environment to systems integration and
include analysis, design, validation, procurement and production through to
delivery and roll out of complete solutions. The services provided by Olsy
include hardware, software and network maintenance and support, outsourcing of
distributed desktop computing environments and consultancy all of which are
provided under contractual arrangements with customers. (see Appendix A attached
hereto; "Notes to Combined Consolidated Financial Statements").
Competition is vigorous in all parts of the worldwide market for network
computing services and solutions. Olsy's competitors were numerous and vary
extensively in size and resources. Some had substantially greater resources,
stronger reference accounts, larger research and engineering staff and larger
marketing organizations than did Olsy. Olsy's competitors included IBM, Seimens
Nixdorf, Bull, Unisys and NCR.
Olsy's customers include commercial customers, businesses, institutions and
governments of varying sizes around the world. The Company's sales, marketing
and professional services groups focus on customers with network and desktop
productivity needs in selected markets. No customer accounted for more than 10%
of Olsy's consolidated revenues in any of the periods reported.
Olsy has a research and development program that is primarily focused on
continuing support of software technology for the banking industry. Olsy's
research and development expenses for the 9-months ended September 30, 1997 were
Lire 33 billion. In fiscal 1996, Olsy spent Lire 90 billion on research and
development in support of its continuing operations.
Properties. At February 28, 1998, Olsy owned and leased a total of 6.2
million square feet of building space around the world, approximately 350,000
square feet of which was subleased to other third parties.
Legal Proceedings. Olsy is a defendant in a number of routine lawsuits
incidental to the conduct of its business. Although it is impossible to predict
the results of specific matters, the Company believes that its aggregate
liability, if any, for all litigation related to Olsy, in excess of insurance
coverage and financial statement provisions, will not be material to the
Company's consolidated financial position or its results of operations.
The executive offices of Olsy are located at Via G. Jervis 77, 10015 Ivrea
Italy.
Specific Incorporation by Reference
The Company's audited consolidated financial statements, management's
discussion and analysis of financial condition and results of operations, and
certain supplementary financial information are incorporated by reference to the
Company's 1998 Annual Report on Form 10-K.
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<PAGE> 29
WANG
SELECTED FINANCIAL DATA
Wang Laboratories, Inc. and Subsidiaries Five-Year Comparison of Selected
Financial Data (Dollars in millions except per share data)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
--------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 SEPT. 30, 1993
-------------- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................ $1,887.0 $1,268.4 $1,013.9 $901.9 $644.4 $210.9
Income (loss) from continuing
operations before
reorganization expenses and
discontinued operations....... (281.6) (6.7) 63.5 (14.2) 8.6 11.9
Reorganization expenses......... -- -- -- -- -- (20.8)
Income (loss) from discontinued
operations.................... -- 76.6 (69.0) (53.9) -- --
Fresh-start reporting
adjustment.................... -- -- -- -- -- 193.6
Gain on debt discharge.......... -- -- -- -- -- 329.3
-------- -------- -------- ------ ------ ------
Net income (loss)............... (281.6) 69.9 (5.5) (68.1) 8.6 514.0
Dividends and accretion on
preferred stock............... (14.1) (14.1) (22.6) (8.7) (4.2) --
-------- -------- -------- ------ ------ ------
Net income (loss) applicable to
common stockholders........... $ (295.7) $ 55.8 $ (28.1) $(76.8) $ 4.4 $514.0
======== ======== ======== ====== ====== ======
Net income (loss) per share:
Basic:
Continuing
operations........... $ (7.29) $ (0.56) $ 1.13 $(0.70) $ 0.13
Discontinued
operations........... -- 2.06 (1.91) (1.64) --
-------- -------- -------- ------ ------ ------
Net income
(loss)........... (7.29) 1.50 (0.78) (2.34) 0.13 *
======== ======== ======== ====== ====== ======
Diluted:
Continuing
operations........... $ (7.29) $ (0.56) $ 1.07 $(0.70) $ 0.13
Discontinued
operations........... -- 2.06 (1.81) (1.64) --
-------- -------- -------- ------ ------ ------
Net income
(loss)........... $ (7.29) $ 1.50 $ (0.74) $(2.34) $ 0.13 $ *
======== ======== ======== ====== ====== ======
Average number of employees..... 13,300 9,300 6,200 5,200 5,900 6,700
AT JUNE 30, 1998 1997 1996 1995 1994
- -------------------------------- -------- -------- -------- ------ ------
Total assets.................... $2,189.2 $1,034.8 $ 856.6 $852.5 $677.1
Depreciable assets, net......... $ 214.1 $ 123.0 $ 137.3 $134.4 $ 79.6
Working capital................. $ 39.3 $ 126.1 $ 86.7 $ 34.1 $ 95.1
Long-term debt, excluding
liabilities subject to
compromise.................... $ 116.9 $ -- $ -- $ 23.0 $ 2.0
Series A preferred stock........ $ 86.2 $ 85.5 $ 84.8 $ 84.1 $ --
Exchangeable preferred stock.... $ -- $ -- $ -- $ 61.5 $ 53.2
Stockholders' equity............ $ 311.5 $ 422.8 $ 343.1 $220.8 $272.3
Number of employees............. 20,800 9,300 7,200 6,200 5,300
</TABLE>
Certain prior years' amounts have been reclassified to conform to the
presentation for fiscal 1998. Employee data excludes discontinued operations and
businesses held for sale.
*Per share data is not presented for the period ended September 30, 1993, the
confirmation date of the Company's Reorganization Plan, due to the general lack
of comparability as a result of the revised capital structure of the Company.
27
<PAGE> 30
PRO FORMA COMBINED SELECTED FINANCIAL DATA
(INCLUDING PER SHARE DATA)
WANG LABORATORIES, INC.
PRO FORMA COMBINED SELECTED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following pro forma information has been prepared assuming that the
acquisition occurred at the beginning of the fiscal year ended June 30, 1997.
The pro forma information is based on the historical financial statements of the
Company and Olsy, giving effect to the transaction under the purchase method of
accounting and the assumptions and adjustments described in the Company's Form
8-K/A, Amendment No. 1 to Current Report Filed March 31, 1998. The pro forma
information for the nine months ended March 31, 1998 includes the unaudited
historical results of Wang and Olsy for the nine months then ended. The pro
forma information for the fiscal year ended June 30, 1997 includes the
historical results of Wang plus the unaudited historical results of Olsy for the
four quarters ended September 30, 1997. Accordingly, the unaudited results of
operations for the Olsy quarter ended September 30, 1997 are included in both
the nine month and fiscal year periods. Revenues and loss from continuing
operations for that quarter were $509.2 million and $32.2 million, respectively.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
MARCH 31, 1998 JUNE 30, 1997
----------------- -------------
<S> <C> <C>
Revenues......................................... $2,694.4 $3,921.7
Income (loss) from continuing operations before
extraordinary item............................. $ (110.0) $ (199.7)
Loss on debt discharge........................... $ (--) $ (19.8)
Income (loss) from continuing operations......... $ (110.0) $ (219.5)
Net income (loss) applicable to common
stockholders................................... $ (120.6) $ (233.6)
Net income (loss) per share from continuing
operations
Basic.......................................... $ (2.56) $ (5.08)
Diluted........................................ $ (2.56) $ (5.08)
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------
<S> <C>
Total assets.......................................... $2,514.0
Depreciable assets, net............................... $ 302.0
Working capital deficit............................... $ (91.0)
Long-term debt........................................ $ 44.4
Series A preferred stock.............................. $ 86.0
Stockholders' equity.................................. $ 507.4
</TABLE>
Financial Information: See Appendix A attached hereto (Reproduced Form
8-K/A)
In connection with the Company's filing of Form 8-K, as amended, and
disclosures made in its August 12, 1998 earnings release regarding the results
of operations for the year ended June 30, 1998, the Company is engaged in
discussions with the staff of the Securities and Exchange Commission regarding
the purchase price allocation related to the Acquisition and other charges
recorded in the June quarter. The Company in concurrence with its auditors,
Ernst & Young, LLP, believe that the purchase price allocation and related
amortization charges, as well as the other charges recorded in the June quarter,
are in accordance with generally accepted accounting principles.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company is exposed to market risk from changes in interest rates and
foreign exchange rates. The Company does not use derivative instruments for
trading purposes. The Company monitors foreign exchange
28
<PAGE> 31
and interest rate risks and manages such risks on specific transactions. The
risk management process uses analytical techniques including market value,
sensitivity analysis, and value at risk estimates. The Company does not believe
that the potential exposure is significant in light of the size of the Company
and its business. In addition, foreign exchange rates may move in the Company's
favor. Recent experience has demonstrated that gains on certain days are offset
by losses on other days. While the Company does not expect to incur material
losses as a result of this market risk, there can be no assurance that losses
will not result.
OLSY
Pro Forma Financial Data: See "Wang -- Pro Forma Combined Selected
Financial Data".
Financial Information: See Appendix A attached hereto (Reproduced Form
8-K/A)
Selected Financial Data: Olivetti Solutions (an integrated unit of the
Olivetti Group) Comparison of Selected Financial Data (Lire in billions)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPT. 30, 1997 DEC. 31, 1996
-------------- -------------
<S> <C> <C>
Revenues......................................... 2,938 4,495
Loss from continuing operations before
extraordinary item............................. (113) (356)
Loss on debt discharge........................... -- (30)
Net loss......................................... (113) (386)
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
1997 1996
--------- --------
<S> <C> <C>
Total assets..................................... 3,429 3,751
Depreciable assets, net.......................... 364 359
Working capital (deficit)........................ 337 (61)
Long-term debt, excluding liabilities subject to
compromise..................................... 76 89
Stockholders' equity (deficit)................... 232 (187)
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS:
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996 (UNAUDITED) AND COMMENTARY ON THE QUARTER ENDED DECEMBER 31,
1996 (UNAUDITED).
OVERVIEW
Olivetti Solutions ("Olsy" or in this "Overview" Section, the "Company"),
an integrated business unit of the Olivetti Group, includes the combined systems
and services businesses of Olivetti Solutions S.p.A. ("Olsy S.p.A.") and its
legally owned companies, O. Group Technology S.p.A., Regulus S.p.A., O.R.E.& L
s.r.l., the systems and services business of Olivetti do Brasil, 40% interest in
Olivetti Espana and 80% interest in Olivetti Corporation of Japan and their
predecessor operations.
Prior to 1996, the business of the Company was conducted by Olivetti S.p.A.
and several other Olivetti Group companies located in Italy and in various other
countries, some of which conducted other operations through several business
lines. Beginning in 1995, the Olivetti Group began a series of transactions to
formally separate the business of the Company from the non-Olsy business and to
consolidate the shareholdings of the
29
<PAGE> 32
various companies into Olivetti Solutions S.p.A. These transactions included the
retention of certain Non-Olsy business assets and liabilities, the disposition
of non-core assets, liabilities and operations and the forgiveness of
approximately Lire 515 billion owed to other Olivetti Group companies. As a
result of the changes in legal structure and share ownership, several previously
combined entities were consolidated in 1997.
The financial statements of the Company have been derived by extracting the
assets and liabilities and results of operations of the Company from the
consolidated assets, liabilities and results of operations of the Olivetti
Group. Accordingly, the combined consolidated financial statements contain
necessary allocations of assets, liabilities, revenues and expenses attributable
to the Company as deemed reasonable by management to present the Company on a
stand alone basis. However, the financial position and results of operations of
the Company may differ from the results that may have been achieved had the
Company operated as an independent entity.
In connection with its acquisition by Wang Laboratories, Inc ("Wang"), Olsy
prepared financial statements in accordance with U.S. Generally Accepted
Accounting Principles for the year ended December 31, 1996 and the nine months
ended September 30, 1997. For purposes of this analysis, the nine months ended
September 30, 1997 are compared to the same unaudited nine month period in the
prior year. The discussion and analysis also includes commentary on the
unaudited three months ended December 31, 1996.
For the nine months ended September 30, 1997, the Company reported revenues
of Lire 2,938 billion, a 5.4% decrease compared to the same period in the prior
year. The decrease is attributable to price pressure in the traditional service
business, a decision to move away from lower margin activities and market
uncertainty surrounding the future of Olsy. Revenues for the quarter ended
December 31, 1996 were Lire 1,387 billion and represented 30.8% of revenues for
the calendar year 1996.
The operating loss for the nine months ended September 30, 1997 of Lire 68
billion includes non-recurring charges of Lire 25 billion and non-recurring
income of Lire 68 billion. The non recurring charges relate principally to
severance and exit costs while non recurring income arose from dispositions of
real estate and non-core businesses. The Lire 25 billion non-recurring charges
are recorded as selling, general and administrative expense while the
non-recurring income is included as other revenues. The operating loss for the
nine months ended September 30, 1996 of Lire 162 billion includes Lire 23
billion of restructure expense for headcount reduction and abandoned space
costs. Excluding the non-recurring charge, the operating loss for the nine
months ended September 30, 1996 was Lire 139 billion.
The Company recorded an operating loss of Lire 116 billion during the
quarter ended December 31, 1996. This included restructuring charges of Lire 59
billion for workforce reductions and facilities disposals. The results of the
quarter also includes a loss on the early extinguishment of debt of Lire 30
billion for lease settlement costs.
Excluding these non recurring items, the operating loss reported for the
nine months ended September 30, 1997 was Lire 111 billion, a decrease of Lire 27
billion from that recorded for the same period in the prior year. This reflects
the impact of the restructuring initiative adopted in the prior year. On the
same basis the operating loss for the quarter ended December 31, 1996 would have
been Lire 27 billion.
Losses before taxes and minority interests for the nine month periods ended
September 30, 1997 and 1996 were Lire 103 billion and Lire 216 billion
respectively.
The loss before taxes and minority interests for the quarter ended December
31, 1996 was Lire 138 billion.
30
<PAGE> 33
Revenues
Total revenues for the nine months ended September 30, 1997 were Lire 2,938
billion, a decline of Lire 170 billion from the same period in the prior year.
Revenues from services for the nine month period ended September 30, 1997
were Lire 1,280 billion, a reduction of Lire 408 billion, or 24.2%, from the
same period in the prior year, while revenues from products were Lire 1,590
billion an increase of Lire 184 billion, or 13.1%. The reduction in services
revenues was caused primarily by reductions in solutions integration projects of
Lire 50 billion, traditional services of Lire 36 billion and a change in the mix
of the network integration business between services and products.
During the quarter ended December 31, 1996, revenues from services were
Lire 575 billion while revenues from products amounted to Lire 812 billion.
Gross Margins
Gross margins on services for the nine month period ended September 30,
1997 were 22.3%, compared to 19.2% for the same period in the prior year. The
improvement is a result of operating efficiencies in the field service
organization, the favorable effects of restructuring initiatives, and the loss
of some lower margin business.
Gross margins on product sales for the nine month period ended September
30, 1997 were 17.7%, compared with 15.8% for the same period in the prior year.
An improved procurement process, an increase in higher margin networking product
sales and a reduction in traditional PC product sales where margins are
generally lower, contributed to this improvement.
Gross margins on services during the quarter ended December 31, 1996 were
26.8%, reflecting the concentration of higher margin solutions integration
projects. Product gross margins were 20.7% during the same quarter as a result
of the favorable mix of specialized banking devices which earn a higher margin.
Selling, General and Administration ("S,G & A") Expenses
S, G &A expenses, excluding research and development, for the nine month
period ended September 30, 1997 were Lire 669 billion or 22.8% of net revenues
compared to Lire 599 billion or 19.4% of net revenues for the same period in the
prior year. The nine month period ended September 30, 1997 includes Lire 25
billion of non-recurring charges described above. Excluding these non-recurring
charges, S,G &A increased by Lire 45 billion. This increase is primarily due to
additional marketing and documentation costs associated with the creation of
Olivetti Solutions and the brand name Olsy. S,G &A expense during the quarter
ended December 31, 1996 amounted to Lire 330 billion.
Research and Development ("R&D") Expenses
R&D expenses for the nine month period ended September 30, 1997 were Lire
33 billion, compared to Lire 70 billion for the same period in the prior year.
This reduction was a consequence of the completion of several initiatives in
1996 and the more focussed approach to the market adopted by the Company during
1997. Research and development expense for the quarter ended December 31, 1996
amounted to Lire 20 billion.
Interest Expense
Interest expense incurred during the nine month period ended September 30,
1997 was Lire 35 billion, compared to Lire 54 billion for the same period of
1996. This was achieved by improved working capital management and other cash
management initiatives.
31
<PAGE> 34
During the quarter ended December 31, 1996 the Company incurred interest
expense of Lire 22 billion. This is consistent with the higher working capital
requirements experienced in the quarter which also has the greatest volume of
business.
Income tax
The provision for income taxes recorded during the nine month period ended
September 30, 1997 was Lire 15 billion compared to Lire 22 billion in the same
prior year period. The provision for the quarter ended December 31, 1997 was
Lire 7 billion recorded in jurisdictions where there was taxable income.
Quantitative and Qualitative Disclosures About Market Risks
Olsy is exposed to market risk from changes in interest rates and foreign
exchange rates. Olsy does not use these derivative instruments for trading
purposes. Subsequent to its acquisition by Wang, Olsy initiated a risk
management control process to monitor the foreign exchange and interest rate
risks. The risk management process uses analytical techniques including market
value, sensitivity analysis, and value at risk estimates. Olsy does not believe
that the potential exposure is significant in light of the size of Olsy and its
business. In addition, the foreign exchange rate can move the Olsy's favor.
Recent experience has demonstrated that gains on certain days are offset by
losses on other days. Therefore, Olsy does not expect to incur material losses.
Prior to December 31, 1996, the Company participated in certain Olivetti
Group centralized foreign currency and risk management functions. As part of
these activities, derivative financial instruments were utilized to manage risks
generally associated with foreign currency and interest rate volatility. The
statement of income for 1996 reflects both specific and allocated benefits and
costs from these functions.
INTEREST OF CERTAIN PERSONS IN THE VOTES
Roberto Colaninno is a director of the Company and is also an Officer of
Olivetti.
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.
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.
32
<PAGE> 35
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 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.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Annual Meeting of
Stockholders for the interim period ending December 31, 1998 must be received by
the Company at its principal office not later than February 28, 1999 for
inclusion in the Proxy Statement for that meeting.
To be considered for presentation at the Annual Meeting of Stockholders for
the interim period ending December 31, 1998, although not included in the Proxy
Statement, proposals of stockholders must be received by the Company at its
principal office no later than the close of business on the tenth day following
the day on which notice of the date of the annual meeting was mailed or such
public disclosure of the date of the annual meeting was made, whichever first
occurs.
33
<PAGE> 36
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with Securities and Exchange
Commission are incorporated herein by reference: the Company's Annual Report on
Form 10-K for the year ended June 30, 1998; the Company's Current Report on Form
8-K filed on August 5, 1998; and the description of the Common Stock contained
in the Company's Registration Statement on Form 8-A filed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), including any amendment
or report filed for the purpose of updating such description.
Certain financial information from the Form 10-K and management's
discussion and analysis information has been included in the Annual Report to
Stockholders which is being mailed to stockholders simultaneously with this
Proxy Statement.
All documents filed by the Company pursuant to sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the mailing date of this Proxy Statement and
prior to November 24, 1998, the date of the Annual Meeting, shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of the
filing of such documents. Any statement contained in this Proxy Statement or in
a document incorporated by reference herein shall be deemed to be modified or
superseded for the purposes of this Proxy Statement to the extent that a
statement contained herein or in any subsequently-filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed, as
modified or superseded, to constitute a part of this Proxy Statement.
This Proxy Statement incorporates documents by reference which are not
presented herein or delivered herewith. The Company will provide without charge
to each person to whom this Proxy Statement is delivered, on the written or oral
request of any such person, by first class mail or other equally prompt means
within one business day of receipt of such request, a copy of any or all the
foregoing documents incorporated herein by reference (other than any exhibits to
such documents which are not specifically incorporated herein by reference).
Requests should be directed to Wang Laboratories, Inc., Attn: Legal Department,
290 Concord Road, Billerica, Massachusetts 01821, telephone no, (978) 967-5000.
By Order of the Board of Directors,
ALBERT A. NOTINI,
Secretary
October , 1998
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.
34
<PAGE> 37
Appendix A
- ----------
OLIVETTI SOLUTIONS
COMBINED CONSOLIDATED
FINANCIAL STATEMENTS
US GAAP
As of September 30, 1997 and December 31, 1996
February 24, 1998
<PAGE> 38
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Olivetti S.p.A.
Ivrea
We have audited the combined consolidated balance sheets of Olivetti Solutions
("Olsy"), an integrated business unit of the Olivetti Group, as of September 30,
1997 and December 31, 1996 and the related combined consolidated statements of
income, changes in net assets (liabilities) and cash flows for the nine month
and one year periods, respectively then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did
not audit the financial statements of certain combined and/or consolidated
companies, whose statements as of and for the nine months ended September 30,
1997 and the year ended December 31, 1996 reflect total assets and revenues
constituting 22% and 22% and 15% and 16% respectively, of the related combined
consolidated totals. Those statements were audited by other auditors whose
reports have been furnished to us and our opinion, in so far as it relates to
the amounts included for those companies, is based solely on the reports of the
other auditors.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and reports of the
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the
combined consolidated financial statements referred to above present fairly, in
all material respects, the financial position of Olsy as of September 30, 1997
and December 31, 1996 and the results of its operations and its cash flows for
the nine month and one year periods respectively then ended, in conformity with
generally accepted accounting principles in the United States of America.
Coopers & Lybrand S.p.A.
Turin, Italy
February 24, 1998 except with respect to
notes 29 c) and 29 d) for which the dates are
April 7, 1998 and May 12, 1998 respectively.
<PAGE> 39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Olsy Belgium S.A.:
We have audited the accompanying consolidated carved out balance sheet of OLSY
BELGIUM S.A. AND SUBSIDIARIES as of December 31, 1996 and the related
consolidated statements of income, cash flows, and stockholders' equity for the
year then ended and the accompanying consolidated balance sheet of Olsy Belgium
S.A. and subsidiaries as of September 30, 1997 and the related consolidated
statements of income, cash flows, and stockholders' equity for the nine months
period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above (not
presented separately herein) present fairly, in all material respects, the
consolidated carved out financial position of Olsy Belgium S.A. and subsidiaries
as of December 31, 1996, and the consolidated results of their carved out
operations and the consolidated carved out cash flows for the year then ended
and the consolidated financial position of Olsy Belgium S.A. and subsidiaries as
of September 30, 1997, and the consolidated results of the their operations and
the consolidated cash flows for the nine months period then ended in conformity
with accounting principles generally accepted in the United States of America.
ARTHUR ANDERSEN
Reviseurs d'Entreprises
/s/ Guy Wygaerts
- ---------------------------------
Guy Wygaerts
February 24, 1998
<PAGE> 40
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Olivetti Espana, S.A.:
We have audited the accompanying carved-out balance sheet of Olivetti Espana,
S.A. as of December 31, 1996, and the accompanying balance sheet as of
September 30, 1997, and the related statements of income, cash flows and
changes in stockholders' equity for the year ended December 31, 1996 and for
the nine-month period ended September 30, 1997. There financial statements are
the responsibility of Olivetti Espana, S.A.'s management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by the management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above (not presented
separately herein) present fairly, in all material respects, the financial
position of Olivetti Espana, S.A. as of December 31, 1996 and September 30,
1997, and the results of its operations and its cash flows for the year ended
December 31, 1996 and the nine-month period ended September 30, 1997, in
accordance with generally accepted accounting principles in the United States of
America.
ARTHUR ANDERSEN
/s/ Koro Usarraga
- -----------------
Koro Usarraga
February 23, 1998
<PAGE> 41
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Olivetti Corporation of Japan:
We have audited the accompanying balance sheet of Olivetti Corporation of Japan
(a Japanese corporation, 80%-owned by Olivetti Systems Technology Corporation
and 20%-owned by Toshiba Corporation) as of December 31, 1996 and the related
statements of loss and accumulated deficit, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatment. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above (not presented
separately herein) present fairly, in all material respects, the financial
position of Olivetti Corporation of Japan as of December 31, 1996 and the
results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Arthur Andersen
Tokyo, Japan,
November 7, 1997
<PAGE> 42
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Olivetti Corporation of Japan:
We have audited the accompanying balance sheet of Olivetti Corporation of Japan
(a Japanese corporation, 80%-owned by Olivetti Systems Technology Corporation
and 20%-owned by Toshiba Corporation) as of September 30, 1997 and the related
statements of loss and accumulated deficit, and cash flows for the nine-month
period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatment. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above (not presented
separately herein) present fairly, in all material respects, the financial
position of Olivetti Corporation of Japan as of September 30, 1997 and the
results of its operations and its cash flows for the nine-month period then
ended in conformity with accounting principles generally accepted in the United
States of America.
/s/ Arthur Andersen
Tokyo, Japan,
November 7, 1997
<PAGE> 43
To the shareholders of
Olsy Austria Information Systems GmbH
Vienna
Olsy Austria Information Systems GmbH (Olsy Austria)
Audit Opinion on the Consolidated Financial Statements
as of December 31, 1996 and September 30, 1997
We have audited the accompanying consolidated balance sheet of Olsy Austria and
its subsidiaries as of December 31, 1996 and September 30, 1997 and the
related consolidated profit and loss account and statements of cash flows for
the year ended December 31, 1996 and the nine months period ended September 30,
1997, all expressed in thousands of Austrian Schillings. These consolidated
financial statements are the responsibility of the Company's Management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits of the above financial statements in accordance with
auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above after
the restatement described in Note 11, present fairly, in all material respects,
the financial position of Olsy Austria as of December 31, 1996 and September 30,
1997, and the results of its operations and its cash flows for the year ended
December 31, 1996 and the nine months period ended September 30, 1997 in
conformity with generally accepted accounting principles in the United States of
America.
PRICE WATERHOUSE AG
/s/ WOLFRAM STEINER /s/ JOHANNES MORTL
------------------- -------------------
WOLFRAM STEINER JOHANNES MORTL
February 24, 1998, except as to
Note 11, which is as of May 12, 1998
<PAGE> 44
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE DIRECTORS AND SHAREHOLDERS OF OLIVETTI (HONG KONG) LIMITED
We have audited the accompanying consolidated financial statements of Olivetti
(Hong Kong) Limited and its subsidiary as of September 30, 1997 and December
31, 1996 and the related consolidated statements of income, of cash flows and
of changes in shareholders' equity for the nine months period ended
September 30, 1997 and the year ended December 31, 1996, all expressed in Hong
Kong dollars. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of Olivetti (Hong Kong) Limited and
its subsidiary at September 30, 1997, and December 31, 1996 and the
consolidated results of their operations and their cash flows for the period
from January 1, 1997 to September 30, 1997 and the year ended December 31, 1996,
in conformity with generally accepted accounting principles in the United
States of America.
PRICE WATERHOUSE
Price Waterhouse
Certified Public Accountants
HONG KONG, January 10, 1998
<PAGE> 45
REPORT OF THE INDEPENDENT AUDITORS
To the Board of Directors of
Olsy Africa (Proprietary) Limited
We have audited the accompanying consolidated balance sheets of Olsy Africa
(Proprietary) Limited as of September 30, 1997 and December 31, 1996 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the two periods ended September 30, 1997 and December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Olsy Africa
(Proprietary) Limited as at September 30, 1997 and December 31, 1996 and the
consolidated results of its operations and its cash flows for each of the
periods ended September 30, 1997 and December 31, 1996 in conformity with
generally accepted accounting principles in the United States of America.
December 24, 1997
/s/ Price Waterhouse
<PAGE> 46
OLIVETTI SOLUTIONS
(AN INTEGRATED BUSINESS UNIT OF THE OLIVETTI GROUP)
COMBINED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(ITALIAN LIRE IN BILLIONS)
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, 1997 DECEMBER 31, 1996
- ------ ------------------ -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents 179 329
Restricted cash 13 10
Marketable securities 19 10
Accounts receivable trade,
net of allowance for doubtful accounts 1,263 1,617
Advances to related parties 744 538
Inventories 405 405
Accrued income, prepaid expenses
and other current assets 294 343
Deferred tax assets 2 3
----- -----
Total current assets 2,919 3,255
----- -----
Property, plant and equipment, net 364 359
Investments 16 16
Prepaid pension costs 22 21
Intangible assets, net 29 29
Other assets 66 54
Deferred tax assets 13 17
----- -----
TOTAL ASSETS 3,429 3,751
===== =====
LIABILITIES
- -----------
Current liabilities:
Due to related parties 533 1,026
Current portion of long-term debt and
obligations under capital leases 341 518
Accounts payable and accrued liabilities 1,595 1,585
Other current liabilities 103 166
Income taxes payable 10 21
----- -----
Total current liabilities 2,582 3,316
----- -----
Long-term debt 76 89
Obligations under capital leases 85 96
Other liabilities 429 402
Deferred tax liabilities 3 4
Minority interests 22 31
----- -----
TOTAL LIABILITIES 3,197 3,938
----- -----
Commitments and contingencies (Note 20)
Net assets (liabilities) 232 (187)
----- -----
TOTAL LIABILITIES AND NET ASSETS 3,429 3,751
===== =====
</TABLE>
The accompanying notes are an integral part of the combined consolidated
financial statements.
1
<PAGE> 47
OLIVETTI SOLUTIONS
(AN INTEGRATED BUSINESS UNIT OF THE OLIVETTI GROUP)
COMBINED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
(ITALIAN LIRE IN BILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Revenues:
Product sales 1,590 2,218
Services 1,280 2,263
Other 68 14
------ ------
TOTAL NET REVENUES 2,938 4,495
Operating costs and expenses:
Cost of product sales (1,309) (1,828)
Cost of services (994) (1,785)
Selling, general and administrative (702) (1,048)
Restructuring costs (1) (82)
------ ------
TOTAL OPERATING COSTS AND EXPENSES (3,006) (4,743)
------ ------
Loss before interest expense,
provision for income taxes, minority interests
and extraordinary item (68) (248)
Interest expense, net (35) (76)
------ ------
Loss before provision for income taxes,
minority interests, and extraordinary item (103) (324)
Provision for income taxes (15) (29)
Minority interests in net loss (earnings) of subsidiaries 5 (3)
------ ------
NET LOSS BEFORE EXTRAORDINARY ITEM (113) (356)
Loss on early extinguishment of debt, net of tax -- (30)
------ ------
NET LOSS (113) (386)
====== ======
</TABLE>
The accompanying notes are an integral part of the combined consolidated
financial statements.
2
<PAGE> 48
OLIVETTI SOLUTIONS
(AN INTEGRATED BUSINESS UNIT OF THE OLIVETTI GROUP)
COMBINED CONSOLIDATED STATEMENTS
OF CHANGES IN NET ASSETS (LIABILITIES)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
THE YEAR ENDED DECEMBER 31, 1996
(ITALIAN LIRE IN BILLIONS)
BALANCE, JANUARY 1, 1996 297
Adjustment for the initial adoption of FASB 87, net of tax (Note 18) (25)
Capital contribution (Note 18) 13
Net capital distribution (Note 1) (84)
Net loss (386)
Foreign currency translation adjustment (2)
----
BALANCE, DECEMBER 31, 1996 (187)
Forgiveness of amounts due to Olivetti Group (Notes 1 and 11) 515
Capital increase, Olivetti Espana S.A. (Note 27) 15
Net loss (113)
Foreign currency translation adjustment 2
----
BALANCE, SEPTEMBER 30, 1997 232
====
The accompanying notes are an integral part of the combined consolidated
financial statements.
3
<PAGE> 49
OLIVETTI SOLUTIONS
(AN INTEGRATED BUSINESS UNIT OF THE OLIVETTI GROUP)
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
(ITALIAN LIRE IN BILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss (113) (386)
Adjustments to reconcile net loss to cash flows provided
by operating activities:
Gain on sale of property, plant and equipment and shareholdings (31) (7)
Loss on disposition of assets -- 23
Loss on early extinguishment of debt -- 30
Allowance for doubtful accounts 11 25
Depreciation and amortization of property, plant and equipment
and intangible assets 101 161
Restructuring costs 1 33
Tax deferrals 5 8
Allocated costs, not paid 26 --
Pension expense 21 25
Other (3) (12)
Changes in assets and liabilities:
Decrease in accounts receivable 343 922
Decrease in inventories -- 161
(Increase) decrease in other current and noncurrent assets 24 (67)
Increase (decrease) in accounts payable and accrued liabilities 10 (566)
Increase (decrease) in other current and noncurrent liabilities (68) (191)
---- ----
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 327 159
Cash flows from investing activities:
Advances to related parties (206) 21
Additions to property, plant and equipment (96) (118)
Proceeds from the sale of property, plant and equipment and shareholdings 46 28
Acquisition of businesses, net of cash acquired (9) (24)
Other, principally marketable securities (10) 206
---- ----
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (275) 113
Cash flows from financing activities:
Due to related parties 4 (53)
Capital contribution from Olivetti Group 15 13
Cash distribution to Olivetti Group -- (159)
Proceeds from long-term debt -- 55
Retirement of long-term debt (205) (217)
---- ----
NET CASH USED IN FINANCING ACTIVITIES (186) (361)
Effect of exchange rate changes on cash and cash equivalents
and restricted cash (13) (31)
Decrease in cash and cash equivalents and restricted cash (147) (120)
Cash and cash equivalents and restricted cash, beginning of year 339 459
---- ----
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR 192 339
==== ====
Income taxes paid 21 14
Interest paid 20 76
</TABLE>
The accompanying notes are an integral part of the combined consolidated
financial statements.
4
<PAGE> 50
OLIVETTI SOLUTIONS
(AN INTEGRATED BUSINESS UNIT OF THE OLIVETTI GROUP)
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
THE COMPANY
Olivetti Solutions "OLSY", an integrated business unit of the Olivetti
Group, includes the combined systems and services businesses of Olivetti
Solutions S.p.A. ("Olsy S.p.A.") and its legally owned companies, O. Group
Technology S.p.A., Regulus S.p.A., O.R.E.& L s.r.l., the systems and
services business of Olivetti do Brasil, 40% interest in Olivetti Espana
and Olivetti Corporation of Japan and their predecessor operations
(collectively the "Company" or the "Business"). These financial statements
have been prepared pursuant to the requirements of the draft Sale and
Purchase Agreement by and among Wang Laboratories, Inc., Wang Netherland
B.V., Olivetti S.p.A., Olivetti Holding B.V. and Olivetti do Brasil S.A.
for inclusion in filings with the United States of America Securities and
Exchange Commission under Rule 3.05 of Regulation SX.
DESCRIPTION OF BUSINESS
The Company is a provider of information technology ("IT") solutions and
services to the Italian, European and global market. The Company's primary
geographical markets outside of Italy are: Great Britain, Netherlands,
France, Belgium, North America and Japan. The Company delivers solutions
and services based on open computing standards, distributed client server
architectures and network infrastructures to customers, pricipally in the
banking, public authority, utility and retail sectors. The solutions range
from development of the initial computing environment to systems
integration and include analysis, design, validation, procurement and
production through to delivery and roll out of complete solutions. The
services provided by the Company, include hardware, software and network
maintenance and support, outsourcing of distributed desktop computing
environments and consultancy all of which are provided under contractual
arrangements with customers.
FORMATION
Prior to 1996, the business of the Company was conducted by Olivetti
S.p.A., several other Olivetti Group corporations located in Italy and in
various other countries, some of which conducted other operations through
several business lines (the "Non-Olsy Business"). Beginning in 1995, the
Olivetti Group began a series of transactions to formally separate the
business of the Company from the Non-Olsy Business. At the end of 1995 and
during the first months of 1996, certain international subsidiaries of the
Olivetti Group transferred certain Non-Olsy Business assets and
liabilities, consisting primarily of inventories and
5
<PAGE> 51
severance pay reserves, to other newly created Olivetti Group companies.
The remaining assets and liabilities of the Non-Olsy Business including
cash, tangible and intangible assets, trade receivables, payables, and
provisions were transferred to the Company. These transfers have been
recorded as a net capital distribution in the combined consolidated
statement of changes in net assets (liabilities). Accordingly, the
statements of income and cash flows subsequent to the transfer reflect the
activity relating to the transferred assets and liabilities.
On January 1, 1997, substantially all of the systems and services assets
and liabilities of Olivetti S.p.A. were transferred to Olivetti Solutions
S.p.A. (formerly Sixcom S.p.A.), an Olivetti Group company, which prior to
that date, had nominal activity and nominal assets and liabilities. As part
of the transaction several minor companies involved in the systems and
services business' and certain other assets and liabilities mainly
including cash, intangibles and debt were retained by Olivetti S.p.A. For
the purpose of these financial statements these transactions have been
accounted for as part of the net capital distribution described above, in
the combined consolidated statement of changes in net assets (liabilities)
as of December 31, 1996.
During 1997, substantially all of the shareholdings in certain
international subsidiaries of the Olivetti Group, except for the
shareholdings in Olivetti do Brasil, Olivetti Corporation of Japan, 40% of
Olivetti Espana S.A., O.Group Technology S.p.A., Regulus S.p.A. and O.R.E.&
L. s.r.l., and some other minor Italian entities were transferred to
Olivetti Solutions S.p.A. In conjunction with the transfer certain amounts
including debt, interest and allocated costs owed by the Company to other
Olivetti Group Companies of approximately Lire 515 billion was forgiven.
The forgiveness has been recorded as a net capital contribution in the
combined consolidated statement of changes in net assets (liabilities).
As a result of the above changes in legal structure and share ownership
certain previously combined entities were consolidated in 1997.
BASIS OF PRESENTATION
These financial statements present the combined consolidated assets and
liabilities and results of operations of the Company. Because the Company
did not previously prepare separate financial statements, these financial
statements were derived by extracting the assets and liabilities and
results of operations of the Company from the consolidated assets,
liabilities and results of operations of the Olivetti Group. Accordingly,
the combined consolidated financial statements contain necessary
allocations of assets, liabilities, revenues and expenses attributable to
the Company as deemed reasonable by management to present the Company on a
stand alone basis. Although management is unable to estimate the actual
costs that would have been incurred had the services been purchased from
independent third parties, the allocation methodologies described below and
within the respective notes to financial statements, where appropriate, are
6
<PAGE> 52
considered reasonable by management. However, the financial position and
results of operations of the Company may differ from the results that may
have been achieved had the Company operated as an independent entity.
Additionally, future expenses incurred as an independent entity may not be
comparable to the historical levels.
The combined consolidated financial statements are presented in accordance
with generally accepted accounting principles of the United States of
America.
The reporting currency of the Company is the Italian lira. All amounts in
these financial statements have been prepared in billions of Italian lira
unless otherwise stated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ALLOCATIONS
The financial statements reflect the assets, liabilities, revenue and
expenses that were directly related to the Company as they were operated
within the Olivetti Group. In cases involving assets and liabilities not
specifically identifiable to any particular business line, a portion of
such items were allocated to the Company based on assumptions that
management considers reasonable in the circumstances.
The Olivetti Group uses a centralized approach to cash management and the
financing of its operations, except for certain specific cash, marketable
securities, and debt recorded by the operating companies. Cash and cash
equivalents, marketable securities and debt not specifically identifiable
to the operations of the Company were allocated to the Company based on the
historical debt to equity ratio of each individual operating company within
Olsy as of the beginning of 1996. The balances of these accounts at the end
of 1996 reflect the beginning allocated balance plus the net cash inflow
and outflow during the year. Interest expense on attributed debt was
allocated to the Company by applying the average interest rates applicable
to each operating company to which the debt related to.
The statements of income include all of the costs of doing business
including specific corporate costs of the Company and certain allocated
costs incurred by the Olivetti Group on the Company's behalf including
finance, human resources,
7
<PAGE> 53
investor relations, strategic planning, legal and the tax department. These
allocations were based on a variety of factors including, for example, the
number of employees, estimates of usage and revenues.
Prior to December 31, 1996, the Company participated in certain Olivetti
Group centralized foreign currency and risk management functions. As part
of these activities, derivative financial instruments were utilized to
manage risks generally associated with foreign currency and interest rate
volatility. The statement of income for 1996 reflects both specific and
allocated benefits and costs from these functions.
PRINCIPLES OF COMBINATION AND CONSOLIDATION
The combined consolidated financial statements of the Company include the
consolidated accounts of Olsy S.p.A. and its subsidiaries and the combined
accounts of O.Group Technology S.p.A., Regulus S.p.A., O.R.E.& L. s.r.l.,
40% of Olivetti Espana S.A., and Olivetti Corporation of Japan, and their
respective predecessor entities. All significant intercompany accounts and
transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reported period. The most significant estimates and assumptions
relate to revenue and cost allocations, income tax allocations, allowance
for uncollectable accounts receivable, employee benefit plans and the
reserve for restructuring costs. Actual results could differ from these
estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash in hand and cash in bank current
accounts, with original maturities of three months or less. Included in
cash and cash equivalents as of September 30, 1997 and December 31, 1996 is
approximately Lire 69 billion and Lire 119 billion, respectively of cash
collected in connection with the securitization program (Note 4) that must
be transferred to the program administrator as repayment of financing under
the securitization program.
8
<PAGE> 54
INVENTORIES
Inventories are valued at the lower of purchase or production cost,
determined on an average cost basis, or net realizable value. Inventories
also include work-in-process recorded using the percentage of completion
(cost to cost) method. Any losses on such contracts are charged to the
combined consolidated statement of income in the period in which they are
first identified.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is provided primarily using the straight-line
method over the estimated useful lives of the related assets. Leasehold
improvements are amortized over the shorter of the lease term or the
estimated useful life of the improvements. Upon retirement or other
disposal of fixed assets, the costs and related accumulated depreciation or
amortization are eliminated from the accounts, and any resulting gain or
loss is reflected in income for the period. Repairs and maintenance costs
are charged to expense as incurred.
The yearly rates are the following:
Buildings 3-5%
Plant and machinery 10-20%
Industrial and commercial equipment 20-40%
Electronic office machines 20-33%
Office furniture and fixture 12-25%
Vehicles 14-25%
INTANGIBLE ASSETS
The excess of cost over the fair value of net assets acquired is recorded
as goodwill and is amortized on a straight-line basis over periods of 5 to
10 years. The cost of other acquired intangibles is amortized on a
straight-line basis over their estimated useful lives. The Company
evaluates the carrying value of intangible assets if the facts and
circumstances indicate a potential impairment of their carrying value. Any
impairments are recognized when the expected future undiscounted operating
cash flows related to such intangible assets are less than their carrying
values.
RECOGNITION OF REVENUES
Revenues from the sale of products are recognized on the transfer of
ownership. Revenues from rental and maintenance contracts are recognized as
earned. Revenues from long-term contracts are recorded using the percentage
of completion (cost to cost) method.
9
<PAGE> 55
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. The Company
receives under the terms of specific legislation assisted loans for
research and development purposes. Interest-relief grants that reduce the
financial charges applied to the research loans received are recognized on
an accrual basis. The costs incurred for research and development were Lire
33 billion and Lire 90 billion for the nine months ended September 30, 1997
and the year ended December 31, 1996, respectively.
INCOME TAXES
The Company is not a separate taxable entity for Italian or international
tax purposes. Accordingly, income tax expense in the combined consolidated
financial statements has been calculated on a separate tax return basis by
tax jurisdiction.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes". SFAS 109 requires an asset and liability approach for financial
accounting and reporting for income tax purposes. Under the asset and
liability method, deferred income taxes are recognized for the tax
consequences of temporary differences and net operating loss carryforwards
by applying enacted statutory tax rates applicable to future years.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
FOREIGN CURRENCY TRANSLATION
The Company has determined that the local currencies of its international
subsidiaries are their functional currencies. In consolidating
international subsidiaries, assets and liabilities are translated at period
end exchange rates and income statement items are translated at the average
exchange rates for the period. Translation adjustments are reported as an
adjustment to net assets (liabilities).
FOREIGN CURRENCY TRANSACTIONS
Currency gains and losses resulting from transactions denominated in
currencies other than the local currency are included in results of
operations. Net currency transaction losses included in other expense were
Lire 5 billion and Lire 32 billion for the nine months ended September 30,
1997 and the year ended December 31, 1996, respectively.
10
<PAGE> 56
CONCENTRATION OF CREDIT RISKS
The Company deposits its cash with major banks throughout the world and
invests in high-quality, short-term liquid money market instruments. The
Company has a policy of making investments only with commercial
institutions that have at least an "A" (or equivalent) credit rating. The
Company's practice has been to advance its excess cash to other Olivetti
Group companies. Although the Company does not currently foresee a credit
risk associated with these amounts, the Company may suffer a significant
loss in the case of non performance by these affiliates.
The Company sells a broad range of products in the information technology
sector in most countries of the world. Concentrations of credit risk with
respect to trade receivables are limited due to the large number of
customers comprising the Company's customer base. Ongoing credit
evaluations of customers' financial condition are performed and, generally,
no collateral is required. The Company maintains reserves for potential
credit losses.
3. RESTRICTED CASH
Restricted cash as of September 30, 1997 and December 31, 1996 consists of
Lire 13 billion and Lire 10 billion respectively, held in deposit by a bank
which has provided financing to another Olivetti Group company. This
financing was repaid on October 11, 1997 and consequently the restriction
was removed.
4. ACCOUNTS RECEIVABLE TRADE, NET
Accounts receivable, net, consists of the following:
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Amounts due from third parties 1,283 1,534
Amounts due from:
Olivetti Group companies 108 214
----- -----
Total 1,391 1,748
Less: allowance for doubtful accounts 128 131
----- -----
TOTAL 1,263 1,617
===== =====
</TABLE>
Receivables from related parties mainly comprise amounts due for goods and
services provided in the ordinary course of business.
Within the normal course of business, the Company operates a securitization
program whereby trade accounts receivable are transferred to Global
Accounts Receivable Backed Offerings Ltd. ("Garbo"). At the time of
transfer the Company receives cash equal to approximately 70% of the total
nominal value of
11
<PAGE> 57
the receivables transferred or the advance purchase price ("APP"). The
remaining purchase price, less applicable fees, or the deferred purchase
price ("DPP"), is received on collection of the transferred receivables. In
accordance with generally accepted accounting principles in the United
States of America, the transfers have been accounted for as secured
borrowings. In this regard, the receivables transferred under the program
have been retained in the accounts of the Company until collected and the
APP is recorded as short term debt (See Note 14). As of September 30, 1997
and December 31, 1996, approximately Lire 173 billion and Lire 191 billion,
respectively were transferred and remained uncollected as of the balance
sheet dates, under the program. The Company provides for potential bad
debts on transferred receivables consistent with its policy on receivables
that are not transferred as part of the program. Included in interest
expense for the nine months ended September 30, 1997 and for the year ended
December 31, 1996 is approximately Lire 12 billion and Lire 29 billion,
respectively in interest charges for the program.
As part of the securitization program, the Company granted a subordinated
start up loan of Lire 2 billion and subordinated revolving loans equal to
the APP received for ineligible receivables (as defined), to Garbo of Lire
7 billion and Lire 17 billion as of September 30, 1997 and December 31,
1996, respectively, all of which are included in other current receivables.
The Company is the collection agent for the transferred receivables. Cash
collected on transferred receivables that has not been forwarded to Garbo
as of the balance sheet date, is recorded as cash with a corresponding
liability of the same amount in debt from factors and other financial
institutions (Note 14).
According to the terms of the contract the securitization program expires
unless renewed. Subsequent to the balance sheet date the Company chose to
discontinue the program. The program is currently in wind up.
5. ADVANCES TO RELATED PARTIES
Advances to related parties consist of the following:
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Due from Olivetti International S.A. 191 124
Due from Olivetti S.p.A. 535 404
Other:
- due from Olivetti Finanziaria Industriale 8 6
- due from Rapida SA 7 --
- due from Olivetti Supplies 1 1
- due from Olivetti Africa Lexikon 2 3
--- ---
TOTAL 744 538
=== ===
</TABLE>
12
<PAGE> 58
The amounts due from Olivetti International S.A. consist of excess cash of
the foreign operating companies deposited with this related party, bearing
interest at LIBOR for the various currencies plus 0.125%. The amounts due
from Olivetti S.p.A. consist of an interest bearing current account,
bearing interest at rates established from time to time. On January 1, 1997
the Company entered into a formal agreement with Olivetti S.p.A. for the
interest bearing current account and the amounts payable to it. In
accordance with the terms of the agreement, the Company may terminate the
arrangement with one months notice and in the event the Company is no
longer an Olivetti Group Company.
6. INVENTORIES
Inventories consist of the following:
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
Spare parts 53 30
Raw materials 15 44
Work in process 20 20
Finished goods 185 225
Contract work-in-process 132 86
--- ---
TOTAL 405 405
=== ===
Recorded in contract work-in-process are cost and unbilled margin of
approximately Lire 32 billion as of September 30, 1997 and December 31,
1996, respectively, relating to a contract on which work has been
suspended. Management anticipates a favorable resolution in the matter. The
Olivetti Group has committed to reimburse the Company for any potential
losses under the contract on or before December 31, 1999.
7. ACCRUED INCOME, PREPAID EXPENSES AND OTHER CURRENT ASSETS
Accrued income, prepaid expenses and other current assets consist of the
following:
13
<PAGE> 59
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Accrued income - third parties 68 28
Prepaid expenses - third parties 71 40
Accrued income and prepaid expenses:
- Olivetti Group companies 23 6
Financial receivables from third parties 23 40
Other receivables:
- third parties 107 201
- other Olivetti Group Companies 2 28
--- ---
TOTAL 294 343
=== ===
</TABLE>
14
<PAGE> 60
8. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------------------- -----
HELD UNDER LEASED TO TOTAL
(in billions of lire) OWNED CAPITAL LEASE THIRD PARTIES
- --------------------- ----- ------------- ------------- -----
<S> <C> <C> <C> <C>
Land and buildings 202 83 285
Plant and machinery 167 4 24 195
Industrial and commercial equipment 391 391
Other assets 251 5 256
Assets under construction 42 42
----- -- -- -----
Total 1,053 92 24 1,169
Less:accumulated depreciation and amortization 753 33 19 805
----- -- -- -----
TOTAL 300 59 5 364
===== == == =====
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------- -----
HELD UNDER LEASED TO TOTAL
(in billions of lire) OWNED CAPITAL LEASE THIRD PARTIES
- --------------------- ----- ------------- ------------- -----
<S> <C> <C> <C> <C>
Land and buildings 205 87 292
Plant and machinery 111 17 128
Industrial and commercial equipment 360 360
Other assets 175 6 181
Assets under construction 43 43
----- -- -- -----
Total 894 93 17 1,004
----- -- -- -----
Less:accumulated depreciation and amortization 617 26 2 645
----- -- -- -----
TOTAL 277 67 15 359
===== == == =====
</TABLE>
Depreciation and amortization expense for property, plant and equipment was
Lire 97 billion and Lire 133 billion, for the nine months ended September
30, 1997 and the year ended December 31, 1996, respectively.
9. INVESTMENTS
Investments consist of the following:
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
- --------------------- ------------------ -----------------
Investments in associated companies 14 13
Investments in other companies 2 3
-- --
TOTAL 16 16
== ==
15
<PAGE> 61
INVESTMENTS IN ASSOCIATED COMPANIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
% %
(In billions of lire) BOOK VALUE OWNED BOOK VALUE OWNED
- --------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Investments accounted using the equity method:
- Caridata S.p.A. 2 40.00 --
- Datitalia Processing S.p.A. 4 30.00 4 30.00
- ISC Bunker Ramo de Mexico 1 25.00 --
- ISC Argentina SA 2 49.00 2 49.00
- Olicredit -- 2 49.00
-- --
Total 9 8
Investments carried at cost:
- Infogroup 1 20.00 1 40.00
- Consorzio Narita 1 50.00 1 50.00
- Zhongshan Bank Autom. 1 40.00 --
- Others (1996 includes 40% of Caridata) 2 3
-- --
TOTAL INVESTMENTS IN ASSOCIATED COMPANIES 14 13
== ==
</TABLE>
INVESTMENTS IN OTHER COMPANIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
% %
(In billions of lire) BOOK VALUE OWNED BOOK VALUE OWNED
- --------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Investments stated at cost:
- Olivetti Ricerca S.C.p.A. 2 3.70 2 3.70
- Others -- 1
-- --
TOTAL INVESTMENTS IN OTHER COMPANIES 2 3
== ==
</TABLE>
16
<PAGE> 62
10. INTANGIBLE ASSETS, NET
Intangible assets, net consist of the following:
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
Goodwill 25 23
Patents and copyrights 15 13
Intangible asset, pension 7 10
-- --
Total 47 46
Less: accumulated amortization 18 17
-- --
NET INTANGIBLE ASSETS 29 29
== ==
Amortization expense for intangible assets was Lire 4 billion and Lire 28
Billion for the nine months ended September 30, 1997 and the year ended
December 31, 1996, respectively.
During the nine months ended September 30, 1997 and the year ended December
31, 1996, the Company acquired all or a majority of the shares in several
entities. The acquisitions have been accounted for using the purchase
business combination method. Supplemental pro forma information on the
results of operations as though the entities had combined at the beginning
of the period in which acquired and for the proceding period, if required,
have not been presented as the pro forma results of operations were not
material in the aggregate.
11. OTHER ASSETS
Other assets consist of the following:
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
Financial receivables 37 27
Deposits 29 27
-- --
TOTAL 66 54
== ==
12. DUE TO RELATED PARTIES
Due to related parties consists of the following:
17
<PAGE> 63
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Due to Olivetti Finanziaria Industriale 11 --
Due to Olivetti International S.A. 476 406
Due to Olivetti S.p.A. 45 611
Other Olivetti Group Companies 1 9
--- -----
TOTAL 533 1,026
=== =====
</TABLE>
The amount due to Olivetti S.p.A. at December 31, 1996 of Lire 611 billion
reflects the allocation of debt to the Company determined based on the
historical debt to equity ratio of Olivetti S.p.A. as of the beginning of
the year. During 1997 approximately Lire 497 billion of the amount due was
forgiven. The forgiveness of debt has been recorded as a capital
contribution in the statement of net assets (liabilities).
During the nine months ended September 30, 1997 and the year ended December
31, 1996, the Company recorded interest expense of Lire 25 billion and Lire
55 billion, respectively on borrowings from related parties. The amounts
due to Olivetti International S.A. bear interest at LIBOR plus 2.50% for
the various currencies. The amounts due to Olivetti S.p.A. bear interest at
rates established from time to time in accordance with the agreement
described in note 5.
13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Trade payables:
- to third parties 744 633
- to Olivetti Group 136 323
Deferred income 177 148
Accrued liabilities and customer advances 267 262
Taxes (other than income) and social
security authorities 113 125
Other payables:
- to Olivetti Group 48 12
- to third parties 110 82
----- -----
TOTAL 1,595 1,585
===== =====
</TABLE>
14. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
18
<PAGE> 64
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Reserve for restructuring costs 33 74
Warranty reserve 21 27
Other provisions 49 65
--- ---
TOTAL 103 166
=== ===
</TABLE>
The reserve for restructuring costs as of September 30, 1997 and December
31, 1996 total Lire 33 billion and Lire 74 billion, respectively and are
comprised of the following:
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Work force reduction costs 12 39
Abandoned space 15 24
Other provisions 6 11
-- --
TOTAL 33 74
== ==
</TABLE>
15. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
IMI loans for research, repayable by 1998
yearly interest rates of 4.5% 1 1
IMI loans for research, pursuant to Law
no. 346/1998 (interest relief grants)
repayable by 2003. Yearly interest rate of 2.265% 6 7
Assisted loans for technological innovation
(FIT) repayable by 2007 yearly
interest rates of 8.76% 2 2
Other loans of foreign subsidiaries
repayable by 2003 79 231
Short term bank borrowings 117 125
Factors or other financial institutions 199 231
--- ---
404 597
Less: Current debt and current portion
of long term debt 328 508
--- ---
LONG TERM DEBT 76 89
=== ===
</TABLE>
Prior to 1996, the Company entered into a sale-leaseback transaction
involving the Company's office buildings in Germany. The transaction was
accounted for as a
19
<PAGE> 65
financing. Included in other loans of foreign subsidiaries as of September
30, 1997 and December 31, 1996 is approximately Lire 66 billion and Lire 69
billion, respectively for this arrangement. Approximately Lire 26 billion
of the above mentioned financing was retained by the purchaser subject to
the successful completion of certain ongoing renovations to the buildings.
The retained amount has been recorded as a financial receivable by the
Company and included in other assets.
The weighted average interest rate on outstanding short term borrowings was
5.82% for the nine months ended September 30, 1997, which was substantially
the same for the year ended December 31, 1996.
Included in debt from factors or other financial institutions as of
September 30, 1997 and December 31, 1996 is approximately Lire 94 billion
and Lire 72 billion, respectively of APP.
Aggregate maturities of debt are as follows:
YEAR ENDING AMOUNTS
SEPTEMBER 30, (in billions of lire)
------------- ---------------------
1998 328
1999 4
2000 5
2001 5
2002 5
Thereafter 57
---
TOTAL 404
===
As of September 30, 1997 the Company had unused lines of credit, primarily
for short term borrowings, of Lire 254 billion. Prior to 1997 the Company
did not have all of its own lines of credit but was able to benefit from
the lines maintained by other Olivetti Group companies.
Certain credit lines or borrowings obtained by the Company have been
guaranteed by other Olivetti Group companies. These guarantees as of
September 30, 1997 and December 31, 1996 amounted to Lire 269 billion and
Lire 194 billion, respectively.
Approximately Lire 34 billion and Lire 170 billion as of September 30, 1997
and December 31, 1996, respectively of lines credit and or borrowings were
collateralized by the Company's inventory, trade receivables and fixed
assets.
20
<PAGE> 66
16. CAPITALIZED LEASE OBLIGATIONS
The minimum future lease payments and present values of the net minimum
lease payments are as follows:
YEAR ENDING AMOUNTS
SEPTEMBER 30, (in billions of lire)
------------- ---------------------
1998 20
1999 17
2000 15
2001 16
2002 11
After 2002 68
---
Total minimum lease payments 147
Less: Amount representing interest 49
---
Present value of net minimum lease payments 98
Less: current portion 13
---
TOTAL 85
===
17. INCOME TAXES
The provision for income taxes consists of the following:
FOR THE NINE MONTHS FOR THE YEAR
ENDED ENDED
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------- -----------------
CURRENTLY PAYABLE:
Italian taxes 1 1
International taxes 8 20
Italian state and local taxes 1 --
--- ---
10 21
DEFERRED:
Italian taxes -- --
International taxes 5 8
Italian state and local taxes -- --
--- ---
TOTAL 15 29
=== ===
21
<PAGE> 67
Temporary differencies and carryforwards as of September 30, 1997 and
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30 ,1997 DECEMBER 31, 1996
- --------------------- ------------------ -----------------
<S> <C> <C>
Current deferred tax assets:
Net operating loss carryforwards 34 23
Account Receivable 16 6
Inventories 20 29
Accrued income and prepaid expenses and
other current assets 7 5
Property, plant and equipment, net 3 10
Accounts payable and accrued liabilities 2 5
Other current liabilities 15 15
Other 5 4
---- ----
Net deferred tax assets 102 97
Valuation allowance (100) (94)
---- ----
Total current deferred tax assets 2 3
==== ====
Non-current deferred tax assets:
Net operating loss carryforwards 622 585
Accounts payable and accrued liabilities 82 91
Other non-current liabilities 47 35
Intangible assets 51 50
Accounts receivable -- 8
Other 13 11
---- ----
Total 815 780
Non-current deferred tax liabilities:
Accounts receivable 2 --
Property, plant and equipment 37 44
---- ----
Total 39 44
Net non-current deferred tax assets 776 736
Valuation allowance (766) (723)
---- ----
TOTAL NON CURRENT DEFERRED TAX ASSETS 10 13
==== ====
</TABLE>
For financial reporting purposes, a valuation allowance was recognized for
the amount of the deferred tax assets as of September 30, 1997 and December
31, 1996, that more likely than not will not be realized on a separate
company basis by tax jurisdiction.
At September 30, 1997, the Company had operating loss carryforwards
totalling approximately Lire 1,541 billion, the tax effect of which is
approximately Lire 656 billion.
22
<PAGE> 68
These carryforwards will expire as follows:
(In billions of lire) AMOUNTS
--------------------- -------
as at 1997 34
1998 39
1999 37
2000 47
2001 44
After 2001 162
Without expiration 293
---
TOTAL 656
===
As a result of changes in the Company's legal structure during 1996, as
described in note 1, the Company lost the use of certain net operating loss
carryforwards and acquired the use of certain other net operating loss
carryforwards the net tax effect of which is a decrease in net operating
loss carryforwards of approximately Lire 704 billion. The net reduction in
net operating loss carryforwards resulted in a corresponding decrease in
valuation allowance.
The reconciliation from the statutory taxes and tax rate to the effective
taxes and tax rate for each of the periods is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
(In billions of lire) AMOUNT % AMOUNT %
- --------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Taxes at Italian statutory tax rate 55 53 189 53
Non deductible losses (15) (15) (61) (17)
Changes in valuation allowance (49) (47) (153) (43)
Impact of foreign tax rates 3 3 -- --
Other (9) (9) (4) (1)
--------------- ---------------
EFFECTIVE INCOME TAX RATE (15) (15) (29) (8)
=============== ===============
</TABLE>
23
<PAGE> 69
18. EMPLOYEE BENEFIT PLANS
The Company sponsors various employee benefit plans, including defined
benefit and defined contribution pension plans, which cover substantially
all employees worldwide and the Company also participates in multiemployer
postretirement benefit plans which cover certain employees in Italy.
DEFINED BENEFIT PENSION PLANS
The Company's international subsidiaries maintain defined benefit pension
plans that provide plan benefits primarily based on the employee's
compensation during the last years before retirement and the number of
years of service. The Company has plans under which funds are deposited
with trustees, annuities are purchased under group contracts, or reserves
are provided. In certain countries the funding of pension plans is not a
common practice, consequently, the Company has pension plans which are
underfunded. Several of these plans including plans in the Company's
Subsidiaries in Germany, Canada and South Africa have been frozen whereby
employees in these locations are no longer accruing additional benefits.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 87 "Employers' Accounting for Pensions"
for its defined benefit plans located outside the United States. The
initial adoption of SFAS No. 87 resulted in Lire 25 billion increase in net
liabilities representing the amount of the net transition obligation that
would have been amortized, net of tax, had SFAS No. 87 been adopted as of
January 1, 1989. The Company did not obtain SFAS No. 87 actuarial
valuations of immaterial defined benefit arrangements.
Net pension expense for the Company's defined benefit plans for the nine
months ended September 30, 1997, and for the year ended December 31, 1996
included the following components:
NINE MONTHS ENDED YEAR ENDED
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
Service cost 17 22
Interest cost 22 27
Actual return on plan assets (25) (24)
Net amortization and deferral 7 --
--- ---
NET PERIODIC PENSION COST 21 25
=== ===
During 1996, the Company instituted a workforce reduction program in its
Japanese subsidiary resulting in a net curtailment gain of Lire 2 billion
and work force reduction costs of Lire 17 billion. The Company received
Lire 13 billion from the Olivetti Group as reimbursement for these costs.
The reimbursement has been recorded as an increase in net assets.
24
<PAGE> 70
The following table sets forth the actuarial present value of the benefit
obligations and funded status for the Company's defined benefit plans:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
PLANS HAVING PLANS HAVING PLANS HAVING PLANS HAVING
ASSETS IN EXCESS ACCUMULATED ASSETS IN EXCESS ACCUMULATED
OF ACCUMULATED BENEFITS IN OF ACCUMULATED BENEFITS IN
(In billions of lire) BENEFITS EXCESS OF ASSETS BENEFITS EXCESS OF ASSETS
--------------------- ------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested Benefit Obligations 267 232 186 234
Non vested benefits 1 3 -- 4
--- ---- --- ----
Accumulated Benefit Obligation ("ABO") 268 235 186 238
Effect of further salary increases 20 29 10 33
--- ---- --- ----
Projected Benefit Obligation ("PBO") 288 264 196 271
Plan assets at fair market value 325 99 235 102
--- ---- --- ----
Plan assets in excess of (less than) PBO 37 (165) 39 (169)
Unrecognized net (gain) loss -- (9) (2) --
Unrecognized transition (asset) obligation (15) 39 (16) 42
Unrecognized Prior Service cost -- -- -- --
Additional minimum liability -- (7) -- (10)
--- ---- --- ----
ACCRUED PENSION COST 22 (142) 21 (137)
=== ==== === ====
</TABLE>
Pursuant to SFAS No. 87, intangible assets of Lire 7 billion and Lire 10
billion were recorded as of September 30, 1997 and December 31, 1996,
respectively, in order to recognize the required minimum liability.
The following table provides the range of assumptions, which are based on
the economic environment of each applicable country, used to develop net
periodic pension cost and the actuarial present value of projected benefit
obligations:
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
Rate of return on assets 3.30% - 8.50% 3.30% - 9.50%
Discount rate 3.50% - 7.50% 3.50% - 8.50%
Salary growth 3.00% - 5.50% 3.00% - 6.50%
ITALIAN TFR
Under Italian law, deferred compensation accrues in favour of employees and
agents which they (or in the case of their death, their heirs) are entitled
to collect upon termination of employment or under certain other
circumstances. The amount payable related to each year's service is
calculated on the basis of the remuneration for that year and will be
subject to annual revaluations based on increases in the Italian
cost-of-living index (ISTAT). Provision for the effect of such revaluations
is made as increases in the cost-of-living index are realized. Included in
other liabilities as of September 30, 1997 and December 31, 1996 is
approximately Lire 181 billion and Lire 171 billion, respectively for this
liability, which is unfunded.
25
<PAGE> 71
DEFINED CONTRIBUTION PENSION PLANS
In addition to the defined benefit plans described above, the Company also
sponsors defined contribution plans in various countries. The Company's
expense for the defined contribution plans totaled approximately Lire 4
billion and Lire 5 billion for the nine months ended September 30, 1997 and
the year ended December 31, 1996, respectively.
MULTIEMPLOYER POSTRETIREMENT PLANS
The Company, as part of the Olivetti Group, sponsors contributory retiree
health benefit plans for managers and employees for its Italian operations
which provide medical and dental benefits to employees who meet age and
years of service requirements prior to retirement and who agree to
contribute to a portion of the cost. The amounts charged to expense for the
nine months ended September 30, 1997 and the year ended December 31, 1996,
were not significant.
19. POSTEMPLOYMENT AND TERMINATION BENEFITS
The Company provides certain postemployment and termination benefits to
certain qualified former or inactive employees. The benefits are paid in
either lump sum amounts or during the period following employment but
before retirement. Postemployment and termination benefit expense totaled
Lire 0 (nil) billion and Lire 2 billion for the nine months ended September
30, 1997 and the year ended December 31, 1996, respectively. Included in
other liabilities are accruals of Lire 5 billion and Lire 7 billion as of
September 30, 1997 and December 31, 1996, respectively for these benefits.
In prior years the Olivetti Group shut down the manufacturing business in
its subsidiary in Spain. This business was part of the Non-Olsy Business.
As part of the shut down, the Olivetti Group granted termination benefits
to the affected employees. The benefits consist of direct payments to the
employee, social security contributions and supplements to retirement
income. The Olivetti Group recorded a provision for this liability. During
1996 this liability was transferred to the Company and recorded as part of
the net capital distribution. Included in other liabilities as of
September 30, 1997 and December 31, 1996 is approximately Lire 72 billion
and Lire 71 billion, respectively for this liability. On December 31, 1997,
the liability was assumed by Promociones Actividades Comerciales RAP S.A.
("Rapida"), another Olivetti Group company, in exchange for a payment equal
to the recorded book value of the liability. Pursuant to the agreement,
Rapida will reimburse the Company for the future benefit payments to the
terminated employees. Such assignment, however does not discharge the
Company, which remains primarily liable, from its obligation to the
terminated employees.
26
<PAGE> 72
20. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is involved in various legal disputes in the ordinary course of
its business. These disputes relate to claims for damages mainly in
connection with the sale of goods and services and recourses against
adjudication of contracts. In some of these disputes the Company has filed
counter-claims. Based on advice from the Company's legal advisors,
management does not believe that the outcome of such disputes will
materially affect the Company's results of operations, cash flows, or
financial position.
Operating Leases
EXPENSE
Costs of office space, vehicles, manufacturing equipment, and office and
data processing equipment held under operating leases amounted to
approximately Lire 50 billion for the nine months ended September 30, 1997
and Lire 65 billion for the year ended December 31, 1996.
The approximate future minimum rental payments required under operating
leases that have initial or remaining noncancellable lease terms are as
follows:
(In billions of lire) YEAR ENDING SEPTEMBER 30
--------------------- ------------------------
1998 54
1999 35
2000 23
2001 22
2002 20
Thereafter 58
---
TOTAL 212
===
RENTAL INCOME
Certain rentals of the Company's commercial equipment are accounted for as
operating leases. The minimum future revenues to be received on commercial
equipment as of September 30, 1997 are as follows:
(In billions of lire) YEAR ENDING SEPTEMBER 30
--------------------- ------------------------
1998 8
1999 4
2000 4
2001 3
2002 2
Thereafter 10
--
TOTAL 31
==
27
<PAGE> 73
Guarantees
From time to time, the Company guarantees the financing for product
purchases by customers. The Company seeks to limit its exposure to credit
risks in any single country or region. Certain financial guarantees are
backed by amounts held in trust for the Company.
"Year 2000"
The Company has commenced an evaluation of its potential commitments
regarding the "Year 2000" date recognition issue in computer systems. The
evaluation will consider the Company's responsibilities concerning the
systems installed in the past with customers, the situation of its internal
systems, those of its key suppliers and the opportunities to transact new
business. At this time it is not possible to quantify the economic effect
that may result from the issue.
Purchase Commitment
With reference to the agreement for the sale of Syntax Processing
("Syntax") from the Olivetti Group, the Company is committed to purchase a
minimum level of certain services from Syntax for approximately five years
for a minimum total amount of Lire 339 billion. The costs for the services
are determined based on rates established in the agreement. During the nine
months ended September 30, 1997 and the year ended December 31, 1996,
purchased services exceeded the required minimums.
Pending Acquisition
The Company is committed to purchase the remaining 2000 shares (40%) of
Datrac AG, at a price to be determined based on the profits realized during
the three year period 1995-1997. The purchase price may range between Lire
16 billion and Lire 21 billion.
Purchase Price Adjustment
In connection with the acquisition in 1997 of an equity investment in Open
Access Ltd., the Company is committed to pay to the seller a price
adjustment to be determined based on earnings (as defined) in the next
three years.
Guarantees and Commitments Received
Olivetti S.p.A. has made the following commitments to the Company: 1) to
hold Olivetti Corporation of Japan harmless for any possible funding
deficit in the local pension plan; 2) to assume the capital lease agreement
entered into in respect of the office building located in Paris, France; 3)
to purchase from the Company some minor shareholdings at their Italian GAAP
book values; 4) to reimburse the
28
<PAGE> 74
Company for any possible shortfalls in the workforce reduction provisions
recorded in the Italian GAAP financial statements as of September 30, 1997;
and 5) to hold the Company harmless for the renovation costs of the German
office buildings in excess of the amounts accrued in the Italian GAAP
financial statements as of September 30, 1997.
Olivetti S.p.A. has pledged to financially support certain of the operating
subsidiaries of the Company that have incurred substantial losses in the
past.
As of September 30, 1997, Olivetti S.p.A. granted approximately Lire 19
billion in performance guarantees to third party suppliers on behalf of the
Company.
21. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, accounts receivable,
advances to related parties, due to related parties, accounts payable,
other loans of foreign subsidiaries, short term bank borrowings and debt
from factors or other financial institutions are not materially different
than fair value due to the short-term maturities of these instruments.
The fair values of marketable securities classified as available-for-sale,
were based on quoted market prices of these or similar instruments where
available. The fair value of available-for-sale securities totaled Lire 9
billion at September 30, 1997, and Lire 6 billion at December 31, 1996
which corresponds to the carrying amounts recorded in current marketable
securities. All other marketable securities are classified as
held-to-maturity and carried at amortized cost.
For the research and assisted loans provided by the Italian government, the
Company is unable to quantify the fair value of these instruments due to
their nature.
22. GEOGRAPHIC AREAS AND SEGMENT INFORMATION
The Company operates entirely in one industry segment, information
technology (IT). As previously reported, the Company is a provider of IT
solutions and services to the Italian, European and global market.
29
<PAGE> 75
The following is a summary of operations by geographic region at September
30, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Sales:
Italy 942 1,515
Europe 1,242 1,954
United States 240 279
Other 446 733
----- -----
Total 2,870 4,481
===== =====
Earnings (losses) before interest expense,
provision for income taxes, minority
interest and extraordinary item:
Italy (89) (231)
Europe 19 8
United States 6 (10)
Other (4) (15)
----- -----
Total (68) (248)
===== =====
Identifiable assets:
Italy 1,675 1,932
Europe 1,251 1,251
United States 150 165
Other 353 403
----- -----
Total 3,429 3,751
===== =====
</TABLE>
Europe includes operations located primarily in United Kingdom,
Netherlands, Belgium, Spain and France.
30
<PAGE> 76
23. RESTRUCTURING COSTS
In 1995 the Company approved a restructuring plan (the "1995 Plan") which
at December 31, 1995 concerned 1,230 employees, which decreased to 356 at
December 31, 1996, after the termination of 874 employees during the year.
An additional 173 employees were terminated during the nine months ended
September 30, 1997. In 1996 the Company approved a new plan (the "1996
Plan") for the termination of 157 employees, to be terminated in the first
nine months of 1997. In 1997 and additional plan was approved for the
termination of an additional 10 employees to be terminated by the end of
1997.
The relevant costs incurred are as follows:
(In billions of lire) AMOUNT
--------------------- ------
Year ended December 31, 1996 82
Nine months ended September 30, 1997 1
<TABLE>
<CAPTION>
NUMBER OF EMPLOYEES PLAN APPROVED PLAN APPROVED PLAN APPROVED IN
TO BE TERMINATED IN IN THE NINE MONTHS ENDED
1995 1996 SEPTEMBER 30, 1997
------------------- -----------------------------------------------------------
<S> <C> <C> <C>
December 31, 1996 356 157 --
September 30, 1997 183 77 10
</TABLE>
<TABLE>
<CAPTION>
AMOUNTS PAID PLAN APPROVED PLAN APPROVED PLAN APPROVED IN
IN IN THE NINE MONTHS ENDED
(In billions of lire) 1995 1996 SEPTEMBER 30, 1997
--------------------- -----------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1996 77 -- --
Nine months ended September 30, 1997 14 14 --
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EMPLOYEES PLAN APPROVED PLAN APPROVED PLAN APPROVED IN
ACTUALLY TERMINATED IN IN THE NINE MONTHS ENDED
1995 1996 SEPTEMBER 30, 1997
------------------- -----------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1996 874 -- --
Nine months ended September 30, 1997 173 80 --
</TABLE>
31
<PAGE> 77
24. RELATED PARTY TRANSACTIONS
Sales to related parties and purchases from related parties are estimated
as Lire 150 billion and Lire 300 billion for the nine months ended
September 30, 1997 and as Lire 350 billion and Lire 800 billion for the
year ended December 31, 1996, respectively.
25. OTHER REVENUES
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Net gain on sales of fixed assets 20 4
Net gain on sales of shareholding 11 3
Equity in earnings 1 1
Other 36 6
--- ---
TOTAL 68 14
=== ===
</TABLE>
Net gain on sales of fixed assets for the nine months ended September 30,
1997, relates primarily to the sale of a building in Spain for proceeds of
Lire 26 billion resulting in a gain of Lire 19 billion.
26. INTEREST EXPENSE, NET
Interest expense, net consists of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Net interest (charged by) income from
other Olivetti Group companies (4) 13
Interest expense, third party borrowings (19) (60)
Securitization charges (12) (29)
--- ---
TOTAL (35) (76)
=== ===
</TABLE>
27. CAPITAL INCREASE
During the nine months ended September 30, 1997, the Company and another
Olivetti Group company contributed Lire 22 billion and Lire 15 billion,
respectively to Olivetti Espana S.A. The contribution of Lire 15 billion
from the other Olivetti Group company has been recorded in the statement of
net assets (liabilities). The remaining amount eliminates in consolidation.
32
<PAGE> 78
28. EXTRAORDINARY ITEM
During 1996 the Company repurchased from a related party equipment for
approximately Lire 83 billion held under several sale-leaseback agreements.
The sale-leaseback agreements were accounted for as financing arrangements
by the Company. The repurchase has been accounted for as an early
extinguishment of the financing arrangements resulting in an extraordinary
loss of approximately Lire 30 billion. The loss results in a deferred tax
asset with a corresponding full valuation allowance.
29. SUBSEQUENT EVENTS
a) On December 31, 1997, net receivables included in trade receivables as
of September 30, 1997 and December 31, 1996 of Lire 82 billion were sold to
another Olivetti Group company for proceeds of Lire 102 billion. The
transaction has been accounted for as a sale of receivables for Lire 82
billion and a capital contribution of Lire 20 billion.
b) Subsequent to September 30, 1997, a change in Italian tax legislation
was enacted which becomes effective on January 1, 1998. The change in the
tax law includes a repeal of certain local taxes on income and adjusts
taxable income for certain expense and income items. The Company has not
yet estimated the impact of the new legislation on its financial position
and its results of operations.
c) On March 17, 1998, the Olivetti Group sold almost all of its ownership
interests in Olsy, except for its interest in Olivetti Corporation of
Japan, which was sold on April 7, 1998, to Wang Laboratories, Inc. pursuant
to the terms of the Stock Purchase Agreement by and among Wang
Laboratories, Inc., Wang Nederland BV, Ing. C. Olivetti & C. S.p.A.,
Olivetti Sistemas e Servicious Limitada and Olivetti do Brasil S.A. dated
February 28, 1998. The Stock Purchase Agreement together with certain other
ancillary agreements contain provisions which required the consummation of
certain pre-closing transactions and other actions by the Company and/or
the Olivetti Group, some of which have been previously described in other
sections of these notes to the combined consolidated financial statements.
Under the terms of the agreements, the Olivetti Group (1) settled or
extinguished all amounts due from/to the Company under certain related
party borrowing/funding arrangements; (2) and the Company, subject to
normal trade practice, agreed on the amounts immediately due on the
outstanding trade receivables and payables between the companies; (3)
caused the assignment of the Company's termination liability for the
terminated employees of the Spanish subsidiary to another Olivetti Group
company, as previously stated in note 19; (4) made cash contributions of
Lire 40 billion to the Company; (5) purchased certain receivables of the
Company for approximately Lire 102 billion; and (6) purchased from the
Company certain real property located in Spain for consideration equal to
the net book value of Lire 10 billion. The Company (1) repaid or
extinguished all amounts owed under third party credit facilities and loan
arrangements, except for certain borrowings of the Company's subsidiary in
Japan, and caused all relevant liens on the assets of the Company to be
released; (2) terminated all securitization and factoring arrangements and
settled all amounts due to or from third parties as a result of the
arrangements and caused all relevant liens on the assets of the Company to
be released; (3) purchased additional shares in Olivetti Ricerca, another
Olivetti Group company, for approximately Lire 8 billion, increasing its
interest to 19.9%, and (4) recorded in its Italian GAAP financial
statements certain additional provisions for abandoned space, vacation,
work force reduction and costs to complete the renovation of the office
buildings in Germany.
Pursuant to the terms of the Stock Purchase Agreement and certain other
ancillary agreements, the Olivetti Group provided the Company with certain
additional guarantees and commitments. In this regard, the Olivetti Group
will (1) assume the capital lease of the office building located in Paris,
France at a date no later than the closing date or June 30, 1998; (2)
reimburse/charge the Company 75% of any shortfall/excess in the work force
reduction provision recorded in the Italian GAAP accounts and for certain
wages incurred after July 1, 1998; (3) purchase from the Company any trade
receivables recorded in the closing financial statements in excess of the
allowance for doubtful accounts which will not be collected within a
certain period of time; (4) purchase any unbilled trade receivable of the
company, not collected within a certain period of time; (5) reimburse the
Company for the minimum amounts due under the Syntax agreement for which
services were not purchased, except Olsy is committed to purchase services
amounting to at least Lire 43 billion in 1998 and Lire 18 billion in 1999;
and (6) will reimburse the Company for all benefits paid during the period
commencing on the closing date and ending on December 31, 2000, from the
Olivetti Corporation of Japan pension plan for benefits accrued to
employees as of the closing date and will reimburse/charge the Company for
80% of the benefit deficit/surplus, as defined, of the plan as determined
on December 31, 2000, net of applicable taxes.
These combined consolidated financial statements do not reflect the affect
of these transactions or any adjustment resulting from the acquisition of
the Company by Wang.
d) On May 12, 1998, the Company's subsidiary in Germany filed a petition in
local court to initiate bankruptcy proceedings. At September 30, 1997 and
December 31, 1996, the subsidiary's net liabilities reflected in these
combined consolidated financial statements approximated Lire 24 billion
and Lire 35 billion, respectively. The subsidiary's revenues and net loss
for the nine months ended September 30, 1997 and the year ended December
31, 1996, were approximately Lire 79 billion and Lire 8 billion and Lire
192 billion and Lire 28 billion, respectively.
33
<PAGE> 79
PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
On March 17, 1998 (the "Closing Date"), the Company completed the purchase of
Olivetti Solutions ("Olsy"), a wholly-owned information technology ("IT")
solutions and service subsidiary of The Olivetti Group ("Olivetti"), except for
Olivetti Corporation of Japan ("OCJ"), the purchase of which was not completed
until April 7, 1998. Olsy's revenues for the calendar year ended December 31,
1997 were approximately $2.4 billion.
In consideration for Olsy, the Company paid Olivetti $68.6 million in cash;
8,750,000 shares of common stock (of which 1,500,000 are expected to be
delivered before the end of calendar year 1998, subject to shareholder approval)
with a value of $146.8 million at the time of issuance; 5,000,000 stock
appreciation rights ("SARs") which give Olivetti value for the increase in the
market price of the Company's common stock above $30.00 per share at any time
from March 2001 to March 2005 and are redeemable in cash or common stock at the
Company's election; and the potential for an additional amount (an "earnout") of
up to $56.0 million payable in the year 2000, subject to meeting mutually-agreed
performance targets for the calendar years 1998 and 1999. The earnout will be
recorded at the time it becomes probable that a payment will be required and the
amount can be reasonably estimated.
The acquisition was accounted for using the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations" ("APB 16"). Under APB 16, purchase price allocations are made to
the assets acquired and the liabilities assumed based on their respective fair
values. The value of the shares was recorded at a discount of 35% of the market
value of the Company's common stock in part because the shares are not
registered and are subject to a three-year restriction period. The value of the
SARs was recorded based on the historical and implied volatility of the common
stock, considering both the minimum guaranteed price and the restrictions on
exercise inherent in the SARs. The stock and SAR values were supported by an
independent valuation.
The Company estimates that expenditures of as much as $380 million will be
required over the next 24 to 36 months in connection with the integration and
rightsizing of both Olsy and Wang. The Company currently estimates that
approximately $290 million of the $380 million will be related to severance and
redundant facilities related to Olsy. Of the $290 million, $45 million was
recorded by Wang as part of purchase accounting at March 31, 1998. An additional
$90 million will relate to integration-related costs, systems and other costs,
of which $23.2 million was recorded at March 31, 1998. Under certain conditions,
costs related to the acquired Olsy business will be accounted for as an
additional cost of the acquisition at the time the formal plan of restructuring
is completed. The accompanying unaudited pro forma financial statements assume
that the remaining Olsy-related costs will be accounted for as additional costs
of the acquisition. Integration-related costs attributable to Wang will be
accounted for as charges to operations in the periods they are determined.
<PAGE> 80
The estimated excess of the acquisition cost over the net tangible assets
acquired was determined as follows:
<TABLE>
<CAPTION>
Unaudited
-----------------------------------------------------------------
AS REPORTED PRO
MARCH 31, 1998 OCJ ADJUSTMENTS FORMA
-------------- ------ ----------- -------
<S> <C> <C> <C> <C>
Cash (including $18.0 million of
transaction costs) $ 47.0 $ 39.6 $ 86.6
Common Stock 146.9 146.9
Stock Appreciation Rights 41.8 41.8
------- ------ ------ -------
TOTAL CONSIDERATION 235.7 39.6 275.3
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Estimated Olsy Restructuring
Liability 245.0 245.0
------- ------- ------ -------
TOTAL ESTIMATED ACQUISITION
COST 235.7 39.6 245.0 520.3
Estimated Fair Value of Net
Tangible Assets Acquired (130.3) 7.6 (25.2) (147.9)
------- ------ ------ -------
Estimated Excess of Purchase
Price over Net Tangible Assets
Acquired $ 105.4 $ 47.2 $219.8 $ 372.4
======= ====== ====== =======
</TABLE>
<PAGE> 81
The estimated excess of the purchase price over the fair value of the net assets
acquired of $372.4 million has been reflected in the unaudited pro forma
financial statements based on a preliminary purchase price allocation.
Finalization of the allocation of the purchase price to assets acquired and
liabilities assumed is subject to appraisals, valuations, evaluations and other
analyses of the fair value of assets acquired and liabilities assumed, including
the anticipated valuation of certain purchased research and development
activities and the finalization of the formal Olsy restructuring plans.
The estimated excess of purchase price over the net tangible assets acquired has
been allocated on a preliminary basis as follows:
Estimated
Values (in millions)
--------------------
Developed software $ 60.0
Trademarks 30.0
Goodwill 207.4
------
Olsy related intangible assets 297.4
In process research and development 75.0
------
Total $372.4
======
In process research and development is to be expensed upon finalization of the
pending valuation, expected in the fourth quarter of fiscal 1998; developed
software is amortized based upon the ratio of anticipated annual revenues to
total anticipated revenues over the life of the developed software, primarily
within three years; trademarks - two to five years and goodwill - twenty-five
years.
Based upon these estimates, the pro forma impact of amortization expense for the
succeeding five years is $45.0 million, $34.0 million, $20.0 million, $15.0
million and $14.0 million, respectively. These estimates of amortization expense
are highly dependent upon the amounts of Olsy related restructuring costs which
still have not been finalized or approved, as well as the allocation of the
excess of purchase price over identifiable tangible assets to various
intangible asset categories. Management anticipates that the purchase price
allocation will be finalized by June 30, 1998.
The unaudited consolidated balance sheet at March 31, 1998 included in the
Company's report on Form 10-Q for the quarterly period ended March 31, 1998
reflects both the balance sheet of the acquired company and certain preliminary
purchase accounting adjustments recorded as of that date by the Company. In
addition, the accompanying unaudited pro forma combined condensed balance sheet
includes the effect of the nonrecurring charge to operations for the fair value
of certain technology under research and development estimated at $75 million
and is reflected as a direct reduction to equity; the estimated incremental
liability associated with restructuring the Olsy business of $245 million; the
preliminary allocation of excess purchase price to identifiable intangible
assets; and the acquisition of OCJ which was completed April 7, 1998. In
connection with the acquisition of OCJ, Olivetti has agreed to reimburse the
Company for the unfunded pension liability at the acquisition date. The unfunded
pension liability at March 31, 1998 was $25.2 million and has been reflected as
a reduction of purchase price in the accompanying pro forma financial
statements.
<PAGE> 82
The accompanying unaudited pro forma combined condensed statements of operations
for the Company's nine months ended March 31, 1998 and its fiscal year ended
June 30, 1997 have been prepared to give effect to the acquisition of Olsy by
the Company. The unaudited pro forma combined statements of operations do not
include the nonrecurring charge to operations for the fair value of certain
purchased technology under research and development of $75 million, nor other
nonrecurring charges which may result from the transaction and the integration
of Olsy into the Company.
On May 12, 1998, the Company's Olsy subsidiary in Germany filed a petition in
local court to initiate bankruptcy proceedings. The pro forma financial
statements presented herein include the results of operations and financial
position of this subsidiary.
The unaudited pro forma information has been prepared assuming that the
acquisition, including OCJ, occurred at the beginning of the Company's most
recently completed fiscal year which began July 1, 1996. The pro forma
information is based on the historical financial statements of the company and
Olsy, giving effect to the transaction under the purchase method of accounting
and the assumptions and adjustments described in the accompanying notes to the
pro forma financial information. The pro forma information for the nine months
ended March 31, 1998 includes the unaudited historical results of Wang and Olsy
for the nine months then ended. The pro forma information for the fiscal year
ended June 30, 1997 includes the historical results of Wang plus the unaudited
historical results of Olsy for the four quarters ended September 30, 1997.
Accordingly, the unaudited results of operations for the Olsy quarter ended
September 30, 1997 are included in both the nine month and fiscal year periods.
Revenues and loss from continuing operations for that quarter were $509.2 and
$32.2, respectively.
The pro forma information is unaudited and does not purport to be indicative of
the financial position or results of operations that would have been attained
had the combination been in effect on the dates indicated, nor of future results
of operations of the combined Company. The unaudited pro forma financial
statements should be read in conjunction with the separate audited financial
statements and notes thereto of Wang Laboratories, Inc. included in its Annual
Report on Form 10-K for the year ended June 30, 1997, the unaudited financial
information included in Wang's Form 10-Q for the three and nine month periods
ended March 31, 1998, and the audited financial statements and notes thereto of
Olsy for the year ended December 31, 1996 and the nine months ended September
30, 1997 included as part of this Form 8-K/A.
<PAGE> 83
PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1998
(Unaudited)
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Wang (A) OCJ (B)(1) Adjustments Combined
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
- ------
CURRENT ASSETS
Cash and equivalents $ 238.7 $ 23.2 $ -- $ 261.9
Accounts receivable, net 790.8 50.6 -- 841.4
Inventories 188.7 9.0 -- 197.7
Other current assets 200.9 4.6 -- 205.5
-------- ------ ------ --------
1,419.1 87.4 -- 1,506.5
Depreciable assets, net 292.1 9.9 -- 302.0
Intangible assets, net 304.2 0.5 -- 304.7
Olsy-related intangible assets 105.4 -- 192.0 (2,3,4) 297.4
Other 117.8 -- (14.4)(2) 103.4
-------- ------ ------ --------
Total assets $2,238.6 $ 97.8 $177.6 $2,514.0
======== ====== ====== ========
LIABILITIES AND
- ---------------
STOCKHOLDERS' EQUITY
- --------------------
CURRENT LIABILITIES
Borrowings due within one year $ 120.3 $ 27.7 $ -- $ 148.0
Accounts payable 381.5 17.3 -- 398.8
Accrued expenses 242.1 34.4 -- 276.5
Other current liabilities 372.2 -- 245.0 (3) 617.2
Deferred service revenue 156.1 0.9 -- 157.0
-------- ------ ------ --------
Total current liabilities 1,272.2 80.3 245.0 1,597.5
-------- ------ ------ --------
Long-term liabilities 291.3 25.2 -- 316.5
-------- ------ ------ --------
Minority interest 6.7 -- -- 6.7
-------- ------ ------ --------
Series A Preferred Stock 86.0 -- -- 86.0
-------- ------ ------ --------
STOCKHOLDERS' EQUITY
Series B Preferred Stock 138.3 138.3
Common stock 0.5 -- -- 0.5
Capital in excess of par value 484.0 52.1 (52.1)(2) 484.0
Cumulative translation
adjustment (8.6) -- -- (8.6)
Retained earnings
(accumulated deficit) (31.8) (59.7) (15.3)(2,4) (106.8)
-------- ------ ------ --------
Total stockholders' equity 582.4 (7.6) (67.4) 507.4
-------- ------ ------ --------
Total liabilities and
stockholders' equity $2,238.6 $ 97.8 $177.6 $2,514.0
======== ====== ====== ========
</TABLE>
(A) As filed on Form 10-Q for the quarter ended March 31, 1998.
(B) Olivetti Corporation of Japan balance sheet, the purchase of which was not
completed by the Company until April 7, 1998. Accordingly, it was not
reported in the Company's March 31, 1998 balance sheet.
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE> 84
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1998
(Unaudited)
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Wang (A) Olsy (B)(5) Adjustments Combined
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenue $1,053.7 $1,640.7 $ -- $2,694.4
-------- -------- ------ --------
Costs and expenses
Cost of revenues 825.2 1,289.7 -- 2,114.9
Research and development 3.7 16.2 -- 19.9
Selling, general and
administrative 194.5 324.6 -- 519.1
Amortization of intangibles -
acquisition and fresh-start 21.1 22.4 25.6 (6) 69.1
Acquisition-related charges 12.5 -- -- 12.5
Restructuring charges 10.7 30.9 -- 41.6
-------- -------- ------ --------
Total costs and expenses 1,067.7 1,683.8 25.6 2,777.1
-------- -------- ------ --------
Operating loss (14.0) (43.1) (25.6) (82.7)
Other (income) expense (6.3) 9.8 3.7 (7) 7.2
-------- -------- ------ --------
Income (loss) before income taxes (7.7) (52.9) (29.3) (89.9)
Provision (benefit) for
income taxes 13.4 6.7 -- 20.1
-------- -------- ------ --------
Income (loss) from continuing
operations $ (21.1) $ (59.6) $(29.3) $ (110.0)
======== ======== ====== ========
Income (loss) from continuing
operations applicable to
common stockholders $ (31.7) $ (59.6) $(29.3) $ (120.6)
======== ======== ====== ========
Earnings per share
Basic $ (1.22) $ (2.56)
Diluted $ (1.22) $ (2.56)
Shares used to compute per
share amounts
Basic 39.8 47.1
Diluted 39.8 47.1
</TABLE>
(A) As filed on Form 10-Q for the quarter ended March 31, 1998.
(B) Includes Olsy and Olivetti Corporation of Japan historical data for the nine
months ended March 31, 1998.
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE> 85
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
(Unaudited)
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Wang (A) Olsy (B)(5) Adjustments Combined
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenue $1,268.4 $2,653.3 $ -- $3,921.7
-------- -------- ------ --------
Costs and expenses
Cost of revenues 961.0 2,074.1 -- 3,035.1
Research and development 3.7 32.9 -- 36.6
Selling, general and
administrative 243.2 603.5 -- 846.7
Amortization of intangibles -
acquisition and fresh-start 47.0 15.6 44.9 (6) 107.5
Acquisition-related charges 35.0 -- -- 35.0
Chapter 11-related charges 1.3 -- -- 1.3
Restructuring charges -- 46.1 -- 46.1
-------- -------- ------ --------
Total costs and expenses 1,291.2 2,772.2 44.9 4,108.3
-------- -------- ------ --------
Operating income (loss) (22.8) (118.9) (44.9) (186.6)
Other (income) expense (0.5) 30.8 4.9 (7) 35.2
-------- -------- ------ --------
Loss from continuing
Operations before income taxes (22.3) (149.7) (49.8) (221.8)
Provision (benefit) for
Income taxes (15.6) 13.3 -- (2.3)
-------- -------- ------ --------
Loss from continuing
Operations $ (6.7) $ (163.0) $(49.8) $ (219.5)
======== ======== ====== ========
Income (loss) from continuing
operations applicable to
common stockholders $ (20.8) $ (163.0) $(49.8) $ (233.6)
======== ======== ====== ========
Earnings per share
Basic $ (0.56) $ (5.08)
Diluted $ (0.56) $ (5.08)
Shares used to compute per
share amounts
Basic 37.2 46.0
Diluted 37.2 46.0
</TABLE>
(A) As filed on Form 10-K for the year ended June 30, 1997.
(B) For the twelve months ending September 30, 1997 (unaudited).
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE> 86
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) Historical balance sheet amounts for Olsy are presented in accordance with
U.S. generally accepted accounting principles and have been converted from
Italian Lira to U.S. Dollars using the exchange rate in effect for the
Company at March 31, 1998.
(2) To reclassify the $39.6 million of escrow related to the purchase of OCJ
included in Other Assets to Olsy-related intangible assets, net of $25.2
million for pension liabilities reimbursable by Olivetti, and to reclassify
net liabilities assumed of $7.6 million to Olsy intangible assets.
(3) To record estimated amounts relating to Olsy to be incurred as part of the
Company's restructuring plan.
(4) To write off the estimated value of in process research and development.
(5) Historical amounts reported in the statement of operations for Olsy are
presented in accordance with U.S. generally accepted accounting principles
and have been converted from Italian Lira to U.S. Dollars using the average
exchange rate for the period.
(6) To record amortization expense for the intangible assets represented by the
excess of purchase price over net assets acquired, established in
connection with the Company's acquisition of Olsy. The amortization expense
has been calculated based on preliminary estimates of the allocation of
purchase price to identifiable intangible assets. An independent valuation
is being performed and is expected to be complete at June 30, 1998.
(7) To record interest expense of $3.7 million and $4.9 million for the nine
months ended March 31, 1998 and the year ended June 30, 1997, respectively,
on the Company's credit facility, assuming an average daily outstanding
balance of $68.6 million, calculated at an interest rate of 7.125%.
<PAGE> 87
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WANG LABORATORIES, INC.
June 1, 1998 By: /s/ Franklyn A. Caine
-------------------------------
Franklyn A. Caine
Executive Vice President and
Chief Financial Officer
<PAGE> 88
EXHIBIT INDEX
23.1 Consent of Coopers & Lybrand S.p.A.
23.2 Consent of Arthur Andersen
23.3 Consent of Arthur Andersen
23.4 Consent of Arthur Andersen
23.5 Consent of Arthur Andersen
23.6 Consent of Price Waterhouse
23.7 Consent of Price Waterhouse
23.8 Consent of Price Waterhouse
<PAGE> 89
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Wang Laboratories Inc. on Forms S-3 (File Nos. 333-06611, 333-19789, 333-27969
and 333-27971) of our report dated February 24, 1998, except with respect to
notes 29(c) and 29(d), for which the dates are April 7, 1998 and May 12, 1998,
respectively, on our audits (which, as stated in our report, are based in part
on the reports of other auditors) of the combined consolidated financial
statements of Olivetti Solutions (an Integrated Business Unit of the Olivetti
Group) as of September 30, 1997 and December 31, 1996 and for the nine month and
one year periods then ended, which report is included in this Form 8-K/A.
Coopers & Lybrand, S.p.A.
Turin, Italy
May 27, 1998
<PAGE> 90
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
incorporated by reference in the registration statements of WANG Laboratories,
Inc. and subsidiaries on Form S-3 (File No. 333-06611) and on Form S-3/A (File
Nos. 333-19789, 333-27971 and 333-27969) of our report dated February 24, 1998
on the audited financial statements of Olsy Belgium S.A. and subsidiaries as of
September 30, 1997 and December 31, 1996, and for the nine months and year then
ended, respectively, which reports are included in this Form 8-K/A.
ARTHUR ANDERSEN
/s/ GUY WYGAERTS
- ----------------
GUY WYGAERTS
May 27, 1998
<PAGE> 91
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
incorporated by reference in the registration statements of WANG Laboratories,
Inc. and subsidiaries registration statements on Form S-3 (File No. 333-06611)
and on Form S-3/A (File Nos. 333-19789, 333-27971 and 333-27969) of our report
dated February 23, 1998 on the audited financial statements of Olivetti Espana,
S.A. as of September 30, 1997 and December 31, 1996, and for the nine-month and
year then ended, respectively, which reports are included in this Form 8-K/A.
ARTHUR ANDERSEN
/s/ Koro Usarraga
- -----------------
Koro Usarraga
May 26, 1998
<PAGE> 92
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
incorporated by reference in the registration statements of WANG Laboratories,
Inc. and subsidiaries registration statements on Form S-3 (File No. 333-06611)
and on Form S-3/A (File Nos. 333-19789, 333-27971 and 333-27969) of our report
dated November 7, 1997 on the audited financial statements of Olivetti
Corporation of Japan as of September 30, 1997, and for the nine months then
ended which report is included in this Form 8-K/A.
ARTHUR ANDERSEN
Tokyo, Japan
May 26, 1998
<PAGE> 93
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
incorporated by reference in the registration statements of WANG Laboratories,
Inc. and subsidiaries registration statements on Form S-3 (File No. 333-06611)
and on Form S-3/A (File Nos. 333-19789, 333-27971 and 333-27969) of our report
dated November 7, 1997 on the audited financial statements of Olivetti
Corporation of Japan as of December 31, 1996, and for the year then ended,
which report is included in this Form 8-K/A.
ARTHUR ANDERSEN
Tokyo, Japan
May 26, 1998
<PAGE> 94
EXHIBIT 23.6
Vienna, May 27, 1998
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Forms S-3 (No. 06611,
No. 19789, No. 27971 and No. 27969) of Wang Laboratories, Inc. of our report
dated February 24, 1998, except as to note 11 which is as of May 12, 1998,
relating to the consolidated financial statements of Olsy Austria Information
Systems GmbH, Vienna, Austria, which appears in the Current Report on Form 8-K/A
of Wang Laboratories, Inc. dated June 1, 1998.
PRICE WATERHOUSE AG
/s/ JOHANNES MORTL /s/ WOLFRAM STEINER
-------------------- -------------------
JOHANNES MORTL WOLFRAM STEINER
<PAGE> 95
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Forms S-3 (No. 06611,
No. 19789, No. 27971 and No. 27969) of Wang Laboratories, Inc. of our report
dated January 10, 1998 relating to the consolidated financial statements of
Olivetti (Hong Kong) Limited, which appears in the Current Report on Form 8-K/A
of Wang Laboratories, Inc. dated June 1, 1998.
/s/ Price Waterhouse
Price Waterhouse
Hong Kong
May 27, 1998
<PAGE> 96
EXHIBIT 23.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Forms S-3 (No. 06611,
No. 19789, No. 27971 and No. 27969) of Wang Laboratories, Inc. of our report
dated December 24, 1997 relating to the consolidated financial statements of
Olsy Africa (Proprietary) Limited, which appears in the Current Report on
Form 8-K/A of Wang Laboratories, Inc. dated June 1, 1998.
/s/ Price Waterhouse
May 27, 1998
<PAGE> 97
WANG LABORATORIES, INC.
- --------------------------------------------------------------------------------
DIRECTOR COMPENSATION AND STOCK OPTION PLAN
- --------------------------------------------------------------------------------
<PAGE> 98
WANG LABORATORIES, INC.
- --------------------------------------------------------------------------------
DIRECTOR COMPENSATION AND STOCK OPTION PLAN
- --------------------------------------------------------------------------------
Page
----
1. Purpose.............................................................. 1
2. Definitions.......................................................... 1
3. Administration....................................................... 4
4. Shares Available Under the Plan...................................... 4
5. Eligibility.......................................................... 5
6. Grants of Restricted Stock and/or Restricted Stock Units............. 5
7. Grants of Options.................................................... 7
8. Deferral of Fees in Deferred Shares; Other Deferrals................. 9
9. Terms of Deferral Accounts........................................... 10
10. Settlement of Deferral Accounts...................................... 11
11. Amendment and Termination............................................ 11
12. General Provisions................................................... 12
<PAGE> 99
WANG LABORATORIES, INC.
- --------------------------------------------------------------------------------
DIRECTOR COMPENSATION AND STOCK OPTION PLAN
- --------------------------------------------------------------------------------
1. PURPOSE. The purpose of this Director Compensation and Stock
Option Plan (the "Plan") is to provide Wang Laboratories, Inc. (the "Company")
with an additional means to attract, retain and compensate non-employee
directors and to enable such persons to increase their proprietary interest in
the Company. In furtherance of this purpose, the Plan authorizes the grant of
Restricted Stock or Restricted Stock Units, the grant of Options, and the grant
of Deferred Shares in lieu of fees.
2. DEFINITIONS. In addition to the terms defined in Section 1
above, the following capitalized terms used in the Plan have the respective
meanings set forth in this Section:
(a) "Administrator" means the administrative committee
specified in Section 3(b) to whom the Board has delegated the authority to take
action under the Plan.
(b) "Award" means a share of Restricted Stock, Restricted
Stock Unit, Option, or Deferred Share granted under the Plan.
(c) "Beneficiary" means any person (which may include
trusts and is not limited to one person) who has been designated by the
Participant in his or her most recent written beneficiary designation filed with
the Company to receive the benefits specified under the Plan in the event of the
Participant's death. If no Beneficiary has been designated who survives the
Participant's death, then Beneficiary means any person(s) entitled by will or,
in the absence thereof, the laws of descent and distribution to receive such
benefits.
(d) "Board" means the Board of Directors of the Company.
(e) "Change in Control" means the occurrence of any of
the following events after the effective date of the Plan:
(i) Any "person," as such term is used in Section 13(d)
and 14(d) of the Exchange Act (other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of
the Company, or any subsidiary owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company's then
outstanding securities;
(ii) During any period of two consecutive years (not
including any period prior to the adoption of the Plan), individuals
who at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect any transaction described
in subsections (i), (iii) or (iv) of this definition) whose election by
the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still
in office who were either directors at the beginning of the period or
<PAGE> 100
whose election or nomination for election was previously so approved
(collectively, the "Disinterested Directors"), cease for any reason to
constitute at least a majority thereof;
(iii) The stockholders of the Company have approved a
merger or consolidation of the Company with any other company and all
other required governmental approvals of such merger or consolidation
have been obtained, other than (A) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no person (as defined above) becomes
the beneficial owner (as defined above) of more than 50% of the
combined voting power of the Company's then outstanding securities; or
(iv) The stockholders of the Company have approved a
plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets, and all other required governmental approvals of
such transaction have been obtained.
(f) "Deferral Account" means the account established and
maintained by the Company for Restricted Stock Units or Deferred Shares credited
under Sections 6 or 8. A Deferral Account may include one or more subaccounts,
including a Restricted Stock Unit Account for forfeitable Restricted Stock Units
under Section 6 and a Deferred Share Account for nonforfeitable Deferred Shares.
The Deferral Account and subaccounts, and Restricted Stock Units and Deferred
Shares credited thereto, will be maintained solely as bookkeeping entries by the
Company to evidence unfunded obligations of the Company.
(g) "Deferred Share" means an Award which represents the
right to receive one share of Stock upon settlement, which Award is
non-forfeitable. In addition to Deferred Shares acquired under Section 8,
Restricted Stock Units as to which the Participant has elected further deferral
upon lapse of the risk of forfeiture will automatically become Deferred Shares
upon the lapse of the risk of forfeiture.
(h) "Disability" means a Participant's termination of
service as a director of the Company due to a physical or mental incapacity of
long duration which renders the Participant unable to perform the duties of a
director of the Company.
(i) "Effective Date" means November 24, 1998, the date
the Plan became effective.
(j) "Exchange Act" means the Securities Exchange Act of
1934, as amended. References to any provision of the Exchange Act or rule
thereunder shall include any successor provisions or rules.
(k) "Fair Market Value" means, with respect to Stock as
of a given date, unless otherwise specified by the Board, as follows: If the
Stock is listed or admitted to trading on a national securities exchange or the
Nasdaq National Market for at least 45 consecutive
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<PAGE> 101
trading days prior to the date, the average of the daily market prices (i.e.,
the closing price, regular way, on the trading day in question, or if no sale
takes place on such day the average of the closing bid and asked prices on such
day) of the Stock for the 30 consecutive trading days before the given date;
provided that the market prices of the Stock during such 30-day period shall be
appropriately adjusted to take into account the effect of any Common Stock
dividend or subdivision, combination or reclassification of the Stock that
occurs during such period.
(l) "Market Price" means, with respect to Stock at a
given date, if the Stock is listed or admitted to trading on a national
securities exchange or the Nasdaq National Market for at least 45 consecutive
trading days prior to the date, the average of the daily market prices (i.e.,
the closing price, regular way, on the trading day in question, or if no sale
takes place on such day the average of the closing bid and asked prices on such
day) of the Stock for the 40 consecutive trading days before the given date;
provided that the market prices of the Stock during such 40-day period shall be
appropriately adjusted to take into account the effect of any Stock dividend or
subdivision, combination or reclassification of the Stock that occurs during
such period.
(m) "Option" means the right, granted to a Participant
under Section 7, to purchase a specified number of shares of Stock at the
specified exercise price for a specified period of time under the Plan. All
Options will be non-qualified stock options.
(n) "Other Director Compensation" means fees payable to a
director in his or her capacity as such, other than Retainer Fees, for attending
meetings and other service on the Board and Board committees or otherwise.
(o) "Participant" means any person who, while a director,
has been granted an Award which remains outstanding.
(p) "Plan Year" means, with respect to a Participant, the
period commencing at the time of the Participant's election as a director at an
annual meeting of stockholders (or the election of a class of directors if the
Company then has a classified Board of Directors), or the director's initial
appointment to the Board if not at an annual meeting of stockholders, and
continuing until the close of business of the day preceding the next annual
meeting of stockholders.
(q) "Qualifying Separation" means a termination of the
Participant's service as a director due to the failure of the Participant to be
renominated or reelected as a director or any other discontinuance of
Participant's service as a director if (in each case) the Participant has
offered and remains willing to continue to serve as a director at the time the
discontinuance is
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<PAGE> 102
announced and the discontinuance is not due to the Participant's act of fraud or
intentional misrepresentation, or embezzlement, misappropriation or conversion
of assets or opportunities of the Company.
(r) "Restricted Stock" means shares of Stock granted
under Section 6, subject to a risk of forfeiture and restrictions on transfer
for a specified period.
(s) "Restricted Stock Unit" means an Award granted under
Section 6 which represents the right to receive one share of Stock upon
settlement, subject to a risk of forfeiture and restrictions on transfer for a
specified period.
(t) "Retainer Fees" means annual Board retainer fees and
Committee retainer fees, if any, payable to a director in his or her capacity as
such for service on the Board and Board committees. Unless otherwise indicated,
Retainer Fees mean the aggregate cash value of Retainer Fees, whether such
Retainer Fees are payable in cash or in property or on a current or deferred
basis.
(u) "Retirement" means a Participant's termination of
service as a director of the Company at or after age 60.
(v) "Stock" means Common Stock or any other equity
securities of the Company substituted or resubstituted for Stock under Section
12(b).
3. ADMINISTRATION.
(a) AUTHORITY. Both the Board and the Administrator
(subject to the ability of the Board to restrict the Administrator) shall
administer the Plan in accordance with its terms, and shall have all powers
necessary to accomplish such purpose, including the power and authority to
construe and interpret the Plan, to define the terms used herein, to prescribe,
amend and rescind rules and regulations, agreements, forms, and notices relating
to the administration of the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan. The Administrator may
perform any function of the Board under the Plan, except for grants of Awards
under Sections 6 and 7, adoption of material amendments to the Plan under
Section 11, or other functions from time to time specifically reserved by the
Board to itself. Any actions of the Board or the Administrator with respect to
the Plan shall be conclusive and binding upon all persons interested in the
Plan, except that any action of the Administrator will not be binding on the
Board. The Board and Administrator may each appoint agents and delegate thereto
powers and duties under the Plan, except as otherwise limited by the Plan.
(b) ADMINISTRATOR. The Administrator shall be the
Organization, Compensation and Nominating Committee of the Board of Directors or
such other committee as may designated by the Board. No member of the
Administrator shall be entitled to act on or decide any matter relating solely
to himself or herself or any of his or her rights or benefits under the Plan. No
bond or other security need be required of the Administrator or any member
thereof in any jurisdiction.
(c) LIMITATION OF LIABILITY. Each member of the Board and
the Administrator shall be entitled to, in good faith, rely or act upon any
report or other information furnished to him or her by any officer or other
employee of the Company or any subsidiary, the Company's
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<PAGE> 103
independent certified public accountants, or any legal counsel, executive
compensation consultant, or other professional retained by the Company to assist
in the administration of the Plan. To the maximum extent permitted by law, no
member of the Board or the Administrator, nor any person to whom ministerial
duties under the Plan have been delegated, shall be liable to any person for any
action taken or omitted in connection with the interpretation and administration
of the Plan.
4. SHARES AVAILABLE UNDER THE PLAN. The total number of shares of
Stock reserved and available for delivery under the Plan is 200,000, plus any
shares reserved for awards under the 1995 Director Stock Option Plan which have
not been and will not be issued under that Plan, in each case subject to
adjustment as provided in Section 12(b). Shares that may be delivered under the
Plan shall be authorized but unissued shares, treasury shares or shares acquired
in the market for the account of the Participant. For purposes of the Plan, if
an Option expires for any reason without having been exercised in full or
Restricted Stock, Restricted Stock Units, or Deferred Shares are forfeited or
cancelled without delivery of shares, the shares subject to the unexercised
portion of such Option or to the forfeited or cancelled Restricted Stock,
Restricted Stock Units, or Deferred Shares will again be available for delivery
under the Plan.
5. ELIGIBILITY. Each non-employee director of the Company who is
paid fees for service on the Board or a Board committee may participate in the
Plan, subject to the terms hereof. No person other than those specified in this
Section 5 will be eligible to participate in the Plan. If Participants are
permitted to participate in the Plan on an elective basis, the Administrator
will notify each person of such eligibility to participate not later than 15
days (or such other period as may be determined by the Administrator) prior to
any deadline for filing an election form.
6. GRANTS OF RESTRICTED STOCK AND/OR RESTRICTED STOCK UNITS.
Restricted Stock and/or Restricted Stock Units shall be granted to non-employee
directors in accordance with policies established from time to time by the Board
specifying the classes of directors to be granted such Awards, the number of
shares of Restricted Stock or Restricted Stock Units to be granted, and the time
or times at which such Awards shall be granted. The foregoing notwithstanding,
in addition to Restricted Stock or Restricted Stock Units granted with a
corresponding reduction in the amount of cash Retainer Fees or Other Director
Compensation, the maximum number of shares of Restricted Stock and Restricted
Stock Units that may be granted to a single director in a given year without
such a corresponding reduction shall be 50% of the number that could have been
granted with such a corresponding reduction.
(a) INITIAL POLICY -- GRANT OF RESTRICTED
STOCK/RESTRICTED STOCK UNITS. The initial policy with respect to Awards under
this Section 6, effective as of the Effective Date and continuing until modified
or revoked by the Board, shall be as follows:
(i) ANNUAL GRANT IN LIEU OF CASH RETAINER FEES. At the
date of each annual meeting of stockholders at which a director is
elected or reelected as a member of the Board or at which members of
another class of directors are elected or reelected (if the Company
then has a classified Board), such director, if he or she is a
non-employee director eligible to participate at that date, shall be
granted the number of shares of Restricted Stock and/or Restricted
Stock Units determined by dividing the director's Retainer Fees for
that year by the Fair Market Value of a share of Stock. This grant of
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<PAGE> 104
Restricted Stock and/or Restricted Stock Units shall be in lieu of
payment of any Retainer Fees to such director for the Plan Year which
commences at the date of grant.
(ii) FORM OF GRANT; DELAYED GRANT OF RESTRICTED STOCK. The
eligible director will be granted Restricted Stock, except if and to
the extent that he or she has elected, by filing an appropriate
election form with the Company prior to such annual meeting of
stockholders, to be granted Restricted Stock Units rather than
Restricted Stock. Unless otherwise determined by the Administrator (and
subject to compliance with applicable requirements of the Delaware
General Corporation Law), if shares of Restricted Stock are to be
granted, the actual shares of Stock shall not be issued until five days
after the effective date of the grant; the Participant's service to the
Company for such five-day period shall be deemed to have a value not
less than the aggregate par value of the shares so issued, and shall
constitute lawful consideration for the issuance of such shares.
(iii) NEWLY ELECTED OR APPOINTED DIRECTORS. Any person who
is first elected or appointed as a director at a date other than an
annual meeting of stockholders will be compensated in cash or otherwise
in accordance with the regular compensation policy for non-employee
directors, and will not be granted Restricted Stock or Restricted Stock
Units under the policy set forth in this Section 6(a).
(b) TERMS OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS
GRANTED UNDER SECTION 6. Restricted Stock and Restricted Stock Units granted
under this Section 6 shall be subject to the following terms and conditions:
(i) VESTING AND FORFEITURE. The Board may establish terms
regarding the times at which Restricted Stock and Restricted Stock
Units shall become vested and non- forfeitable. Unless otherwise
determined by the Board, an Award granted under this Section 6 and not
previously forfeited shall become vested and non-forfeitable as to all
of the shares of Restricted Stock or Restricted Stock Units at the
close of business on the day preceding the annual meeting of
stockholders in the third year following the year of grant of such
Award; provided, however, that an Award of Restricted Stock or
Restricted Stock Units not previously vested or forfeited shall vest
and become non-forfeitable immediately upon (A) a Change in Control
(unless otherwise determined by the Board and so specified in the
Restricted Stock instrument), (B) termination of the Participant's
service as a director due to death, Disability or Retirement, or (C) a
Qualifying Separation of the Participant at or after the date of the
annual meeting of stockholders in the year following the year of grant;
and, provided further, that a pro rata portion of the Award of
Restricted Stock or Restricted Stock Units not previously vested or
forfeited shall vest and become non-forfeitable upon a Qualifying
Separation of the Participant prior to the date of the annual meeting
in the year following the year of grant determined by multiplying the
number of shares of Restricted Stock or Restricted Stock Units by a
fraction the numerator of which is the number of days between the date
of grant and the date of the Qualifying Separation and the denominator
of which is 365. Unless otherwise determined by the Board, an Award of
Restricted Stock or Restricted Stock Units (or portion thereof) not
vested at or before the date of termination of Participant's service as
a director will cease to vest and will be forfeited upon the
termination of the Participant's service.
(ii) DIVIDENDS ON RESTRICTED STOCK. Unless otherwise
determined by the Board, dividends on Restricted Stock declared and
paid prior to the vesting and lapse of
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<PAGE> 105
the risk of forfeiture on such Restricted Stock shall be automatically
reinvested in additional shares of Restricted Stock, which shall be
subject to the same terms, including risk of forfeiture, as the
Restricted Stock on which the dividend was paid.
(iii) DIVIDEND EQUIVALENTS ON RESTRICTED STOCK UNITS.
Dividend equivalents will be credited on Restricted Stock Units in
accordance with Section 9(a). Unless otherwise determined by the Board,
Restricted Stock Units credited as a result of dividend equivalents
under Section 9(a) shall be subject to the same terms, including risk
of forfeiture, as the Restricted Stock Units with respect to which the
dividend equivalents were credited.
(iv) AWARDS NONTRANSFERABLE. Restricted Stock and
Restricted Stock Units shall be nontransferable by the Participant at
any time that the Award remains subject to a risk of forfeiture.
(v) CERTIFICATES EVIDENCING RESTRICTED STOCK; SETTLEMENT.
Unless otherwise determined by the Administrator, the Company will
retain possession of certificates evidencing Restricted Stock. The
Company may place an appropriate legend on such certificates,
reflecting the restrictions imposed under the Plan. The Participant
will, upon request, execute and deliver to the Company a stock power
authorizing the transfer of such certificates to the Company in the
event of forfeiture. Upon the lapse of the risk of forfeiture and other
restrictions on the Restricted Stock, the Company will promptly deliver
such shares in certificate form to a Participant (or his or her
Beneficiary) or to a nominee for the account of the Participant (or his
or her Beneficiary), or in such other manner as the Administrator may
determine. Any share certificates so delivered shall be free of legends
(other than those required under the federal and state securities laws,
if any).
(vi) SETTLEMENT OF RESTRICTED STOCK UNITS. Restricted
Stock Units will be settled promptly following the lapse of the risk of
forfeiture and other restrictions, unless such settlement is deferred
by the Participant. A Participant may elect to defer settlement of
Restricted Stock Units in accordance with Section 9(b). Settlement of
Restricted Stock Units will be made in the manner provided in Section
10(a).
7. GRANTS OF OPTIONS. Options shall be granted to non-employee
directors in accordance with policies established from time to time by the Board
specifying the classes of directors to be granted such Options, the number of
shares to be subject to each Option, and the time or times at which Options
shall be granted. The foregoing notwithstanding, the maximum number of shares
that may be subject to Options granted to a single director in a given year
shall not exceed the greater of 10,000 or three times the number of shares of
Restricted Stock or Restricted Stock Units that could be granted to such
director under Section 6 for that year, in each case subject to adjustment in
accordance with Section 12(b).
(a) INITIAL POLICY -- GRANT OF OPTIONS. The initial
policy with respect to Options granted under this Section 7, effective as of the
Effective Date and continuing until modified or revoked by the Board, shall be
as follows:
(i) PERFORMANCE OPTIONS. At the date of each annual
meeting of stockholders at which a director is automatically granted
Restricted Stock or Restricted Stock Units
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<PAGE> 106
under Section 6(a), such director shall be automatically granted an
Option (designated a "Performance Option") to purchase a number of
shares equal to two times the number of shares of Restricted Stock and
Restricted Stock Units granted at that date to the director.
(ii) INITIAL AND ANNUAL OPTIONS. At the close of business
on the date a person is first elected or appointed as a director, such
director, if he or she is then eligible under Section 5, shall be
automatically granted an Option (designated an "Initial Option") to
purchase 6,500 shares, subject to adjustment as provided in Section
12(b). At the close of business on March 31 of each year (beginning
March 31, 1999), each director who is then eligible under Section 5 and
who attended in the fiscal year ending the prior December 31 at least
75% of the aggregate of (A) the number of Board of Directors meetings
held in such fiscal year at times during which he or she served and (B)
the number of meetings held in such fiscal year by committees of the
Board of Directors on which he or she served, shall be automatically
granted an Option (designated an "Annual Option") to purchase 6,500
shares, subject to adjustment as provided in Section 12(b); provided,
however, that no Annual Option will be granted to a director if within
the [three months] prior thereto he or she was granted an Initial
Option under the Plan.
(b) TERMS OF OPTIONS GRANTED UNDER SECTION 7. Each Option
granted under this Section 7 shall be subject to the following terms and
conditions:
(i) EXERCISE PRICE. The exercise price per share of Stock
purchasable under an Option will be equal to 100% of the Fair Market
Value of Stock on the date of grant of the Option.
(ii) OPTION TERM. Each Option shall expire at the earlier
of (A) ten years after the date of grant or (B) the date as the Option
may no longer be exercised and cannot, by its terms, thereafter become
exercisable, or otherwise terminates under Section 7(b)(iii).
(iii) VESTING AND EXERCISABILITY. The Board may establish
terms regarding the times at which Options granted under this Section 7
shall become vested and exercisable.
(A) Unless otherwise determined by the Board, a
Performance Option granted under this Section 7 and not
previously forfeited shall vest and become exercisable by a
Participant in full at the earlier of (A) the day prior to the
annual meeting of stockholders in the seventh year after the
year of grant or (B) the earliest date, following the date of
grant, on which the Market Price equals or exceeds an amount
(rounded to the next higher whole dollar) equal to 1.667 times
the exercise price of the option or such higher amount as
determined by the Board; provided, however, that a Performance
Option not previously vested or forfeited shall vest and
become exercisable immediately upon a Change in Control
(unless otherwise determined by the Board and so specified in
the Option grant instrument); and, provided further, that a
portion of the Performance Option not previously vested or
forfeited shall vest and become exercisable immediately upon
(A) termination of the Participant's service as a director due
to death, Disability or Retirement, or (B) a Qualifying
Separation of the Participant, with such portion determined by
multiplying the number of shares subject to the Performance
Option by a fraction the numerator of which is the number of
months (rounded to the next full month) between the date of
grant and the date of the termination of service and the
denominator of which is 84. In the event of termination of a
Participant's service as a director, any portion of a
Performance
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Option that is vested and exercisable after such termination
will remain exercisable until the earlier of ten years after
the date of grant or the one year following the death of the
Participant.
(B) Unless otherwise determined by the Board, an
Initial or Annual Option granted under this Section 7 and not
previously forfeited shall vest and become exercisable by a
Participant as to one-third of the shares subject to such
Option on each of the first three anniversaries of the date of
grant; provided, however, that an Initial or Annual Option not
previously vested or forfeited shall vest and become
exercisable immediately upon a Change in Control (unless
otherwise determined by the Board and so specified in the
Option grant instrument) or termination of the Participant's
service as a director due to death or Disability. In the event
of termination of a Participant's service as a director, any
portion of an Initial or Annual Option that is vested and
exercisable after such termination, including portions that
become vested and exercisable after Retirement (as provided in
Section 7(b)(iii)(C)), shall terminate at the earliest of one
year following termination due to Disability, one year
following death, immediately upon termination due to any act
of fraud or intentional misrepresentation, or embezzlement,
misappropriation or conversion of assets or opportunities of
the Company (an "Adverse Termination"), 30 days following any
termination other than due to death, Disability, Retirement,
or an Adverse Termination, or the date ten years after the
date of grant.
(C) Unless otherwise determined by the Board, a
Performance, Initial, or Annual Option (or portion thereof)
not vested at or before the date of termination of
Participant's service as a director will cease to vest and
will be forfeited upon the termination of the Participant's
service; provided, however, that in the event of a
Participant's Retirement, the Participant's Initial and Annual
Option(s) shall continue to vest and become exercisable in
accordance with Section 7(b)(iii)(B), except that such
Option(s) will immediately vest and become exercisable upon a
Change in Control (unless otherwise determined by the Board
and so specified in the Option grant instrument) or the death
of the Participant.
(iv) PAYMENT. The exercise price of an Option shall be
paid to the Company either in cash or by the surrender of Stock, or any
combination thereof, or in such other form or manner as may be
established by the Administrator, unless otherwise determined by the
Board.
8. DEFERRAL OF FEES IN DEFERRED SHARES; OTHER DEFERRALS. The
Board may adopt compensation policies which permit a director of the Company who
is eligible under Section 5 to elect, in accordance with Section 8(a), to be
paid Retainer Fees and Other Director Compensation in the form of Deferred
Shares under Section 8(b).
(a) ELECTIONS. A director shall elect to participate and the terms
of such participation by filing an election with the Company prior to the
beginning of a Plan Year or at such other date as may be specified by the
Administrator, provided that any date so specified shall ensure effective
deferral of taxation and otherwise comply with applicable laws. The
Administrator will provide a form of election which will permit a director to
make appropriate elections with respect to all relevant matters under this
Section 8. The Administrator will also adopt appropriate rules covering the
effect and irrevocability of Participant elections.
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(b) DEFERRAL OF RETAINER FEES AND OTHER DIRECTOR
COMPENSATION IN THE FORM OF DEFERRED SHARES. If a Participant has elected to
defer receipt of a specified amount of Retainer Fees or Other Director
Compensation in the form of Deferred Shares, a number of Deferred Shares shall
be credited to the Participant's Deferral Account, as of the date such Retainer
Fees or Other Director Compensation otherwise would have been payable to the
Participant but for such election to defer, equal to (i) such amount otherwise
payable divided by (ii) the Fair Market Value of a share of Stock at that date.
Deferred Shares credited under this Section 8(b) shall be subject to the terms
and conditions of Deferred Shares specified in Section 9. The right and interest
of each Participant in Deferred Shares credited to the Participant's Deferral
Account under this Section 8(b) at all times will be nonforfeitable.
(c) DEFERRAL OF CERTAIN OPTION SHARES. Upon any exercise
of an Option or an option granted under any other plan or program of the Company
by a non-employee director, if the exercise price of such option is paid by
surrender of shares of Stock to the Company, the director may elect to defer
receipt of all or a portion of the shares deliverable upon exercise of the
option in excess of the number surrendered in payment of the exercise price. In
such case, the number of shares deferred shall be credited as Deferred Shares to
the Participant's Deferral Account.
9. TERMS OF DEFERRAL ACCOUNTS.
(a) DIVIDEND EQUIVALENTS ON RESTRICTED STOCK UNITS AND
DEFERRED SHARES. Dividend equivalents will be credited on Restricted Stock
Units, in the form of additional Restricted Stock Units, and on Deferred Shares,
in the form of additional Deferred Shares, as follows:
(i) CASH AND NON-SHARE DIVIDENDS. If the Company declares
and pays a dividend on Stock in the form of cash or property other than
shares of Stock, then a number of additional Restricted Stock Units or
Deferred Shares shall be credited to a Participant's Deferral Account
as of the payment date for such dividend equal to (i) the number of
Restricted Stock Units and Deferred Shares, respectively, credited to
the Account as of the record date for such dividend, multiplied by (ii)
the amount of cash plus the Fair Market Value of any property other
than shares actually paid as a dividend on each share at such payment
date, divided by (iii) the Fair Market Value of a share of Stock at
such payment date.
(ii) SHARE DIVIDENDS AND SPLITS. If the Company declares
and pays a dividend on Stock in the form of additional shares of Stock,
or there occurs a forward split of Stock, then a number of additional
Restricted Stock Units or Deferred Shares shall be credited to the
Participant's Deferral Account as of the payment date for such dividend
or forward Stock split equal to (i) the number of Restricted Stock
Units and Deferred Shares, respectively, credited the Account as of the
record date for such dividend or split multiplied by (ii) the number of
additional Shares actually paid as a dividend or issued in such split
in respect of each Share.
(b) ELECTIONS AS TO SETTLEMENT. A Participant's Deferral
Account will be settled, with respect to Restricted Stock Units credited thereto
and not forfeited, at the later of the date
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the risk of forfeiture of such Restricted Stock Units lapses or such time or
times as may have been validly elected by the Participant under this Section
9(b), subject to accelerated settlement under Section 10. In addition, a
Participant's Deferral Account will be settled, with respect to Deferred Shares
credited thereto, at such time or times as may have been validly elected by the
Participant under this Section 9(b), subject to accelerated settlement under
Section 10. To make an election as to the time of settlement of a Deferral
Account (including to defer settlement of Restricted Stock Units), the
Participant, while still a director of the Company, shall file an election with
the Administrator specifying the time or times at which the Participant's
Deferral Account will be settled at specified future dates (including following
the Participant's termination of service as a director of the Company), and
whether distribution will be in a single lump sum or in a number of annual
installments not exceeding ten.
(i) ELECTION FORMS. Elections under the Plan shall be
made in writing on such form or forms as may be specified from time to
time by the Administrator.
(ii) MODIFYING ELECTIONS. A Participant may modify a prior
election as to the time at which a Participant's Deferral Account will
be settled at any time prior to the earlier of one year prior to the
date of settlement or the date the Participant ceases to serve as a
director of the Company, subject to such requirements as may be
specified by the Administrator. Such modification shall be made by
filing a new election with the Administrator. The foregoing
notwithstanding, the Administrator may disapprove or limit elections
under this Section 9(b) in order to ensure that the Participant will
not be deemed to have constructively received compensation in respect
of the Participant's Deferral Account prior to settlement.
(c) STATEMENTS. The Administrator will furnish statements
to each Participant reflecting the amounts credited to a Participant's Deferral
Account, transactions therein, and other related information from time to time,
in the Administrator's discretion.
(d) FRACTIONAL SHARES. The amount of Restricted Stock
Units and Deferred Shares credited to a Deferral Account shall include
fractional shares calculated to at least three decimal places.
10. SETTLEMENT OF DEFERRAL ACCOUNTS. The Company will settle a
Participant's Deferral Account by making one or more distributions to the
Participant (or his or her Beneficiary, following Participant's death) at the
time or times, in a lump sum or installments, as specified in accordance with
Section 9(b); provided, however, that a Deferral Account will be settled on an
accelerated basis in accordance with Sections 10(b), (c), and (d).
(a) FORM OF DISTRIBUTION. Distributions in respect of a
Participant's Deferral Account shall be made only in shares of Stock, together
with cash in lieu of any fractional share remaining at a time that less than one
whole Deferred Share is credited to such Deferral Account. Shares may be
delivered in certificate form to a Participant (or his or her Beneficiary) or to
a nominee for the account of the Participant (or his or her Beneficiary), or in
such other manner as the Administrator may determine.
(b) DEATH. If a Participant ceases to serve as a director
due to death or dies prior to distribution of all amounts from his or her
Deferral Account, the Company shall make a
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<PAGE> 110
single lump-sum distribution in settlement of unforfeited Restricted Stock Units
and Deferred Shares to the Participant's Beneficiary. Any such distribution
shall be made as soon as practicable following notification to the Company of
the Participant's death.
(c) FINANCIAL EMERGENCY AND OTHER PAYMENTS. Other
provisions of the Plan notwithstanding, if, upon the written application of a
Participant, the Board determines that the Participant has a financial emergency
of such a substantial nature and beyond the Participant's control that
settlement of Deferred Shares under the Plan is warranted, the Board may direct
the delivery of shares to the Participant in settlement of all or a portion of
the Deferred Share balance in the Participant's Deferral Account and the time
and manner of such payment.
(d) CHANGE IN CONTROL. In the event of a Change in
Control, distributions in settlement of any Deferral Account (including a
Deferral Account with respect to which one or more installment payments have
previously been made) shall be made promptly but in no event more than 15
business days following such Change in Control.
11. AMENDMENT AND TERMINATION. The Board may, with prospective or
retroactive effect, amend, alter, suspend, discontinue, or terminate the Plan at
any time without the consent of Participants, stockholders, or any other person;
provided, however, that, without the consent of a Participant, no such action
shall materially and adversely affect the rights of such Participant with
respect to any rights to payment of amounts credited to such Participant's
Deferral Account; and provided further, that any amendment or alteration to the
Plan shall be subject to the approval of the Company's stockholders not later
than the annual meeting next following such Board action if such stockholder
approval is required by any federal or state law or regulation or the rules of
any stock exchange or automated quotation system on which the Stock may then be
listed or quoted, and the Board may otherwise, in its discretion, determine to
submit other such changes to the Plan to stockholders for approval.
12. GENERAL PROVISIONS.
(a) LIMITS ON TRANSFERABILITY. Awards and all other
rights under the Plan will not be transferable by a Participant except by will
or the laws of descent and distribution, or to a Beneficiary in the event of a
Participant's death, and will not otherwise be subject to alienation,
anticipation, encumbrance, garnishment, attachment, levy, execution or other
legal or equitable process, nor subject to the debts, contracts, liabilities or
engagements, or torts of any Participant or his or her Beneficiary. Any attempt
to alienate, sell, transfer, assign, pledge, garnish, attach or take any other
action subject to legal or equitable process or encumber or dispose of any
interest in the Plan shall be void. The foregoing notwithstanding, the
Administrator may permit a Participant to transfer Options, Deferred Shares, and
related rights to one or more trusts, partnerships, or family members during the
lifetime of the Participant solely for estate planning purposes, but only if and
to the extent then consistent with the registration of any offer and sale of
shares related thereto on Form S-8, Form S-3, or such other registration form of
the Securities and Exchange Commission as may then be filed and effective with
respect to the Plan. The Company may rely upon the Beneficiary designation last
filed in accordance with this Section 12(a).
(b) ADJUSTMENTS. In the event that any large, special and
non-recurring dividend or other distribution (whether in the form of cash,
Stock, or other property),
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recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Stock
such that an adjustment is determined by the Board to be appropriate in order to
prevent dilution or enlargement of a Participant's rights under the Plan, then
the Board shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of shares of Stock reserved and available for delivery
under the Plan and to be subject to Awards thereafter granted or credited, (ii)
the number of shares subject to Awards automatically granted under any existing
Board policy under Section 6 or 7 of the Plan, (iii) the number and kind of
shares of Stock deliverable upon exercise of outstanding Options, and the
exercise price per share thereof (provided that no fractional shares will be
delivered upon exercise of any Option), (iv) the number and kind of shares of
Stock to be delivered upon settlement of outstanding Restricted Stock Units and
Deferred Shares (taking into account any Restricted Stock Units and Deferred
Shares credited as dividend equivalents under Section 9(a)), and (v) the number
and kind of shares outstanding as Restricted Stock.
(c) RECEIPT AND RELEASE. Payments to any Participant or
Beneficiary in accordance with the provisions of the Plan shall, to the extent
thereof, be in full satisfaction of all claims for the compensation deferred and
relating to the Deferral Account to which the payments relate against the
Company, the Board, or the Administrator, and the Administrator may require such
Participant or Beneficiary, as a condition to such payments, to execute a
receipt and release to such effect. In the case of any payment under the Plan of
less than all amounts then credited to a Deferral Account in the form of
Deferred Shares, the amounts paid shall be deemed to relate to the Deferred
Shares credited to the Account at the earliest time.
(d) UNFUNDED STATUS OF PLAN; CREATION OF TRUSTS. The Plan
is intended to constitute an "unfunded" plan for deferred compensation and
Participants shall rely solely on the unsecured promise of the Company for
payment hereunder. With respect to any payment not yet made to a Participant
under the Plan, nothing contained in the Plan shall give a Participant any
rights that are greater than those of a general unsecured creditor of the
Company; PROVIDED, HOWEVER, that the Board may authorize the creation of trusts
or make other arrangements to meet the Company's obligations under the Plan,
which trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan unless the Board otherwise determines with the consent of
each affected Participant.
(e) COMPLIANCE. The Company shall have no obligation to
deliver shares under the Plan until all legal and contractual obligations of the
Company relating to establishment of the Plan and such delivery shall have been
complied with in full. In addition, the Company shall impose such restrictions
on Stock delivered to a Participant hereunder and any other interest
constituting a security as it may deem advisable in order to comply with the
Securities Act of 1933, as amended, the requirements of any stock exchange or
automated quotation system upon which the Stock is then listed or quoted, any
state securities laws applicable to such a transfer, any provision of the
Company's Certificate of Incorporation or Bylaws, or any other law, regulation,
or binding contract to which the Company is a party.
(f) OTHER PARTICIPANT RIGHTS. No Participant shall have
any of the rights or privileges of a stockholder of the Company under the Plan,
including as a result of the grant of an Option or crediting of Restricted Stock
Units or Deferred Shares to a Deferral Account, or the creation of any Trust and
deposit of Stock therein, except at such time as such Option may have been duly
exercised or Stock may be actually delivered in settlement of a Deferral
Account,
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<PAGE> 112
except that a Participant granted Restricted Stock shall have rights of a
stockholder except to the extent that those rights are limited by the terms of
the Plan and the agreement relating to the Restricted Stock. No provision of the
Plan, document relating to the Plan, or transaction hereunder shall confer upon
any Participant any right to continue to serve as a director of the Company or
in any other capacity with the Company or a subsidiary or to be nominated for
reelection as a director, or interfere in any way with the right of the Company
to increase or decrease the amount of any compensation payable to such
Participant. Subject to the limitations set forth in Section 12(a) hereof, the
Plan shall inure to the benefit of, and be binding upon, the parties hereto and
their successors and assigns.
(g) CONTINUED SERVICE AS AN EMPLOYEE. If a Participant
ceases to serve as a director and, immediately thereafter, is employed by the
Company or any subsidiary, then such Participant will not be deemed to have
ceased to serve as a director at that time, and his or her continued employment
by the Company or any subsidiary will be deemed to be continued service as a
director or chair or a member of a Board committee; PROVIDED, HOWEVER, that, for
purposes of Section 5, such former director will not be deemed to be a
non-employee director eligible for further grants of Awards.
(h) GOVERNING LAW. The validity, construction, and effect
of the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of laws, and applicable provisions of federal
law.
(i) LIMITATION. A Participant and his or her Beneficiary
shall assume all risk in connection with any decrease in value of Awards, and
neither the Company, the Board nor the Administrator shall be liable or
responsible therefor.
(j) CONSTRUCTION. The captions and numbers preceding the
sections of the Plan are included solely as a matter of convenience of
reference and are not to be taken as limiting or extending the meaning of any of
the terms and provisions of the Plan. Whenever appropriate, words used in the
singular shall include the plural or the plural may be read as the singular.
(k) SEVERABILITY. In the event that any provision of the
Plan shall be declared illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining provisions of the Plan but shall be
fully severable, and the Plan shall be construed and enforced as if said illegal
or invalid provision had never been inserted herein.
(l) NONEXCLUSIVITY OF THE PLAN. The adoption of the Plan
by the Board shall not be construed as creating any limitation on the power of
the Board to adopt such other compensatory arrangements for directors as it may
deem desirable.
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<PAGE> 113
(m) STOCKHOLDER APPROVAL. The Plan is conditioned upon
stockholder approval of the plan at the Company's 1998 Annual Meeting of
Stockholders, by a vote sufficient to meet the requirements of the Nasdaq
National Market and any other laws, regulations, and obligations of the Company
applicable to the Plan. The Plan shall be null and void if the Plan is not so
approved by the Company's stockholders. Other provisions of the Plan
notwithstanding, no shares will be issued in respect of any Award until such
time as the Company's stockholders have approved the Plan.
As adopted by the Board of Directors of the
Company on July 22, 1998
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<PAGE> 114
WANG LABORATORIES, INC.
ANNUAL MEETING OF STOCKHOLDERS -- NOVEMBER 24, 1998
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 24, 1998 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 II Directors:
MARCIA J. HOOPER / / FOR / / WITHHOLD AUTHORITY
JOSEPH J. KROGER / / FOR / / WITHHOLD AUTHORITY
JOHN P. WHITE / / FOR / / WITHHOLD AUTHORITY
2. To approve the Amendment and Restatement of the Director Stock Option
Plan of the Company.
/ / FOR / / AGAINST / / ABSTAIN
3. To approve an Amended and Restated Certificate of Incorporation of the
Company.
/ / FOR / / AGAINST / / ABSTAIN
(Continued on other side)
<PAGE> 115
(Continued from other side)
4. To approve the issuance of additional shares of Common Stock to Ing. C.
Olivetti S.p.A.
/ / 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: ___________________________, 1998
----------------------------------------
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.
