<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-5677
Wang Laboratories, Inc.
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2192707
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
290 Concord Road
Billerica, Massachusetts 01821-4130
------------------------ ----------
(Address of principal executive offices) (Zip Code)
(978) 625-5000
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
l934 during the preceding twelve months, and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes /X/ No / /
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practical date (March 31, 1999):
Common stock, par value $0.01 per share 47,045,406 shares
<PAGE> 2
WANG LABORATORIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION PAGE NO.
<S> <C>
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998 3
Consolidated Statements of Operations -
Three months ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows -
Three months ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements -
March 31, 1999 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. Quantitative and Qualitative
Disclosures about Market Risk 29
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 30
SIGNATURE 35
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
WANG LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- -----------
(unaudited)
(Amounts in millions)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and equivalents $ 182.0 $ 301.3
Accounts receivable, net of allowance for doubtful accounts of
$23.9 million at March 31, 1999 and $25.8 million at December 31, 1998 870.2 881.7
Inventories:
Finished products 119.2 136.1
Raw materials and work-in-process 15.8 17.3
Service parts and supplies 20.4 15.1
-------- --------
Total inventories 155.4 168.5
Other current assets 157.6 156.8
Total current assets 1,365.2 1,508.3
-------- --------
Depreciable assets, net of accumulated depreciation of $162.2 million at
March 31, 1999 and $144.9 million at December 31, 1998 235.6 236.0
Intangible assets, net of accumulated amortization of $114.9 million at
March 31, 1999 and $96.6 million at December 31, 1998 468.2 502.0
Other 126.2 123.5
-------- --------
Total assets $2,195.2 $2,369.8
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings due within one year $ 29.7 $ 34.9
Accounts payable 421.7 538.1
Accrued expenses 218.7 226.2
Other current liabilities 344.8 434.8
Deferred service revenue 200.5 173.7
-------- --------
1,215.4 1,407.7
Total current liabilities -------- --------
Long-term liabilities 599.0 516.7
-------- --------
Commitments and contingencies
Minority interest 3.7 10.7
-------- --------
Series A Preferred Stock 86.7 86.5
-------- --------
STOCKHOLDERS' EQUITY
Series B Preferred Stock, $0.01 par value, 143,750 shares authorized and
outstanding, liquidation preference of $143.8 million 138.3 138.3
Common stock, $0.01 par value, 100,000,000 shares authorized; outstanding
shares: 47,045,406 at March 31, 1999 and 46,334,047 at December 31, 1998 0.5 0.5
Capital in excess of par value 524.9 522.5
Accumulated other comprehensive loss (17.0) (11.0)
Accumulated deficit (356.3) (302.1)
-------- --------
Total stockholders' equity 290.4 348.2
-------- --------
Total liabilities and stockholders' equity $2,195.2 $2,369.8
======== ========
</TABLE>
See notes to the consolidated financial statements.
<PAGE> 4
WANG LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
---- ----
(Amounts in millions, except per share data)
REVENUES
<S> <C> <C>
Services $ 492.0 $ 285.3
Products 297.0 117.3
------- -------
Total revenues 789.0 402.6
------- -------
COSTS AND EXPENSES
Cost of services 389.7 225.0
Cost of products 249.0 93.3
Research and development 3.2 2.2
Selling, general and administrative 126.6 91.5
Amortization of acquisition-related intangibles 18.1 8.5
Acquisition-related charges 48.3 14.0
Restructuring charges - 9.2
------ -------
Total costs and expenses 834.9 443.7
------ -------
OPERATING LOSS (45.9) (41.1)
------ -------
OTHER (INCOME) EXPENSE
Interest (income) expense, net 6.0 3.7
Other (income) expense, net (0.7) 0.1
------- -------
Total other expense 5.3 3.8
------- -------
LOSS BEFORE INCOME TAXES AND
MINORITY INTERESTS (51.2) (44.9)
Provision for income taxes 3.2 -
------- -------
LOSS FROM OPERATIONS BEFORE MINORITY INTERESTS (54.4) (44.9)
Minority Interests in Loss of Consolidated Subsidiaries 0.2 -
------- -------
NET LOSS (54.2) (44.9)
Dividends and accretion on preferred stock (3.5) (3.5)
------- -------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (57.7) $ (48.4)
======= =======
PER SHARE AMOUNTS
Basic $ (1.25) $ (1.22)
Diluted $ (1.25) $ (1.22)
SHARES USED TO COMPUTE PER SHARE AMOUNTS
Basic 46.2 39.8
Diluted 46.2 39.8
</TABLE>
See notes to the consolidated financial statements.
<PAGE> 5
WANG LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
-------- --------
(Amounts in millions)
<S> <C> <C>
OPERATING ACTIVITIES
Net Loss $ (54.2) $ (44.9)
Depreciation 26.7 18.1
Amortization 19.2 9.2
Non-cash provision (benefit) for income taxes 1.7 (2.0)
Other non-cash expense 0.4 0.1
Acquisition-related charges 48.3 14.0
Other restructuring charges -- 9.2
Payments for acquisition-related and restructuring charges (21.6) (3.4)
Payments for liquidation of subsidiary (23.5) --
------- -------
(3.0) 0.3
------- -------
CHANGES IN OTHER ACCOUNTS AFFECTING OPERATIONS
Accounts receivable (10.3) 45.1
Inventories 6.8 (0.6)
Other current assets 5.2 (0.7)
Accounts payable and other current liabilities (161.3) (34.9)
Unearned revenue 29.8 (0.6)
------- -------
Net changes in other accounts affecting operations (129.8) 8.3
------- -------
(132.8) 8.6
Cash used in discontinued operations -- (3.0)
------- -------
Cash provided by (used in) operations (132.8) 5.6
------- -------
INVESTING ACTIVITIES
Depreciable assets (34.2) (16.0)
Proceeds from asset sales 2.9 (1.1)
Business acquisitions, net of cash acquired (16.1) 29.1
Other 0.9 (3.1)
------- -------
Cash provided by (used in) investing activities (46.5) 8.9
------- -------
FINANCING ACTIVITIES
Net borrowings under line-of-credit agreement 51.7 68.6
Increase in short-term borrowings 12.5 --
Proceeds from stock plans 5.5 2.9
Dividends paid on preferred stock (3.3) (3.3)
Other (0.4) (1.9)
------- -------
Cash provided by financing activities 66.0 66.3
------- -------
Effect of changes in foreign exchange rates on cash (6.0) (1.6)
------- -------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS (119.3) 79.2
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 301.3 159.5
------- -------
CASH AND EQUIVALENTS AT END OF PERIOD $ 182.0 $ 238.7
======= =======
</TABLE>
See notes to the consolidated financial statements.
<PAGE> 6
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
NOTE A - BASIS OF PRESENTATION
The financial information included herein has not been audited. However, in the
opinion of management, all material adjustments necessary for a fair
presentation of the results for the periods presented have been reflected and
consist only of normal recurring accruals, except for acquisition-related and
other special charges recorded in the three month periods ended March 31, 1999
and 1998.
The accompanying financial information should be read in conjunction with the
consolidated financial statements and notes thereto contained in Amendment No. 1
on Form 10-K/A to the Company's Transition Report on Form 10-K, filed with the
Securities and Exchange Commission for the six months ended December 31, 1998.
The Company completed the purchase of Olsy ("Olsy"), the wholly-owned
information technology ("IT") solutions and service subsidiary of Olivetti
S.p.A. ("Olivetti"), on March 17, 1998, except for Olivetti Corporation of Japan
("OCJ"), Olsy's subsidiary in Japan, which was completed April 7, 1998. Cash of
$39.6 million was deposited in escrow and was paid to Olivetti upon completion
of the purchase of OCJ. This cash deposit is reported in Other noncurrent assets
at March 31, 1998. Accordingly, the Company's Consolidated Statements of
Operations and of Cash Flows include the results of the acquired businesses
subsequent to their dates of acquisition.
Certain amounts in the prior year period have been reclassified to conform to
current presentations.
Comprehensive loss for the Company is computed as the sum of net loss and the
change in the cumulative translation adjustment. For the quarters ended March
31, 1999 and March 31, 1998, comprehensive loss was $60.2 million and $46.7
million, respectively.
Interest Rate Swaps:
On January 8, 1999 the Company entered into short-term interest rate swaps for
an aggregate notional amount of $150 million in order to assist in the
management of interest rate exposure. Swap agreements related to notional
amounts of $75 million are scheduled to mature on June 30, 1999 and December 31,
1999.
Under the interest rate swap agreements the Company is entitled to receive
monthly interest payments based on one-month London Interbank Offered Rates
("LIBOR") and is obligated to pay interest at a fixed rate of approximately
5.0%. The Company has designated the borrowings under its Credit Facility and
its interest rate swap agreements to be an integrated transaction. Accordingly,
the interest rate swap is being accounted for as a hedge and the differential
to be paid or received on the interest rate swap agreements is accrued and
recognized as an adjustment to interest expense over the life of the
agreements.
Should the Company and the counterparty to the agreements terminate the swaps
prior to their original maturity, any gain or loss upon termination will be
amortized to interest expense over the remaining original life of the swap
agreements.
Forward Share Repurchase:
On March 9, 1999 the Company entered into a forward agreement to repurchase
shares of its common stock. As of March 31, 1999, the Company had forward
contracts outstanding to purchase 1,291,500 shares of the Company's common stock
at an average price of $24.29 per share.
On or prior to the maturity of the forward contract on May 27, 1999, the Company
may elect to either take possession of the shares for cash or settle on a net
share basis. Accordingly the Company has accounted for the forward agreement as
an equity instrument. As a result, there was no effect on the Company's results
of operations for the quarter ended March 31, 1999. Shares potentially
deliverable to the counter party to the forward contract are excluded from
diluted earnings per share since the effect is anti-dilutive. Stock delivered to
the Company upon settlement of the contract will be accounted for as an
adjustment to stockholders' equity and will be designated as treasury stock.
<PAGE> 7
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
NOTE B - BUSINESS ACQUISITION - OLSY
In connection with the acquisition of Olsy, the following pro forma results of
operations have been prepared as though the Olsy acquisition had occurred as of
the beginning of the period presented. This pro forma financial information does
not purport to be indicative of the results of operations that would have been
attained had the acquisition been made as of that date or of results of
operations that may occur in the future (in millions except per share data):
Three Months Ended
March 31, 1998
------------------
Revenues $ 843.3
Net loss $ (101.5)
Loss attributable to common stockholders $ (105.0)
Net loss per share applicable to common
stockholders $ (2.64)
<PAGE> 8
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
NOTE C - ACQUISITION-RELATED AND RESTRUCTURING CHARGES
During the quarter ended March 31, 1999, the Company recorded net
acquisition-related charges of $48.3 million ($54.1 million for new initiatives
net of a $5.8 million reversal of previously recorded charges). The $54.1
million of integration-related costs associated with the new initiative recorded
in the three months ended March 31, 1999 is comprised of $45.1 million for
workforce-related initiatives, principally severance costs, $6.4 million for
excess facilities costs, $2.5 million for the write-down to disposal value of
depreciable assets and $0.1 million for other costs. Periodically, the accruals
related to the integration-related activities are reviewed and compared to their
respective requirements. As a result of those reviews, the accruals are adjusted
for changes in cost and timing assumptions of previously approved and recorded
initiatives. The review of these previously-recorded accruals during the quarter
ended March 31, 1999 identified $5.8 million of excess accruals which were
reversed and recorded as a reduction of the acquisition-related charge recorded
in the quarter ending March 31, 1999, comprised of $0.6 million for
workforce-related initiatives, principally severance costs, $2.3 million for
excess facilities costs, $0.6 million for the write-down to disposal value of
depreciable assets and $2.3 million for other costs. In addition, the Company
identified excess accruals of $19.4 million which had been recorded in
connection with the allocation of purchase price to net liabilities assumed in
the acquisition of Olsy. The excess accruals were comprised of $17.5 million for
workforce-related initiatives, principally severance costs, and $1.9 million for
other costs. The reversal of these excess accruals was recorded as a reduction
of goodwill.
During the quarter ended March 31, 1998, the Company recorded
acquisition-related and restructuring charges of $23.2 million.
The net integration and restructuring-related costs of $48.3 million and $23.2
million were provided after certain actions had been identified, quantified and
approved. The net integration and restructuring charges recorded in the three
month periods ended March 31, 1999 and 1998, respectively, consist of the
following (in millions):
Three months ended
March 31,
1999 1998
---- ----
Workforce-related $ 44.5 $ 13.0
Facilities 4.1 9.3
Depreciable assets and other (0.3) 0.9
------ ------
$ 48.3 $ 23.2
====== ======
These charges of $48.3 million and $23.2 million were based upon best estimates
of costs associated with approved actions through March 31, 1999 and 1998,
respectively. Workforce-related charges, consisting principally of severance
costs, were recorded based on specific identification of employees to be
terminated, along with their job classifications or functions and their
locations. The facilities-related charges for the Company's excess facilities
were recorded to recognize the lower of the amount of the remaining lease
obligations, net of any sublease rentals, or the expected lease settlement
costs. These costs have been estimated only from the time when the space is
expected to be vacated and only if there are no plans to utilize the facility in
the future. Costs incurred prior to that time will be charged to operations.
Depreciable asset-related charges were provided to recognize, at net realizable
value, the write-down to disposal value of existing assets. Cash requirements to
complete the $54.1 million in acquisition-related initiatives recorded in the
quarter ended March 31, 1999 are estimated to approximate $26 million through
the remainder of 1999 and $24 million thereafter.
<PAGE> 9
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
NOTE D - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
--------- ---------
(In millions except per share data)
Numerator:
<S> <C> <C>
Net Loss $ (54.2) $ (44.9)
Dividends and accretion on the
Series A Preferred Stock (1.2) (1.2)
Dividends on the Series B Preferred Stock (2.3) (2.3)
------- -------
Numerator for basic and diluted earnings
per share - net loss applicable to
common stockholders $ (57.7) $ (48.4)
======= =======
Denominator:
Denominator for basic and diluted earnings
per share - weighted average shares 46.2 39.8
======= =======
Basic Earnings per Share $ (1.25) $ (1.22)
======= =======
Diluted Earnings per Share $ (1.25) $ (1.22)
======= =======
</TABLE>
<PAGE> 10
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
NOTE E - SEGMENT INFORMATION
Financial information for the Company's business segments is as follows (in
millions):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
------ ------
Revenues from unaffillated customers:
<S> <C> <C>
United States $ 267.6 $ 203.3
Other Americas 21.5 20.3
Europe/Middle East/Africa 418.6 129.7
Asia/Pacific 80.0 42.5
------- -------
Total segment 787.7 395.8
Corporate 1.3 6.8
------- -------
$ 789.0 $ 402.6
======= =======
Business segment profit or (loss):
United States $ 12.2 $ 9.2
Other Americas 0.1 2.9
Europe/Middle East/Africa 13.3 7.2
Asia/Pacific 3.0 (0.9)
Elimination and adjustments (0.1) 0.1
------- -------
Total segment profit 28.5 18.5
Corporate (3.0) (0.1)
Amortization of acquisition-related
intangibles (19.2) (9.2)
Acquisition-related charges (48.3) (14.0)
Other restructuring charges -- (9.2)
Other nonrecurring costs (3.2) (27.2)
Interest expense, net (6.0) (3.7)
------- -------
Loss before income taxes and minority
interests $ (51.2) $ (44.9)
======= =======
</TABLE>
<PAGE> 11
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
NOTE F - CONTINGENCIES
The Company is a defendant in a number of lawsuits arising from the conduct of
its business. Although the Company is not in a position to predict accurately
the results of specific matters, the Company does not currently believe that its
liability, if any, for all current litigation will be material to the Company's
consolidated financial position or results of operations.
As part of its consideration for Olsy, the Company has the potential 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 24 months
ended December 31, 1999. The earnout will be recorded as additional purchase
price at the time it becomes probable that a payment will be required and the
amount can be reasonably estimated.
<PAGE> 12
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
NOTE G - SUBSEQUENT EVENTS
On May 4, 1999, the Company announced that it had entered into an Agreement and
Plan of Merger with Getronics NV ("Getronics") of Amsterdam, the Netherlands,
providing for the acquisition of all of the outstanding common stock of Wang for
$29.25 per share in cash. The transaction will be implemented through a tender
offer, followed by a merger. The Company's board of directors has voted to
recommend acceptance of the offer. The total consideration will approximate $2.0
billion. In accordance with the agreement, Getronics has commenced a cash tender
for any and all outstanding shares of Wang common stock and other outstanding
capital instruments on these terms. Any shares of common stock and other capital
instruments not acquired in the tender offer will be acquired for cash in a
subsequent merger on the same terms. The tender will be made only pursuant to
definitive offering documents which have been filed by Getronics with the
Securities and Exchange Commission. The combined company will have annual
revenues of approximately $5.0 billion (based on 1998 revenues), 33,000
employees, and operations in over 44 countries.
<PAGE> 13
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This discussion includes certain forward-looking statements about matters such
as the Company's expected revenue, expenses, operating results and the need for
additional investment. Any such statements are subject to normal business risks
and uncertainties that could cause the actual results or needs to differ from
those described herein. For a further discussion of the various risks affecting
the business, refer to "Risks and Uncertainties" appearing at the end of this
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
BASIS OF PRESENTATION
On May 4, 1999, the Company announced that it entered into an Agreement and Plan
of Merger with Getronics NV of Amsterdam, the Netherlands, providing for the
acquisition of all of the outstanding common stock of Wang for $29.25 per share
in cash. The transaction will be implemented through a tender offer, followed by
a merger. The financial statements as of and for the three months ended March
31, 1999 reflect the financial position and results of operations, respectively,
of Wang as an autonomous entity.
On March 17, 1998, the Company completed the purchase of Olsy ("Olsy"), the
wholly-owned information technology ("IT") solutions and service subsidiary of
Olivetti S.p.A. ("Olivetti"), except for Olivetti Corporation of Japan ("OCJ"),
Olsy's subsidiary in Japan, which was completed April 7, 1998. Accordingly, the
Company's Consolidated Balance Sheets and Statements of Operations and of Cash
Flows include the results of Olsy subsequent to the respective dates of
acquisition. Olsy develops, implements and manages IT solutions for large public
and private corporate customers, mainly in banking, the public authorities and
utilities sector, and retail. The company provides a broad range of services,
including application development and systems integration, network integration
and management services and distributed IT management services to a worldwide
customer portfolio.
On the date of acquisition, Olsy had approximately fourteen R&D projects which
were expected to reach completion principally by the end of 1998. These projects
related primarily to software development activities focused on operating on a
Microsoft Distributed interNet Architecture for Financial Services ("Microsoft
DNA FS"). At the acquisition date, these R&D projects ranged in completion from
10% to 95% and total R&D commitments to complete the projects were expected to
be approximately $11 million. As of March 31, 1999, the projects ranged in
completion from 70% to 100%, and remaining R&D commitments on these projects
totaled approximately $2 million. Revenues and operating profits from projects
are estimated to be substantially earned between 1999 and 2002 and to diminish
thereafter, and are consistent with the estimates made at the acquisition date.
These estimates are subject to change, given the uncertainties of the
development process, and no assurance can be given that deviations from these
estimates will not occur. Management believes the Company is positioned to
complete the major R&D projects valued hereunder during 1999. However, there is
risk associated with the completion of the projects, and there is no assurance
that any project will meet with either technological or commercial success.
In connection with the Company's acquisition of Olsy, the Company has conducted
business under the name Wang Global. The formal name change is subject to
shareholder approval at the next annual meeting of shareholders. During the
interim, the Company's legal name will continue to be Wang Laboratories, Inc.
The results of operations for the periods reported are not necessarily
indicative of those that may be expected for the full fiscal year.
<PAGE> 14
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF CONTINUING OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
OVERVIEW
For the three months ended March 31, 1999, the Company reported revenues of
$789.0 million, compared to $402.6 million in the same prior year period. The
increase is attributable to growth in the Company's network services revenues
and the inclusion of Olsy's results for the full quarter ended March 31, 1999,
compared to the inclusion of Olsy results for the post-acquisition period in the
quarter ended March 31, 1998.
The Company reported an operating loss of $45.9 million for the three months
ended March 31, 1999, compared to an operating loss of $41.1 million for the
three months ended March 31, 1998.
The operating loss for the three months ended March 31, 1999 relates primarily
to nonrecurring charges of $51.5 million, which include $48.3 million of net
integration and restructuring costs, and $3.2 million for other operating costs,
primarily transition-related period costs, incurred to integrate the acquired
Olsy business. The $51.5 million is recorded in the Consolidated Statements of
Operations as follows: $0.9 million in Cost of services, $2.3 million in
Selling, general and administrative and $48.3 million in Acquisition-related
charges.
The operating loss for the three months ended March 31, 1998 relates primarily
to nonrecurring charges of $52.2 million, which include $23.2 million of Wang
integration and restructuring costs, $10.3 million for advertising related to
the Olsy acquisition, $7.3 million related to reductions in the carrying value
of certain assets and $11.4 million for other costs. The $52.2 million is
recorded in the Consolidated Statements of Operations as follows: $27.2 million
in Selling, general and administrative expenses; $1.8 million in Amortization of
intangibles; $14.0 million in Acquisition-related charges and $9.2 million in
Restructuring charges.
Excluding these charges, the Company would have reported operating income of
$5.6 million and $11.1 million and income before taxes of $0.3 million and $10.8
million in the three months ended March 31, 1999 and 1998, respectively. The
calculated income before taxes of $10.8 million in the three months ended March
31, 1998 also includes $3.5 million of nonrecurring interest expense recorded
for fees and expenses associated with that portion of the Company's new
revolving credit facility which was used to replace the existing $225 million
facility. The decrease in operating profit is primarily attributable to
increased amortization charges associated with the Olsy acquisition.
EBITDA (earnings before interest, income taxes, depreciation and amortization)
was $52.2 million and $36.5 million in the three month periods ended March 31,
1999 and 1998, respectively. EBITDA can be calculated differently from one
company to the next, so this measure may not be comparable to EBITDA reported by
other companies.
EBITDA is calculated for the three months ended March 31, 1999 by adjusting the
operating loss of $45.9 million for nonrecurring charges of $51.5 million,
depreciation and amortization expenses not included in the nonrecurring charges
of $26.7 million and $19.2 million, respectively, and other income of $0.7
million not included in the nonrecurring charges.
<PAGE> 15
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
EBITDA is calculated for the three months ended March 31, 1998 by adjusting the
operating loss of $41.1 million for nonrecurring charges of $52.2 million,
depreciation and amortization expenses not included in the nonrecurring charges
of $18.1 million and $7.4 million, respectively, and other expense of $0.1
million not reflected in the nonrecurring charges.
For the three months ended March 31, 1999, cash used in operating and investing
activities was $132.8 million and $46.5 million, respectively. Cash provided by
financing activities was $66.0 million.
The Company periodically evaluates the carrying value of intangible assets to
determine if impairment exists based upon estimated undiscounted future cash
flows, net of tax. The impairment, if any, is measured by the difference
between carrying value and estimated discounted future cash flows, net of tax,
and is charged to expense in the period identified. In the June quarter of
fiscal 1998, the Company originally recorded impairment charges related to the
carrying value of certain intangible assets totaling $134.8 million. Such
amounts were originally calculated without consideration of a tax effect. As
previously reported, in connection with the conclusion of discussions with the
Securities and Exchange Commission ("SEC"), and consistent with the Company's
past practice, the impairment charge was subsequently adjusted to $157.0
million to reflect the difference between carrying value and estimated
discounted cash flows on a net of tax basis. The revised amount along with
certain other adjustments resulting from the discussions with the SEC regarding
the purchase price accounting for the Olsy transaction have been reflected in
an amended Form 10-K for the fiscal year ended June 30, 1998. There were no
intangible assets which were determined to be impaired during the quarter
ending March 31, 1999.
REVENUES
Services revenues were $492.0 million for the three months ended March 31, 1999,
compared to $285.3 million in the three months ended March 31, 1998. The
increase was primarily attributable to the inclusion of Olsy revenues during the
entire 1999 quarter. Networked technology services and solutions revenues
increased to $416.0 million in the three months ended March 31, 1999, compared
to $242.0 million in the comparable prior year period. Traditional services
revenues were $76.0 million compared to $43.2 million reported in the three
months ended March 31, 1998. The anticipated decline in traditional VS and GCOS
services was more than offset by the addition of Olsy traditional services
revenues.
Product revenues increased to $297.0 million in the three months ended March 31,
1999, from to $117.3 million in the same prior year period. Networked technology
product revenues more than doubled, increasing by $65.3 million, to $120.6
million, compared to $55.3 million. Traditional product revenues increased by
$62.4 million, to $98.6 million, compared to $36.2 million in the prior year
period. Standard product revenues, defined as commodity client/server products
that are sold without accompanying services, were $77.8 million, a $52.0 million
increase from the comparable prior year period. The increases were primarily
attributable to the acquisition of Olsy.
GROSS MARGIN
Services gross margin decreased to 20.8% for the three months ended March 31,
1999, compared to 21.1% in the prior year period. Margin was negatively affected
by the increase in lower-margin maintenance revenues on multi-vendor services
and the decline in higher-margin revenues from traditional maintenance
contracts.
Product gross margin was16.2%, compared to 20.5% in the prior year period. This
decrease is primarily the result of the decline in traditional VS and GCOS
product sales, which have historically higher margins than the margins on resold
client-server products, and the inclusion of lower-margin standard product sales
from Olsy.
<PAGE> 16
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
RESEARCH AND DEVELOPMENT EXPENSES
Research and development costs increased by $1.0 million, to $3.2 million, for
the three months ended March 31, 1999, from $2.2 million in the comparable prior
year period. Research and development costs include amounts spent by Olsy since
the acquisition and development by OliRicerca (a minority investee company)
under contract with Wang Global. The Company's modest level of research and
development spending is primarily related to continuing support for its
proprietary VS products and specialized client server products sold to the U.S.
government and to the development of software technology for the banking
industry.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased by $35.1 million to
$126.6 million, including $2.3 of nonrecurring charges, in the three months
ended March 31, 1999. This compares to $91.5 million, including $27.2 million of
nonrecurring charges, in the three months ended March 31, 1998. During the three
months ended March 31, 1999 and 1998, selling, general and administrative
expenses, including nonrecurring charges, were 16.0% and 22.7% of revenues,
respectively.
Nonrecurring charges recorded in Selling, general and administrative expenses in
the March 1999 quarter related primarily to transition-related period costs
incurred to integrate Olsy. Nonrecurring charges recorded in the March 1998
quarter included $10.3 million for advertising, branding and positioning
initiatives to launch the new combined entity doing business as Wang Global,
$5.5 million related to reductions in the carrying value of certain assets and
$11.4 million for other costs. Excluding these nonrecurring charges, selling,
general and administrative expenses would have been $124.3 million and $64.3
million, or 15.8% and 16.0% of revenues for the three months ended March 31,
1999 and 1998, respectively.
The overall reduction in selling, general and administrative expenses relative
to revenues reflects the results of integration activities initiated in
connection with the Company's recent acquisitions, in addition to other cost
control activities.
<PAGE> 17
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
INTEREST INCOME AND EXPENSE
Net interest expense of $6.0 million in the three months ended March 31, 1999 is
comprised of $7.7 million of interest expense, including $5.0 million related to
the Company's $500.0 million Revolving Credit Facility and $1.7 million of
interest income. Net interest expense of $3.7 million in the three months ended
March 31, 1998 is primarily comprised of $5.6 million of interest expense,
including $4.7 million related to the Company's new Revolving Credit Facility of
$500 million, and the previous Revolving Credit Facility, and $1.9 million of
interest income.
OTHER INCOME AND EXPENSE
Net other income of $0.7 million for the three months ended March 31, 1999
primarily consists of $0.8 million of foreign exchange transaction gains. This
compares to net other expense of $0.1 million reported in the three months ended
March 31, 1998.
INCOME TAXES
The provision for income taxes in the three months ended March 31, 1999 was $3.2
million, including $1.7 million of non-cash tax expense. The tax provision is
attributable to taxes on income of foreign subsidiaries which do not have
available net operating loss carryforwards. There was no provision for income
taxes recorded in the three months ended March 31, 1998, the third quarter of
the Company's fiscal year ended June 30, 1998, based on the results for the
quarter and the Company's projections of the results for the fiscal year.
AMORTIZATION
Amortization of acquired intangible assets totaled $18.1 million in the three
months ended March 31, 1999, including $13.4 million for intangible assets
established in connection with the Olsy acquisition. This compares to $8.5
million in the prior year period, including $0.2 million for intangible assets
established in connection with the Olsy acquisition, and $1.8 million for the
writedown of intangible assets determined to be impaired. The impairment charge
is attributable to the assembled workforce acquired in the BISS transaction and
was the result of faster than expected attrition of that acquired workforce.
Impairment of this asset was determined to exist because the estimate of
undiscounted cash flows of the revenue stream to which the asset relates was
less than the carrying amount of the intangible asset. The undiscounted future
cash flows are calculated based upon historical results, current projections and
internal earnings targets, net of applicable income taxes, for the revenue
stream. The impairment was measured using a discount rate equal to the Company's
estimated cost of capital.
ACQUISITION-RELATED AND RESTRUCTURING CHARGES
The Company recorded net acquisition-related charges of $48.3 million ($54.1
million for new initiatives net of a $5.8 million reversal of previously
recorded charges) in the three months ended March 31, 1999 which reflect costs
associated with combining the operations of Wang and Olsy. The $54.1 million of
integration-related costs associated with the new initiative recorded in the
three months ended March 31, 1999 are comprised of $45.1 million for
workforce-related initiatives, principally severance costs, $6.4 million for
excess facilities costs, $2.5 million for the write-down to disposal value of
depreciable assets and $0.1 million for other costs. Periodically, the accruals
related to the integration-related activities are reviewed and compared to their
respective requirements. As a result of those reviews during the quarter,
previously-recorded accruals totalling $5.8 million were reversed, and were
comprised of $0.6 million for workforce-related initiatives, principally
severance costs, $2.3 million for excess facilities costs, $0.6 million for the
write-down to disposal value of depreciable assets and $2.3 million for other
costs. In addition, the Company identified excess accruals of $19.4 million
which had been recorded in connection with the allocation of purchase price to
net liabilities assumed in the acquisition of Olsy. The excess accruals were
comprised of $17.5 million for workforce-related initiatives, principally
severance costs, and $1.9 million for other costs. The reversal of these
accruals was recorded as a reduction of goodwill, and will result in a reduction
of annual amortization expense of $0.7 million.
<PAGE> 18
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
During the quarter ended March 31, 1998, the Company recorded
acquisition-related charges of $14.0 million for costs associated with combining
the operations of the Company and Olsy and $9.2 million of restructuring charges
which primarily reflect the costs associated with workforce reductions relative
to the Company's declining traditional VS revenue stream. These combined charges
total $23.2 million, and are comprised of $13.0 million for workforce-related
initiatives, principally severance, $9.3 million for excess facilities costs,
$0.6 million for the write-down to disposal value of depreciable assets and $0.3
million for other costs.
LIQUIDITY AND SOURCES OF CAPITAL
Cash and equivalents were $182.0 million at March 31, 1999, a decrease of $119.3
million from December 31, 1998.
Cash used in operations during the three months ended March 31, 1999 was $132.8
million, primarily attributable to operating results and working capital. Days
Sales Outstanding ("DSO") for accounts receivable was 95 days at March 31, 1999,
compared to 76 days at March 31, 1998. The increase in DSO is the result of the
significant increase in the foreign composition of the Company's receivables,
which have historically longer collection periods. The Company paid $23.5
million in the three months ended March 31, 1999 to complete the liquidation of
a subsidiary acquired in connection with the Olsy transaction.
Cash used in investing activities during the three months ended March 31, 1999
was $46.5 million, and includes $34.2 million used for capital additions,
including $17.5 million for nonconsumable spare parts. Capital additions were
partially offset by $2.9 million of proceeds on asset sales. The Company used
$16.1 million to complete the acquisition of certain subsidiaries acquired in
connection with the Olsy acquisition.
Cash provided by financing activities was $66.0 million during the three months
ended March 31, 1999, and was comprised of $51.7 million of net borrowings under
the Company's revolving credit facility and $12.5 million for other short term
borrowings, plus proceeds of $5.5 million from employee stock plans, less cash
dividends on preferred stock of $3.3 million.
In connection with the acquisition of Olsy, the Company entered into a
multi-currency, Revolving Credit Facility with and certain financial
institutions on March 13, 1998. The five-year facility provides borrowings up to
$500.0 million, including up to $200.0 million for letters of credit. At March
31, 1999, $311.2 million of the line was in use, including $7.8 million for
letters of credit. On January 8, 1999, the Company entered into short-term
interest rate swaps for a notional amount of $150.0 million at an effective
fixed rate approximating 5.0% in order to assist in the management of interest
rate exposure, $75.0 million of which terminate on June 30, 1999 and $75.0
million of which terminate on December 31, 1999.
In addition to normal operating activities, capital expenditures and payment of
preferred dividends, the Company estimates that expenditures of as much as $380
million will be required in connection with the integration and rightsizing of
the combined company. To date, $367 million has been recognized for these and
certain other activities, of which $184 million has been charged to operations
and $183 million has been recorded as an adjustment to the purchase price
related to Olsy. The $367 million includes approximately $206 million related to
organizational redundancies, $51 million related to facilities and $110 million
related to systems and other costs. The Company estimates that the $380 million
will be recovered through cost savings through the year 2000. Total cash
requirements for recorded restructuring initiatives, including those
discussed above are estimated to be $164 million, to be expended as follows:
$104 million through the remainder of 1999 and $60 million thereafter.
<PAGE> 19
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
On November 3, 1998, the Company announced that its board of directors had
authorized the use of up to $50 million for repurchase of its common stock or
publicly traded warrants via open market purchases. On March 9, 1999, the
Company entered into a forward agreement to repurchase shares of its common
stock. As of March 31, 1999, the Company had forward contracts outstanding to
purchase 1,291,500 shares of the Company's common stock at an average price of
$24.29 per share. The agreement will mature on May 27, 1999. The Company may
elect to either take possession of the shares for cash or settle on a net share
basis. The Company is also authorized to enter into hedging transactions
designed to reduce the potential dilutive impact of its Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock and warrants. If the
Company's shareholders do not approve the issuance of the 1.5 million shares of
the Company's common stock to Olivetti as part of the consideration for Olsy by
June 30, 1999, the Company will be required to settle the outstanding obligation
in cash. The amount will be based on the average trading price of the common
stock of the Company during the 10 days prior to that date.
The Company expects to spend approximately $2 million in the balance
of the year to attain technological feasibility on R&D projects that were in
process in Europe and the United States at the date of the Olsy acquisition.
The Company believes that existing cash balances, cash generated from
operations, and borrowing availability under its revolving credit facility will
be sufficient to meet the Company's operational cash requirements as well as the
integration and restructuring initiatives previously discussed, and for pursuing
potential investments, acquisitions and other expansion opportunities in the
event the transaction with Getronics is not consumated. As part of furthering
its business strategy, the Company explores acquisitions and strategic
relationships with other businesses on an ongoing basis. One or more of these
opportunities could have an impact on the Company's liquidity through the use of
cash or could involve the issuance of debt or equity securities of the Company.
YEAR 2000
Overview. Ensuring that the Company's business and service delivery processes
are not disrupted by Year 2000 ("Y2K") related problems is a top priority. The
Company is taking necessary steps to ensure that the products and services of
its suppliers and sub-contractors upon whom the Company relies will not be
adversely affected by millennium problems.
Prior to the acquisition of Olsy in March 1998, the Company was in the process
of replacing many of the systems used to operate its business. Olsy was involved
in a similar venture to achieve Y2K compliance for its systems. Although Y2K
compliance is a key consideration, the driving force behind the introduction of
new systems has been the need to consolidate multiple service management and
delivery systems into a new generation of systems that allow the Company to
operate as a larger enterprise in the service environment.
Wang's IT strategy has been to select and implement Y2K compliant solutions to
replace the majority of legacy systems currently in use in the Company. The
rollout of these systems is well underway and should be completed in the third
quarter of 1999. For functions where replacement systems cannot be deployed
before the third quarter of 1999, the Company is upgrading existing legacy based
systems to be Y2K compliant. This strategy will allow Wang to continue its
program of development, while minimizing risk through continued use of its
existing systems during the transition.
<PAGE> 20
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Implementation. In describing the detailed plans for implementing compliance of
the Company's major Management Information Systems, support systems can be
divided into two general categories:
o Infrastructure, including network and mail servers and network and desktop
systems; and
o Business Application Systems, including Service Support Systems and
Enterprise, Resource & Planning (ERP) Systems.
Infrastructure. Wang operates more than 20,000 personal computers and 400 NT
servers. Since 1996, the Company has been implementing a common operating
environment that is Y2K compliant. Desktop systems are being migrated to Windows
95, NT and 98 with Microsoft Office, Explorer and Outlook applications. Servers
are being migrated to compliant releases of Windows NT. The underlying
infrastructure is implemented on routers which have been certified as Y2K
compliant from the Company's strategic partner, Cisco Systems. The Company has
also tested the network equipment in the Global Network and at the country
level. The Company is on schedule to complete this project in the first half of
1999, at a total cost of $10 million for infrastructure and $4 million to bring
Olsy up to Wang's common operating environment.
Business Applications. Business applications fall into two categories:
corporate (addressing common global business practices) and local (reflecting
unique geographic, business and operating needs). The comments below relate to
the corporate or common systems assessment.
1. Service Delivery Systems. The Company is consolidating eight service
delivery systems in the Americas into a single service delivery system
model ("SDSM") that has been certified as Y2K compliant. SDSM refers to
a combination of "best of breed" solutions blended with Internet and
EDI technology to support its service delivery. The Company plans to
implement its SDSM in North America in 1999. In Europe there is a
consolidation around the three Olsy legacy service delivery systems
(already Y2K compliant). Between 1999 and 2001, Wang will migrate from
these systems to the compliant SDSM. The process and timing in the Asia
Pacific area is the same as in Europe.
A contingency plan, based on using Y2K compliant legacy systems, exists
and addresses unforeseen delays in rolling out the SDSM. A major
component of its contingency plan involves enhancing certain legacy
service delivery systems in order to allow them to operate past 2000.
This will allow the International operations to deploy the SDSM at a
pace and sequence that accommodates the intensive management attention
required to integrate Wang and Olsy while serving to mitigate the risk
associated with any SDSM implementation delay.
<PAGE> 21
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
2. Enterprise Resource Planning Systems. Wang has chosen SAP R/3 as
its strategic ERP solution, and has already installed the software in
many of its subsidiaries. In 1998, the Company implemented SAP R/3 as
a replacement for the Olsy subsidiary legacy systems in the United
States and the U.K. During 1999, the Company plans to roll out the SAP
systems to the nineteen remaining countries, replacing all the Olsy
legacy ERP systems. SAP has certified SAP R/3 as Y2K compliant. Small
countries in the Latin America region are migrating to a corporate
small-scale system (Solomon IV) that provides an interim step towards
future SAP migration, when those operations reach sufficient size to
justify the SAP investment. Solomon Software has certified Solomon IV
as Y2K compliant. The Company is updating all legacy and local
applications to minimize the risk of any delay in the deployment plan
of SAP and Solomon. This update is expected to be completed in the
second quarter of calendar year 1999.
Costs to Address Y2K Issues. An investment program of nearly $100 million
commenced in 1996 supports the Company's strategy of replacing legacy systems.
An additional $5 million has been allocated for work on corporate legacy systems
required for compliance.
A further $5 million will be allocated for funding of local system compliance
projects.
Risks to the Company of Y2K Issues. Y2K noncompliance by the Company would
seriously damage its image and credibility within the marketplace, adversely
affecting Wang's operating results and growth plans. Specifically, failure to
complete the required work in a timely manner may result in the following:
Wang Service Delivery Impact: Service delivery at the Company will be
forced to move to manual processes, impacting Wang's ability to meet
service level agreement obligations. At best, such a move would cause the
projected profit margin on key contracts to erode and at worst the
contracts would be terminated for failure to perform. Reverting to manual
processes would add cost and reduce gross margin.
Customer Compliance Failure Impact: The Company relies on its customers to
be Y2K compliant and to rectify any of their own internal compliance
problems. In the event such customers fail to become compliant they likely
would be forced to move to manual processes to work around the issues.
Although it is unlikely that Wang would lose such contracts, it is likely
that the Company's service delivery costs would increase, and as a result,
gross margin would erode.
Supplier Compliance Failure Impact: Wang relies on key information
technology suppliers (Microsoft, Dell, Hewlett-Packard, SAP, Siemens
Nixdorf, EMC, Northern Telecomm and Cisco) to implement the Company's Y2K
strategy. While Wang is performing some level of independent testing, the
Company expects its suppliers to extensively test all affected products. If
these suppliers' products prove not to be compliant, then Wang's service
delivery and internal operations would be impacted as described herein.
<PAGE> 22
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Wang Internal Systems Impact: If the Company's internal systems do not
comply with Y2K standards, Wang will be forced to move to manual reporting
and processing which would increase SG&A costs by as much as 50% for those
systems negatively impacted until the problems are resolved.
Company's Contingency Plan. In the event that Wang is unable to implement its
Y2K plan fully, manual processes will be used until the failed systems can be
fixed. For example, automated service call tracking and dispatch would be
handled manually until the automated systems become available.
Given the Company's reliance on replacement programs, continual close monitoring
of their progression is essential. Any replacement program slippage will require
increased investment in Y2K remediation of legacy systems.
The Company is committed to assisting its customers in managing the compliance
of their IT systems purchased from, or serviced by, the Company in order to meet
the Year 2000 challenge. The compliance of products and services supplied by the
Company has been given the highest priority.
The Company is committed to providing its customers with products that are
supportable beyond the Year 2000 and has engaged in a development effort to
bring its principal products into Year 2000 compliance.
The Company has developed a suite of products designed to provide VS users the
information, products, and tools required to update their VS systems as well as
to assist users in identifying and resolving issues with their own or third
party VS applications.
The Company has engaged in a communications campaign to notify its customers of
the compliance status of its products. This communications campaign has
consisted of written notices sent directly to customers, meetings with
customers, open forums for customers, and numerous postings on the Company's web
site. Although the Company cannot ensure that every customer has received all of
the necessary information, the Company believes that its communications effort
has been successful in informing its customers about the compliance status of
the Company's products and solutions.
The Company believes that its development effort and communications campaign has
minimized its potential exposure to Year 2000 claims and liability. Moreover,
the Company believes that the standard terms and conditions of its customer
contracts provide substantial protection against potential claims by customers.
The Company recognizes, however, that there continue to be risks associated with
the sale and use of Wang products that may not be Year 2000 compliant. The
Company is unable to assess the extent of the risk at this time. No claim has
been filed against the Company relating to Year 2000 issues and no customer has
asserted losses associated with Y2K problems in any products of the Company.
<PAGE> 23
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Third Party Products. It is the Company's goal to supply only products made by
other companies that are Year 2000 compliant. Where products originate from
third parties, the Company will seek to verify that the supplier has certified
the product as Year 2000 compliant. If an upgrade or future release of a product
is required, the Company will work with its customers to establish a plan for
obtaining the required upgrade or release. The Company has implemented a
certification program in which it has requested certifications from its
principal strategic suppliers. The Company is committed to providing its
customers with all of the relevant information available regarding Year 2000
status of products and provides information about standard PCs and links to a
number of our strategic partners and suppliers.
The Company recognizes, however, that there continue to be risks associated with
the sale of third-party hardware and software products that may not be Year 2000
compliant. The Company is unable to assess the extent of the risk at this time.
No claim has been filed against the Company relating to Year 2000 issues of
third party products and no customer has asserted losses caused by Y2K problems
in third party products sold by the Company.
Multi-Vendor Maintenance Services. The Company provides maintenance services for
customers around the world who are using hundreds of different hardware and
software products made by dozens of companies. Although the Company will assist
its maintenance customers in addressing their Year 2000 related problems, the
Company does not intend to provide hardware maintenance or software support for
products that will not be Year 2000 complaint or will not be supported by the
manufacturer beyond the Year 2000. Through its field service engineering work
force and its professional services teams, Wang will help customers analyze the
impact of the Year 2000 on its systems. Such services will be available on a
project basis at current commercial rates and terms.
Because the Company's standard maintenance contracts do not cover problems
associated with the Year 2000, the Company does not believe that it has material
exposure for providing maintenance services. The Company recognizes, however,
that there continue to be risks associated with the maintenance of hardware and
software products that may not be Year 2000 compliant. The Company is unable to
assess the extent of the risk at this time. No claim has been filed against the
Company relating to Year 2000 maintenance issues and no customer has asserted
losses due to any actions of the Company.
All Year 2000 statements contained herein or in any of the Company's prior
public filings or announcements are designated as "Year 2000 Readiness
Disclosures" pursuant to the Year 2000 Information and Readiness Disclosure Act
(P.L. 105-271).
<PAGE> 24
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
RISKS AND UNCERTAINTIES
Certain statements in this Form 10-Q may be deemed "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Act"). The Company desires to take advantage of the safe harbor provisions of
the Act and is including this statement for the express purpose of availing
itself of the protection of the safe harbor with respect to all forward-looking
statements that involve risks and uncertainties. The Company or its
representatives may also make forward looking statements in other written
reports filed with the Securities and Exchange Commission ("SEC"), in materials
delivered to stockholders, in press releases or in oral statements to security
analysts, investors and others. Forward looking statements provide current
expectations of future events based on certain assumptions and include any
statement that does not directly relate to any historical or current fact. Words
such as "anticipates," "believes," "expects," "estimates," "intends," "plans,
"projects," and similar expressions, may identify such forward-looking
statements. In accordance with the Act, set forth below are cautionary
statements that accompany those forward-looking statements. Readers should
carefully review these cautionary statements as they identify certain important
factors that could cause actual results to differ materially from those in the
forward-looking statements and from historical trends. Such forward-looking
statements may relate to various matters, including, without limitation, the
Company's business, revenue, expenses, profitability, acquisitions,
dispositions, products, services, intellectual property, expenses, labor
matters, effective tax rate and operating and capital requirements. The
following cautionary statements are not exclusive and are in addition to other
factors discussed elsewhere in the Company's filings with the SEC and in
materials incorporated therein by reference.
IMPLEMENTATION OF BUSINESS STRATEGY. The Company's business strategy is to
increase the revenues and margins it realizes from providing network services
and products to customers and clients and to build upon that growth through
acquisitions and alliances with other companies. The Company's ability to
implement successfully this strategy over the long term, and the ultimate
success of this strategy and the achievement of sustained profitable growth is
uncertain and subject to a broad range of variables and contingencies, many of
which are beyond the Company's control. The Company may not be able to achieve
the revenue growth it is seeking as a result of an inability to obtain new
customer contracts, recruit and retain required skilled personnel or the
inability to deliver the required services in a timely and satisfactory manner
to customers. In addition, there can be no assurance that the Company will be
able to implement strategic relationships or acquisitions, or, if entered into,
that such strategic relationships or acquisitions will in fact further the
implementation of the Company's business strategy. The Company's existing
strategic relationships with Microsoft Corporation, Dell Computer Corporation
and Cisco Systems, Inc. are subject to a variety of uncertainties, including
possible evolutions in technology, business relationships or strategic plans of
the parties which may, in the future, result in the termination of, or a change
in the nature of or in the expectations with respect to, such strategic
relationships. The Company's relationships with Microsoft and Cisco also include
certain contractual obligations, which, if not satisfied, could allow Microsoft
and Cisco, respectively, to terminate all or a portion of the relationships.
Currently, a significant portion of the Company's revenues and gross margins
are attributable to the servicing, upgrading and enhancement of its installed
base of VS and other proprietary systems. The Company expects revenues from
proprietary sources, including the acquired Bull proprietary product and service
revenue streams, to decline at a rate approximating 25% per year on a constant
currency basis, but that rate may accelerate as the Company's customers make
systems decisions regarding Year 2000 compliance. Additionally, from one period
to the next, the decline rate could be highly variable. As the Company's
proprietary revenues decline, the loss of individual customers will have an
increasingly
<PAGE> 25
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
significant effect on the rate of decline for any particular measurement period.
The Company's continued growth is predicated on the business strategy described
above (including the acquisition of new customer service and network integration
businesses) more than offsetting the decline in revenues and gross margins from
proprietary sources. There can be no assurance that delays or difficulties in
the implementation of the Company's strategy, or a higher than anticipated
decline in revenues and gross margins from proprietary sources will not
adversely impact the Company's results of operations or the price of its equity.
RISKS OF NEWLY ACQUIRED BUSINESSES. In March and April 1998, the Company
completed its acquisition of the wholly-owned IT solutions and services business
of Olivetti ("Olsy") from the Olivetti Corporation. The transaction more than
doubled the revenue and number of employees of the Company. The Company will
confront a number of risks as it operates the Olsy business and integrates it
with the Company's existing business. As with any significant acquisition or
merger, the Company confronts challenges in retaining employees, customer
relationships, synchronizing service delivery systems and business processes,
and integrating logistics, marketing, and product offerings to achieve greater
efficiencies. Moreover, the Company may be unable to implement all anticipated
cost savings in the Olsy business. Finally, there can be no assurance that the
acquisition of Olsy or any of the Company's other acquisitions or strategic
alliances will result in long-term benefits to the Company, or that the Company
and its management will be able to effectively assimilate and manage the
business of such acquired companies. The Company continues to evaluate such
opportunities regularly, and one or more other transactions could occur at any
time.
The proposed acquisition of Wang by Getronics will likely limit the
Company's use of its net operating loss. Federal tax rules impose an annual
limitation on the use of a net operating loss when there is a change of
ownership of shares in a corporation.
DEPENDENCE ON KEY PERSONNEL. The Company depends to a significant extent on
key management personnel and technical employees. The Company's growth and
future success will depend in large part on its ability to attract, motivate and
retain highly qualified personnel, particularly, trained and experienced
technical professionals capable of providing sophisticated network and desktop
outsourcing and integration services. In particular, the Company's new
relationship with Microsoft contemplates that the Company will train a
significant number of qualified Microsoft-certified personnel, particularly in
the context of Getronics' proposed acquisition of the outstanding common stock
of Wang. Competition for such personnel is intense and there can be no
assurances that the Company will be successful in hiring, motivating or
retaining such qualified personnel. The loss of key personnel or the inability
to hire or retain qualified personnel could have a material adverse effect on
the Company's business, financial condition or results of operations.
COMPETITION. The information technology ("IT") services industry, including
the network and desktop services markets, is intensely competitive and
undergoing continual change. Worldwide competition is vigorous in all of the
markets in which the Company does business. The Company's competitors are
numerous and vary widely in market position, size and resources. Competitors
differ significantly depending upon the market, customer and geographic area
involved. In many of the Company's markets, traditional computer hardware
manufacturing, communications and consulting companies provide the most
significant competition. The Company must also compete with smaller IT services
businesses providers that have been able to develop strong local or regional
customer bases. Many of the Company's competitors have substantially greater
resources, including larger research and engineering staffs and larger marketing
organizations, than those of the Company. The Company may have difficulty
implementing the leading edge technology required to services its customers.
There can be no assurance that the Company will be able to compete successfully
against other companies that provide similar IT services.
<PAGE> 26
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
YEAR 2000 LIABILITY. The Company supplies computer systems to large
organizations in the commercial and government markets, which include federal,
state and local customers. Any failure of the Company's products to perform,
including system malfunctions due to the onset of the calendar year 2000 (caused
by a data structure problem that will prevent software from properly recognizing
dates after the year 1999), could result in claims against the Company. Although
the Company maintains computer software and services errors and omissions
insurance, a claim brought against the Company could have a material adverse
effect on the Company's business, financial condition or results of operations.
Moreover, an increasing number of the Company's installed base of VS and other
traditional proprietary systems could choose to convert to other calendar year
2000 compliant systems in order to avoid such malfunctions. An increasing rate
of conversion would result in an increasing rate of decline of revenue
associated with such proprietary systems, and could have a material adverse
effect on the Company's business, financial condition or results of operations.
In addition, the Company operates legacy systems and applications that contain
Year 2000 limitations. Initiatives are underway to replace existing systems and
address existing Year 2000 limitations. There can be no assurance that the
conversion will be completed in a timely manner.
In the course of providing complex, integrated solutions to customers, the
Company frequently forms alliances with third parties that supply both hardware
and software products and services. Future results will in part depend upon the
performance and capabilities of these parties, including their ability to deal
effectively with the Year 2000 issue. The Company is evaluating the impact of
the Year 2000 compliance on its suppliers and is working with its suppliers and
customers on resolving Year 2000 compliance issues. Because the Company relies
on the cooperation and assistance of its suppliers in addressing Year 2000
matters, there remains a possibility that the Company's reliance on its
suppliers could have a material adverse impact on future results.
See "Year 2000" above.
POSSIBLE VOLATILITY OF PRICE OF COMMON STOCK. The market price of the
Company's Common Stock has fluctuated significantly in the past and may continue
to fluctuate in the future. Factors such as announcements of the proposed
acquisition of Wang by Getronics, technological innovations or other
developments concerning the Company, its competitors or other third parties,
quarterly variations in the Company's results of operations, non-recurring
transactions and changes in overall industry and economic conditions may all
affect the market prices of the Common Stock and cause it to fluctuate
significantly. Moreover, the Company's expense levels are based in part on
expectations of future revenue levels, and a shortfall in expected revenue could
therefore have a disproportionate adverse effect on the Company's net income.
Furthermore, the market prices of the stocks of many high technology companies
have experienced wide fluctuations that have not necessarily been related to the
operating performance of the individual companies.
DEPENDENCE ON GOVERNMENT REVENUE. The Company derives significant revenues
from the United States government and its agencies and from agencies of various
governments. A significant portion of the revenue from the acquired Olsy
operations is attributable to the sale of products and services to governments
of other countries and their instrumentalities and agencies, in particular, the
Italian government and its agencies. A significant portion of the Company's US
government revenues comes from orders under government contract or subcontract
awards, which involves the risk that the failure to obtain an award, or a delay
on the part of the government agency in making the award or of ordering or
paying for products or services under an awarded contract, could have a material
adverse effect on the financial performance of the Company for the period in
question. Other risks involved in government sales are the larger discounts (and
thus lower margins) often involved in government sales, the unpredictability of
funding for various government programs, and the ability of the government
agency to unilaterally terminate the contract. Revenues from the government of
the United States and other foreign governments and their instrumentalities and
agencies are received under a number of different contracts and from a number of
different contracting authorities.
<PAGE> 27
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
INTERNATIONAL OPERATIONS. International revenues in recent years have
accounted for a substantial portion of the Company's total revenues. As a result
of the acquisition of Olsy, the Company expects to derive more than fifty
percent of its revenue from affiliates operating in non-US environments. The
Company's international operations are subject to all of the risks normally
associated with international sales, including changes in regulatory compliance
requirements, compliance costs associated with International Standards
Organization (ISO) 9000 quality control standards, special standards
requirements, exposure to currency fluctuations, exchange rates, tariffs and
other barriers, difficulties in staffing and managing international subsidiary
operations, potentially adverse tax consequences and country-specific product
requirements. The introduction of the Euro may result in changes to business
practices throughout Europe affecting pricing, systems and competition. While
the Company attempts to reduce its currency exposure, there can be no assurance
that it will not experience losses due to international currency fluctuations.
The Company's results of operations could also be affected by economic
conditions and changes in foreign countries and by macro-economic changes,
including recession and inflation. For example, weakness in some Asian markets
may have an adverse impact on the Company's business. In addition, effective
intellectual property protection may not be available in every foreign country
in which the Company distributes its own and other products and the loss of such
protection could have a material adverse effect on the business of the Company.
NATURE OF CONTRACTS. Some of the Company's contracts are for a fixed price
and are long-term in duration, which subjects the Company to substantial risks
relating to unexpected cost increases and other factors outside the control of
the Company. Revenues and profits on such contracts are recognized using
estimates and actual results, when known, may differ materially from such
estimates. Additionally, some of the customer relationships in the international
arena, particularly those acquired through the Olsy acquisition, are supported
by purchase orders in lieu of contracts of a predetermined duration. Revenues
supported by purchase orders are often less predictable and may be jeopardized
by the acquisition of Olsy by the Company. Finally, IT outsourcing contracts in
particular, often contain provisions that allow for termination for convenience,
service level agreement compliance, liquidated damages and penalties and are
awarded based on a competitive procurement process. Such contracts often require
high expenditures and long lead times with no assurance of success.
MARKET RISK. For market risks related to changes in interest rates and
foreign currency exchange rates, reference is made to Part II, Item 7A,
Quantitative and Qualitative Disclosures About Market Risk and to the subheading
"Market Risks" under Part II, Item 7A, Management's Discussion and Analysis of
Financial Condition and Results of Operations in the Registrant's Annual Report
on Form 10-K for the transition period ended December 31, 1998.
Interest Rate Swaps:
On January 8, 1999 the Company entered into short-term interest rate swaps for
an aggregate notional amount of $150 million in order to assist in the
management of interest rate exposure. Swap agreements related to notional
amounts of $75 million are scheduled to mature on June 30, 1999 and
December 31, 1999.
Under the interest rate swap agreements the Company is entitled to receive
monthly interest payments based on one-month London interbank offered rates
("LIBOR") and is obligated to pay interest at a fixed rate of approximately
5.0%. The Company has designated the borrowings under its Credit Facility and
its interest rate swap agreements to be an integrated transaction. Accordingly,
the interest rate swap is being accounted for as a hedge and the differential to
be paid or received on the interest rate swap agreements is accrued and
recognized as an adjustment to interest expense over the life of the agreements.
Should the Company and the counterparty to the agreements terminate the swaps
prior to their original maturity, any gain or loss upon termination will be
amortized to interest expense over the remaining original life of the swap
agreements.
<PAGE> 28
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Forward Share Repurchase:
On March 9, 1999 the Company entered into a forward agreement to repurchase
shares of its common stock. As of March 31, 1999, the Company had forward
contracts outstanding to purchase 1,291,500 shares of the Company's common stock
at an average price of $24.29 per share.
On or prior to the maturity of the forward contract on May 27, 1999, the Company
may elect to either take possession of shares for cash or settle on a net share
basis. Stock delivered to the Company upon settlement of the contract
will be accounted for as an adjustment to stockholders' equity and will be
designated as "treasury stock."
SUPERIOR RIGHTS OF PREFERRED STOCK. The Board of Directors of the Company is
authorized under the Company's Certificate of Incorporation, without stockholder
approval, to issue from time to time up to an aggregate of 5,000,000 shares of
preferred stock, $0.01 par value per share (the "Preferred Stock"), in one or
more series. Of the 5,000,000 authorized shares of Preferred Stock, 90,000
shares have been designated as 4 1/2% Series A Cumulative Convertible Preferred
Stock (the "Series A Preferred Stock"), all of which shares have been issued,
and 143,750 shares have been designated as 6 1/2% Series B Cumulative
Convertible Preferred Stock ("Series B Preferred Stock"), all of which shares
have been issued. The rights of holders of Common Stock are subject to, and may
be adversely affected by, the rights of holders of the Series A Preferred Stock
and the Series B Preferred Stock and any other series of Preferred Stock that
the Company may designate and issue in the future. In particular, before any
payment or distribution is made to holders of Common Stock upon the liquidation,
dissolution or winding-up of the Company, holders of both the Series A Preferred
Stock and the Series B Preferred Stock are entitled to receive a liquidation
preference of $1,000.00 per share, plus accrued and unpaid dividends. The
holders of the Series A Preferred Stock and the Series B Preferred Stock also
have various rights, preferences and privileges with respect to dividends,
redemption, voting, conversion and registration under the Securities Act.
AVAILABILITY OF FINANCING. The Company may need to raise additional funds
through public or private debt or equity offerings in order to make other
acquisitions and otherwise implement its strategy. The Company entered into a
$500 million secured credit facility in conjunction with the completion of the
transaction with Olivetti. While the Company believes that the facility provides
sufficient capital availability there can be no assurance that sufficient
capital will be available on terms acceptable to the Company.
ANTI-TAKEOVER PROVISIONS. The Company's Certificate of Incorporation and
By-Laws and the Delaware General Corporation Law contain certain provisions
which could have the effect of delaying or preventing transactions that might
result in a change in control of the Company, including transactions in which
stockholders might otherwise receive a premium for their shares over the
then-current market price, and may limit the ability of stockholders to approve
transactions that they deem to be in their best interests. In addition, the
Company has recently adopted a shareholder rights plan which is intended to
deter coercive or unfair takeover tactics and to prevent a potential acquirer
from gaining control of the Company without offering a fair price to all of the
Company' shareholders.
On May 4, 1999, the Company announced that it had entered into an agreement with
Getronics, providing for the acquisition of all the outstanding common stock of
Wang for $29.25 per share in cash. In the event Getronics is unable to tender
for a majority of Wang shares of common stock, the proposed merger between the
two companies may not occur. Such an event could have a negative impact on the
market price of the Company's common stock.
<PAGE> 29
WANG LABORATORIES, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to the disclosure under "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Risks and
Uncertainties-Market Risk", which is incorporated herein by reference.
<PAGE> 30
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
Exhibit No. Description
2.1(1) The Amended and Restated Reorganization Plan of Wang
Laboratories, Inc. and Official Committee of Unsecured
Creditors dated September 30, 1993
3.1(2) Certificate of Incorporation
3.2(8) Certificate of Incorporation, as Amended
3.3(10) Certificate of Stock Designation with respect to the 4 1/2%
Series A Cumulative Convertible Preferred Stock
3.4(14) Certificate of Elimination of the Registrant's 11%
Exchangeable Preferred Stock
3.5(14) Certificate of Stock Designation with respect to the 6 1/2%
Series B Cumulative Convertible Preferred Stock
3.6(25) Certificate of Stock Designation with respect to the Series C
Junior Participating Preferred Stock
3.7(13) By-Laws of the Registrant
3.8 Amendment to By-Laws of the Registrant
4.1 Rights Agreement
10.1(3) 1993 Directors' Stock Option Plan
10.2(4) Form of Contingent Severance Compensation Agreements with
Donald P. Casey, J.J. Van Vuuren, Albert A. Notini, David I.
Goulden, and James J. Hogan, each an executive officer of the
Company
10.3(5) Contingent Severance Compensation Agreement with Joseph M.
Tucci
10.4(6) Employment Agreement with James J. Hogan
10.5(5) Employee Retention Agreement with James J. Hogan
10.6(7) Stock Incentive Plan, as Amended
10.7(8) Contingent Severance Compensation, as Amended with
Franklyn A. Caine (Employment Agreement)
10.8(8) Employees' Stock Incentive Plan
10.9(8) 1995 Director Stock Option Plan
10.10(9) Employment Agreement with Donald P. Casey, as Amended
10.11(10) Form of Amendment to Contingent Severance Compensation
Agreements with Joseph M. Tucci, Donald P. Casey, Albert A.
Notini, David I. Goulden, James J. Hogan, and Franklyn A.
Caine, each an executive officer of the Company
10.12(11) 1994 Employees' Stock Incentive Plan, as Amended
10.13(11) Form of Amendment to Employment Letter Agreement for David I.
Goulden, Albert A. Notini and Franklyn A. Caine
1
<PAGE> 31
Exhibit No. Description
10.14(12) Form of Non-Qualified Long Term Incentive Option
to Purchase Shares of Common Stock for Messrs. Tucci, Caine,
Casey, Goulden, Hogan, Notini, and Van Vuuren
10.15(12) Registration Rights Agreement 6 1/2% Cumulative Convertible
Preferred Stock
10.16(14) Employment Agreement of Lucy A. Flynn
10.17(15) 1995 Employees' Stock Purchase Plan, as Amended
10.18(15) Employees' Stock Incentive Plan, as Amended
10.19(15) 1995 Director Stock Option Plan, as Amended
10.20(16) Asset Purchase Agreement, as amended, with respect to the
Registrant's sale of its software business unit to Eastman
Kodak Company
10.21(17) Amended and Restated Employment Agreement of Joseph M. Tucci
10.22(17) Restricted Stock Agreement of Joseph M. Tucci
10.23(17) Non-Qualified Long Term Incentive Stock Option Agreement of
Joseph M. Tucci
10.24(17) Second Amendment to the Change in Control Severance Agreement
of Joseph M. Tucci
10.25(17) Form of Non-Qualified Long Term Incentive Stock Option
Agreement with Messrs. Caine, Goulden and Notini, each an
executive officer of the Registrant
10.26(17) Form of Restricted Stock Agreement with Messrs. Caine,
Goulden and Notini, each an executive officer of the
Registrant
10.27(17) Letter Agreement of Employment of Jose Ofman
10.28(17) Amendment Number 1 to Letter Agreement of Employment of Jose
Ofman
10.29(17) Non-Qualified Long Term Stock Option Agreement with Jeremiah
J. J. Van Vuuren
10.30917) Letter Agreement for Special Bonus of Franklyn A. Caine
10.31(17) Change in Control Severance Agreement, as amended of Franklyn
A. Caine
10.32(17) Letter Agreement for Special Bonus of Albert A. Notini
10.33(17) Change in Control Severance Agreement, as amended of
Albert A. Notini
10.34(17) Letter Agreement for Special Bonus of David I. Goulden
10.35(17) Change in Control Severance Agreement, as amended of David I.
Goulden
10.36(17) Amendment Number 1 to the 1993 Directors' Stock Option Plan
10.37(17) Amendment Number 2 to the Stock Incentive Plan
2
<PAGE> 32
Exhibit No. Description
10.38(17) Amendment Number 3 to the Employees' Stock Incentive Plan
10.39(18) Restricted Stock Agreement of Jeremiah J. J. Van Vuuren with
Registrant
10.40(18) Employment Agreement of Jeremiah J. J. Van Vuuren with Wang
Laboratories Ireland B.V.
10.41(18) Employment Agreement of Jeremiah J. J. Van Vuuren
10.42(18) Change in Control Severance Agreement, as amended of Jeremiah
J. J. Van Vuuren
10.43(19) Form of Change in Control Severance Agreement with Messrs.
Buckingham and Brauneis
10.44(20) Amendment No. 4 to the 1995 Employee Stock Incentive Plan
10.45(20) Amendment No. 5 to the 1995 Employee Stock Incentive Plan
10.46(20) Amendment No. 2 to the 1995 Director Stock Option Plan
10.47(20) Amendment No. 2 to the 1995 Employee Stock Purchase Plan
10.48(20) Short Term Incentive Plan
10.49(21) Stock Purchase Agreement and Wang Laboratories, Inc. and Wang
Nederlands B.V., Ing. C. Olivetti SpA and certain subsidiaries
10.50(21) Credit Agreement among Wang Laboratories, Inc., various
subsidiary borrowers and Bankers Trust Company and various
financial institutions
10.51(22) Olsy Employees Stock Incentive Plan
10.52(23) Rights Agreement, dated April 22, 1998, between Wang
Laboratories, Inc. and American Stock Transfer & Trust
Company, as Rights Agent, including all exhibits thereto
10.53(24) Amendment to Employment Agreement with Franklyn A. Caine
10.54(24) Amendment to Employment Agreement with Donald P. Casey
10.55(24) Amendment to Employment Agreement with Lucy A. Flynn
10.56(24) Amendment to Employment Agreement with David I. Goulden
10.57(24) Amendment to Employment Agreement with James J. Hogan
10.58(24) Amendment to Employment Agreement with Albert A. Notini
10.59(24) Amendment to Employment Agreement with Jose Ofman
10.60(24) Amendment to Employment Agreement with Jerimiah J.J.
van Vuuren with Wang Laboratories Ireland B.V.
10.61(24) Amendment to Employment Agreement with Jerimiah J.J. van
Vuuren with Wang Laboratories, Inc.
10.62(24) Amendment to Change of Control Severance Agreement with
Franklyn A. Caine
3
<PAGE> 33
Exhibit No. Description
10.63(24) Amendment to Change of Control Severance Agreement with
Donald P. Casey
10.64(24) Amendment to Change of Control Severance Agreement with
Lucy A. Flynn
10.65(24) Amendment to Change of Control Severance Agreement with
David I. Goulden
10.66(24) Amendment to Change of Control Severance Agreement with
James J. Hogan
10.67(24) Amendment to Change of Control Severance Agreement with
Albert A. Notini
10.68(24) Amendment to Change of Control Severance Agreement with
Jose Ofman
10.69(24) Amendment to Change of Control Severance Agreement with
Jeremiah J.J. van Vuuren
10.70(25) Amendment to Employment Agreement with Jose Ofman
10.71(25) Amendment to Rights Agreement
10.72 Employment Agreement of Michael Levinger
10.73 Change in Control Severance Agreement with Michael Levinger
12.1 Calculation of Ratio of Earnings to Fixed Charges
27.1 Financial Data Schedule
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form 8-A
(File No. 0-22470), filed on September 27, 1993.
(2) Filed as an Exhibit to the Registrant's Registration Statement on Form S-8
(File No. 33-73210), filed on December 21, 1993.
(3) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1993.
(4) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended March 31, 1994.
(5) Filed as an Exhibit to the Registrant's Registration Statement on Form S-1,
as amended (File No. 33-81526) filed September 13, 1994.
(6) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ended June 30, 1994.
(7) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended September 30, 1994.
(8) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1994.
(9) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ending June 30, 1995.
(10) Filed as an Exhibit to the Registrant's report on Form 10-Q/A for the
quarter ended September 30, 1995.
(11) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1995.
(12) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended March 31, 1996.
(13) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated
May 3, 1996.
(14) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ended June 30, 1996.
4
<PAGE> 34
(15) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1996.
(16) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated
March 17, 1997.
(17) Filed as an Exhibit to the Registrant's quarterly report a Form 10-Q for
the quarter ended March 31, 1997.
(18) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ended June 30, 1997.
(19) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended September 30, 1997.
(20) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1997.
(21) Filed as an Exhibit to the Registrant's Current Report on Form 8-k dated
March 17, 1998.
(22) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended March 31, 1998.
(23) Filed as an Exhibit to the Registrant's Registration Statement on Form 8-A
dated May 15, 1998.
(24) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended September 30, 1998.
(25) Filed as an Exhibit to the Registrant's transition period report on Form
10-K for the year ended December 31, 1998.
(b) During the quarter ended March 31, 1999, the Registrant filed no
Current Reports of Form 8-K
<PAGE> 35
SIGNATURE
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, thereunto duly authorized.
DATE: May 14, 1999
WANG LABORATORIES, INC.
/s/ Paul F. Brauneis
---------------------
Paul F. Brauneis,
Vice President and
Corporate Controller
<PAGE> 36
EXHIBIT INDEX
Exhibit No. Description
2.1(1) The Amended and Restated Reorganization Plan of Wang
Laboratories, Inc. and Official Committee of Unsecured
Creditors dated September 30, 1993
3.1(2) Certificate of Incorporation
3.2(8) Certificate of Incorporation, as Amended
3.3(10) Certificate of Stock Designation with respect to the 4 1/2%
Series A Cumulative Convertible Preferred Stock
3.4(14) Certificate of Elimination of the Registrant's 11%
Exchangeable Preferred Stock
3.5(14) Certificate of Stock Designation with respect to the 6 1/2%
Series B Cumulative Convertible Preferred Stock
3.6(25) Certificate of Stock Designation with respect to the Series C
Junior Participating Preferred Stock
3.7(13) By-Laws of the Registrant
3.8 Amendment to By-Laws of the Registrant
4.1 Rights Agreement
10.1(3) 1993 Directors' Stock Option Plan
10.2(4) Form of Contingent Severance Compensation Agreements with
Donald P. Casey, J.J. Van Vuuren, Albert A. Notini, David I.
Goulden, and James J. Hogan, each an executive officer of the
Company
10.3(5) Contingent Severance Compensation Agreement with Joseph M.
Tucci
10.4(6) Employment Agreement with James J. Hogan
10.5(5) Employee Retention Agreement with James J. Hogan
10.6(7) Stock Incentive Plan, as Amended
10.7(8) Contingent Severance Compensation, as Amended with
Franklyn A. Caine (Employment Agreement)
10.8(8) Employees' Stock Incentive Plan
10.9(8) 1995 Director Stock Option Plan
10.10(9) Employment Agreement with Donald P. Casey, as Amended
10.11(10) Form of Amendment to Contingent Severance Compensation
Agreements with Joseph M. Tucci, Donald P. Casey, Albert A.
Notini, David I. Goulden, James J. Hogan, and Franklyn A.
Caine, each an executive officer of the Company
10.12(11) 1994 Employees' Stock Incentive Plan, as Amended
10.13(11) Form of Amendment to Employment Letter Agreement for David I.
Goulden, Albert A. Notini and Franklyn A. Caine
1
<PAGE> 37
Exhibit No. Description
10.14(12) Form of Non-Qualified Long Term Incentive Option
to Purchase Shares of Common Stock for Messrs. Tucci, Caine,
Casey, Goulden, Hogan, Notini, and Van Vuuren
10.15(12) Registration Rights Agreement 6 1/2% Cumulative Convertible
Preferred Stock
10.16(14) Employment Agreement of Lucy A. Flynn
10.17(15) 1995 Employees' Stock Purchase Plan, as Amended
10.18(15) Employees' Stock Incentive Plan, as Amended
10.19(15) 1995 Director Stock Option Plan, as Amended
10.20(16) Asset Purchase Agreement, as amended, with respect to the
Registrant's sale of its software business unit to Eastman
Kodak Company
10.21(17) Amended and Restated Employment Agreement of Joseph M. Tucci
10.22(17) Restricted Stock Agreement of Joseph M. Tucci
10.23(17) Non-Qualified Long Term Incentive Stock Option Agreement of
Joseph M. Tucci
10.24(17) Second Amendment to the Change in Control Severance Agreement
of Joseph M. Tucci
10.25(17) Form of Non-Qualified Long Term Incentive Stock Option
Agreement with Messrs. Caine, Goulden and Notini, each an
executive officer of the Registrant
10.26(17) Form of Restricted Stock Agreement with Messrs. Caine,
Goulden and Notini, each an executive officer of the
Registrant
10.27(17) Letter Agreement of Employment of Jose Ofman
10.28(17) Amendment Number 1 to Letter Agreement of Employment of Jose
Ofman
10.29(17) Non-Qualified Long Term Stock Option Agreement with Jeremiah
J. J. Van Vuuren
10.30917) Letter Agreement for Special Bonus of Franklyn A. Caine
10.31(17) Change in Control Severance Agreement, as amended of Franklyn
A. Caine
10.32(17) Letter Agreement for Special Bonus of Albert A. Notini
10.33(17) Change in Control Severance Agreement, as amended of
Albert A. Notini
10.34(17) Letter Agreement for Special Bonus of David I. Goulden
10.35(17) Change in Control Severance Agreement, as amended of David I.
Goulden
10.36(17) Amendment Number 1 to the 1993 Directors' Stock Option Plan
10.37(17) Amendment Number 2 to the Stock Incentive Plan
2
<PAGE> 38
Exhibit No. Description
10.38(17) Amendment Number 3 to the Employees' Stock Incentive Plan
10.39(18) Restricted Stock Agreement of Jeremiah J. J. Van Vuuren with
Registrant
10.40(18) Employment Agreement of Jeremiah J. J. Van Vuuren with Wang
Laboratories Ireland B.V.
10.41(18) Employment Agreement of Jeremiah J. J. Van Vuuren
10.42(18) Change in Control Severance Agreement, as amended of Jeremiah
J. J. Van Vuuren
10.43(19) Form of Change in Control Severance Agreement with Messrs.
Buckingham and Brauneis
10.44(20) Amendment No. 4 to the 1995 Employee Stock Incentive Plan
10.45(20) Amendment No. 5 to the 1995 Employee Stock Incentive Plan
10.46(20) Amendment No. 2 to the 1995 Director Stock Option Plan
10.47(20) Amendment No. 2 to the 1995 Employee Stock Purchase Plan
10.48(20) Short Term Incentive Plan
10.49(21) Stock Purchase Agreement and Wang Laboratories, Inc. and Wang
Nederlands B.V., Ing. C. Olivetti SpA and certain subsidiaries
10.50(21) Credit Agreement among Wang Laboratories, Inc., various
subsidiary borrowers and Bankers Trust Company and various
financial institutions
10.51(22) Olsy Employees Stock Incentive Plan
10.52(23) Rights Agreement, dated April 22, 1998, between Wang
Laboratories, Inc. and American Stock Transfer & Trust
Company, as Rights Agent, including all exhibits thereto
10.53(24) Amendment to Employment Agreement with Franklyn A. Caine
10.54(24) Amendment to Employment Agreement with Donald P. Casey
10.55(24) Amendment to Employment Agreement with Lucy A. Flynn
10.56(24) Amendment to Employment Agreement with David I. Goulden
10.57(24) Amendment to Employment Agreement with James J. Hogan
10.58(24) Amendment to Employment Agreement with Albert A. Notini
10.59(24) Amendment to Employment Agreement with Jose Ofman
10.60(24) Amendment to Employment Agreement with Jerimiah J.J.
van Vuuren with Wang Laboratories Ireland B.V.
10.61(24) Amendment to Employment Agreement with Jerimiah J.J. van
Vuuren with Wang Laboratories, Inc.
10.62(24) Amendment to Change of Control Severance Agreement with
Franklyn A. Caine
3
<PAGE> 39
Exhibit No. Description
10.63(24) Amendment to Change of Control Severance Agreement with
Donald P. Casey
10.64(24) Amendment to Change of Control Severance Agreement with
Lucy A. Flynn
10.65(24) Amendment to Change of Control Severance Agreement with
David I. Goulden
10.66(24) Amendment to Change of Control Severance Agreement with
James J. Hogan
10.67(24) Amendment to Change of Control Severance Agreement with
Albert A. Notini
10.68(24) Amendment to Change of Control Severance Agreement with
Jose Ofman
10.69(24) Amendment to Change of Control Severance Agreement with
Jeremiah J.J. van Vuuren
10.70(25) Amendment to Employment Agreement with Jose Ofman
10.71(25) Amendment to Rights Agreement
10.72 Employment Agreement of Michael Levinger
10.73 Change in Control Severance Agreement with Michael Levinger
12.1 Calculation of Ratio of Earnings to Fixed Charges
27.1 Financial Data Schedule
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form 8-A
(File No. 0-22470), filed on September 27, 1993.
(2) Filed as an Exhibit to the Registrant's Registration Statement on Form S-8
(File No. 33-73210), filed on December 21, 1993.
(3) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1993.
(4) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended March 31, 1994.
(5) Filed as an Exhibit to the Registrant's Registration Statement on Form S-1,
as amended (File No. 33-81526) filed September 13, 1994.
(6) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ended June 30, 1994.
(7) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended September 30, 1994.
(8) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1994.
(9) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ending June 30, 1995.
(10) Filed as an Exhibit to the Registrant's report on Form 10-Q/A for the
quarter ended September 30, 1995.
(11) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1995.
(12) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended March 31, 1996.
(13) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated
May 3, 1996.
(14) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ended June 30, 1996.
4
<PAGE> 40
(15) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1996.
(16) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated
March 17, 1997.
(17) Filed as an Exhibit to the Registrant's quarterly report a Form 10-Q for
the quarter ended March 31, 1997.
(18) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ended June 30, 1997.
(19) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended September 30, 1997.
(20) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1997.
(21) Filed as an Exhibit to the Registrant's Current Report on Form 8-k dated
March 17, 1998.
(22) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended March 31, 1998.
(23) Filed as an Exhibit to the Registrant's Registration Statement on Form 8-A
dated May 15, 1998.
(24) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended September 30, 1998.
(25) Filed as an Exhibit to the Registrant's transition period report on Form
10-K for the year ended December 31, 1998.
<PAGE> 1
EXHIBIT 3.8
WANG LABORATORIES, INC.
BY-LAWS
AMENDMENT NO. 2
Pursuant to a vote of the Board of Directors of Wang Laboratories, Inc.
(the "Corporation") on March 24, 1999, to amend the By-Laws of the Corporation
as follows:
To amend Article II, Section 4, Advance Notice, by deleting the third
paragraph in its entirety and replacing it as follows:
To be timely, a stockholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the
Corporation not less than forty-five (45) days nor more than sixty (60)
days prior to the date on which the Corporation first mailed its proxy
materials for the prior year's annual meeting; provided, however, that
in the event that the annual meeting is called for a date that is not
within thirty (30) days before or after the anniversary of the prior
year's annual meeting, notice by the stockholder in order to be timely
must be so received not later than the close of business on the tenth
(10th) day following the day on which such 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.
<PAGE> 1
EXHIBIT 10.72
March 12, 1999
Mr. Michael Levinger
50 Bradford Road
Wellesley, MA 02481
Dear Mike:
This letter, along with Wang's Standard Employment Agreement, as
presently modified and attached hereto, sets forth the terms of your employment
with Wang Laboratories, Inc. ("Wang" or "the Company"). The Company agrees to
employ you, and you agree to remain in the employ of the Company, upon the
following terms and conditions.
1. POSITION
You will be employed as Senior Vice President, Marketing, effective as
of April 12, 1999 ("Hire Date").
2. TERM
The terms and conditions of this letter will be in full force and
effect for a three (3) year period commencing on your Hire Date and terminating
on April 11, 2002, unless otherwise terminated as set forth in paragraph 4.
3. COMPENSATION AND BENEFITS
(a) YEARLY PAYMENTS
Your initial base salary will be $285,000 on an annualized
basis, and you will be eligible to participate in an annualized fiscal year
bonus plan targeted at fifty percent (50%) of your base salary, depending upon
your performance against the objectives specified in the plan. For calendar year
1999 you will be eligible for seventy-five percent (75%) of the targeted annual
bonus, fifty percent (50%) of which is guaranteed. Your salary and bonus plan
percentages will be reviewed annually for possible upward adjustment at the
discretion of the Company and as applicable the Board of Directors of the Wang
(the "Board") or a committee of the Board authorized to act on such matters.
<PAGE> 2
MR. MICHAEL LEVINGER
MARCH 12, 1999
PAGE 2
(b) STOCK INCENTIVES
Subject to final approval by the Organization, Compensation and
Nominating Committee of the Board, you will be eligible to receive an option to
purchase one hundred and sixty thousand (160,000) shares of Wang Common Stock.
The option, having a seven (7) year term, will vest in four (4) equal
installments over a four (4) year period, the first installment vesting on the
one (1) year anniversary of the grant date, and the other installments on the
second, third and fourth anniversaries thereafter. The exercise price of this
option will be based on the fair market value of the Common Stock when approved
by the Committee or an authorized designee thereof.
Further, you will receive a grant of twenty-five thousand (25,000)
restricted registered shares of Wang Common Stock (the "Restricted Shares")
which will vest and be freely transferable (subject to applicable law) on the
third anniversary of the date of the grant, subject to (i) the acceleration of
one third of the Restricted Shares, on or after the first anniversary of the
grant date, if the average of the Closing Prices of Wang Common Stock for any
period of 40 consecutive trading days ending on or prior to the first
anniversary of the grant date is $32 per share, (ii) the acceleration of two
thirds of the Restricted Shares, on or after the second anniversary of the grant
date, if the average of the Closing Prices of Wang Common Stock for any period
of 40 consecutive trading days ending on or prior to the second anniversary of
the grant date is $40 per share and (iii) the acceleration of one-half of the
unvested Restricted Shares in the event your employment with the Company is
terminated on a basis which entitles to you to the severance payments as set
forth in paragraph 4 of this letter.(1)
(c) OTHER PROVISIONS
(i) The Company will provide health, vision, dental and disability
coverage to you in accordance with existing Company plans available to all
employees generally. You are eligible to participate in Wang's Retirement
Savings Plan effective as of your Hire Date. You will also be eligible to
participate in Wang's Senior Executive Retirement Plan ("SERP")
- -------------------------
1 For the purposes of this paragraph, "Closing Price" for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case
reported in the principal consolidated transaction reporting system with respect
to shares of Common Stock listed or admitted to trading on the New York Stock
Exchange, or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system or as quoted by the Nasdaq National
Market with respect to securities listed or admitted to trading on another
national securities exchange or quoted by the Nasdaq National Market,
respectively, or, if the shares of Common Stock are not listed or admitted to
trading on any national securities exchange or quoted by the Nasdaq National
Market, the last quoted price, or, if not so quoted, the average of the high bid
and low asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers Automated Quotation System or such other
system then in use, or, if on any such date the shares of Common Stock are not
quoted by an such organization, the average of the closing bid and asked prices
as furnished by a professional market marker making a market in the Common Stock
selected by the Committee. "Common Stock" when used herein shall mean the common
stock, par value $0.01 per share, of the Company.
<PAGE> 3
MR. MICHAEL LEVINGER
MARCH 12, 1999
PAGE 3
according to the terms and conditions of that plan. The Company will provide
term life insurance to you based on your insurability in the amount of five
times your base salary plus target bonus (50% of base salary) compensation.
Further, you will receive the Company's standard personal holiday benefit as
well as four weeks of vacation, accruable ratably over the calendar year. It is
understood and agreed that you will be taking a vacation of three consecutive
weeks in 1999. To arrange for your benefits and receive your Wang Benefits
Enrollment Kit, please contact Maria Haddad, Human Resources Consultant, at
(978) 625-7060 upon acceptance of this offer.
(ii) During your employment, the Company will pay you a monthly
automobile allowance of $585.00 per month. In connection therewith, you may
elect one of two options:
Option 1: Wang will pay the automobile insurance
premium for one automobile if the automobile is
leased through the Wang automobile lease
program.
Option 2: You may lease or buy an automobile in your
own personal name (and not through the Wang
automobile lease program), in which case Wang
will not pay the automobile insurance premium
in connection with such an arrangement.
(iii) During your employment, the company will also reimburse you, at
regular intervals and in accordance with Company policy, for all business
travel, telephone and out-of-pocket expenses incurred by you in the performance
of your duties as an employee of the Company.
4. TERMINATION/SEVERANCE COMPENSATION AND BENEFITS
(a) (i) In the event that your employment with the Company is
involuntarily terminated, (other than a termination "for cause," a term which
includes but is not limited to a violation of the standards set forth in Wang's
Standards of Ethics and Business Conduct booklet, or because of your death, in
which case this paragraph is inapplicable), or (ii) if during the term of this
Agreement and without your consent (x) you cease to be a Senior Vice President,
Marketing of the Company (y), either or both of your annual base salary or
target bonus is decreased from the level it was at immediately prior to such
decrease without your consent (a "Decrease Event") (z) your job location is
changed to someplace other than Massachusetts (other than in connection with a
relocation of the Company's worldwide headquarters), and upon the occurrence of
an event set forth in items (x),(y) or (z) above you resign, then Wang will pay
you semi-monthly an eighteen (18) month salary continuance equal to your then
base pay plus the target contained in your bonus plan, at 100% performance, at
the time of your termination (provided that, if your termination follows the
occurrence of a Decrease Event, then the salary and target bonus levels will be
those in effect immediately prior to any such decrease). Wang shall also pay to
you, at
<PAGE> 4
MR. MICHAEL LEVINGER
MARCH 12, 1999
PAGE 4
such time as Wang pays executives generally under the applicable annual
management incentive plan, the pro rata share of your target bonus (and in the
case of a Decrease Event at the target level immediately prior to such
decrease), calculated at an achievement level equal to Wang's actual performance
(as used for calculating the payout to other executives measured on the same
basis) for financial targets for the year in which your employment was
terminated through the date of your termination (less any amount thereof
previously paid to you). Finally, the restrictions on 50% of your then unvested
Restricted Shares will vest and such shares shall become freely transferable,
subject to applicable law.
(b) During this salary continuation period, Wang will continue
to provide you with health, vision and dental benefits pursuant to the
provisions of the Consolidated Omnibus Budget Reconciliation Act ("COBRA"). Wang
shall pay the applicable COBRA premium for you during this continuance period.
Other employee benefits will not be continued during this salary continuance
period.
(c) In the event you become employed at any time during the eighteen
(18) month salary continuance period, all remaining salary continuance payments
shall terminate as of your date of hire by your new employer, except to the
extent that the total annual compensation for your new employment is less than
the total of your remaining salary continuance payments and, in such event, the
Company shall only pay that amount equal to the difference.
(d) In the event of any dispute between you and the Company as to
whether you have been terminated "for cause" as that term is used in
subparagraph 4(a)(i) above, (i) the Company agrees to pay you, on a semi-monthly
basis, the severance amount set forth in subparagraph 4(a) above during the time
period of any such dispute; and (ii) you and the Company agree that in any such
dispute the party prevailing in a final, non-appealable judgment on the merits
shall bear the other party's reasonable attorneys' fees (the "Prevailing
Party"). In addition, you agree to repay promptly to the Company any funds paid
to you during the period of any such dispute if you are not the Prevailing
Party.
(e) As of April 12, 2002, your employment status will be at will,
meaning that your employment at Wang will be for an indefinite period of time
and will be terminable at any time, with or without cause being shown, by either
you or the Company. Therefore, unless this Agreement is extended in writing, the
terms and conditions contained in paragraph 4 of this letter will conclude at
the end of the three (3) year period set forth herein and the original,
unmodified terms of paragraph 6 of the attached, modified standard Wang
Employment Agreement will be in full force and effect. Wang agrees to meet with
you to discuss whether you and Wang wish to extend this Agreement and the terms
of any such extension not later than six (6) months prior to the expiration of
the three (3) year period described in this letter.
(f) You will also be granted a contingent severance agreement
applicable in the event of a change in control of the Company.
<PAGE> 5
MR. MICHAEL LEVINGER
MARCH 12, 1999
PAGE 5
5. NO CONFLICTS OF INTEREST
By signing this letter, you represent that you are not subject to any
restrictions, particularly, but without limitation, in connection with any
previous employment, which prevent you from entering into and performing your
obligations under this letter or which materially and adversely affect (or may
in the future, so far as you can reasonably foresee, materially and adversely
affect) your right to participate in the affairs of the Company.
6. STANDARDS OF ETHICS AND BUSINESS CONDUCT
You are required to comply with the Company's Standards of Ethics and
Business Conduct (a copy of which is enclosed herewith), and a completed
Standard of Ethics and Business Conduct form (enclosed) is a condition of your
employment.
7. I-9, EXPORT FORMS
Your employment is also contingent upon your ability to provide, within
three (3) business days after commencement of employment, the completed enclosed
I-9 form, and acceptable original documents that will establish your employment
authorization and identity in compliance with the Immigration Reform and Control
Act of 1986. In addition, you are required to complete the U.S. Export
Administration Employment Compliance Form I. If you answer "NO" to question 1
you are required to call H.R. Administration at (978) 625-7061 before you report
to work to complete a U.S. Export Administration Employment Compliance Form II.
Copies of your Visa and Form I-94, will also be required. Your response to the
questions in Form II may affect your eligibility for employment.
8. NON-COMPETITION
By signing this letter, you agree as follows:
(a) During the period of your employment with Wang, and for a
period of twelve (12) months following the termination of your employment, you
agree that you will not, without the prior written consent of Wang, which shall
not unreasonably be withheld, directly or indirectly, whether as a principal,
agent, employee, consultant, contractor, advisor, representative, stockholder
(other than as a holder of an interest of one percent (1%) or less in the equity
of any corporation whose stock is traded on a public stock exchange), or in any
other capacity:
(1) provide services, advice or assistance to any business,
person or entity which competes in the United States directly, as
a primary focus of
<PAGE> 6
MR. MICHAEL LEVINGER
MARCH 12, 1999
PAGE 6
its business, with Wang or any of its subsidiaries or affiliates
in the offer, sale or delivery of those desktop and network
services which constitute more than twenty per cent (20%) of
Wang's revenues in the prior twelve month period or, with respect
to identifiable new product or service offerings (and not
categories thereof), those which are material to Wang and for
which you had responsibility and material and direct involvement
("Competes")(except that this restriction shall not apply if you
provide services, advice or assistance to or within a separate
division or operating unit of any such business, person or entity
that does not itself compete with Wang or any of its subsidiaries
and affiliates and you have no substantive involvement with any
part of such business, person or entity that does Compete with
Wang); or
(2) intentionally entice, induce or solicit, or attempt to
entice, induce or solicit, any individual or entity having a
business relationship with Wang, whether as an employee,
consultant, customer or otherwise, to terminate or cease such
relationship.
(b) If your employment is involuntarily terminated, other than
for cause or as a result of your death, or if you resign as a result of one of
the reasons set forth in paragraph 4(a)(ii) herein, the restrictions set forth
in subparagraph 8(a) above shall apply only during your employment and for six
(6) months thereafter.
(c) The parties represent and agree that any breach of this
paragraph 8 is likely to cause irreparable injury to Wang, and that damages for
any breach of this paragraph are difficult to calculate. Therefore, upon breach
of this paragraph Wang shall, at its election, be entitled to injunctive and
other equitable relief. However nothing in this sub-paragraph shall limit Wang's
right to seek any relief or remedies, including damages, to which it may be
entitled.
(d) It is the intention of the parties that the restrictions
contained in this paragraph 8 be reasonable as to time, geographic scope, and in
all other respects. The parties also intend that this paragraph be enforced to
the fullest extent permissible. Therefore, in the event that any provision of
this paragraph shall be determined by the court to be unreasonable, invalid or
unenforceable such determination shall not invalidate or render unenforceable
the remainder of this paragraph, and the restrictions of this paragraph shall be
enforced insofar as possible.
(e) Notwithstanding the provisions of paragraph 2 of this
agreement, this paragraph 8 shall survive the termination of this agreement.
(f) In the event of any inconsistency or conflict between the
language of this paragraph and the provisions of the Wang General Employment
Agreement, the provisions of this paragraph shall govern. In light of the more
detailed provisions of this
<PAGE> 7
MR. MICHAEL LEVINGER
MARCH 12, 1999
PAGE 7
paragraph of this letter, is agreed that the provisions of Paragraph 8 of the
Wang Global Employment Agreement are deleted and will have no force or effect
on you.
(g) This paragraph 8 shall be governed by the laws of the
Commonwealth of Massachusetts, and you agree that any suit for violation of this
paragraph may be brought in any court of competent jurisdiction located within
the Commonwealth of Massachusetts.
9. CONFIDENTIALITY
By our signatures below, we agree to treat the details of this letter
with utmost confidentiality and that we will not disclose them to any third
parties except your immediate family, or respective financial and/or legal
advisors, and such Wang personnel and/or agents as have a need to know this
information for business purposes and as may otherwise be required by law.
Confirmation of your acceptance of these terms and of your Hire Date by
your signature below would be appreciated within seven (7) business days from
receipt of this letter. By your signature, you acknowledge that you have read
and understand the terms of this agreement and that you are entering into it
knowingly and voluntarily.
Mike, on a more personal note, welcome to the Wang Global. I have no
doubt that you will add a positive new dimension to the team, help us reach our
goals and have a lot of fun doing it. We are all looking forward to working with
you. If you have any questions, please call me at (978) 625-5050.
Regards,
Joseph M. Tucci
Chairman and Chief Executive Officer
Enclosures: Standard Employment Agreement (as presently modified)
New Hire Forms
ACCEPTED AND AGREED TO:
- ----------------------------
Michael Levinger
Dated: _________________
<PAGE> 1
EXHIBIT 10.73
AGREEMENT
THIS AGREEMENT, dated as of April 5, 1999, is made by and
between the Company, and Michael Levinger (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its shareholders to foster the continuous employment of key
management personnel;
WHEREAS, the Board of Directors of Wang Laboratories, Inc.
(the "Board") recognizes that, as is the case with many publicly-held
corporations, the possibility of a Change in Control (as defined in the last
Section hereof) exists and that such possibility, and the uncertainty and
questions which it may raise among such management, may result in the departure
or distraction of management personnel to the detriment of the Company and its
shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. Capitalized terms, not elsewhere defined in
this Agreement, are defined in Section 16 hereof.
2. Terms of Agreement.
(a) This Agreement shall commence as of April 5, 1999 (the
"Effective Date") and shall continue in effect while the Executive is employed
by the Company for a period of three years, provided, however, that commencing
on the third anniversary of the commencement of the term of this Agreement and
on each anniversary thereafter, the term of this Agreement shall automatically
be extended for one additional year unless, not later than ninety days prior to
any such anniversary date either party shall have given notice that it does not
wish to extend this Agreement (provided that no such notice may be given by the
Company during the pendency of or within one year following a Potential Change
in Control); provided, further, if a Change in Control shall have occurred
during the original or extended
<PAGE> 2
term of this Agreement, this Agreement shall continue in effect for a period of
thirty-six months beyond the month in which such Change in Control occurred.
(b) It is intended, and the parties hereto agree, that (i) the
benefit, if any, payable to the Executive under any other severance or
termination pay plan, arrangement or agreement of or with the Company shall be
reduced by the amount of any payment actually provided under Section 6.1 hereof
and (ii) any options to acquire shares of the Company's stock ("Options")
awarded to the Executive, any shares of the Company's stock awarded to the
Executive and subject to one or more restrictions on the Executive's full
ownership or right to transfer or enjoy the economic benefit of such shares
("Restricted Shares") or any contractual agreement with the Executive pursuant
to which the Executive will receive shares of the Company's stock, subject to
one or more restrictions (a "Restricted Stock Unit"), shall become fully
exercisable or all restrictions thereon shall terminate, as the case may be,
upon occurrence of a Change in Control during the term of this Agreement.
(c) The acceleration provisions of subparagraph (b)(ii) above
(the "Subparagraph (b)(ii) Acceleration Provisions") shall not apply (i) to
Options, Restricted Shares or Restricted Stock Units that are not fully
exercisable or are not free of restrictions until a target share price
performance has been reached if such target price has not been reached at the
time of the Change in Control or (ii) to the extent that the Subparagraph
(b)(ii) Acceleration Provisions conflict with any specific provisions related to
the accelerated exercisability of or lapse of restrictions on any Options,
Restricted Shares or Restricted Stock Units in the event of a Change in Control
set forth in agreements, plans or instruments evidencing such Options,
Restricted Shares or Restricted Stock Units (collectively, the "Grant
Instruments"), in which case the terms of the Grant Instrument shall prevail.
The definition of Change in Control set forth in this Agreement shall prevail
over any contrary definition in a Grant Instrument unless such Grant Instrument
specifically refers to this Agreement and states that the definition of Change
in Control in the Grant Instrument prevails.
3. Company's Covenants Summarized. In order to induce the
Executive to become employed by or remain in the employ of the Company as the
case may be, and in consideration of the Executive's covenant set forth in
Section 4 hereof, the Company agrees, under the conditions described herein, to
pay the Executive the "Severance Payment" described herein in the event the
Executive's employment with the Company is terminated under the circumstances
described below following a Change in Control and during the term of this
Agreement. No amount or benefit shall be payable under this Agreement unless
there shall have been
2
<PAGE> 3
(or under the terms hereof, there shall be deemed to have been) a termination
of the Executive's employment with the Company following a Change in Control.
4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the term of this Agreement, the Executive
will remain in the employ of the Company until the earliest of (i) a date which
is six (6) months from the date of such Potential Change in Control, (ii) the
date of a Change in Control, (iii) the date of termination by the Executive of
the Executive's employment for Good Reason (determined by treating the Potential
Change in Control as a Change in Control in applying the definition of Good
Reason), or by reason of Death, Disability or Retirement, or (iv) the
termination by the Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payment.
5.1 Following a Change in Control during the term of this
Agreement, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Company shall continue to pay the Executive's full salary to
the Executive at the rate in effect at the commencement of any such period,
together with all compensation and benefits payable to the Executive under the
terms of any compensation or benefit plan, program or arrangement maintained by
the Company during such period, until the Executive's employment is terminated
by the Company for Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the term of this Agreement, the
Company shall pay the Executive's full salary to the Executive through the Date
of Termination at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to the Executive
through the Date of Termination under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company during such period.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the term of this Agreement, the
Company shall, except as provided in Section 2 above, pay the Executive's normal
post-termination compensation and benefits to the Executive as such payments
become due. Such post-termination compensation and benefits shall be determined
under, and paid in accordance with, the Company's retirement, insurance and
other compensation or benefit plans, programs, agreements or arrangements.
3
<PAGE> 4
6. Severance Payment.
6.1 Subject to Section 6.2 hereof, the Company shall pay the
Executive the payment described in this Section 6.1 (the "Severance Payment")
upon the termination of the Executive's employment following a Change in Control
during the term of this Agreement, in addition to the payments and benefits
described in Section 5 hereof, unless such termination is (i) by the Company for
Cause, (ii) by reason of the Executive's Death or Disability or (iii) by the
Executive without Good Reason. Moreover, the Executive's employment shall be
deemed to have been terminated following a Change in Control by the Company
without Cause or by the Executive with Good Reason if the Executive's employment
is terminated without Cause prior to a Change in Control at the direction of a
Person who has entered into an agreement with the Company, the consummation of
which will constitute a Change in Control, or if the Executive terminates his
employment with Good Reason prior to a Change in Control (determined by treating
a Potential Change in Control as a Change in Control in applying the definition
in Good Reason) if the circumstance or event which constitutes Good Reason
occurs at the direction of such Person. In lieu of any further salary payments
to the Executive for periods subsequent to the Date of Termination and in lieu
of any severance benefit otherwise payable to the Executive, the Company shall
pay to the Executive a lump sum severance payment, in cash, equal to 2.99 times
the average of the Executive's base salary and annual bonus paid in (i) each of
the 2 calendar years preceding the calendar year in which occurs the Date of
Termination or, (ii) in the event the Executive has been employed by the Company
for less than 2 full calendar years, such lesser number of calendar years during
any part of which the Executive has been so employed, with his base salary taken
into account at its full annual rate for any partial year or years.
6.2 Notwithstanding any other provisions of this Agreement, in
the event that any payment or benefit received or to be received by the
Executive in connection with a Change in Control or the termination of the
Executive's employment, whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the Company or such
Person (all such payments and benefits, including the Severance Payments, being
hereinafter called "Total Payments"), would be subject (in whole or part), to
the excise tax imposed under section 4999 of the Code (the "Excise Tax"), then
the Severance Payments shall be reduced to the extent necessary so that no
portion of the Total Payments is subject to the Excise Tax (after taking into
account any reduction in the Total Payments provided by reason of section 280G
of the Code in such other plan, arrangement or agreement) if (A) the net amount
of such Total Payments, as so
4
<PAGE> 5
reduced, (and after deduction of the net amount of federal, state and local
income tax on such reduced Total Payments) is greater than (B) the excess of (i)
the net amount of such Total Payments, without reduction (but after deduction of
the net amount of federal, state and local income tax on such Total Payments),
over (ii) the amount of Excise Tax to which the Executive would be subject in
respect of such Total Payments. For purposes of determining whether and the
extent to which the Total Payments will be subject to the Excise Tax, (i) no
portion of the Total Payments the receipt or enjoyment of which the Executive
shall have effectively waived in writing prior to the Date of Termination shall
be taken into account, (ii) no portion of the Total Payments shall be taken into
account which in the opinion of tax counsel selected by the Company does not
constitute a "parachute payment" within the meaning of section 280G(b)(2) of the
Code, (including by reason of section 280G(b)(4)(A) of the Code) and, in
calculating the Excise Tax, no portion of such Total Payments shall be taken
into account which constitutes reasonable compensation for services actually
rendered, within the meaning of section 280G(b)(4)(B) of the Code, in excess of
the Base Amount allocable to such reasonable compensation, and (iii) the value
of any non-cash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by the Company in accordance with the principles of
sections 280G(d)(3) and (4) of the Code. Prior to the payment date set forth in
Section 6.3 hereof, the Company shall provide the Executive with its calculation
of the amounts referred to in this Section and such supporting materials as are
reasonably necessary for the Executive to evaluate the Company's calculations.
6.3 The payment provided for in Section 6.1 hereof shall be
made not later than the fifth day following the Date of Termination, provided,
however, that if the amount of such payment, and the limitation on such payment
set forth in Section 6.2 hereof, cannot be finally determined on or before such
day, the Company shall pay to the Executive on such day an estimate, as
determined in good faith by the Company, of the minimum amount of such payment
to which the Executive is clearly entitled and shall pay the remainder of such
payment (together with interest at the rate provided in section 1274(b)(2)(B) of
the Code) as soon as the amount thereof can be determined but in no event later
than the thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payment exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section, the Company shall
provide the Executive with a written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received
5
<PAGE> 6
from outside counsel, auditors or consultants (and any such opinions or advice
which are in writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees
and expenses incurred by the Executive as a result of or in connection with a
termination of employment following a Change in Control and during the term of
this Agreement (including all such fees and expenses, if any, incurred in good
faith in disputing any such termination or in seeking in good faith to obtain or
enforce any benefit or right provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the application of
section 4999 of the Code to any payment or benefit provided hereunder). Such
payments shall be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such evidence of fees
and expenses incurred as the Company reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the term of this Agreement, any purported termination of the Executive's
employment (other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to other party hereto in accordance
with Section 10 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. Further, a Notice of
Termination for Cause is required to include a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the Board which was called and held for
the purpose of considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with his counsel, to be
heard before the Board) finding that, in the good faith opinion of the Board,
the Executive was guilty of conduct set forth in the definition of Cause herein,
and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination", with respect
to any termination of the Executive's employment after a Change in Control and
during the term of this Agreement, shall mean (i) if the Executive's employment
is terminated for Disability, thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination
6
<PAGE> 7
(which, in the case of a termination by the Company, shall not be less than
thirty (30) days (except in the case of a termination for Cause) and, in the
case of a termination by the Executive, shall not be less than fifteen (15) days
nor more than sixty (60) days, respectively, from the date such Notice of
Termination is given).
7.3 Dispute Concerning Termination. Notwithstanding any
provision of Section 7.2 hereof to the contrary, if within fifteen (15) days
after any Notice of Termination is received, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party in writing that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally resolved, either by mutual written
agreement of the parties or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided that the Date of Termination shall be extended by a notice of dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence. For the
purposes of the preceding sentence, a dispute concerning termination shall be
deemed finally resolved if neither party commences an action in any court within
thirty (30) days of an arbitration award concerning such dispute seeking the
modification of or other relief from such award.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the term of this Agreement, and
such termination is disputed in accordance with Section 7.3 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation, benefit
and insurance plans in which the Executive was participating when the notice
giving rise to the dispute was given, until the dispute is finally resolved in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to this
Agreement. Further, the amount of any payment or benefit provided for in this
Agreement shall not be reduced by any compensation earned by the Executive as
the
7
<PAGE> 8
result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Executive to the Company, or
otherwise.
9. Successors.
9.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for Good
Reason after a Change in Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
To the Company:
Wang Laboratories, Inc.
290 Concord Road
Billerica, Massachusetts 01821
Attention: Chief Executive Officer
Copy to: General Counsel
To the Executive:
Michael Levinger
50 Bradford Road
Wellesley, MA 02481
8
<PAGE> 9
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the Commonwealth of Massachusetts. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Company and the Executive under
Sections 5, 6 and 7 shall survive the expiration of the term of this Agreement.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration
conducted before a panel of three arbitrators in Boston, Massachusetts in
accordance with the commercial rules of the American Arbitration Association
("AAA") then in effect. Unless the panel of arbitrators shall have been selected
by agreement of the parties within thirty (30) days of the initiation of
arbitration proceedings, each party shall be entitled to select one arbitrator
within ten (10) business days of the lapse of such thirty (30) day period and
the third arbitrator shall be selected by agreement of the two arbitrators so
selected within seven (7) business days after the selection of the two
arbitrators. In the event that either party does not timely designate an
arbitrator or that the two arbitrators do not timely select a third arbitrator
in accordance with the preceding sentence, then upon application of either party
to the Boston office of the AAA, the AAA shall designate such arbitrator.
Judgment may be entered on the arbitrators' award in any court having
jurisdiction, provided, however, that the Executive shall be entitled to seek
specific performance of his right to be paid until
9
<PAGE> 10
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
15. Nondisclosure of Confidential Information. The Executive
shall keep secret and confidential and shall not disclose to any third party in
any fashion or for any purpose whatsoever, any information regarding this
Agreement, or any other information regarding the Company which is (i) not
available to the general public, and/or (ii) not generally known outside the
Company, to which he has or will have had access at any time during the course
of his employment by the Company, including, without limitation, any information
relating to: the Company's business or operations; its plans, strategies,
prospects or objectives; its products, technology, processes or specifications;
its research and development operations or plans; its customers and customer
lists; its manufacturing, distribution, sales, service, support and marketing
practices and operations; its financial condition and results of operations; its
operational strengths and weaknesses; and, its personnel and compensation
policies and procedures. Notwithstanding the foregoing provisions of this
Section 15, the Executive may discuss this Agreement with the members of his
immediate family and with his personal legal and tax advisors, provided that,
prior to disclosing any term or condition of this Agreement to any person, the
Executive shall obtain from such person for the benefit of the Company his or
her agreement to observe the foregoing provisions.
16. Definitions. For purposes of this Agreement, the following
shall have the meanings indicated below:
(A) "Affiliate" shall mean an entity that is controlled by
Wang Laboratories, Inc.
(B) "Base Amount" shall have the meaning defined in section
280G(b)(3) of the Code.
(C) "Beneficial Owner" and "Beneficial Ownership" shall have
the meaning defined in, and shall be determined pursuant to, Rule 13d-3 under
the Securities Exchange Act of 1934, as amended.
(D) "Board" shall mean the Board of Directors of Wang
Laboratories, Inc.
(E) "Cause" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean the willful and continued
failure by the Executive to substantially perform the Executive's duties with
the
10
<PAGE> 11
Company, a substantial, and not de minimis, violation of the Company's Standards
of Ethics and Business Conduct or its Rules of Employee Conduct (and any
successor documents, however titled), as the same are in effect from time to
time, the Executive's conviction of a felony or engaging in conduct that
constitutes a violation of Section 15 hereof.
(F) A "Change in Control" shall be deemed to have occurred if any one of the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(i) any Person (other than a trustee or other fiduciary
holding securities under an employee benefit plan of the
Company) is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates)
representing 20% or more of the combined voting power of the
Company's then outstanding securities; or
(ii) during any period of twenty-four consecutive months (not
including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a
director whose initial assumption of office is in connection
with an actual or threatened election contest, including but
not limited to a consent solicitation, relating to the
election of directors of the company) whose election by the
Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election was previously
so approved, cease for any reason to constitute a majority
thereof; or
(iii) The Company or any Subsidiary or Affiliate merges or
consolidates with any other corporation, other than (i) a
merger or consolidations 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), in combination with the ownership of
any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, at least 75% of the
combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such
merger or consolidation, or (ii) a merger or consolidation
effected to implement
11
<PAGE> 12
a recapitalization of the Company (or similar transaction) in
which no Person acquires more than 20% of the combined voting
power of the Company's then outstanding securities, or;
(iv) the shareholders of the Company approve a plan of
complete liquidation of the Company or there is consummated
the sale or disposition by the Company of all or substantially
all of the Company's assets or the Company is dissolved and
its assets distributed in a judicial proceeding.
(G) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time. All references to the Code shall be deemed also to
refer to any successor provisions to such sections.
(H) Except with respect to Sections 16(F) and (O) hereof,
"Company" shall mean Wang Laboratories, Inc. or one of its Subsidiaries or
Affiliates, both as defined herein, and any successor to their business and/or
assets which assumes and agrees to perform this Agreement by operation of law,
or otherwise. For the purposes of Sections 16(F) and (O) hereof, "Company" shall
mean Wang Laboratories, Inc. and any and all successors thereto or any parent
thereto.
(I) "Date of Termination" shall have the meaning stated in
Sections 7.2 and 7.3 hereof.
(J) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of the
Executive's incapacity due to physical or mental illness, the Executive shall
have been absent from the full-time performance of the Executive's duties with
the Company for a period of six (6) consecutive months, the Company shall have
given the Executive a Notice of Termination for Disability, and, within thirty
(30) days after such Notice of Termination is given, the Executive shall not
have returned to the full-time performance of the Executive's duties.
(K) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(L) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) of any one of the following acts by the Company, or
failures by the Company to act, unless, in the case of any act or failure to act
described in paragraph
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<PAGE> 13
(i), (iv), (v), (vi), or (vii) below, such act or failure to act is corrected
prior to the Date of Termination specified in the Notice of Termination given in
respect thereof:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior officer of the
Company;
(ii) a reduction by the Company in the Executive's
annual base salary as in effect on the date hereof or as the same may
be increased from time to time except for across-the-board salary
reductions similarly affecting all senior executives of the Company and
all senior executives of any Person in control of the Company;
(iii) the failure by the Company to pay to the
Executive any portion of the Executive's current compensation except
pursuant to an across-the-board compensation deferral similarly
affecting all senior executives of the Company and all senior
executives of any Person in control of the Company, or to pay to the
Executive any portion of an installment of deferred compensation under
any deferred compensation program of the Company, within fourteen (14)
days of the date such compensation is due;
(iv) the failure by the Company to continue in effect
any compensation plan in which the Executive participates immediately
prior to the Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
such plan, or the failure by the Company to continue the Executive's
participation therein (or in a substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount of
benefits provided and the level of the Executive's participation
relative to other participants, as existed at the time of the Change in
Control;
(v) the failure by the Company to continue to provide
the Executive with benefits substantially similar to those enjoyed by
the Executive under any of the Company's pension, life insurance,
medical, health and accident, or disability plans in which the
Executive was participating at the time of the Change in Control, the
taking of any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the Executive of any
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<PAGE> 14
material fringe benefit enjoyed by the Executive at the time of the
Change in Control, or the failure by the Company to provide the
Executive with the number of paid vacation days to which the Executive
is entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect at the
time of the Change in Control;
(vi) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1; for purposes of this
Agreement, no such purported termination shall be effective; or
(vii) the failure by the Company to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 9 hereof.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or failure
to act constituting Good Reason hereunder.
(M) "Notice of Termination" shall have the meaning stated in
Section 7.1 hereof.
(N) "Person" shall have the meaning defined in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended.
(O) "Potential Change in Control" shall be deemed to have
occurred if any one of the conditions set forth in any one of the following
paragraphs shall have been satisfied:
(i) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in
Control;
(ii) the Company or any other Person publicly
announces an intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
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<PAGE> 15
(iii) any Person (other than a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company) who is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 10% or more of
the combined voting power of the Company's then outstanding securities,
increases such Person's Beneficial Ownership of such securities by 5%
or more over the percentage so owned by such Person on the date hereof;
or
(iv) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control has
occurred.
(P) "Retirement" shall mean retirement after attaining "normal
retirement age" under any pension or retirement plan maintained by the Company
in which the Executive participates.
(Q) "Severance Payment" shall mean the payment described in
Section 6.1 hereof.
(R) "Subsidiary" shall mean an entity that is controlled by
Wang Laboratories, Inc.
(S) "Total Payment" shall mean those payments described in
Section 6.2 hereof.
WANG LABORATORIES, INC.
By: _________________________
Joseph M. Tucci
Chairman of the Board
and Chief Executive Officer
Accepted and Agreed to:
- -------------------------
Michael Levinger
15
<PAGE> 1
EXHIBIT 12.1 - CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions except ratios)
<TABLE>
<CAPTION> Three months Six months
ended ended Year ended Year ended Year ended Year ended
March 31, December 31, June 30, June 30, June 30, June 30,
1999 1998 1998 1997 1996 1995
------------ ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
FIXED CHARGES
Interest expense $ 7.7 $14.4 $10.4 $10.9 $ 5.1 $ 3.7
Portion of rent expense
representative of interest 3.5 7.4 15.0 9.4 9.4 5.9
------------ ----------- ----------- ------------ ----------- ------------
11.2 21.8 25.4 20.3 14.5 9.6
Preferred dividend requirement 5.8 11.7 23.5 23.5 37.7 14.5
------------ ----------- ----------- ------------ ----------- ------------
Combined fixed charges and
preferred dividend $17.0 $33.5 $48.9 $43.8 $ 52.2 $ 24.1
============ =========== =========== ============ =========== ============
EARNINGS
Income (loss) from continuing
operations before income taxes,
discontinued operations,
fresh-start reporting adjustment
and extraordinary item ($51.2)(1) ($23.5)(2) ($237.5)(3) ($22.3)(4) $ 94.9 (5) $ 6.9 (6)
Fixed charges per above 11.2 21.8 25.4 20.3 14.5 9.6
------------ ----------- ----------- ------------ ----------- ------------
($40.0) ($1.7) ($212.1) ($2.0) $109.4 $16.5
============ =========== =========== ============ =========== ============
Ratio of earnings to combined
fixed charges and
preferred dividends -- -- -- -- 2.1 --
============ =========== =========== ============ =========== ============
Coverage deficiency $ (57.0) $ (35.2) $ (261.0) $ (45.8) -- $ (7.6)
============ =========== =========== ============ =========== ============
<CAPTION>
Predecessor
Company
--------------
Nine months Three months
ended ended
June 30, September 30,
1994 1993
---------- -------------
<S> <C> <C>
FIXED CHARGES
Interest expense $ 3.5 $ 1.2
Portion of rent expense
representative of interest 5.6 2.7
---------- -------------
9.1 3.9
Preferred dividend requirement 8.7 --
---------- -------------
Combined fixed charges and
preferred dividend $17.8 $ 3.9
========== =============
EARNINGS
Income (loss) from continuing
operations before income taxes,
discontinued operations,
fresh-start reporting adjustment
and extraordinary item $18.4 $(8.5)
Fixed charges per above 9.1 3.9
--------- ------------
$27.5 ($4.6)
========= =============
Ratio of earnings to combined
fixed charges and
preferred dividends 1.5 --
========= =============
Coverage deficiency -- $ (8.5)
========== =============
</TABLE>
(1) Includes $48.3 million of acquisition-related charges
(2) Includes $35.1 million of acquisition-related charges
(3) Includes $23.2 million of acquisition-related, restructuring and Chapter
11-related charges
(4) Includes $36.3 million of acquisition-related,restructuring and Chapter
11-related charges
(5) Includes $(1.1) million of acquisition-related,restructuring and Chapter
11-related charges
(6) Includes $62.1 million of acquisition-related,restructuring and Chapter
11-related charges
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF OPERATIONS AND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 182,000
<SECURITIES> 0
<RECEIVABLES> 894,100
<ALLOWANCES> 23,900
<INVENTORY> 155,400
<CURRENT-ASSETS> 1,365,200
<PP&E> 397,800
<DEPRECIATION> 162,200
<TOTAL-ASSETS> 2,195,200
<CURRENT-LIABILITIES> 1,215,400
<BONDS> 340,900
86,700
138,300
<COMMON> 500
<OTHER-SE> 152,100
<TOTAL-LIABILITY-AND-EQUITY> 2,195,200
<SALES> 297,000
<TOTAL-REVENUES> 789,000
<CGS> 249,000
<TOTAL-COSTS> 638,700
<OTHER-EXPENSES> 69,600<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,700
<INCOME-PRETAX> (51,200)
<INCOME-TAX> 3,200
<INCOME-CONTINUING> (54,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (54,200)
<EPS-PRIMARY> (1.25)
<EPS-DILUTED> (1.25)
<FN>
<F1> Includes $48.3 million of nonrecurring acquistion-related charges.
</FN>
</TABLE>
