March 25, 1994
BY EDGAR
Securities & Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Lotus Development Corporation Preliminary Proxy Materials
Dear Sir/Madam:
Accompanying this electronic transmission for filing on behalf
of Lotus Development Corporation, a Delaware corporation (the
"Company"), pursuant to Rule 14a-6(a) of the Securities Exchange
Act of 1934, as amended, and Regulation S-T, please find
preliminary copies of the following materials:
1.A letter to shareholders of the Company from Jim P. Manzi,
the Chairman of the Board and President of the Company;
2.A Notice of Annual Meeting of Shareholders for the annual
meeting of the Company's shareholders to be held on May 25,
1994 (the "Meeting");
3.The Company's proxy statement relating to the Meeting; and
4.The form of proxy card.
Pursuant to Item 10 of Rule 14a-101 under the Exchange Act, this
filing also includes a copy of the Company's 1986 Stock Option
Plan for Non-Employee Directors, which is the subject of a
proposed material amendment under Proposal No. 2 of the proxy
statement.
In addition, please note that pursuant to Item 304 of Regulation
S-T, the Company shall submit the performance graph that is to
appear in the proxy statement on paper under cover of Form S-E
on the first business day following the date of this electronic
transmission.
The Company intends to release definitive proxy materials to its
shareholders on or about April 12, 1994.
Securities & Exchange Commission
March 25, 1994
Page Two
Kindly direct any comments or questions about these above
referenced materials to the undersigned by telephone (617)
693-1403 or by fax at (617) 693-4814.
Sincerely,
Larry J. Braverman
Senior Corporate Counsel
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant /X/
Filed by a party other than the registrant /_/
Check the appropriate box:
/X/ Preliminary proxy statement
/_/ Definitive proxy statement
/_/ Definitive additional materials
/_/ Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Lotus Development Corporation
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(j)(2).
/_/ $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
/_/ Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:<F1>
(4) Proposed maximum aggregate value of transaction:
/_/ Check box if any part of the fee is offset as provided
by Exchange act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
[FN]
<F1>Set forth the amount on which the filing fee is calculated
and state how it was determined.
PRELIMINARY COPY
April 12, 1994
Dear Shareholder:
You are cordially invited to attend the 1994 Annual Meeting
of Shareholders of Lotus Development Corporation, which will be
held at the Wang Center for the Performing Arts, 270 Tremont
Street, Boston, Massachusetts, on Wednesday, May 25, 1994 at
11:00 a.m., local time.
Information about the Annual Meeting, including a listing
and discussion of the matters on which the shareholders of the
Company will act, may be found in the enclosed formal Notice of
Annual Meeting and Proxy Statement. The Annual Report to
Shareholders for the fiscal year ended December 31, 1993 has also
been enclosed if not previously furnished to you.
We hope that you will be able to attend the Annual Meeting.
However, whether or not you anticipate attending in person, I
urge you to complete, sign and return the enclosed proxy card
promptly to ensure that your shares will be represented at the
Annual Meeting. If you do attend, you, of course, will be
entitled to vote in person, and such vote will revoke your proxy.
Sincerely,
/s/Jim P. Manzi
Jim P. Manzi
Chairman of the Board and President
PRELIMINARY COPY
Lotus Development Corporation 55 Cambridge Parkway, Cambridge,
Massachusetts 02142 617 577-8500
LOTUS DEVELOPMENT CORPORATION
55 Cambridge Parkway
Cambridge, Massachusetts 02142
-------------------------
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
------------------------
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders (the "Meeting") of Lotus
Development Corporation, a Delaware corporation (the "Company"),
will be held on Wednesday, May 25, 1994 at 11:00 a.m., local
time, at the Wang Center for the Performing Arts, 270 Tremont
Street, Boston, Massachusetts. The purpose of the Meeting shall
be:
1. To elect directors of the Company to serve until the next
Annual Meeting of Shareholders and until their respective
successors have been duly elected and qualified.
2. To approve the amendment of the Company's 1986 Stock
Option Plan for Non-Employee Directors to provide for an
automatic grant of options to newly elected directors of the
Company.
3. To approve certain performance-based compensation payable
to the Company's Chief Executive Officer in order to retain its
deductibility for U.S. Federal Income Tax purposes.
4. To approve the amendment of the Company's Certificate of
Incorporation to provide for an increase in the number of
authorized shares of capital stock.
5. To ratify the selection of the firm of Coopers & Lybrand
as auditors for the Company for the fiscal year ending December
31, 1994.
6. To transact such other business as may properly come
before the Meeting or any adjournments thereof.
Only shareholders of record on the books of the Company at the
close of business on April 1, 1994 will be entitled to notice
of and to vote at the Meeting.
Please sign, date and return the enclosed proxy card in the
enclosed envelope at your earliest convenience. If you return
your proxy, you may nevertheless attend the Meeting and vote your
shares in person.
All shareholders of the Company are cordially invited to
attend the Meeting.
By Order of the Board of Directors
Thomas M. Lemberg
Secretary
Cambridge, Massachusetts
April 12, 1994
- -----------------------------------------------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE
AND MAIL THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED FROM WITHIN THE UNITED STATES.
- -----------------------------------------------------------------
PRELIMINARY COPY
LOTUS DEVELOPMENT CORPORATION
55 Cambridge Parkway
Cambridge, Massachusetts 02142
---------------
PROXY STATEMENT
------------
Annual Meeting of Shareholders To Be Held on May 25, 1994
Proxies enclosed with this Proxy Statement are solicited by
the Board of Directors of Lotus Development Corporation, a
Delaware corporation (the "Company"), for use at the Annual
Meeting of Shareholders (the "Meeting") to be held on Wednesday,
May 25, 1994 at 11:00 a.m., local time, at the Wang Center for
the Performing Arts, 270 Tremont Street, Boston, Massachusetts,
and any adjournments thereof.
Shares represented by duly executed proxies in the form
enclosed herewith received by the Company prior to the Meeting
will be voted at the Meeting FOR the election of the nominees
for director named below (except to the extent that authority
therefor is withheld) and FOR each proposal described in this
Proxy Statement. Where no choice has been specified on a proxy
with respect to a particular matter, the shares represented by
that proxy will be voted FOR the particular matter.
Any shareholder may revoke a proxy at any time prior to its
exercise by delivering a later-dated proxy or a written notice of
revocation to the Secretary of the Company at the address of the
Company set forth above, or by voting in person at the Meeting.
If a shareholder does not intend to attend the Meeting, any proxy
or notice should be returned for receipt by the Company not later
than the close of business on Tuesday, May 24, 1994. The persons
named in the proxies are officers of the Company. The Company
will bear the cost of solicitation of proxies relating to the
Meeting.
Only shareholders of record as of the close of business on
April 1, 1994 (the "Record Date") will be entitled to notice of
and to vote at the Meeting and any adjournments thereof.
As of the Record Date there were _________ shares (excluding
treasury shares) of the Company's Common Stock, $.01 par value
(the "Common Stock"), issued and outstanding. Such shares of
Common Stock are the only voting securities of the Company.
Shareholders are entitled to cast one vote for each share of
Common Stock held of record on the Record Date.
The Board of Directors (the "Board of Directors") of the
Company is not aware of any other matters to be presented at the
Meeting. If any other matter should be presented at the Meeting
upon which a vote properly may be taken, shares represented by
all duly executed proxies received by the Company will be voted
with respect thereto in accordance with the best judgment of the
persons named in the proxies. An Annual Report to Shareholders,
containing financial statements for the fiscal year ended
December 31, 1993, preceded or accompanies this Proxy Statement.
This Proxy Statement and the proxy enclosed herewith were first
mailed to shareholders on or about April 12, 1994.
The mailing address of the Company's principal executive
offices is 55 Cambridge Parkway, Cambridge, Massachusetts 02142.
PRINCIPAL HOLDERS OF VOTING SECURITIES
Security Ownership of Certain Beneficial Owners
The following table sets forth as of December 31, 1993 the
name of each person who, to the knowledge of the Company, owned
beneficially more than five percent (5%) of the shares of Common
Stock of the Company outstanding at such date, the number of
shares owned by each such person and the percentage of the
outstanding shares represented thereby. The information below
with respect to beneficial ownership is based upon information
filed with the Securities and Exchange Commission ("SEC")
pursuant to Sections 13(d) or 13(g) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and furnished to the
Company by the respective shareholders.
<TABLE>
<CAPTION>
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Ownership Percent of Class
<S> <C> <C>
The Capital Group, Inc. 2,585,000(1) 5.75%
333 South Hope Street
Los Angeles, CA 90071
FMR Corp. 6,154,039(2) 13.70%
82 Devonshire Street
Boston, MA 02109
Manning and Napier 2,807,868(3) 6.25%
Advisors, Inc.
1100 Chase Square
Rochester, NY 14604
The Prudential Insurance 3,250,833(4) 7.24%
Company of America
751 Broad Street
Newark, NJ 07102-3777
Twentieth Century 4,164,900(5) 9.27%
Companies, Inc.
4500 Main Street
Kansas City, MO 64141
</TABLE>
(1) Represents shares held by Capital Research and Management
Company, a registered investment adviser ("CRMC") and an
operating subsidiary of The Capital Group, Inc. As of the date
set forth above, CRMC exercised sole investment discretion with
respect to all of such shares, all of which were owned by
various institutional investors. CRMC had no voting power with
respect to such shares and disclaims beneficial ownership of
such shares.
(2 ) Represents shares beneficially owned by (i) FMR Corp.
through its wholly owned subsidiaries, Fidelity Management &
Research Company, a registered investment adviser ("Fidelity"),
and Fidelity Management Trust Company, a bank ("FMTC"), (ii) by
certain investment companies (including the Fidelity Magellan
Fund) for which Fidelity serves as investment adviser (the
"Fidelity Funds"), and (iii) by Edward C. Johnson 3d, as
Chairman of FMR Corp., and through certain members of his family
by virtue their controlling interest as a group in the voting
stock of FMR Corp. The Fidelity Magellan Fund beneficially
owned 4,208,100 shares or 9.37% of the Common Stock outstanding
as of the date set forth above. Mr. Johnson and FMR Corp. each
held shared voting and dispositive power with respect to all
shares reported above. FMR Corp. and Mr. Johnson, each through
their control of Fidelity, and the Fidelity Funds each had sole
dispositive power with respect to the 5,996,849 shares owned by
the Fidelity Funds. FMR Corp., through its control of FMTC,
had sole dispositive power over 157,190 Shares and sole voting
power with respect to 91,690 of these shares and no voting power
with respect to 65,000 shares owned by institutional accounts
managed by FMTC.
(3) The beneficial owner, a registered investment adviser,
possessed sole voting and dispositive power with respect to all
such share as of the date stated above.
(4) Represents shares held by The Prudential Insurance
Corporation of America ("Prudential ") directly as well as
shares held for the benefit of Prudential's clients, by its
separate accounts, externally managed accounts, registered
investment companies, subsidiaries and/or other affiliates.
Includes 3,153,300 shares or 7.02% of the Common Stock then
outstanding beneficially owned by Jennison Associates Capital
Corp., a registered investment advisor ("Jennison"). As of the
date set forth above, Prudential, possessed sole voting power
and sole dispositive power with respect to 280,493 of these
shares, shared voting power with respect to 2,394,040 shares and
shared dispositive power with respect to 2,967,040 shares. As
of such date, Jennison possessed sole voting power with respect
to 422,100 shares, shared voting power with respect to
2,186,300 shares and shared dispositive power with respect to
3,153,300 shares.
(5) Represents shares beneficially owned by Twentieth Century
Companies, Inc. ("TCC") on its own behalf, on behalf of its
wholly owned subsidiary, Investors Research Corporation ("IRC"),
a registered investment adviser, on behalf of Twentieth Century
Investors, Inc. ("TCI"), a registered investment company managed
by IRC, and on behalf of Mr. James E. Stowers, Jr., a
controlling shareholder of TCC. As of the date set forth above,
TCC, IRC and Mr. Stowers each possessed sole voting power with
respect to 4,164,800 of these shares, sole dispositive power
over all 4,164,900 of these shares and shared voting power with
respect to 20,100 of these shares. TCI possessed sole voting
and dispositive power with respect to 3,520,000 of these shares.
Security Ownership of Directors and Executive Officers
The following table sets forth for each member of the Board
of Directors, the Company's Chief Executive Officer ("CEO"), and
each of the next four most highly compensated executive officers
of the Company, the position presently held by such person and
the number of shares and percentage of outstanding Common Stock
of the Company beneficially owned by each and by all directors
and executive officers as a group, as of March 1, 1994.
<TABLE>
<CAPTION>
Name Positions and Offices Amount and Nature of
with the Company Beneficial Ownership (1) Percent of Class
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jim P. Manzi Chairman of the Board 1,244,906(2) 2.74%
and President
Richard S. Braddock Director 3,000(3) *
Lawrence G. Graev Director 59,000(4) *
William H. Gray III Director 0 *
Aldo Papone Director 31,000(5) *
Michael E. Porter Director 3,500 *
Chester A. Siuda Director 45,000(6) *
Henri A. Termeer Director 0 *
John B. Landry Senior Vice President-- 26,156(7) *
Development and
Chief Technology
Officer
June L. Rokoff Senior Vice President-- 17,194(8) *
Development
Robert P. Schechter Senior Vice President-- 83,011(9) *
International Business
Group
Robert K. Weiler Senior Vice President-- 50,218(10) *
North American Business
Group
All directors and executive 1,668,779(11) 3.64%
officers as a group (16
persons)
________________
* less than 1%
</TABLE>
(1) Except where expressly stated otherwise, each named person
possesses sole voting and investment power with respect to the
shares.
(2) Includes 26,201 shares held in the Jim P. Manzi 1993
Irrevocable Trust for the benefit of Mr. Manzi's children.
Includes 25,000 shares that Mr. Manzi has the right to acquire
within 60 days of March 1, 1994 by the exercise of stock options.
(3) Includes 2,500 shares that Mr. Braddock has the right to
acquire within 60 days of March 1, 1994 by the exercise of stock
options.
(4) Includes 45,000 shares that Mr. Graev has the right to
acquire within 60 days of March 1, 1994 by the exercise of stock
options. Includes 14,000 shares held in trust for the benefit of
Mr. Graev through the O'Sullivan Graev & Karabell Profit Sharing
Plan.
(5) Includes 30,000 shares that Mr. Papone has the right to
acquire within 60 days of March 1, 1994 by the exercise of stock
options.
(6) Includes 45,000 shares that Mr. Siuda has the right to
acquire within 60 days of March 1, 1994 by the exercise of stock
options.
(7) Includes 16,406 shares that Mr. Landry has the right to
acquire within 60 days of March 1, 1994 by the exercise of stock
options. Includes 8 shares held in trust for the benefit of Mr.
Landry under the Company's 401k and Profit Sharing Plan and 1,200
shares over which Mr. Landry exercises investment discretion as
custodian of such shares held for the benefit of his minor
children.
(8) Includes 1,562 shares that Ms. Rokoff has the right to
acquire within 60 days of March 1, 1994 by the exercise of stock
options. Includes 6,632 shares held in trust for the benefit of
Ms. Rokoff under the Company's 401k and Profit Sharing Plan.
(9) Includes 79,531 shares that Mr. Schechter has the right to
acquire within 60 days of March 1, 1994 by the exercise of stock
options.
(10) Includes 49,218 shares that Mr. Weiler has the right to
acquire within 60 days of March 1, 1994 by the exercise of stock
options.
(11) Includes 400,011 shares that directors and executive
officers of the Company have the right to acquire within 60 days
of March 1, 1994 by the exercise of stock options and 6,640
shares of Common Stock held in trust as described above.
EXECUTIVE COMPENSATION AND OTHER INFORMATION CONCERNING DIRECTORS
AND EXECUTIVE OFFICERS
Summary Compensation
The following table sets forth information concerning the
cash and noncash compensation in each of the last three fiscal
years for the Company's CEO and the next four most highly
compensated executive officers.
<TABLE>
<CAPTION>
Annual Compensation(1) Long Term All Other
_____________________ Compensation Compensation
Name and Principal Position Year Salary ($) Bonus ($) Options (#) ($)(2)
_______________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Jim P. Manzi 1993 650,000 650,000 40,000 35,046
Chairman of the Board 1992 650,000 0 0 34,214
and President 1991 650,000 195,000 50,000 36,738
John B. Landry 1993 325,000 325,000 12,500 28,325
Senior Vice President -- 1992 325,000 0 0 208,889(3)
Development and Chief 1991 12,500(4) 0 150,000(5) 325,625(3)
Technology Officer
June L. Rokoff -- 1993 325,000 325,000 25,000 19,771
Senior Vice President -- 1992 307,400(6) 0 65,000 19,945
Development 1991 258,000 140,000 75,000 17,123
Robert P. Schechter 1993 325,000 325,000 42,500 19,771
Senior Vice President -- 1992 325,000 0 0 22,469
International Business 1991 325,000 195,000 25,000(7) 20,488
Group
Robert K. Weiler 1993 325,000 325,000 17,500 19,771
Senior Vice President -- 1992 325,000 0 0 24,688
North American 1991 298,750(4) 260,000 175,000(5) 283,935(8)
Business Group
</TABLE>
(1) Does not include perquisites or other personal benefits in
any year for which the aggregate amount was less than the
lesser of either $50,000 or 10 percent of the total annual
salary and bonus for the executive officer in that year.
(2) Includes amounts credited to the account of the executive
officer in those years in which he or she served in such capacity
in connection with (i) the profit sharing feature of the
Company's 401k and Profit Sharing Plan, (ii) the Company's
Defined Contribution Restoration Plan and (iii) the Company
matching contribution under the savings feature of
the 401k and Profit Sharing Plan as follows:
<TABLE>
<CAPTION>
Defined
Contribution
Profit Sharing Restoration 401K Matching
Name Year Amount ($) Plan ($) Contribution ($)
________________________________________________________________________________________
<S> <C> <C> <C> <C>
Manzi . . . . . . . 1993 11,084 19,465 4,497
1992 7,781 22,069 4,364
1991 11,111 21,389 4,238
Landry . . . . . . . 1993 11,084 12,744 4,497
1992 7,781 14,744 4,364
1991 625 0 0
Rokoff . . . . . . 1993 11,084 4,190 4,497
1992 7,781 7,800 4,364
1991 11,111 1,774 4,238
Schechter . . . . . 1993 11,084 4,190 4,497
1992 7,781 10,324 4,364
1991 11,111 5,139 4,238
Weiler . . . . . . 1993 11,084 4,190 4,497
1992 7,781 12,543 4,364
1991 11,111 18,586 4,238
</TABLE>
(3) Includes payment by the Company of $325,000 in 1991 and
$182,000 in 1992 related to Mr. Landry's prior employment for
cash and other compensation that he had foregone by joining the
Company.
(4) Represents salary received for that portion of the year that
the executive officer was employed by the Company.
(5) Represents options granted to the executive officer at the
time of joining the Company.
(6) Upon becoming Senior Vice President -- Development in May
1992, Ms. Rokoff's annual base salary rate was increased to
$325,000.
(7) Does not include options granted to Mr. Schechter's spouse
in fiscal 1991 to purchase 2,500 shares of Common Stock, of which
options and shares Mr. Schechter disclaims beneficial ownership.
(8) Includes payment by the Company of $250,000 related to Mr.
Weiler's prior employment for cash and other compensation that he
had foregone by joining the Company.
Option Grants in Last Fiscal Year
The following table sets forth information concerning
individual stock option grants made to the Company's CEO and each
of the Company's next four most highly compensated executive
officers during fiscal 1993.
<TABLE>
<CAPTION>
Individual Grants (1)
-------------------------------------------------------------- Potential Realizable
Value at Assumed
Annual Rates of
Percent of Stock Price Appreciation
Total Options for Option Term (2)
Options Granted to Employees Exercise --------------------
Granted in Fiscal Year Price Expiration 5% 10%
Name (#) (%) ($/Sh) Date ($) ($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jim P. Manzi 40,000 1.66 22.13 January 27, 2000 360,284 839,615
John B. Landry 12,500 0.52 22.13 January 27, 2000 112,589 262,380
June L. Rokoff 25,000 1.04 22.13 January 27, 2000 225,117 524,759
Robert P. Schechter 42,500 1.76 22.13 January 27, 2000 382,802 892,091
Robert K. Weiler 17,500 0.73 22.13 January 27, 2000 157,624 367,331
</TABLE>
(1) All grants described above are non-qualified stock options
that become exercisable with respect to 25% of the total number
of shares subject to option on the first anniversary of the date
of grant and thereafter, with respect to the remaining 75% of
such shares, over the next succeeding 36 months in equal monthly
installments. All options were granted at a per share exercise
price equal to the fair market value of a share of Common Stock
on the date of grant.
(2) Calculation of potential realizable values are based on
theoretical rates of return mandated by the rules of the SEC and
may or may not accurately reflect or predict the actual value of
the stock options.
Aggregated Option Exercises In Last Fiscal Year And Fiscal
Year-End Option Values
The following table sets forth information concerning each
exercise of stock options by the CEO and each of the Company's
next four most highly compensated executive officers during
fiscal 1993 and the value of unexercised options at the end of
that fiscal year.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised in-the-Money
Options at Fiscal Options at
Shares Year-End Fiscal Year-End(1)
Acquired Value Exercisable/ Exercisable/
on Exercise Realized Unexercisable Unexercisable
Name (#) ($) (#) ($)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jim P. Manzi 76,250 1,420,156 33,750 / 65,000 1,062,500 / 2,218,125
John B. Landry 37,500 758,438 37,500 / 87,500 1,317,188 / 3,045,313
June L. Rokoff 111,075 1,919,871 15,000 / 117,500 510,156 / 3,363,906
Robert P. Schechter (2) 66,750 1,329,861 103,750 / 80,000 3,025,781 / 2,551,094
Robert K. Weiler 51,250 1,487,969 6,250 / 105,000 225,781 / 3,792,500
</TABLE>
(1) Based on the closing price on the NASDAQ National Market
System for a share of Common Stock on December 31, 1993 of
$55.00.
(2) Does not include information with respect to Mr.
Schechter's spouse, as to whose shares of Common Stock and
options to purchase such shares Mr. Schechter disclaims
beneficial ownership. During 1993, Mr. Schechter's spouse
acquired 14,575 shares of Common Stock through the exercise of
stock options for a realized value of $82,383. At fiscal year
end, his spouse held no exercisable or unexercisable options to
purchase Common Stock.
Pension Plan
In 1985, the Company established the Lotus Development
Corporation Pension Plan (the "Pension Plan") for the purpose of
assisting its employees in meeting the needs of retirement. In
1992, the Company determined that its Profit Sharing and 401k
Plan could provide adequate retirement assistance to employees
and, effective June 1, 1992, suspended the Pension Plan. While
all benefits accrued under the Pension Plan through May 31, 1992
have become fully vested, no further benefits have accrued to
employees after that date.
Benefits under the Pension Plan are based on an average of
the participant's highest consecutive 36 months of total annual
compensation during the 72 months of service prior to June 1, 1992
("Final Average Compensation"). The monthly benefit payable upon normal
retirement in the form of a single life annuity is computed as
follows: 1/12th of 1.5% of Final Average Compensation is
multiplied by the employee's total number of years of service at
retirement up to no more than 35 years. From that result is
subtracted the monthly value of the annuity that could be
acquired (on specified actuarial assumptions) with the amount of
Company profit sharing contributions for the employees account
for 1990 and subsequent years accumulated with a deemed interest
return.
The table below sets forth the estimated annual benefits
payable upon normal retirement under the Pension Plan formula to
employees in the specified average salary and years of service
classifications:
Years of Service
----------------
Remuneration 5 10
$25,000 1,875 3,750
50,000 3,750 7,500
75,000 5,625 11,250
100,000 7,500 15,000
125,000 9,375 18,750
150,000 11,250 22,500
175,000 13,125 26,250
200,000 15,000 30,000
228,860* 22,500 45,000
___________________
* The maximum permitted salary recognized under the
Internal Revenue Code of 1986, as amended (the
"Code") as in effect in 1992.
As of June 1, 1992, the date on which the accrual of future
benefits was suspended, Mr. Manzi had eight years, Mr. Landry had
less than one year, Ms. Rokoff had seven years, Mr. Schechter had
four years and Mr. Weiler had one year of service under the
Pension Plan.
Other Benefit Plans
The Company currently provides certain benefits to its
eligible employees (including its executive officers) through the
additional benefit plans described below:
1992 Stock Option Plan. The Company maintains the 1992
Stock Option Plan (the "Stock Option Plan") to attract and
retain the best available personnel for positions of substantial
responsibility and to provide additional incentives to certain
employees and consultants to contribute to the success of the
Company. The Stock Option Plan is administered by a committee of
the Board of Directors that consists of independent directors.
Stock options granted under the Plan may not be granted at less
than fair market value on the date of grant.
Employee Stock Purchase Plan. The Company maintains the
Employee Stock Purchase Plan (the "Employee Plan") to provide
incentive and to encourage ownership of Common Stock by all
eligible employees of the Company and its subsidiaries. Employees
of the Company may participate in the Employee Plan by
authorizing payroll deductions over a six month period, with the
proceeds being used to purchase shares of Common Stock for the
participant at a discounted price. The Employee Plan is intended
to be an "employee stock purchase plan" under Section 423 of the
Code.
Profit Sharing Plan and 401k Plan. The Company's Profit
Sharing and 401k Plan (the "Plan") provides savings options to
eligible U.S. employees of the Company through deferment of a
portion of their compensation. Participants may elect to defer
2% to 12% of their compensation into the Plan and may also elect
to contribute up to an additional 10% of their compensation on a
non-deferred basis; provided that the combination of deferred and
non-deferred contributions cannot exceed 12% of annual
compensation. The Company also makes matching contributions equal
to a percentage of the participant's monthly deferred
contributions.
Under the Plan, an annual discretionary profit sharing
contribution by the Company based on a percentage of operating
profit is allocated to the accounts of all participants, who do
not themselves make any profit sharing contribution. The level of
Company profit sharing and matching contributions is set annually
by the Board of Directors.
The Plan is administered by a committee appointed by the
Board of Directors. Each participant's contributions to the Plan
are held in trust by a bank trustee and are invested in certain
investment funds in accordance with the participant's
instructions. The Plan is intended to be a qualified plan under
Section 401(k) of the Code.
Defined Restoration Plan. The Company adopted the Defined
Contribution Restoration Plan to provide supplemental retirement
benefits to employees, who because of limitations imposed by the
law on benefits under tax qualified plans, would receive less
than the full benefits to which they would have otherwise been
entitled under the Company's qualified retirement plan. Under the
Defined Contribution Restoration Plan, a participant's account is
credited each year with the amount by which his or her profit
sharing allocation under the Company's Profit Sharing and 401k
Plan, calculated without consideration of the limitations imposed
under the Code, exceeds the amounts permitted under the Code. The
Company's funding policy is to pay these supplemental benefits
directly to participants as they become due, and no assets are
being set aside in advance for this purpose.
Compensation Committee Report on Executive Compensation
The Company's executive compensation program is administered
by the Compensation Committee of the Board of Directors (the
"Committee"). The Committee, which is composed of four
independent directors, makes recommendations to the Board on the
three key components of the Company's executive compensation
program, base salary, annual incentive awards and long term
incentives.
Compensation Policies for Executive Officers.
The Company's executive compensation program is designed to
attract and retain fully qualified executives in the highly
competitive high technology marketplace. The levels of executive
compensation established by the Committee are designed to be
consistent with those available to other executives in the
industry.
The Committee establishes individual compensation awards
based on the contribution the executive has made in attaining the
Company's short term and strategic performance objectives as well
as the executive's anticipated future contribution. The Company's
executive compensation program consists primarily of the
following integrated components:
1. Base Salary-which is designed to compensate executives
competitively within the industry and marketplace.
2. Annual Incentives-which provide a direct link between
executive compensation and annual Company performance against
predetermined measures.
3. Long Term Incentives-which consist of stock options that
link management decision making with long-term Company
performance and shareholder interests.
Base Salary. Base salary levels for executive officers of
the Company are reviewed annually by the Compensation Committee.
The Committee's current policy is to maintain base salary levels
within the upper quartile of the industry, based on industry
surveys and competitive analyses compiled by the Company's Human
Resources department and reviewed by the full Board of Directors.
With the exception of June Rokoff, who was promoted to Senior
Vice President of Development in May 1992, base salary levels
have not increased since 1990 for the Company's named executive
officers.
Annual Incentives. All executive officers participate in an
Executive Incentive Plan, which compensates officers in the form
of annual cash bonuses. Awards under this plan are based on the
attainment of specific Company performance measures established
by the Compensation Committee at the beginning of the fiscal
year. These performance measurements are keyed to management's
annual operating plan and are based on the achievement of
specific operating profit, revenue growth, revenue per headcount
and expense per headcount.
Long Term Incentives. The Company provides long term
incentives through its Amended and Restated 1983 Nonqualified
Stock Option Plan and its 1992 Stock Option Plan. The purpose of
these plans is to create a direct link between compensation and
the long-term performance of the Company. Stock options under
these plans are granted at or above fair market value and vest in
installments, generally over four years. Options granted before
January 1, 1993 have a five year term and options granted on or
after that date have a seven year term. The Company makes its
annual grant of options to its employees, including its executive
officers, in January, to enable the Company to more closely link
option grants to individual contribution and Company performance.
When recommending option awards for an executive officer,
the Committee considers (i) the executive's current contribution
to Company performance, (ii) the anticipated contribution in
meeting the Company's long-term strategic performance goals and
(iii) industry practices and norms. Because the receipt of value
by an executive officer under a stock option is dependent upon an
increase in the price of the Company's Common Stock, this portion
of the executives' compensation is directly aligned with an
increase in shareholder value.
In 1994, the Company adopted a "premium" stock option
program for the CEO, the executive officers and certain other
officers of the Company, which program is designed to enhance the
link between the participant's compensation and the long-term
performance of the Company, and assist in the retention of each
participant. Under this program participants receive options to
purchase Common Stock under the 1992 Stock Option Plan at 20%
above fair market value. Options granted under this program have
a seven year term and vest over three years beginning on the
second anniversary of the date of grant and thereafter in equal
monthly installments over the succeeding 36 months.
In January 1994, the Company granted "premium" options to
purchase the following number of shares of Common Stock to the
CEO and the next four most highly compensated executive officers
at an exercise price of $64.50 per share: Mr. Manzi - 200,000;
Mr. Landry - 100,000; Ms. Rokoff - 100,000; Mr. Schechter -
100,000; and Mr. Weiler- 100,000.
CEO Compensation
Base Salary. The CEO's salary is positioned competitively
to the mid-range of the marketplace through comparison of
industry surveys and competitive analyses compiled by the
Company's Human Resources department and reviewed by the
Committee. The CEO has not received a base salary increase since
January 1990.
Incentive Compensation. During the past four years, the
Committee has gradually moved to increase the incentive portion
of the CEO's total potential compensation through the annual
Executive Incentive Program. The Executive Incentive Program is
dependent on Company performance as determined by four
measurements, each of which has a weighting that comprises 100%
of the CEO's target incentive award. The CEO's maximum potential
annual incentive award under this program is 150% of base salary.
The four award measurements are: (i) the Company's performance
against operating profit (ii) total revenue growth (iii) average
revenue dollars per head and (iv) average expense per employee.
These targets are set and approved by the Committee annually.
This year, the Company is soliciting the approval of the material
terms under which compensation is payable to the CEO under the
Executive Incentive Program in order to retain its deductibility
for U.S. federal income tax purposes. See "Proposal No. 3"
below.
Long Term Incentive. In January 1994, the CEO received a
"premium" option grant as described above. Consistent with the
Committee's considerations for awards under this plan, the award
was based on the anticipated contribution of the CEO to the
attainment of the Company's
long-term strategic performance. Based upon an assessment of
industry norms, the Committee believes that the awarding of this
grant is within the scope of the marketplace for industry
executives.
Respectfully submitted by the
Compensation Committee.
Richard S. Braddock, Chairman
Chester A. Siuda
Henri Termeer
Aldo Papone
Compensation of Directors
All Directors, with the exception of Mr. Manzi, received an
annual retainer of $24,000 for the fiscal year ended December 31,
1993, together with reimbursement of expenses incurred in
attending meetings of the Board of Directors.
On January 1, 1994, Mr. Braddock, Mr. Graev, Mr. Papone, Mr.
Porter, Mr. Siuda and Mr. Termeer were each granted an option to
acquire 10,000 shares of the Company's Common Stock at an
exercise price of $53.875 per share, which price was equal to the
market value of the Company's Common Stock on the first business
day following that date, pursuant to the Company's 1986 Stock
Option Plan for Non-Employee Directors. For a more complete
description of that plan, see "Proposal No. 2" below.
Compensation Committee Interlocks and Insider Participation
Mr. Braddock, Mr. Graev, Mr. Papone, Mr. Siuda and Mr.
Termeer each served on the Compensation Committee of the Board
during 1993.
Mr. Graev, who is a member of the Company's Board of
Directors and who was a member of its Compensation Committee during 1993,
is also a member of the law firm of O'Sullivan Graev & Karabell.
During fiscal year 1993, the Company paid to O'Sullivan
Graev & Karabell fees of approximately $2,738,000 for legal services.
Compliance with Section 16(a) of the Exchange Act
Michael E. Porter, a Director of the Company, made one late
filing reporting the purchase of 500 shares of Common Stock that was
required to be filed in 1993 on Form 4 under Section 16(a) of the
Exchange Act. Mr. Porter subsequently reported this transaction.
Performance Graph
The following indexed graph indicates the Company's total
return to its shareholders for the past five year period ended
December 31, 1993 as compared to the total return over such
period for the Standard & Poor's 500 Composite Index and the
Standard & Poor's High Tech Composite Index. This graph assumes a
$100 investment at the beginning of the five-year period and the
reinvestment of all dividends.
(Pursuant to Item 304 of Regulation S-T, the Company has submitted
the performance graph under cover of Form S-E)
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Each of the persons named below has been nominated for
election as a director of the Company until the 1995 Annual
Meeting of Shareholders and until his successor has been duly
elected and qualified. No proxy may be voted for more persons
than the number of nominees listed below. Shares represented by
all duly executed proxies received by the Company and not marked
to withhold authority to vote for any individual director or for
all directors will be voted FOR the election of all the nominees
named below. The Board of Directors knows of no reason why any
such nominee should be unable or unwilling to serve, but if such
should be the case, the shares represented by duly executed
proxies received by the Company will be voted for the election
of a substitute nominee selected by the Board of Directors. The
nominees receiving a plurality of the votes cast at the Meeting
will be elected as directors.
Information Pertaining to Nominees
The following table sets forth the name and address of each
nominee, the age of each nominee, the year in which each nominee
first became a director of the Company, the principal occupation
of each nominee during the past five years and any other
directorships held, as of March 1, 1994, by each nominee in any
company subject to the reporting requirements of the Exchange Act
or in any company registered as an investment company under the
Investment Company Act of 1940, as amended.
<TABLE>
<CAPTION>
Year in
Which
Nominee
First Became Principal Occupation
Name and Address Age Director During Past 5 Years Directorships
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jim P. Manzi 42 1984 Chairman of the Board of the None
c/o Lotus Development Company (1986 to present);
Corporation President and Director of the
55 Cambridge Parkway Company (1984 to present)
Cambridge, MA 02142
Richard S. Braddock 52 1992 Chief Executive Officer (1993), Eastman Kodak Company
c/o Lotus Development Medco Containment Services, Inc.
Corporation (health care related services
55 Cambridge Parkway company); President and Chief
Cambridge, MA 02142 Operating Officer (1990-1992),
Citicorp and Citibank, N.A.
(bank and financial services
companies); Sector Executive
(1985-1989), Citicorp and
Citibank, N.A.
William H. Gray III 52 1994 President and Chief Executive Chase Manhattan Corp.;
c/o United Negro College Fund Officer of the United Negro MBIA Corp.; Prudential
700 13th Street, N.W. College Fund (since 1991); Insurance Corp. of
Suite 1180 Congressman 2nd District America; Rockwell Int'l
Washington, D.C. 20005 Pennsylvania, U.S. House of Corp.; Scott Paper Co.;
Representatives (1979-1991) Union Pacific Corp.;
Warner Lambert Corp.;
and Westinghouse Corp.
Michael E. Porter 46 1993 Professor, Harvard Business Alpha Beta Technologies, Inc.
c/o Harvard Business School (1973 - present)
School
Aldrich Building,
Room 200
Soldiers Field Road
Boston, MA 02163
Henri A. Termeer 47 1993 Chairman, President and Chief Abiomed Inc.;
c/o Genzyme Corporation Executive Officer, Genzyme AutoImmune Inc.;
One Kendall Square Corporation (1988 - present) Hambrecht & Quist
Cambridge, MA 02139 Health Care Investors,
Inc.; Hambrecht & Quist
Life Sciences; IG
Laboratories, Inc.; and
Neozyme II Corp.
</TABLE>
Board Meetings and Committees
The Board of Directors is comprised of Jim P. Manzi, Richard
S. Braddock, Lawrence G. Graev, William H. Gray III, Aldo Papone,
Michael E. Porter, Chester A. Siuda and Henri A. Termeer. The
Board of Directors met seven times during the year ended December
31, 1993. The Board of Directors has a Compensation Committee,
which establishes and reviews compensation of senior management
and which consists of Messrs. Braddock, Termeer, Papone and
Siuda. The Compensation Committee met three times during 1993.
The Board of Directors also has an Audit Committee which oversees
actions taken by the Company's independent auditors and reviews
the Company's internal controls, consisting of Messrs. Porter,
Papone and Siuda. The Audit Committee met twice during 1993.
The Board of Directors of the Company had a Nominating
Committee consisting of Messrs. Braddock, Graev, Papone and
Siuda for the purpose of recommending nominees for election as
directors of the Company to the Board of Directors. The
Nominating Committee met once during 1993. The Nominating
Committee was disbanded in September 1993.
Pursuant to the Company's By-laws, the Board of Directors
has set the number of directors of the Company to be elected at
the Meeting at five. All nominees are currently members of the
Board of Directors. Mr. Graev, Mr. Papone and Mr. Siuda have
decided not to stand for re-election in 1994.
Certain Transactions
In 1993, the Company paid fees for legal services to
O'Sullivan Graev & Karabell, the law firm of which Mr. Graev, a
director of the Company, is a member. See "Compensation
Committee Interlocks and Insider Participation" above.
The Company's Profit Sharing and 401k Plan invests in a
number of investment funds at the direction of its participants.
During 1993, the Profit Sharing and 401k Plan invested in the
Fixed Income Fund, which is managed by Fidelity Management Trust
Company, and in the Fidelity Magellan Fund and the Fidelity
Equity Income Funds, which are managed by Fidelity Management &
Research Company. Both Fidelity Management Trust Company and
Fidelity Management & Research Company are wholly owned
subsidiaries of FMR Corp., which, as of December 31, 1993,
beneficially owned greater than 5% of the outstanding Common
Stock of the Company. See "Principal Holders of Voting
Securities" above and "Other Benefit Plans--Profit Sharing and
401k Plan" above.
PROPOSAL NO. 2 TO APPROVE AMENDMENT
OF THE NON-EMPLOYEE DIRECTORS PLAN
Description of the 1986 Stock Option Plan for Non-Employee
Directors
Purpose. The 1986 Stock Option Plan for Non-Employee
Directors (the "Directors Plan") was approved by the Company's
shareholders in April 1987. The purpose of the Directors Plan is
to attract and retain the services of experienced and
knowledgeable independent directors of the Company for the
benefit of the Company and its shareholders.
Shares to be Optioned. Subject to adjustment as described
below, no more than 500,000 shares of the Company's Common Stock
may be issued through the exercise of options granted pursuant to
the Non-Employee Directors Plan. No option may be granted under
the Non-Employee Directors Plan after April 27, 1997 (the
"Termination Date").
Administration of the Plan. The Plan is administered by the
Board of Directors of the Company, which has the power to
construe the Plan, to determine all questions arising thereunder,
and to adopt and amend such rules and regulations for the
administration of the Plan as it deems desirable.
Eligible Persons. Each member of the Board of Directors of
the Company who is not, and who during the immediately preceding
12-month period has not been, an employee of the Company or any
subsidiary of the Company automatically becomes a participant (a
"Participant") in the Plan. There are currently seven directors
- - Richard S. Braddock, Lawrence G. Graev, William H. Gray III,
Henri A. Termeer, Aldo Papone, Michael E. Porter, and Chester A.
Siuda - eligible to receive options under the Plan. Each
Participant who is in office on November 15 of any year is, on
the immediately succeeding January 1, automatically granted an
option to acquire 10,000 shares of Common Stock. More than one
option may be granted to any one person and be outstanding at any
time.
Option Price. The price of shares that may be purchased
upon exercise of an option granted under the Directors Plan is
the fair market value of the Common Stock on the date of grant as
determined in accordance with the Directors Plan.
Exercise of Options. Each option granted under the
Directors Plan is evidenced by an option agreement which is
subject to the terms and conditions of such plan. Options
granted pursuant to the Directors Plan, except as described
below, are exercisable in installments of 25% upon each
anniversary of the date of grant. The term of each option,
except as described below, is for a period not exceeding ten
years from the date of grant. Upon exercise of an option, a
Participant may pay the Company the amount of the aggregate
option exercise price with cash or check or with shares of Common
Stock.
Restrictions on Options. No options may be granted under
the Directors Plan and no shares of Common Stock may be issued
upon the exercise of options unless and until the Company and/or
the Participant shall have complied with all laws and regulations
relating thereto, including but not limited to federal and state
securities laws. Option granted under the Directors Plan are
nonassignable and nontransferable by Participant except by will
or by the laws of descent and distribution.
Changes in Capital Structure. In the event of a stock
dividend, stock split or other change in the capital structure of
the Company affecting its Common Stock, an adjustment shall be
made in the number of shares subject to the Directors Plan and
the number and option price of shares subject to options granted
thereunder, as may be determined to be appropriate.
Change in Control. In the event of a Change in Control of
the Company (as defined below), an option granted to a
Participant will become fully exercisable if, within one year of
such Change in Control, such Participant ceases for any reason to
be a member of the Board. A "Change in Control" will be deemed
to have occurred if (a) there is consummated (i) any
consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which
shares of Common Stock are converted into cash, securities or
other property, other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the
same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (ii) any sale,
lease, exchange or other transfer (in one transaction or a series
of related transactions) of all or substantially all of the
assets of the Company; (b) the Company's shareholders approve any
plan or proposal for the liquidation or dissolution of the
Company; (c) any person (as such term is used in Sections 13(d)
and 14(d)(2) of the Exchange Act) becomes the beneficial owner
(within the meaning of Rule 13d-3 under said Act) of 30% or more
of the outstanding Common Stock; or (d) during any period of two
consecutive years, individuals who at the beginning of such
period constitute the entire Board of Directors cease for any
reason to constitute a majority thereof unless the election, or
the nomination for election by the Company's shareholders, of
each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the
beginning of the period. Any exercise of an option permitted in
the event of a Change in Control must be made within 180 days of
the related Participant's termination as a director of the
Company.
Amendment. The Directors Plan may be terminated, modified
or amended at any time prior to the Termination Date by the Board
of Directors, provided such termination, modification or
amendment does not (i) increase the maximum aggregate number of
shares for which options may be granted under the Directors Plan
or the number of shares for which an option may be granted to any
Participant without the approval of the shareholders of the
Company or (ii) affect the rights of a Participant in the
Directors Plan with respect to options previously granted to him
or her without his or her consent.
Termination of Options. In the event of the death of a
Participant, any option granted to such Participant may be
exercised, to the extent exercisable on the date of death, by the
estate of such Participant, or by any person or persons who
acquired the right to exercise such option by will or by the laws
of descent and distribution. Such option may be exercised at any
time within 180 days after the date of death of such Participant,
but not after the date on which the option expires by its terms.
In the event that a Participant ceases to be a director for the
Company, other than by reason of his or her death, any option
granted to such Participant may be exercised, to the extent
exercisable on the date the Participant ceases to be a director,
for a period of 30 days after such date, but not after the date
on which the option expires by its terms.
Proposed Action
On March 24, 1994, the Board of Directors of the Company
approved the amendment of the Directors Plan to provide that,
subject to the approval of the shareholders of the Company, any
non-employee of the Company elected to the Board of Directors
between January 1 and June 30 of 1994 or any period from November
16 through June 30 thereafter shall be automatically granted the
option to purchase 10,000 shares of Common Stock on the later to
occur of (i) the date that such amendment was approved by the
Board or (ii) the date of the first meeting of the Board of
Directors following the election of the new director. Such
option will be at a per share exercise price equal to the fair
market value of a share of Common Stock on the date of grant, as
such value is determined under the Directors Plan and will be on
the same terms as other options granted under the Directors Plan.
The amendment will provide for option grants to new members
of the Board who because of the timing of their election to the
Board would not receive the same benefits under the Directors
Plan as other Board members serving during substantially the same
period of time. Approval of the amendment is being sought so
that the Company can continue to attract and retain the services
of experienced and knowledgeable independent directors for the
benefit of the Company and its shareholders.
Approval of the amendment to the Plan is also being
requested so that options granted to Directors pursuant to the
Directors Plan may qualify for favorable treatment under Rule
16b-3 promulgated by SEC under the Exchange Act. Approval of the
Directors Plan will require the affirmative vote of a majority of
shares of Common Stock present or represented, and entitled to
vote, at the Meeting. If the amendment is authorized, the text
of the Section 4 of the Directors Plan will be restated as
follows by adding the language indicated below in italics:
4. Eligibility: Grant of Option. Each director
of the Corporation who is not, and has not during
the immediately preceding 12 month period been,
an employee of the Corporation or any subsidiary
of the Corporation (a "Participant") shall
automatically be a participant in the Plan. Each
Participant who is in office on November 15 of
any year (commencing with November 15, 1986)
shall, on the immediately succeeding January 1,
automatically be granted an option to acquire
10,000 Shares under the Plan. In addition, any
Participant who is elected to the Board of
Directors on or between January 1, 1994 and June
30, 1994 or during any seven and one-half month
period beginning November 16 and ending June 30
thereafter shall automatically be granted an
option to acquire 10,000 Shares on the later to
occur of (i) March 24, 1994 or (ii) the date of
the first meeting of the Board following the
election of such Participant as a director."
New Plan Benefits
If the Plan is approved by shareholders, Mr. Gray, who was
elected to the Board in January 1994, will receive an option to
purchase 10,000 shares of Common Stock at the per share exercise
of $81.75.
The Board of Directors unanimously recommends that
shareholders vote for the approval of the amendment to the
Directors Plan.
PROPOSAL NO. 3 TO APPROVE THE DEDUCTIBILITY
OF CERTAIN EXECUTIVE COMPENSATION
Under a recently enacted amendment to the Code, the United
States Congress voted to deny a deduction for U.S. Federal Income
Tax purposes to publicly held corporations to the extent that
compensation paid to a corporation's CEO or any one of the four
next most highly paid executive officers exceeds $1,000,000.
These deduction limits do not apply, however, to certain types of
"performance-based" compensation that meet the requirements of
Section 162(m) of the Code, which requirements include approval
by the shareholders of the material terms under which the
compensation is payable.
This proposal solicits approval of shareholders for purposes
of Section 162(m) of the Code of the material terms under which
the CEO is paid an annual cash bonus under the Company's
Executive Incentive Plan. See "Compensation Committee Report on
Executive Compensation" above.
Awards to the CEO under the Executive Incentive Plan are
based on the attainment of specific Company performance measures
approved by the Compensation Committee of the Board of Directors.
These performance measurements are keyed to management's annual
operating plan and are based on the achievement of specific
operating profit, revenue growth and, revenue per head and
expense per employee. According to the written performance goals
established for the CEO under the Executive Incentive Plan, the
maximum bonus award payable to the CEO under the Executive
Incentive Plan is equal to 150% of the CEO's base salary for the
year with respect to which the award is made.
Approval of this proposal will enable the Company to
continue to offer its CEO an incentive compensation package that
will continue to retain and attract qualified executives in the
highly competitive high technology market place, while preserving
for the Company a deduction for U.S. Federal Income Tax purposes
for the full amount of such compensation. Approval of this
proposal will require the affirmative vote of a majority of
shares of Common Stock present or represented, and entitled to
vote, at the Meeting.
The Board of Directors unanimously recommends that
shareholders vote for the approval of the material terms of the
compensation program described above.
PROPOSAL NO. 4 TO AMEND THE CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
Under the provisions of the Fourth Article of the Company's
Second Amended and Restated Certificate of Incorporation, as
amended, the Company's current authorized capital stock is one
hundred five million shares, consisting of one hundred million
shares of common stock, $.01 par value ("Common Stock"), and five
million shares of preferred stock, $1.00 par value ("Preferred
Stock"). As of March 1, 1994, there were approximately
45,475,965 shares of Common Stock issued and outstanding and
another 13,307,689 shares reserved for issuance under the
Company's stock option and employee stock purchase plans. On
March 24, 1994, a resolution was unanimously adopted by the Board
of Directors which approved submission to a vote of the
shareholders a proposal to amend the first sentence of the Fourth
Article of the Certificate of Incorporation to provide for a
total authorized capital stock of the Company of 305,000,000,
consisting of 300,000,000 shares of Common Stock and 5,000,000
shares of Preferred Stock. In all other respects, the Fourth
Article of the Certificate of Incorporation would remain
unchanged.
If approved, the increased number of authorized shares of
Common Stock will be available for issue from time to time for
such purposes and consideration as the Board of Directors may
approve and no further vote of shareholders of the Company will
be required, except as provided under Delaware law or the rules
of the NASDAQ System or of any national securities exchange on
which the shares of Common Stock of the Company are at the time
listed. The availability of additional shares for issue, without
the delay and expense of obtaining the approval of shareholders
at a special meeting, will afford the Company greater flexibility
in acting upon proposed transactions or in declaring a stock
dividend. The Company from time to time investigates acquisition
opportunities which might involve the issuance of its Common
Stock and is currently considering the declaration of a stock
dividend. The availability of sufficient authorized shares will
enable the Company to take advantage of these opportunities more
readily. However, the Company currently has no agreements to
issue additional shares of Common Stock other than the shares of
Common Stock that previously have been reserved for issuance as
described above.
The additional shares of Common stock for which
authorization is sought would be identical to the shares of
Common Stock of the Company now authorized. Holders of Common
Stock do not have preemptive rights to subscribe to additional
securities which may be issued by the Company.
Approval of this amendment to the Certificate of
Incorporation will require the affirmative vote of a majority of
shares of Common Stock entitled to vote at the Meeting. If the
amendment is authorized, the text of the first sentence of the
Fourth Article of the Company's Certificate of Incorporation will
be as follows:
"FOURTH. The total number of shares of stock
which the Corporation shall authority to issue is
three hundred five million (305,000,000) shares,
of which 300,000,000 shares shall be Common
Stock, $.01, par value and 5,000,000 shares shall
be Preferred Stock, $1.00 par value."
The Board of Directors unanimously recommends that
shareholders vote FOR the proposed increase in authorized shares
of Common Stock.
PROPOSAL NO. 5 RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Coopers &
Lybrand, independent certified public accountants, to serve as
auditors for the fiscal year ending December 31, 1994. Coopers &
Lybrand has served as the Company's auditors since 1982. It is
expected that a member of the firm of Coopers & Lybrand will be
present at the Meeting and will be available to make a statement
and to respond to appropriate questions. If the shareholders do
not ratify the selection of Coopers & Lybrand, the Board of
Directors may consider selection of other independent certified
public accountants to serve as independent auditors, but no
assurances can be made that the Board of Directors will do so or
that any other independent certified public accountants would be
willing to serve.
The Board of Directors unanimously recommends a vote FOR the
ratification of this Selection.
VOTING PROCEDURES
For purposes of determining whether a proposal has received
a majority vote, abstentions will be included in the vote totals,
with the result that an abstention will have the same effect as a
negative vote. In instances where brokers are prohibited from
exercising discretionary authority for beneficial holders who
have not returned a proxy (so-called "broker non-votes"), those
shares will not be included in the vote totals and, therefore,
will have no effect on the outcome of the vote. Shares that
abstain or for which the authority to vote is withheld on certain
matters will, however, be treated as present for quorum purposes
on all matters.
OTHER BUSINESS
The Board of Directors knows of no business which will be
presented for consideration at the Meeting other than that stated
above. If other business should come before the Meeting, the
persons named in the proxies solicited hereby, each of whom is an
officer of the Company, may vote all shares subject to such
proxies with respect to any such business in the best judgment of
such persons.
SHAREHOLDER PROPOSALS
It is currently contemplated that the 1995 Annual Meeting of
Shareholders will be held on or about May 10, 1995. Proposals of
shareholders intended for inclusion in the proxy statement to be
furnished to all shareholders entitled to vote at the next
annual meeting of the Company must be received at the Company's
principal executive offices not later than December 13, 1994. It
is suggested that proponents submit their proposals by certified
mail, return receipt requested.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the
Company. Proxies will be solicited principally by the Company by
use of the mails. The Company has also engaged the services of
Georgeson & Company Inc., a professional proxy solicitation firm,
to assist in the solicitation of proxies for a fee of $7,500 plus
expenses. Further solicitation of proxies from some shareholders
may be made by directors, officers and regular employees of the
Company personally or by telephone, telegraph or letter. No
additional compensation, except for reimbursement of reasonable
out-of-pocket expenses, will be paid for any such further
solicitation. In addition, the Company may request banks, brokers
and other custodians, nominees and fiduciaries to solicit
customers of theirs who have shares of Common Stock registered in
the name of a nominee. The Company will reimburse any such
persons for their reasonable out-of-pocket expenses.
Dated: April 12, 1994
_______________________________________________________________________________
PRELIMINARY COPY
LOTUS DEVELOPMENT CORPORATION
55 Cambridge Parkway
Cambridge, Massachusetts 02142
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Edwin J. Gillis and Thomas
M. Lemberg as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote
all the shares of Common Stock, $.01 par value, of Lotus
Development Corporation held of record by the undersigned on
April 1, 1994, at the Annual Meeting of Shareholders to be held
on May 25, 1994, or any adjournment thereof, on all matters on
which the undersigned would be entitled to vote.
This Proxy when properly executed will be voted in the
manner indicated herein by the undersigned. If no contrary
indication is made, the proxies will vote FOR the other proposals
described in this Proxy and the accompanying Proxy Statement.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
Please mark
X votes as in
------ this example
The Board of Directors recommends that you vote FOR Proposals 1
through 5.
1. Election of Directors
Nominees: Jim P. Manzi, Richard S. Braddock,
Ratification of selection of
William H. Gray III, Michael E. Porter
and Henri A. Termeer
FOR WITHHELD
______ ______
______________________________________
For all nominees except as noted above
2. Amendment of 1986 Stock Option Plan for Non-Employee Directors
FOR AGAINST ABSTAIN
________ ________ _________
3. Approval of certain compensation payable to CEO for U.S.
Federal Income Tax purposes
FOR AGAINST ABSTAIN
________ ________ _________
4. Amendment of Certificate of Incorporation to increase number
of authorized shares
FOR AGAINST ABSTAIN
_______ ________ _________
5. Ratification of selection of Coopers & Lybrand as auditors
FOR AGAINST ABSTAIN
______ ________ _________
MARK HERE FOR ADDRESS CHANGE
AND NOTE AT LEFT ____________________________
This Proxy must be signed exactly as your name appears
hereon. When shares are held by joint tenants both should sign.
Executors, administrators, trustees, etc. should indicate their
capacities. If the signer is a corporation, please sign full
corporate name and indicate capacity of duly authorized
officer executing on behalf of the corporation.
Signature:__________________________ Date:________________
Signature:__________________________ Date:________________
_______________________________________________________________________________
LOTUS DEVELOPMENT CORPORATION
1986 STOCK OPTION PLAN
FOR
NON-EMPLOYEE DIRECTORS
1. Purpose
The purpose of the Lotus Development Corporation Stock
Option Plan for Non-Employee Directors (the "Plan") is to attract
and retain the services of experienced and knowledgeable
independent directors of Lotus Development Corporation (the
"Corporation") for the benefit of the Corporation and its
stockholders and to provide additional incentive for such
directors to continue to work for the best interests of the
Corporation and its stockholders through continuing ownership of
its common stock.
2. Shares Subject to the Plan
The total number of shares of common stock, par value $.01
per share ("Shares"), of the Corporation for which options may be
granted under the Plan shall not exceed 500,000 in the aggregate,
subject to adjustment in accordance with Section 12 hereof.
Within the foregoing limitations, Shares for which options have
been granted pursuant to the Plan but which options have lapsed
or otherwise terminated shall become available for the grant of
additional options. There will initially be reserved for
issuance or transfer from the Corporation's treasury upon the
exercise of options granted under the Plan 300,000 Shares,
subject to adjustment in accordance with Section 12 hereof.
3. Administration of Plan
The Plan shall be administered by the Board of Directors of
the Corporation (the "Board"). The Board shall have the power to
construe the Plan, to determine all questions arising thereunder,
and to adopt and amend such rules and regulations for the
administration of the Plan as it may seem desirable.
4. Eligibility; Grant of Option
Each director of the Corporation who is not, and has not
during the immediately preceding 12 month period been, an
employee of the Corporation or any subsidiary of the Corporation
(a "Participant") shall automatically be a participant in the
Plan. Each Participant who is in office on November 15 of any
year (commencing with November 15, 1986) shall, on the
immediately succeeding January 1, automatically be granted an
option to acquire 10,000 Shares under the Plan.
5. Option Agreement
Each option granted under the Plan shall be evidenced by an
option agreement (the "Agreement") duly executed on behalf of the
Corporation and by the Participant to whom such option is
granted, which Agreements may but need not be identical and which
shall (i) comply with and be subject to the terms and conditions
of the Plan and (ii) provide that the Participant agrees to
continue to serve as a director of the Corporation during the
term for which he or she was elected. Any Agreement may contain
such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Board. No option shall be
deemed granted within the meaning of the Plan and no purported
grant of any option shall be effective, until such Agreement
shall have been duly executed on behalf of the Corporation and
the Participant to whom the option is to be granted.
6. Option Exercise Price
The option exercise price for an option granted under the
Plan on or prior to January 1, 1988, shall be the fair market
value of the Shares covered by the option on the November 15, or,
if such November 15 is not a day on which Shares are traded, on
the next succeeding trading day, immediately preceding the date
on which the option is granted. The option exercise price for an
option granted under the Plan on or after January 1, 1989, shall
be the fair market value of the Shares covered by the option on
the date of grant, or if such date is not a day on which Shares
are traded, on the next succeeding trading day, immediately
preceding the date on which the option is granted. The date on
which the fair market value is determined in accordance with the
two immediately preceding sentences is referred to herein as the
"Pricing Date". For purposes hereof, the fair market value of
the Shares covered by an option shall be the average of the high
and low sales prices of the Shares on the applicable date as
reported in the National Market List of the National Association
of Securities Dealers Inc. Automated Quotation System or on the
principal national securities exchange on which the Shares are
then listed for trading.
7. Time and Manner of Exercise of Option
(a) Options granted under the Plan shall become exercisable
in installments of 25 percent upon each anniversary of
the date of grant.
(b) To the extent that the right to exercise an option has
accrued and is in effect, the option may be exercised
from time to time, by giving written notice, signed by
the person or persons exercising the option, to the
Corporation, stating the number of shares with respect
to which the option is being exercised, accompanied by
payment in full for such Shares, which payment may be
in whole or in part in shares of the common stock of
the Corporation already owned by the person or persons
exercising the option, valued at fair market value on
the date of payment (as determined pursuant to Section
6 hereof).
(c) Upon exercise of the option, delivery of a certificate
for fully paid and non-assessable Shares shall be made
at the principal office of the Corporation in the
Commonwealth of Massachusetts to the person or persons
exercising the option as soon as practicable (but in no
event more than 30 days) after the date of receipt of
the notice of exercise by the Corporation, or at such
time, place and manner as may be agreed upon by the
Corporation and the person or persons exercising the
option.
8. Term of Options
Each option, shall expire ten years from the date of the
granting thereof, but shall be subject to earlier termination as
follows:
(a) In the event of the death of a Participant, the option
granted to such Participant may be exercised, to the
extent exercisable on the date of death pursuant to
Section 7(a), by the estate of such Participant, or by
any person or persons who acquired the right to
exercise such option by will or by the laws of descent
and distribution. Such option may be exercised at any
time within 180 days after the date of death of such
Participant or prior to the date on which the option
expires by its terms, whichever is earlier.
(b) In the event that a Participant ceases to be a director
of the Corporation, other than by reason of his or her
death, the option granted to such Participant may be
exercised, to the extent exercisable on the date the
Participant ceases to be a director, for a period of 30
days after such date, or prior to the date on which the
option expires by its terms, whichever is earlier.
9. Merger, Consolidation, Sale of Assets, etc., Resulting in a
Change of Control
(a) In the event of a Change in Control (as hereinafter
defined), notwithstanding the provisions of Sections
7(a) and 8, an option granted to a Participant shall
become fully exercisable if, within one year of such
Change in Control, such Participant shall cease for any
reason to be a member of the Board. For purposes
hereof, a Change in Control of the Corporation shall be
deemed to have occurred if (i) there shall be
consummated (x) any consolidation or merger of the
Corporation in which the Corporation is not the
continuing or surviving Corporation or pursuant to
which shares of the common stock of the Corporation
would be converted into cash, securities or other
property, other than a merger of the Corporation in
which the holders of the common stock of the
Corporation immediately prior to the merger have the
same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or
(y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of
all, or substantially all, of the assets of the
Corporation; or (ii) the stockholders of the
Corporation approve any plan or proposal for the
liquidation or dissolution of the Corporation; or (iii)
any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act"), shall become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange
Act) of 30% or more of the Corporation's outstanding
common stock; or (iv) during any period of two
consecutive years, individuals who at the beginning of
such period constitute the entire Board of Directors
shall cease for any reason to constitute a majority
thereof unless the election, or the nomination for
election by the Corporation's stockholders, of each new
director was approved by a vote of at least two-thirds
of the directors then still in office who were
directors at the beginning of the period.
(b) Any exercise of an option permitted pursuant to Section
9(a) shall be made within 180 days of the related
Participant's termination as a director of the
Corporation.
10. Options Not Transferable
The right of any Participant to exercise an option granted
to him or her under the Plan shall not be assignable or
transferable by such Participant otherwise than by will or the
laws of descent and distribution, and any such option shall be
exercisable during the lifetime of such Participant only by him
or her.
11. No Rights as Stockholder until Exercise
Neither the recipient of an option under the Plan nor his
successors in interest shall have any rights as a stockholder of
the Corporation with respect to any Shares subject to an option
granted to such person until such person becomes a holder of
record of such Shares.
12. Adjustments Upon Changes in Capitalization
In the event that the outstanding shares of the common stock
of the Corporation are changed into or exchanged for a different
number or kind of shares or other securities of the Corporation
or of another corporation, by reason of any reorganization,
merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares or dividend payable in capital
stock, appropriate adjustment shall be made in the number and
kind of shares subject to and reserved for issuance or transfer
under the Plan and as to which outstanding options (or portions
thereof then unexercised) shall be exercisable, to the end that
the proportionate interest of Participants and prospective
Participants, with respect to options theretofore granted and to
be granted, shall be maintained as before the occurrence of such
event. Such adjustment in outstanding options shall be made
without change in the total price applicable to the unexercised
portion of such options, but with a corresponding adjustment in
the option price per share.
13. Restrictions on Issue of Shares
Anything in this Plan to the contrary notwithstanding, the
Corporation may delay the issuance of Shares covered by the
exercise of any option and the delivery of a certificate for such
Shares until one of the following conditions shall be satisfied:
(1)the Shares with respect to which an option has been
exercised are at the time of the issue or transfer of
such Shares effectively registered under applicable
federal securities laws now in force or hereafter
amended; or
(2)counsel for the Corporation shall have given an opinion,
which opinion shall not be unreasonably conditioned or
withheld, that such Shares are exempt from the
registration under applicable federal securities laws now
in force or hereafter amended.
It is intended that all exercises of options shall be effective.
Accordingly, the Corporation shall use its best efforts to bring
about compliance with the above conditions within a reasonable
time, except that the Corporation shall be under no obligation to
cause a registration statement or a post-effective amendment to
any registration statement to be prepared at its expense solely
for the purpose of covering the issuance or transfer from the
Corporation's treasury of Shares in respect of which any option
may be exercised.
14. Purchase for Investment
Unless the Shares to be issued upon exercise of an option
granted under the Plan have been effectively registered under the
Securities Act of 1933 as now in force or hereafter amended, the
Corporation shall be under no obligation to issue or transfer any
Shares covered by any option unless the person or persons who
exercise such option, in whole or in part, shall give a written
representation and undertaking to the Corporation, which is
satisfactory in form and scope to counsel to the Corporation and
upon which, in the opinion of such counsel, the Corporation may
reasonably rely, that he or she is acquiring the Shares issued or
transferred to him or her pursuant to such exercise of the option
for his or her own account as an investment and not with a view
to, or for sale in connection with, the distribution for any such
Shares, and that he or she will make no transfer of the same
except in compliance with any rules and regulations in force at
the time of such transfer under the Securities Act of 1933, or
any other applicable law, and that if Shares are issued or
transferred without such registration a legend to this effect may
be endorsed upon the certificates representing the Shares.
15. Effective Date
The effective date (the "Effective Date") of this Plan shall
be the date which is the later of (i) the date of which the Plan
is approved by stockholders of the Corporation and (ii) the date
on which the Corporation receives an interpretive letter from the
Securities and Exchange Commission to the effect that
participants in the Plan are disinterested persons within the
meaning of Rule 16b-3 of the Securities Exchange Act of 1934 for
the purpose of administering certain other compensation plans for
the Corporation.
16. Expenses of the Plan
All costs and expenses of the adoption and administration of
the Plan shall be borne by the Corporation and none of such
expenses shall be charged to any Participant.
17. Termination and Amendment of Plan
Unless sooner terminated as herein provided, the Plan shall
terminate ten years from the Effective Date. The Board may at
any time terminate the Plan or make such modification or
amendment thereof as it deems advisable; provided, however, that,
except as provided in Section 12, the Board may not, without the
approval of the stockholders of the Corporation increase the
maximum aggregate number of shares for which options may be
granted under the Plan or the number of Shares for which an
option may be granted to any Participant. Termination or any
modification or amendment of the Plan shall not, without the
consent of a Participant, affect his or her rights under an
option previously granted to him or her.
