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