- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
-------------------
LOTUS DEVELOPMENT CORPORATION
(Name of Subject Company)
WHITE ACQUISITION CORP.
(Bidder)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(Title of Class of Securities)
545700106
(CUSIP Number of Class of Securities)
-------------------
LAWRENCE R. RICCIARDI, ESQ.
INTERNATIONAL BUSINESS MACHINES CORPORATION
OLD ORCHARD ROAD
ARMONK, NY 10504
(914) 765-1900
(Name, Address and Telephone Number of Persons Authorized to
Receive Notices and Communications on Behalf of Bidder)
-------------------
COPY TO:
ALLEN FINKELSON, ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NY 10019
(212) 474-1000
CALCULATION OF FILING FEE
================================================================================
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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$3,575,309,440 $715,061.89
================================================================================
*Based on the offer to purchase all outstanding shares of Common Stock of the
Subject Company together with the associated preferred share purchase rights
at $64.00 cash per share, the number of shares of Common Stock represented
by the Company to be outstanding (46,579,120) and under option (9,030,132)
as of May 27, 1995, and the number of shares of Common Stock represented
by the Company to have been issued (231,658) and under newly granted options
(23,300) since May 27, 1995.
**1/50 of 1% of Transaction Valuation.
[X]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or Schedule and the date of its filing.
Amount Previously Paid: $662,403.73 Filing Party: White Acquisition Corp.
Form or Registration No.: Schedule 14D-1 Date Filed: June 6, 1995
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<PAGE>
White Acquisition Corp. hereby amends and supplements its Tender Offer
Statement on Schedule 14D-1 (the "Statement"), originally filed on June 6, 1995,
as amended by Amendment No. 1, with respect to its offer to purchase all
outstanding shares of Common Stock, par value $.01 per share, of Lotus
Development Corporation, a Delaware corporation, together with the associated
preferred share purchase rights, as set forth in this Amendment No. 2.
Capitalized terms not defined herein have the meanings assigned thereto in the
Statement.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
On June 11, 1995, IBM and the Company issued a press release, a copy of
which is attached hereto as Exhibit (a)(11) and is incorporated herein by
reference.
IBM, the Purchaser and the Company have entered into an Agreement and Plan
of Merger dated as of June 11, 1995 (the "Merger Agreement"). The Merger
Agreement is attached hereto as Exhibit (a)(12) and is incorporated herein by
reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
IBM, the Purchaser and the Company have entered into the Merger Agreement, a
copy of which is attached hereto as Exhibit (a)(12) and is incorporated herein
by reference.
ITEM 10. ADDITIONAL INFORMATION
Multiple class action complaints have been filed against the Company and its
directors by stockholders of the Company seeking declaratory and injunctive
relief. Copies of these complaints are attached hereto as Exhibits (g)(2)-(14)
and are incorporated herein by reference.
On June 11, 1995, Parent issued a press release, a copy of which is attached
hereto as Exhibit (a)(11) and is incorporated herein by reference.
IBM, the Purchaser and the Company have entered into the Merger Agreement, a
copy of which is attached hereto as Exhibit (a)(12) and is incorporated herein
by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
(a)(11) Press Release, dated June 11, 1995.
(a)(12) Agreement and Plan of Merger dated as of June 11, 1995, among
International Business Machines Corporation, White Acquisition Corp. and Lotus
Development Corporation.
(g)(2) Complaint in David Shaev v. Lotus Development Corp., et al., filed in
the Court of Chancery of the State of Delaware in and for New Castle County on
June 5, 1995.
(g)(3) Complaint in Joseph E. Kassoway Trust, et al. v. Jim P. Manzi, et
al., filed in the Court of Chancery of the State of Delaware in and for New
Castle County on June 5, 1995.
(g)(4) Complaint in Leonard Shapiro v. Jim P. Manzi, et al., filed in the
Court of Chancery of the State of Delaware in and for New Castle County on June
5, 1995.
(g)(5) Complaint in Brickell Partners v. Jim P. Manzi, et al., filed in the
Court of Chancery of the State of Delaware in and for New Castle County on June
5, 1995.
(g)(6) Complaint in Benjamin Brown v. Lotus Development Corp., et al., filed
in the Court of Chancery of the State of Delaware in and for New Castle County
on June 5, 1995.
2
<PAGE>
(g)(7) Complaint in Brilliant Trading Ltd. v. Lotus Development Corp., et
al., filed in the Court of Chancery of the State of Delaware in and for New
Castle County on June 5, 1995.
(g)(8) Complaint in Gordon Oppenheim v. Lotus Development Corporation, et
al., filed in the Court of Chancery of the State of Delaware in and for New
Castle County on June 5, 1995.
(g)(9) Complaint in Marjorie Slater, Trustee for Rita Slater v. Jim P.
Manzi, et al., filed in the Superior Court Department of the Trial Court of the
Commonwealth of Massachusetts, County of Middlesex on June 6, 1995.
(g)(10) Complaint in Moise Katz v. Jim P. Manzi, et al., filed in the Court
of Chancery of the State of Delaware in and for New Castle County on June 6,
1995.
(g)(11) Complaint in Joseph Wald v. Jim P. Manzi, et al., filed in the Court
of Chancery of the State of Delaware in and for New Castle County on June 6,
1995.
(g)(12) Complaint in Annette Siegel v. Jim P. Manzi, et al., filed in the
Court of Chancery of the State of Delaware in and for New Castle County on June
6, 1995.
(g)(13) Complaint, as amended, in Joseph E. Kassoway Trust, et. al. v. Jim
P. Manzi, et. al., filed in the Court of Chancery of the State of Delaware in
and for New Castle County on June 9, 1995.
(g)(14) Complaint in Steven G. Cooperman v. Lotus Development Corporation,
et al., filed in the United States District Court for the District of Delaware
on June 9, 1995.
3
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: June 12, 1995
WHITE ACQUISITION CORP.
By /S/ LEE A. DAYTON
...................................
Name: Lee A. Dayton
Title: President
4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. EXHIBIT PAGE
- --------- ---------------------------------------------------------------------- ------------
<C> <S> <C> <C>
(a) (11) Press Release, dated June 11, 1995....................................
(a) (12) Agreement and Plan of Merger dated as of June 11, 1995, among
International Business Machines Corporation, White Acquisition Corp.
and Lotus Development Corporation.....................................
(g) (2) Complaint in David Shaev v. Lotus Development Corp., et al., filed in
the Court of Chancery of the State of Delaware in and for New Castle
County on June 5, 1995................................................
(g) (3) Complaint in Joseph E. Kassoway Trust, et al. v. Jim P. Manzi, et al.,
filed in the Court of Chancery of the State of Delaware in and for
New Castle County on June 5, 1995...................................
(g) (4) Complaint in Leonard Shapiro v. Jim P. Manzi, et al., filed in the
Court of Chancery of the State of Delaware in and for New Castle
County on June 5, 1995..............................................
(g) (5) Complaint in Brickell Partners v. Jim P. Manzi, et al., filed in the
Court of Chancery of the State of Delaware in and for New Castle
County on June 5, 1995..............................................
(g) (6) Complaint in Benjamin Brown v. Lotus Development Corp., et al., filed
in the Court of Chancery of the State of Delaware in and for New
Castle County on June 5, 1995.......................................
(g) (7) Complaint in Brilliant Trading Ltd. v. Lotus Development Corp., et
al., filed in the Court of Chancery of the State of Delaware in and
for New Castle County on June 5, 1995...............................
(g) (8) Complaint in Gordon Oppenheim v. Lotus Development Corporation, et
al., filed in the Court of Chancery of the State of Delaware in and
for New Castle County on June 5, 1995...............................
(g) (9) Complaint in Marjorie Slater, Trustee for Rita Slater v. Jim P. Manzi,
et al., filed in the Superior Court Department of the Trial Court of
the Commonwealth of Massachusetts, County of Middlesex on June 6,
1995..................................................................
(g) (10) Complaint in Moise Katz v. Jim P. Manzi, et al., filed in the Court of
Chancery of the State of Delaware in and for New Castle County on
June 6, 1995..........................................................
(g) (11) Complaint in Joseph Wald v. Jim P. Manzi, et al., filed in the Court
of Chancery of the State of Delaware in and for New Castle County on
June 6, 1995..........................................................
(g) (12) Complaint in Annette Siegel v. Jim P. Manzi, et al., filed in the
Court of Chancery of the State of Delaware in and for New Castle
County on June 6, 1995..............................................
(g) (13) Complaint, as amended, in Joseph E. Kassoway Trust, et. al. v. Lotus
Development Corporation, et. al., filed in the Court of Chancery of
the State of Delaware in and for New Castle County on June 9,
1995..................................................................
(g) (14) Complaint in Steven G. Cooperman v. Lotus Development Corporation, et
al., filed in the United States District Court for the District of
Delaware on June 9, 1995............................................
</TABLE>
Exhibit (a)(11)
FOR IMMEDIATE RELEASE
Contact:
Bryan Simmons Rob Wilson
Lotus Development Corp. IBM Corp.
(617) 693-1697 (212) 745-4736
IBM, LOTUS ANNOUNCE AGREEMENT ON IBM TENDER OFFER
AT $64 PER LOTUS SHARE IN CASH
ARMONK, N.Y., and CAMBRIDGE, Mass., June 11, 1995 . . . IBM and
Lotus Development Corp. today announced a definitive merger agreement under
which IBM will pay $64 per Lotus share in cash for all of Lotus'
outstanding shares and preferred share purchase rights. The transaction has
a total equity value of approximately $3.5 billion.
"We're delighted that Lotus and IBM have been able to reach an
agreement so quickly," said IBM Chairman and Chief Executive Officer Louis
V. Gerstner, Jr. "This means we can begin moving ahead rapidly to bring our
shared vision of team computing -- and its many powerful benefits -- to
reality for our customers. I know I speak on behalf of all IBM employees
when I say that we eagerly look forward to working with our future
colleagues at Lotus and its industry partners. We have much to do, and we
are anxious to get started."
"We are excited about this opportunity to partner with IBM," said
Jim Manzi, who will continue in his role as chairman and CEO of Lotus,
reporting to Mr. Gerstner. "We intend to utilize our combined resources to
expand our leadership position in communications software and advance our
desktop software business. After careful consideration, Lotus' Board of
Directors believes it has acted in the best interests of the company's
employees, shareholders and customers. We now look forward to working with
IBM to grow our customer base and set our collective sights on the market
opportunities before us."
Mr. Manzi will be named a senior vice president of IBM and will
work hand in hand with John M. Thompson, senior vice president, IBM Software
Group, to manage the transition and day-to-day interface between Lotus and
IBM.
Completion of the tender offer is conditioned on the tender of a
majority of the outstanding Lotus shares and expiration of the
Hart-Scott-Rodino waiting periods.
Additional details on today's announcement will be available on
the IBM and Lotus Internet home pages (IBM: http//www.ibm.com. Lotus:
http//www.lotus.com).
# # #
Exhibit (a)(12)
AGREEMENT AND PLAN OF MERGER
Among
INTERNATIONAL BUSINESS MACHINES CORPORATION,
WHITE ACQUISITION CORP.
and
LOTUS DEVELOPMENT CORPORATION
Dated as of June 11, 1995
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
The Offer
---------
SECTION 1.01. The Offer . . . . . . . . . . . . . . . 3
SECTION 1.02. Company Actions . . . . . . . . . . . . 6
ARTICLE II
The Merger
----------
SECTION 2.01. The Merger . . . . . . . . . . . . . . 8
SECTION 2.02. Closing . . . . . . . . . . . . . . . . 9
SECTION 2.03. Effective Time . . . . . . . . . . . . 9
SECTION 2.04. Effects of the Merger . . . . . . . . . 10
SECTION 2.05. Certificate of Incorporation and
By-laws . . . . . . . . . . . . . . . 10
SECTION 2.06. Directors . . . . . . . . . . . . . . . 10
SECTION 2.07. Officers . . . . . . . . . . . . . . . 10
ARTICLE III
Effect of the Merger on the Capital Stock of the
------------------------------------------------
Constituent Corporations; Exchange of Certificates
--------------------------------------------------
SECTION 3.01. Effect on Capital Stock . . . . . . . . 11
(a) Capital Stock of Sub . . . . . . . 11
(b) Cancellation of Treasury Stock and
Parent Owned Stock . . . . . . . 11
(c) Conversion of Company Common Stock 12
(d) Shares of Dissenting Stockholders 12
(e) Withholding Tax . . . . . . . . . 13
SECTION 3.02. Exchange of Certificates . . . . . . . 13
(a) Paying Agent . . . . . . . . . . . 13
(b) Exchange Procedure . . . . . . . . 14
(c) No Further Ownership Rights in
Company Common Stock . . . . . . 16
(d) No Liability . . . . . . . . . . . 16
<PAGE>
Contents, p. 2
Page
----
ARTICLE IV
Representations and Warranties of the Company
---------------------------------------------
SECTION 4.01. Organization . . . . . . . . . . . . . 17
SECTION 4.02. Capitalization . . . . . . . . . . . . 19
SECTION 4.03. Authority . . . . . . . . . . . . . . . 21
SECTION 4.04. Consents and Approvals; No Violations . 22
SECTION 4.05. SEC Reports and Financial Statements . 23
SECTION 4.06. Absence of Certain Changes or Events . 25
SECTION 4.07. No Undisclosed Liabilities . . . . . . 27
SECTION 4.08. Information Supplied . . . . . . . . . 28
SECTION 4.09. Benefit Plans . . . . . . . . . . . . . 29
SECTION 4.10. Other Compensation Arrangements. . . . . 30
SECTION 4.11. Litigation . . . . . . . . . . . . . . . 32
SECTION 4.12. Compliance with Applicable Law . . . . 32
SECTION 4.13. Rights Agreement . . . . . . . . . . . 33
SECTION 4.14. Tax Matters . . . . . . . . . . . . . . 34
SECTION 4.15. State Takeover Statutes . . . . . . . . 37
SECTION 4.16. Brokers . . . . . . . . . . . . . . . . 37
SECTION 4.17. Opinion of Financial Advisor . . . . . 38
SECTION 4.18. Intellectual Property . . . . . . . . . 38
ARTICLE V
Representations and Warranties
------------------------------
of Parent and Sub
-----------------
SECTION 5.01. Organization . . . . . . . . . . . . . 43
SECTION 5.02. Authority . . . . . . . . . . . . . . . 43
SECTION 5.03. Consents and Approvals; No Violations . 44
SECTION 5.04. Information Supplied . . . . . . . . . 45
SECTION 5.05. Interim Operations of Sub . . . . . . . 46
SECTION 5.06. Brokers . . . . . . . . . . . . . . . . 47
SECTION 5.07. Financing . . . . . . . . . . . . . . . 47
ARTICLE VI
Covenants
---------
SECTION 6.01. Covenants of the Company . . . . . . . 47
(a) Ordinary Course . . . . . . . . . 48
(b) Dividends; Changes in Stock . . . 48
(c) Issuance of Securities . . . . . . 49
(d) Governing Documents . . . . . . . 49
<PAGE>
Contents, p. 3
Page
----
(e) No Acquisitions . . . . . . . . . 50
(f) No Dispositions . . . . . . . . . 50
(g) Indebtedness . . . . . . . . . . . 50
(h) Advice of Changes; Filings . . . . 51
(i) Tax Matters . . . . . . . . . . . 51
(j) Discharge of Liabilities . . . . . 51
(k) Material Contracts . . . . . . . . 51
SECTION 6.02. No Solicitation . . . . . . . . . . . . 52
SECTION 6.03. Other Actions . . . . . . . . . . . . . 57
ARTICLE VII
Additional Agreements
---------------------
SECTION 7.01. Stockholder Approval; Preparation of
Proxy Statement . . . . . . . . . . . 58
SECTION 7.02. Access to Information . . . . . . . . . 60
SECTION 7.03. Reasonable Efforts . . . . . . . . . . 62
SECTION 7.04. [Not used] . . . . . . . . . . . . . . 63
SECTION 7.05. Certain Benefits; Company
Stock Options . . . . . . . . . . . . . 63
SECTION 7.06. Directors . . . . . . . . . . . . . . . 67
SECTION 7.07. Fees and Expenses . . . . . . . . . . . 69
SECTION 7.08. Indemnification; Insurance . . . . . . 70
SECTION 7.09. Rights Agreement . . . . . . . . . . . 71
SECTION 7.10. Certain Litigation . . . . . . . . . . 72
SECTION 7.11. Consent Solicitation . . . . . . . . . 72
ARTICLE VIII
Conditions
----------
SECTION 8.01. Conditions to Each Party's Obligation To
Effect the Merger . . . . . . . . . . 73
(a) Company Stockholder Approval . . . 73
(b) No Injunctions or Restraints . . . 73
(c) Purchase of Shares . . . . . . . . 74
ARTICLE IX
Termination and Amendment
-------------------------
SECTION 9.01. Termination . . . . . . . . . . . . . . 74
SECTION 9.02. Effect of Termination . . . . . . . . . 76
<PAGE>
Contents, p. 4
Page
----
SECTION 9.03. Amendment . . . . . . . . . . . . . . . 77
SECTION 9.04. Extension; Waiver . . . . . . . . . . . 78
ARTICLE X
Miscellaneous
-------------
SECTION 10.01. Nonsurvival of Representations,
Warranties and Agreements . . . . . . 78
SECTION 10.02. Notices . . . . . . . . . . . . . . . . 79
SECTION 10.03. Interpretation . . . . . . . . . . . . 80
SECTION 10.04. Counterparts . . . . . . . . . . . . . 81
SECTION 10.05. Entire Agreement; No Third Party
Beneficiaries . . . . . . . . . . . . 81
SECTION 10.06. Governing Law . . . . . . . . . . . . . 82
SECTION 10.07. Publicity . . . . . . . . . . . . . . . 82
SECTION 10.08. Assignment . . . . . . . . . . . . . . 82
Exhibits
--------
Exhibit A Conditions of the Offer
Exhibit B Rights Plan Amendment
Exhibit C Executive Severance
Disclosure Schedules
--------------------
Company Disclosure Schedule
---------------------------
Section 4.04 Consents and Approvals; No Violations
Section 4.07 No Undisclosed Liabilities
Section 4.09 Benefit Plans
Section 4.10 Other Compensation Arrangements
Section 4.11 Litigation
Section 4.12 Compliance with Applicable Law
Section 6.01 Covenants (Capital Expenditures)
Parent Disclosure Schedule
--------------------------
Section 5.03 Consents and Approvals; No Violations
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of
June 11, 1995, among INTERNATIONAL BUSINESS
MACHINES CORPORATION, a New York corporation
("Parent"), WHITE ACQUISITION CORP., a New
York corporation and a wholly owned
subsidiary of Parent ("Sub"), and LOTUS
DEVELOPMENT CORPORATION, a Delaware
corporation (the "Company").
WHEREAS, Sub has outstanding an offer (the
"Existing Offer", and, as amended pursuant to this
Agreement, the "Offer") to purchase all the outstanding
shares of Common Stock, par value $.01 per share, of the
Company (the "Company Common Stock"; all the outstanding
shares of Company Common Stock being hereinafter
collectively referred to as the "Shares") and the associated
Preferred Share Purchase Rights (the "Rights") issued
pursuant to the Rights Agreement dated as of November 7,
1988, as amended as of April 5, 1990, as of September 16,
1991, and as of the date hereof, between the Company and The
First National Bank of Boston, as Rights Agent (the "Rights
Agreement"), at a purchase price of $60 per Share (and
associated Right), net to the seller in cash, without
interest thereon, upon the terms and subject to the
<PAGE>
2
conditions set forth in the Offer to Purchase dated June 6,
1995, and in the related letter of transmittal;
WHEREAS, in consideration of the Company's
entering into this Agreement, Parent is willing to cause Sub
to increase the price to be paid pursuant to the Offer to
$64 per Share, net to the seller in cash, without interest
thereon (such amount being hereinafter referred to as the
("Offer Price");
WHEREAS, the Board of Directors of the Company has
(i) determined that the consideration to be paid for each
Share in the Offer and in the Merger (as defined below) is
fair to and in the best interests of the stockholders of the
Company, (ii) approved this Agreement and the transactions
contemplated hereby and (iii) resolved to recommend
acceptance of the Offer and the Merger and approval of this
Agreement by such stockholders; and
WHEREAS, the Board of Directors of Parent and Sub
have each approved the merger (the "Merger") of Sub with the
Company in accordance with the Business Corporation Law of
the State of New York (the "BCL") and the General
Corporation Law of the State of Delaware (the "DGCL") upon
the terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing
and the mutual covenants and agreements herein contained,
<PAGE>
3
and intending to be legally bound hereby, Parent, Sub and
the Company hereby agree as follows:
ARTICLE I
The Offer
---------
SECTION 1.01. The Offer. (a) Sub shall amend
----------
the Offer as soon as practicable after the date hereof to
(i) increase the purchase price offered to the Offer Price,
(ii) modify the conditions of the Offer to conform to the
conditions or events set forth in Exhibit A hereto (the
"Offer Conditions") and no others and (iii) to make such
other amendments as are required to conform the Offer to
this Agreement, it being understood that except for the
foregoing amendments or as otherwise provided herein, the
Offer shall be on the same terms and conditions as the
Existing Offer. The obligation of Sub to, and of Parent to
cause Sub to, accept for payment, and pay for, any Shares
tendered pursuant to the Offer shall be subject to the Offer
Conditions (any of which may be waived in whole or in part
by Sub in its sole discretion, provided that, without the
consent of the Company, Sub shall not waive the Minimum
Condition (as defined in Exhibit A)) and to the terms and
conditions of this Agreement. Without the consent of the
Company, Sub shall not (i) reduce the number of Shares
sought in the Offer, (ii) reduce the Offer Price,
<PAGE>
4
(iii) change or add to the Offer Conditions, (iv) except as
provided in the next sentence, extend the Offer, (v) change
the form of consideration payable in the Offer or (vi) amend
any other term of the Offer in any manner adverse to the
holders of the Shares. Notwithstanding the foregoing, Sub
may, without the consent of the Company, (A) extend the
Offer, if at the scheduled expiration date of the Offer any
of the Offer Conditions shall not be satisfied or waived,
until such time as such conditions are satisfied or waived,
(B) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and
Exchange Commission (the "SEC") or the staff thereof
applicable to the Offer and (C) extend the Offer for any
reason on one or more occasions for an aggregate period of
not more than 25 business days (for all such extensions)
beyond the latest expiration date that would otherwise be
permitted under clause (A) or (B) of this sentence. Subject
to the terms and conditions of the Offer and this Agreement,
Sub shall, and Parent shall cause Sub to, accept for
payment, and pay for, all Shares validly tendered and not
withdrawn pursuant to the Offer that Sub becomes obligated
to accept for payment, and pay for, pursuant to the Offer as
soon as practicable after the expiration of the Offer.
<PAGE>
5
(b) As soon as reasonably practicable after the
date hereof, Sub shall amend its Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1") with respect to the
Offer that was originally filed with the SEC on June 6,
1995, and shall file such amendment with the SEC. The
Schedule 14D-1 will contain a supplement to the Offer to
Purchase dated June 6, 1995, and a revised form of the
related letter of transmittal (which Schedule 14D-1, Offer
to Purchase and other documents, as amended and
supplemented, together with any further amendments or
supplements thereto, are referred to herein collectively as
the "Offer Documents"), which shall be mailed to the holders
of Shares. Parent, Sub and the Company each agrees promptly
to correct any information provided by it for use in the
Offer Documents that shall have become false or misleading
in any material respect, and Parent and Sub further agree to
take all steps necessary to cause the Schedule 14D-1 as so
corrected to be filed with the SEC and the other Offer
Documents as so corrected to be disseminated to holders of
Shares, in each case as and to the extent required by
applicable Federal securities laws.
(c) Parent shall provide or cause to be provided
to Sub on a timely basis the funds necessary to accept for
<PAGE>
6
payment, and pay for, any Shares that Sub becomes obligated
to accept for payment, and pay for, pursuant to the Offer.
SECTION 1.02. Company Actions. (a) The Company
----------------
hereby approves of and consents to the Offer and represents
that the Board of Directors of the Company, at a meeting
duly called and held, duly and unanimously adopted
resolutions approving this Agreement, the Offer and the
Merger, determining that the terms of the Offer and the
Merger are fair to, and in the best interests of, the
Company's stockholders and recommending that the Company's
stockholders accept the Offer and tender their shares
pursuant to the Offer and approve and adopt this Agreement.
The Company has been advised by each of its directors and
executive officers that each such person intends to tender
all Shares owned by such person pursuant to the Offer.
(b) On the date the Offer Documents are filed
with the SEC, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 with
respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9") containing the
recommendation described in paragraph (a) and shall mail the
Schedule 14D-9 to the stockholders of the Company. Each of
the Company, Parent and Sub agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if
<PAGE>
7
and to the extent that such information shall have become
false or misleading in any material respect, and the Company
further agrees to take all steps necessary to amend or
supplement the Schedule 14D-9 and to cause the
Schedule 14D-9 as so amended or supplemented to be filed
with the SEC and disseminated to the Company's stockholders,
in each case as and to the extent required by applicable
Federal securities laws.
(c) In connection with the Offer, the Company
shall cause its transfer agent to furnish Sub promptly with
mailing labels containing the names and addresses of the
record holders of Shares as of a recent date and of those
persons becoming record holders subsequent to such date,
together with copies of all lists of stockholders, security
position listings and computer files and all other
information in the Company's possession or control regarding
the beneficial owners of Company Common Stock, and shall
furnish to Sub such information and assistance (including
updated lists of stockholders, security position listings
and computer files) as Parent may reasonably request in
communicating the Offer to the Company's stockholders.
Subject to the requirements of applicable law, and except
for such steps as are necessary to disseminate the Offer
Documents and any other documents necessary to consummate
<PAGE>
8
the Merger, Parent and Sub and their agents shall hold in
confidence the information contained in any such labels,
listings and files, will use such information only in
connection with the Offer and the Merger and, if this
Agreement shall be terminated, will, upon request, deliver,
and will use their best efforts to cause their agents to
deliver, to the Company all copies of and any extracts or
summaries from such information then in their possession or
control.
ARTICLE II
The Merger
----------
SECTION 2.01. The Merger. Upon the terms and
-----------
subject to the conditions set forth in this Agreement, and
in accordance with the DGCL and the BCL, Sub shall be merged
with and into the Company at the Effective Time (as
hereinafter defined). Following the Effective Time, the
separate corporate existence of Sub shall cease and the
Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the
DGCL and the BCL. At the election of Parent, any direct or
indirect wholly owned subsidiary (as defined in
Section 10.03) of Parent may be substituted for Sub as a
constituent corporation in the Merger, provided that no such
--------
<PAGE>
9
substitution shall be made if it would materially delay or
impede the transactions contemplated hereby. In such event,
the parties agree to execute an appropriate amendment to
this Agreement in order to reflect the foregoing.
SECTION 2.02. Closing. The closing of the Merger
--------
will take place at 10:00 a.m. on a date to be specified by
Parent or Sub, which shall be no later than the second
business day after satisfaction or waiver of the conditions
set forth in Article VIII (the "Closing Date"), at the
offices of Cravath, Swaine & Moore, Worldwide Plaza,
825 Eighth Avenue, New York, New York 10019, unless another
date or place is agreed to in writing by the parties hereto.
SECTION 2.03. Effective Time. Subject to the
---------------
provisions of this Agreement, as soon as practicable on or
after the Closing Date, the parties shall file a certificate
of merger or other appropriate documents (in any such case,
the "Certificate of Merger") executed in accordance with the
relevant provisions of the DGCL and the BCL and shall make
all other filings or recordings required under the DGCL and
the BCL. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Delaware
Secretary of State and the New York Secretary of State, or
at such other time as Sub and the Company shall agree should
be specified in the Certificate of Merger (the time the
<PAGE>
10
Merger becomes effective being hereinafter referred to as
the "Effective Time").
SECTION 2.04. Effects of the Merger. The Merger
----------------------
shall have the effects set forth in Section 259 of the DGCL
and Section 907 of the BCL.
SECTION 2.05. Certificate of Incorporation and
--------------------------------
By-laws. (a) The certificate of incorporation of the
--------
Company, as in effect immediately prior to the Effective
Time, shall be the certificate of incorporation of the
Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
(b) The by-laws of the Company as in effect at
the Effective Time shall be the by-laws of the Surviving
Corporation, until thereafter changed or amended as provided
therein or by applicable law.
SECTION 2.06. Directors. The directors of Sub
----------
immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective
successors are duly elected and qualified, as the case may
be.
SECTION 2.07. Officers. The officers of the
---------
Company immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, until the earlier of
<PAGE>
11
their resignation or removal or until their respective
successors are duly elected and qualified, as the case may
be.
ARTICLE III
Effect of the Merger on the Capital Stock of the
-------------------------------------------------
Constituent Corporations; Exchange of Certificates
--------------------------------------------------
SECTION 3.01. Effect on Capital Stock. As of the
------------------------
Effective Time, by virtue of the Merger and without any
action on the part of the holder of any Shares or any shares
of capital stock of Sub:
(a) Capital Stock of Sub. The issued and
---------------------
outstanding shares of capital stock of Sub shall be
converted into and become 57 million fully paid and
nonassessable shares of Common Stock, par value $.01
per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent
-----------------------------------------
Owned Stock. Each share of Company Common Stock (and
------------
associated Right) that is owned by the Company or by
any subsidiary of the Company and each Share (and
associated Right) that is owned by Parent, Sub or any
other subsidiary of Parent shall automatically be
cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
<PAGE>
12
(c) Conversion of Company Common Stock. Subject
-----------------------------------
to Section 3.01(d), each Share (and associated Right)
issued and outstanding (other than shares to be
cancelled in accordance with Section 3.01(b)) shall be
converted into the right to receive from the Surviving
Corporation in cash, without interest, the price paid
in the Offer (the "Merger Consideration"). As of the
Effective Time, all such Shares (and associated Rights)
shall no longer be outstanding and shall automatically
be cancelled and retired and shall cease to exist, and
each holder of a certificate representing any such
Shares (and Rights) shall cease to have any rights with
respect thereto, except the right to receive the Merger
Consideration, without interest.
(d) Shares of Dissenting Stockholders.
----------------------------------
Notwithstanding anything in this Agreement to the
contrary, any issued and outstanding Shares (and
associated Rights) held by a person (a "Dissenting
Stockholder") who objects to the Merger and complies
with all the provisions of Delaware law concerning the
right of holders of Company Common Stock to dissent
from the Merger and require appraisal of their Shares
("Dissenting Shares") shall not be converted as
described in Section 3.01(c) but shall become the right
<PAGE>
13
to receive such consideration as may be determined to
be due to such Dissenting Stockholder pursuant to the
laws of the State of Delaware. If, after the Effective
Time, such Dissenting Stockholder withdraws his demand
for appraisal or fails to perfect or otherwise loses
his right of appraisal, in any case pursuant to the
DGCL, his Shares shall be deemed to be converted as of
the Effective Time into the right to receive the Merger
Consideration. The Company shall give Parent
(i) prompt notice of any demands for appraisal of
Shares received by the Company and (ii) the opportunity
to participate in and direct all negotiations and
proceedings with respect to any such demands. The
Company shall not, without the prior written consent of
Parent, make any payment with respect to, or settle,
offer to settle or otherwise negotiate, any such
demands.
(e) Withholding Tax. The right of any
----------------
stockholder to receive the Merger Consideration shall
be subject to and reduced by the amount of any required
tax withholding obligation.
SECTION 3.02. Exchange of Certificates.
-------------------------
(a) Paying Agent. Prior to the Effective Time, Parent shall
-------------
designate a bank or trust company to act as paying agent in
<PAGE>
14
the Merger (the "Paying Agent"), and, from time to time on,
prior to or after the Effective Time, Parent shall make
available, or cause the Surviving Corporation to make
available, to the Paying Agent funds in amounts and at the
times necessary for the payment of the Merger Consideration
upon surrender of certificates representing Shares as part
of the Merger pursuant to Section 3.01, it being understood
that any and all interest earned on funds made available to
the Paying Agent pursuant to this Agreement shall be turned
over to Parent.
(b) Exchange Procedure. As soon as reasonably
-------------------
practicable after the Effective Time, the Paying Agent shall
mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time
represented Shares (the "Certificates"), (i) a letter of
transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the
Paying Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed
<PAGE>
15
by Parent, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the amount
of cash into which the Shares theretofore represented by
such Certificate shall have been converted pursuant to
Section 3.01, and the Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of
ownership of Shares that is not registered in the transfer
records of the Company, payment may be made to a person
other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be
properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay
any transfer or other taxes required by reason of the
payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered as contemplated by this
Section 3.02, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to
receive upon such surrender the amount of cash, without
interest, into which the Shares theretofore represented by
such Certificate shall have been converted pursuant to
<PAGE>
16
Section 3.01. No interest will be paid or will accrue on
the cash payable upon the surrender of any Certificate.
(c) No Further Ownership Rights in Company Common
---------------------------------------------
Stock. All cash paid upon the surrender of Certificates in
------
accordance with the terms of this Article III shall be
deemed to have been paid in full satisfaction of all rights
pertaining to the Shares theretofore represented by such
Certificates. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no
further registration of transfers on the stock transfer
books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the
Surviving Corporation or the Paying Agent for any reason,
they shall be cancelled and exchanged as provided in this
Article III.
(d) No Liability. None of Parent, Sub, the
-------------
Company or the Paying Agent shall be liable to any person in
respect of any cash delivered to a public official pursuant
to any applicable abandoned property, escheat or similar
law.
ARTICLE IV
Representations and Warranties of the Company
---------------------------------------------
Except as set forth on the disclosure schedule
<PAGE>
17
delivered by the Company to Parent prior to the execution of
this Agreement (the "Company Disclosure Schedule"), the
Company represents and warrants to Parent and Sub as
follows:
SECTION 4.01. Organization. Each of the Company
-------------
and its Significant Subsidiaries (as defined below) is a
corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and
corporate authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have
such power, authority, and governmental approvals would not
have a material adverse effect. For purposes of this
Agreement, a "Significant Subsidiary" means any subsidiary
of the Company that constitutes a significant subsidiary
within the meaning of Rule 1-02 of Regulation S-X of the
SEC. The Company and each of its subsidiaries is duly
qualified or licensed to do business and in good standing in
each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except
where the failure to be so duly qualified or licensed and in
<PAGE>
18
good standing would not have a material adverse effect or
prevent or materially delay the consummation of the Offer or
the Merger. The Company has made available to Parent
complete and correct copies of the certificate of
incorporation and by-laws of the Company, in each case as
amended to the date of this Agreement, and will make
available immediately following the date of this Agreement
the certificates of incorporation and by-laws or other
organizational documents of its subsidiaries, in each case
as amended to the date of this Agreement. The respective
certificates of incorporation and by-laws or other
organizational documents of the subsidiaries of the Company
do not contain any provision limiting or otherwise
restricting the ability of the Company to control such
subsidiaries. The list of subsidiaries of the Company filed
by the Company with its most recent Report on Form 10-K is a
true and accurate list of all the subsidiaries of the
Company which are required to be set forth therein. All the
outstanding shares of capital stock of each subsidiary are
owned by the Company, by another wholly owned subsidiary of
the Company or by the Company and another wholly owned
subsidiary of the Company, free and clear of all liens, and
are duly authorized, validly issued, fully paid and
nonassessable.
<PAGE>
19
SECTION 4.02. Capitalization. As of the date
---------------
hereof, the authorized capital stock of the Company consists
of (i) 200,000,000 shares of Company Common Stock of which,
as of May 27, 1995, 46,579,120 shares were issued and
outstanding and 16,997,590 shares were held in treasury; and
(ii) 5,000,000 shares of preferred stock, par value $1.00
per share ("Company Preferred Stock"), none of which are
issued and outstanding. As of May 27, 1995, (i) no shares
of Company Common Stock and 550,000 shares of Company
Preferred Stock are reserved for issuance in accordance with
the Rights Agreement and (ii) 9,030,132 shares of Company
Common Stock were reserved for issuance upon exercise of
outstanding options or stock appreciation rights pursuant to
the Company's stock option and similar plans (collectively,
the "Company Stock Plans"). Since May 27, 1995, options to
purchase 23,300 shares of Company Common Stock have been
granted and no shares of Company Common Stock have been
issued except for 231,658 shares of Company Common Stock
issued pursuant to the Company's Employee Stock Purchase
Plan and shares issued pursuant to the exercise of options
outstanding as of June 10, 1995. All the outstanding shares
of Company Common Stock are, and all shares which may be
issued pursuant to Company Stock Plans will be, when issued
in accordance with the terms thereof, duly authorized,
<PAGE>
20
validly issued, fully paid and nonassessable and free of any
preemptive rights in respect thereto. As of the date
hereof, no bonds, debentures, notes or other indebtedness of
the Company convertible into securities having the right to
vote ("Convertible Debt") are issued or outstanding. Except
as set forth above, as of the date hereof, no shares of
capital stock or other voting securities of the Company are
outstanding, no equity equivalents, interests in the
ownership or earnings of the Company or other similar rights
are outstanding and there are no existing options, warrants,
calls, subscriptions or other rights or other agreements or
commitments of any character relating to the issued or
unissued capital stock or Convertible Debt of the Company or
any of its subsidiaries or obligating the Company or any of
its subsidiaries to issue, transfer or sell or cause to be
issued, transferred or sold any shares of capital stock or
Convertible Debt of, or other equity interests in, the
Company or of any of its subsidiaries or securities
convertible into or exchangeable for such shares or equity
interests or obligating the Company or any of its
subsidiaries to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement or
commitment. As of the date hereof, there are no outstanding
contractual obligations of the Company or any of its
<PAGE>
21
subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its
subsidiaries.
SECTION 4.03. Authority. The Company has the
----------
requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby (other than, with respect to the Merger,
the approval of the terms of this Agreement by the holders
of a majority of the outstanding shares of Company Common
Stock). The execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than, with respect to
the Merger, the approval of the terms of this Agreement by
the holders of a majority of the outstanding shares of
Company Common Stock). This Agreement has been duly
executed and delivered by the Company and, assuming this
Agreement constitutes a valid and binding obligation of
Parent and Sub, constitutes a valid and binding obligation
of the Company enforceable against the Company in accordance
with its terms.
<PAGE>
22
SECTION 4.04. Consents and Approvals; No
--------------------------
Violations. Except as set forth in the Company Disclosure
-----------
Schedule, and except for filings, permits, authorizations,
consents and approvals as may be required under, and other
applicable requirements of, the Securities Exchange Act of
1934, as amended (the "Exchange Act") (including the filing
with the SEC of the Schedule 14D-9 and a proxy statement
relating to any required approval by the Company's
stockholders of this Agreement (the "Proxy Statement")), the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the DGCL, the BCL, blue sky laws,
state takeover laws and foreign laws, neither the execution,
delivery or performance of this Agreement by the Company nor
the consummation by the Company of the transactions
contemplated hereby will (i) conflict with or result in any
breach of any provision of the certificate of incorporation
or by-laws of the Company or of the equivalent
organizational documents of any of its Significant
Subsidiaries, (ii) require any filing with, or permit,
authorization, consent or approval of, any court, arbitral
tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a
"Governmental Entity") (except where the failure to obtain
such permits, authorizations, consents or approvals or to
<PAGE>
23
make such filings would not have a material adverse effect),
(iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a
default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of them or any of
their properties or assets may be bound or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any of its subsidiaries or any of
their properties or assets, except in the case of clauses
(iii) or (iv) for violations, breaches or defaults that
would not have a material adverse effect or prevent or
materially delay the consummation of the Offer or the
Merger.
SECTION 4.05. SEC Reports and Financial
-------------------------
Statements. Each of the Company and its subsidiaries has
-----------
filed with the SEC, and has heretofore made available to
Parent true and complete copies of, all forms, reports,
schedules, statements and other documents required to be
filed by it since December 31, 1993, under the Exchange Act
or the Securities Act of 1933 (the "Securities Act") (such
<PAGE>
24
forms, reports, schedules, statements and other documents,
to the extent filed and publicly available prior to the date
of this Agreement, other than preliminary filings, are
referred to as the "Company SEC Documents"). The Company
SEC Documents, at the time filed, (a) did not contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading and
(b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as
the case may be, and the applicable rules and regulations of
the SEC thereunder. The Company SEC Documents, considered
as a whole, do not contain an untrue statement of a material
fact or omit to state a material fact required to be stated
or incorporated by reference therein or necessary in order
to make the statements therein, in light of the
circumstances under which they were made, not misleading.
The financial statements of the Company included in the
Company SEC Documents comply as to form in all material
respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
<PAGE>
25
during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly
present (subject, in the case of the unaudited statements,
to normal, recurring audit adjustments) the consolidated
financial position of the Company and its consolidated
subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods
then ended. Any change in the Company's results of
operations will not be deemed to make the foregoing
representations not true and correct.
SECTION 4.06. Absence of Certain Changes or
-----------------------------
Events. Except as contemplated by this Agreement and as
-------
disclosed in the Company SEC Documents or in the Company
Disclosure Schedule, since April 1, 1995, the Company and
its subsidiaries have conducted their respective businesses
only in the ordinary course, and there has not been (i) any
material adverse change, (ii) any declaration, setting aside
or payment of any dividend or other distribution with
respect to its capital stock or any redemption, purchase or
other acquisition of any of its capital stock, (iii) any
split, combination or reclassification or any of its capital
stock or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in
<PAGE>
26
substitution for shares of its capital stock, (iv) (w) any
granting by the Company or any of its subsidiaries to any
officer of the Company or any of its subsidiaries of any
increase in compensation, except in the ordinary course of
business (including in connection with promotions)
consistent with prior practice or as was required under
employment agreements in effect as of the date of the most
recent audited financial statements included in the Company
SEC Documents, (x) any granting by the Company or any of its
subsidiaries to any such officer of any increase in
severance or termination pay, except as part of a standard
employment package to any person promoted or hired (but not
including the five most senior officers), or as was required
under employment, severance or termination agreements in
effect as of the date of the most recent audited financial
statements included in the Company SEC Documents, (y) except
termination arrangements in the ordinary course of business
consistent with past practice with employees other than any
executive officer of the Company, any entry by the Company
or any of its subsidiaries into any employment, severance or
termination agreement with any such officer or (z) any
increase in benefits available under or establishment of any
Benefit Plan (as defined in Section 4.09(a)) (including the
granting of stock options, stock appreciation rights,
<PAGE>
27
performance awards or restricted stock awards or the
amendment or acceleration of vesting of any existing stock
options, stock appreciation rights, performance awards or
restricted stock awards but excluding any amendment
accelerating vesting of existing stock options), except in
the ordinary course of business consistent with past
practice, (v) any damage, destruction or loss to physical
properties owned or used by the Company, whether or not
covered by insurance, that has or reasonably could be
expected to have a material adverse effect on the Company,
(vi) any revaluation by the Company of any of its material
assets or (vii) any material change in accounting methods,
principles or practices by the Company.
SECTION 4.07. No Undisclosed Liabilities. Except
---------------------------
as and to the extent set forth in the Company's Annual
Report to Shareholders for the year ended December 31, 1994,
or in any subsequently filed Company SEC Document, neither
the Company nor any of its subsidiaries has any liabilities
or obligations of any nature, whether or not accrued,
contingent or otherwise, that would be required by generally
accepted accounting principles to be reflected on a
consolidated balance sheet of the Company and its
subsidiaries (including the notes thereto), except for
liabilities or obligations incurred in the ordinary course
<PAGE>
28
of business since December 31, 1994, that would not,
individually or in the aggregate, have a material adverse
effect.
SECTION 4.08. Information Supplied. None of the
---------------------
information supplied or to be supplied by the Company
specifically for inclusion or incorporation by reference in
(i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
information to be filed by the Company in connection with
the Offer pursuant to Rule 14f-1 promulgated under the
Exchange Act (the "Information Statement") or (iv) the Proxy
Statement, will, in the case of the Offer Documents, the
Schedule 14D-9 and the Information Statement, at the
respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first
published, sent or given to the Company's stockholders, or,
in the case of the Proxy Statement, at the time the Proxy
Statement is first mailed to the Company's stockholders or
at the time of the Stockholders Meeting (as hereinafter
defined), contain any untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading, except that no representation or
warranty is made by the Company with respect to statements
<PAGE>
29
made or incorporated by reference therein based on
information supplied by Parent or Sub in writing
specifically for inclusion or incorporation by reference
therein. The Schedule 14D-9, the Information Statement and
the Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the
rules and regulations thereunder.
SECTION 4.09. Benefit Plans. Subject to
--------------
Section 4.14(h), (a) Each "employee pension benefit plan"
(as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"))(a
"Pension Plan"), "employee welfare benefit plan" (as defined
in Section 3(1) of ERISA)(a "Welfare Plan"), and each other
plan, arrangement or policy (written or oral) relating to
stock options, stock purchases, compensation, deferred
compensation, bonuses, severance, fringe benefits or other
employee benefits, in each case maintained or contributed
to, or required to be maintained or contributed to, by the
Company or its subsidiaries for the benefit of any present
or former employee, officer or director (each of the
foregoing, a "Benefit Plan") has been administered in
accordance with its terms. The Company and its subsidiaries
and all the Benefit Plans are in compliance with the
applicable provisions of ERISA, the Internal Revenue Code of
<PAGE>
30
1986, as amended (the "Code"), all other applicable laws and
all applicable collective bargaining agreements.
(b) None of the Company or any other person or
entity that, together with the Company, is treated as a
single employer under Section 414 of the Code (each,
including the Company, a "Commonly Controlled Entity") has
incurred any liability to a Pension Plan under Title IV of
ERISA (other than for contributions not yet due) or to the
Pension Benefit Guaranty Corporation (other than for payment
of premiums not yet due), which liability has not been fully
paid.
(c) No Commonly Controlled Entity is required to
contribute to any "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) or has withdrawn from any
multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (within the
meaning of Section 4201 of ERISA) that has not been fully
paid.
(d) Each Benefit Plan that is a Welfare Plan may
be amended or terminated at any time after the Effective
Time without liability to the Company or its subsidiaries.
SECTION 4.10. Other Compensation Arrangements.
--------------------------------
Except as disclosed in the Company Disclosure Schedule or
the Company SEC Documents, and except as provided in this
<PAGE>
31
Agreement, as of the date of this Agreement, neither the
Company nor any of its subsidiaries is a party to any
written (i) consulting agreement not terminable on not more
than 60 calendar days notice involving the payment of more
than $500,000 per annum or union or collective bargaining
agreement which covers more than 100 employees,
(ii) agreement with any executive officer or other key
employee of the Company or any of its subsidiaries (x) the
benefits of which are contingent, or the terms of which are
materially affected or altered, upon the occurrence of a
transaction involving the Company of the nature contemplated
by this Agreement or (y) providing any term of employment or
compensation guarantee extending for a period longer than
two years or the payment of more than $500,000 per year or
(iii) agreement or plan, including any stock option plan,
stock appreciation right plan, restricted stock plan or
stock purchase plan, any of the benefits of which will be
increased or affected, or the vesting of the benefits of
which will be accelerated or affected, by the occurrence of
any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated
on the basis of any of the transactions contemplated by this
Agreement.
<PAGE>
32
SECTION 4.11. Litigation. Except as disclosed in
-----------
the Company SEC Documents or in the Company Disclosure
Schedule and except for suits filed in connection with the
Offer, there is no suit, claim, action, proceeding or
investigation pending before any Governmental Entity or, to
the best knowledge of the Company, threatened against the
Company or any of its subsidiaries that could reasonably be
expected to have a material adverse effect. Except as
disclosed in the Company SEC Documents or in the Company
Disclosure Schedule, neither the Company nor any of its
subsidiaries is subject to any outstanding order, writ,
injunction or decree that could reasonably be expected to
have a material adverse effect.
SECTION 4.12. Compliance with Applicable Law.
-------------------------------
The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits"), except
for failures to hold such permits, licenses, variances,
exemptions, orders and approvals that would not,
individually or in the aggregate, have a material adverse
effect. The Company and its subsidiaries are in compliance
with the terms of the Company Permits, except where the
failure so to comply would not have a material adverse
<PAGE>
33
effect. Except as disclosed in the Company SEC Documents,
to the best knowledge of the Company, the businesses of the
Company and its subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any
Governmental Entity, except for possible violations that,
individually or in the aggregate, would not have a material
adverse effect or prevent or materially delay the
consummation of the Offer or the Merger. Except as set
forth in the Company Disclosure Schedule, as of the date of
this Agreement, no investigation or review by any
Governmental Entity with respect to the Company or any of
its subsidiaries is pending or, to the best knowledge of the
Company, threatened, nor has any Governmental Entity
indicated an intention to conduct any such investigation or
review, other than, in each case, those the outcome of which
would not be reasonably expected to have a material adverse
effect or prevent or materially delay the consummation of
the Offer or the Merger.
SECTION 4.13. Rights Agreement. The Company has
-----------------
heretofore provided Parent with a complete and correct copy
of the Rights Agreement, including all amendments and
exhibits thereto. The amendment to the Rights Agreement
attached hereto as Exhibit B has been duly authorized by the
Board of Directors of the Company and has been duly executed
<PAGE>
34
by the Company, and, accordingly, the execution of this
Agreement, the announcement or making of the Existing Offer
or the Offer, the acquisition of Shares pursuant to the
Offer and the Merger and the other transactions contemplated
in this Agreement will not cause the Rights to become
exercisable or result in either Parent or Sub or any of
their Affiliates being considered to be an "Acquiring
Person" (as defined in the Rights Agreement) or the
occurrence of a "Distribution Date", a "Section 11(a)(ii)
Event" or a "Section 13 Event" (as such terms are defined in
the Rights Agreement).
SECTION 4.14. Tax Matters. Except as set forth
------------
in the Company Disclosure Schedule and subject to
Section 4.14(h):
(a) Each of the Company and each of its
subsidiaries has filed all Federal income tax returns and
all other material tax returns and reports required to be
filed by it. All such returns are complete and correct.
Each of the Company and each of its subsidiaries has paid
(or the Company has paid on its subsidiaries' behalf) all
taxes shown as due on such returns and all taxes for which
no return was required to be filed.
(b) No tax return of the Company or any of its
subsidiaries is under audit or examination by any taxing
<PAGE>
35
authority, and no written or unwritten notice of such an
audit or examination has been received by the Company or any
of its subsidiaries. Each deficiency resulting from any
audit or examination relating to taxes by any taxing
authority has been paid, except for deficiencies being
contested in good faith. No issues relating to taxes were
raised in writing by the relevant taxing authority during
any presently pending audit or examination, and no material
issues relating to taxes were raised in writing by the
relevant taxing authority in any completed audit or
examination that can reasonably be expected to recur in a
later taxable period. The Federal income tax returns of the
Company and each of its subsidiaries consolidated in such
returns have been examined by and settled with the Internal
Revenue Service for all years, or all years are otherwise
closed, through 1984.
(c) No liens for taxes exist with respect to any
assets or properties of the Company or any of its
subsidiaries, except for statutory liens for taxes not yet
due.
(d) None of the Company or any of its
subsidiaries is a party to or is bound by any tax sharing
agreement, tax indemnity obligation or similar agreement,
arrangement or practice with respect to taxes (including any
<PAGE>
36
advance pricing agreement, closing agreement or other
agreement relating to taxes with any taxing authority).
(e) Except as contemplated by this Agreement, the
disallowance of a deduction under Section 162(m) of the Code
for employee remuneration will not apply to any amount paid
or payable by the Company or any of its subsidiaries under
any contract, Company Stock Plan, Benefit Plan, program,
arrangement or understanding currently in effect.
(f) Except as contemplated by this Agreement, any
amount or other entitlement that could be received (whether
in cash or property or the vesting of property) as a result
of any of the transactions contemplated by this Agreement by
any employee, officer or director of the Company or any of
its affiliates who is a "disqualified individual" (as such
term is defined in proposed Treasury Regulation Section
1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Benefit Plan
currently in effect would not be characterized as an "excess
parachute payment" (as such term is defined in Section
280G(b)(1) of the Code).
(g) As used in this Agreement, "taxes" shall
include all Federal, state, local and foreign income,
property, sales, excise, withholding and other taxes,
tariffs or governmental charges of any nature whatsoever.
<PAGE>
37
(h) For purposes of Article IX and Exhibit A to
this Agreement, no representations set forth in
Sections 4.09 and 4.14 (each, a "Relevant Representation")
shall be deemed to be untrue unless all untruths of Relevant
Representations cumulatively would reasonably be expected to
have a material adverse effect.
SECTION 4.15. State Takeover Statutes. The Board
------------------------
of Directors of the Company has approved the Offer, the
Merger and this Agreement and such approval is sufficient to
render inapplicable to the Offer, the Merger and this
Agreement and the transactions contemplated by this
Agreement the provisions of Section 203 of the DGCL and the
provisions of Massachusetts General Laws Chapters 110C and
110E. To the best of the Company's knowledge, no other
state takeover statute or similar statute or regulation
applies or purports to apply to the Offer, the Merger, this
Agreement or any of the transactions contemplated by this
Agreement.
SECTION 4.16. Brokers. No broker, investment
--------
banker, financial advisor or other person, other than Lazard
Freres & Co. LLC, the fees and expenses of which will be
paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this
<PAGE>
38
Agreement based upon arrangements made by or on behalf of
the Company. The estimated fees and expenses incurred and
to be incurred by the Company in connection with this
Agreement and the transactions contemplated by this
Agreement (including the fees of the Company's legal counsel
and the legal counsel for its financial advisor) are set
forth in the Company Disclosure Schedule. The Company has
provided Parent true and correct copies of all agreements
between the Company and Lazard Freres & Co. LLC.
SECTION 4.17. Opinion of Financial Advisor. The
-----------------------------
Company has received the opinion of Lazard Freres & Co. LLC,
to the effect that, as of the date of this Agreement, the
consideration to be received in the Offer and the Merger by
the Company's stockholders is fair to the Company's
stockholders from a financial point of view.
SECTION 4.18. Intellectual Property. (a) Except
----------------------
to the extent that the inaccuracy of any of the following
(or the circumstances giving rise to such inaccuracy),
individually and in the aggregate, would not have a material
adverse effect:
(1) the Company and each of its subsidiaries owns,
or is licensed or otherwise has the right to use (in
each case, clear of any liens or encumbrances of any
<PAGE>
39
kind), all Intellectual Property used in or necessary
for the conduct of its business as currently conducted;
(2) no claims are pending or, to the knowledge of
the Company, threatened that the Company or any of its
subsidiaries is infringing on or otherwise violating
the rights of any person with regard to any
Intellectual Property owned by and/or licensed to the
Company or its subsidiaries;
(3) to the knowledge of the Company, no person is
infringing on or otherwise violating any right of the
Company or any of its subsidiaries with respect to any
Intellectual Property owned by and/or licensed to the
Company or its subsidiaries; provided that all the
--------
foregoing is qualified to the extent of publicly known
problems with respect to software piracy and copyright
protection;
(4) none of the former or current members of
management or key personnel of the Company or any of
its subsidiaries, including all former and current
employees, agents, consultants and contractors who have
contributed to or participated in the conception and
development of computer software or other Intellectual
Property of the Company or any of its subsidiaries has
asserted in writing any claim against the Company or
<PAGE>
40
any of its subsidiaries in connection with the
involvement of such persons in the conception and
development of any computer software or other
Intellectual Property of the Company or any of its
subsidiaries, and no such claim has been asserted or
threatened in writing;
(5) the execution and delivery of this Agreement,
compliance with its terms and the consummation of the
transactions contemplated hereby do not and will not
conflict with or result in any violation or default
(with or without notice or lapse of time or both) or
give rise to any right, license or encumbrance relating
to Intellectual Property, or right of termination,
cancellation or acceleration of any material
Intellectual Property right or obligation, or the loss
or encumbrance of any Intellectual Property or material
benefit related thereto, or result in or require the
creation, imposition or extension of any lien or
encumbrance upon any Intellectual Property or right;
(6) no licenses or rights have been granted to
distribute the source code of, or to use source code to
create Derivative Works (as hereinafter defined) of,
Notes, Lotus 1-2-3, Freelance Graphics, Word Pro,
cc:Mail or any product currently marketed by,
<PAGE>
41
commercially available from, or under development by,
the Company or any of its subsidiaries and
(7) the Company and each of its subsidiaries has
taken reasonable and necessary steps to protect their
Intellectual Property and their rights thereunder, and
to the knowledge of the Company no such rights to
Intellectual Property have been lost or are in jeopardy
of being lost through failure to act by the Company or
any of its subsidiaries.
As used herein, "Derivative Work" shall mean a
work which is based upon one or more preexisting works, such
as a revision, enhancement, modification, abridgement,
condensation, expansion or any other form in which such
preexisting works may be recast, transformed or adapted, and
which, if prepared without authorization of the owner of the
copyright in such preexisting work, would constitute a
copyright infringement. For purposes hereof, a Derivative
Work shall also include any compilation that incorporates
such a preexisting work as well as translations from one
human language to another and from one type of code to
another.
(b) For purposes of this Agreement, "Intellectual
Property" shall mean trademarks (registered or
unregistered), service marks, brand names, certification
<PAGE>
42
marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the
foregoing and registrations in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing,
including any extension, modification or renewal of any such
registration or application; inventions, discoveries and
ideas, whether patented, patentable or not in any
jurisdiction; nonpublic information, trade secrets and
confidential information and rights in any jurisdiction to
limit the use or disclosure thereof by any person; writings
and other works, whether copyrighted, copyrightable or not
in any jurisdiction; registration or applications for
registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; any similar intellectual
property or proprietary rights and computer programs and
software (including source code, object code and data);
licenses, immunities, covenants not to sue and the like
relating to the foregoing; and any claims or causes of
action arising out of or related to any infringement or
misappropriation of any of the foregoing.
<PAGE>
43
ARTICLE V
Representations and Warranties
------------------------------
of Parent and Sub
-----------------
Parent and Sub represent and warrant to the
Company as follows:
SECTION 5.01. Organization. Each of Parent and
-------------
Sub is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and
corporate authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its
business as now being conducted except where the failure to
be so organized, existing and in good standing or to have
such power, authority, and governmental approvals would not,
individually or in the aggregate, be reasonably expected to
prevent or materially delay the consummation of the Offer or
the Merger.
SECTION 5.02. Authority. Parent and Sub have
----------
requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and
<PAGE>
44
Sub and no other corporate proceedings on the part of Parent
and Sub are necessary to authorize this Agreement or to
consummate such transactions. No vote of Parent
shareholders is required to approve this Agreement or the
other transactions contemplated hereby. This Agreement has
been duly executed and delivered by Parent and Sub, as the
case may be, and, assuming this Agreement constitutes a
valid and binding obligation of the Company, constitutes a
valid and binding obligation of each of Parent and Sub
enforceable against them in accordance with its terms.
SECTION 5.03. Consents and Approvals; No
--------------------------
Violations. Except as set forth in the disclosure schedule
-----------
delivered by Parent to the Company on the date hereof (the
"Parent Disclosure Schedule"), and except for filings,
permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the
Exchange Act (including the filing with the SEC of the Offer
Documents), the HSR Act, the BCL, the DGCL, blue sky laws,
state takeover laws and foreign laws, neither the execution,
delivery or performance of this Agreement by Parent and Sub
nor the consummation by Parent and Sub of the transactions
contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective certificate of
incorporation or by-laws of Parent and Sub, (ii) require any
<PAGE>
45
filing with, or permit, authorization, consent or approval
of, any Governmental Entity (except where the failure to
obtain such permits, authorizations, consents or approvals
or to make such filings would not be reasonably expected to
prevent or materially delay the consummation of the Offer
and the Merger), (iii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time
or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under,
any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, lease, contract,
agreement or other instrument or obligation to which Parent
or any of its subsidiaries is a party or by which any of
them or any of their properties or assets may be bound or
(iv) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Parent any of its
subsidiaries or any of their properties or assets, except in
the case of clauses (iii) and (iv) for violations, breach or
defaults which would not, individually or in the aggregate,
be reasonably expected to prevent or materially delay the
consummation of the Offer or the Merger.
SECTION 5.04. Information Supplied. None of the
---------------------
information supplied or to be supplied by Parent or Sub
specifically for inclusion or incorporation by reference in
<PAGE>
46
the Offer Documents, as amended pursuant to Section 1.01,
the Schedule 14D-9, the Information Statement or the Proxy
Statement will, in the case of the Offer Documents, the
Schedule 14D-9 and the Information Statement, at the
respective times the Offer Documents (as so amended), the
Schedule 14D-9 and the Information Statement are filed with
the SEC or first published, sent or given to the Company's
stockholders, or, in the case of the Proxy Statement, at the
date the Proxy Statement is first mailed to the Company's
stockholders or at the time of the meeting of the Company's
stockholders held to vote upon the approval and adoption of
this Agreement, contain any untrue statement of a material
fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading, except that no representation is made
by Parent or Sub with respect to information supplied by the
Company in writing specifically for inclusion or
incorporation by reference therein. The Offer Documents, as
amended pursuant to Section 1.01, comply as to form in all
material respects with the Exchange Act and the rules and
regulations promulgated thereunder.
SECTION 5.05. Interim Operations of Sub. Sub was
--------------------------
formed solely for the purpose of engaging in the
<PAGE>
47
transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as
contemplated hereby.
SECTION 5.06. Brokers. No broker, investment
--------
banker, financial advisor or other person, other than
CS First Boston Corporation, the fees and expenses of which
will be paid by Parent, is entitled to any broker's,
finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on
behalf of Parent or Sub.
SECTION 5.07. Financing. Parent has sufficient
----------
funds available to purchase all the outstanding shares on a
fully diluted basis of Company Common Stock pursuant to the
Offer and the Merger and to pay all fees and expenses
related to the transactions contemplated by this Agreement.
ARTICLE VI
Covenants
---------
SECTION 6.01. Covenants of the Company. Until
-------------------------
such time as Parent's designees shall constitute a majority
of the Board of Directors of the Company, the Company agrees
as to itself and its subsidiaries that (except as expressly
<PAGE>
48
contemplated or permitted by this Agreement, or to the
extent that Parent shall otherwise consent in writing):
(a) Ordinary Course. The Company and its
----------------
subsidiaries shall carry on their respective businesses in
the usual, regular and ordinary course in substantially the
same manner as heretofore conducted (except for changes
resulting from actions taken or statements made by Parent or
its affiliates or agents, including without limitation
commencement of the Offer and announcement of the related
consent solicitation or as contemplated by this Agreement)
and shall use all reasonable efforts to preserve intact
their present business organizations, keep available the
services of their present officers and employees and
preserve their relationships with customers, suppliers and
others having business dealings with the Company and its
subsidiaries.
(b) Dividends; Changes in Stock. The Company
----------------------------
shall not, and it shall not permit any of its subsidiaries
that are organized under the laws of a jurisdiction other
than the United States or any state thereof to, (i) declare
or pay any dividends on or make other distributions in
respect of any of its capital stock, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of,
<PAGE>
49
in lieu of or in substitution for shares of its capital
stock or (iii) repurchase, redeem or otherwise acquire, or
permit any subsidiary to repurchase, redeem or otherwise
acquire, any shares of capital stock.
(c) Issuance of Securities. The Company shall
-----------------------
not, and it shall not permit any of its subsidiaries to,
issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital
stock of any class or any securities convertible into, or
any rights, warrants, calls, subscriptions or options to
acquire, any such shares or convertible securities, or any
other ownership interest (including but not limited to stock
appreciation rights or phantom stock) other than (i) the
issuance of shares of Company Common Stock upon the exercise
of stock options or stock appreciation rights or warrants
granted under Company Stock Plans and outstanding on the
date of this Agreement and in accordance with the present
terms of such options or stock appreciation rights and
(ii) issuances by a wholly owned subsidiary of the Company
of its capital stock to the Company.
(d) Governing Documents. The Company shall not
--------------------
amend or propose to amend its certificate of incorporation
or by-laws.
<PAGE>
50
(e) No Acquisitions. The Company shall not, and
----------------
it shall not permit any of its subsidiaries to, acquire or
agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial
portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or
other business organization or division thereof.
(f) No Dispositions. Other than sales or
----------------
licenses of product or technology in the ordinary course of
business consistent with prior practice, the Company shall
not, and it shall not permit any of its subsidiaries to,
sell, lease, license, encumber or otherwise dispose of, or
agree to sell, lease, license, encumber or otherwise dispose
of, any of its assets, except in the ordinary course of
business consistent with past practice.
(g) Indebtedness. The Company shall not, and it
-------------
shall not permit any of its subsidiaries to, incur (which
shall not be deemed to include entering into credit
agreements, lines of credit or similar arrangements until
borrowings are made under such arrangements) any
indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of the
Company or any of its subsidiaries or guarantee any debt
<PAGE>
51
securities of others, except in the ordinary course of
business consistent with prior practice.
(h) Advice of Changes; Filings. The Company
---------------------------
shall confer on a regular and frequent basis with Parent,
report on operational matters and promptly advise Parent
orally and in writing of any material adverse change. The
Company shall promptly provide to Parent (or its counsel)
copies of all filings made by the Company with any Federal,
state, foreign or supranational Governmental Entity in
connection with this Agreement and the transactions
contemplated hereby.
(i) Tax Matters. The Company shall not make any
------------
tax election that would have a material adverse effect or
settle or compromise any income tax liability of the Company
or any of its subsidiaries that would have a material
adverse effect. The Company shall, before filing or causing
to be filed any material tax return of the Company or any of
its subsidiaries, consult with Parent and its advisors as to
the positions and elections that may be taken or made with
respect to such return.
(j) Discharge of Liabilities. The Company shall
-------------------------
not, and it shall not permit any of its subsidiaries to,
pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
<PAGE>
52
contingent or otherwise), other than the payment, discharge
or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their
terms, of liabilities recognized or disclosed in the most
recent consolidated financial statements (or the notes
thereto) of the Company included in the Company SEC
Documents or incurred since the date of such financial
statements in the ordinary course of business consistent
with past practice, or waive the benefits of, or agree to
modify in any manner, any confidentiality, standstill or
similar agreement to which the Company or any of its
subsidiaries is a party.
(k) Material Contracts. Except in the ordinary
-------------------
course of business, neither the Company nor any of its
subsidiaries shall modify, amend or terminate any material
contract or agreement to which the Company or such
subsidiary is a party or waive, release or assign any
material rights or claims.
SECTION 6.02. No Solicitation. (a) The Company
----------------
and its officers, directors, employees, representatives and
agents shall immediately cease any discussions or
negotiations with any parties that may be ongoing with
respect to a Takeover Proposal (as hereinafter defined).
The Company shall not authorize or permit any of its
<PAGE>
53
officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to
(i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action to
facilitate, any inquiries or the making of any proposal
which constitutes, or may reasonably be expected to lead to,
any Takeover Proposal or (ii) participate in any discussions
or negotiations regarding any Takeover Proposal; provided,
--------
however, that, if at any time prior to the acceptance for
-------
payment of Shares pursuant to the Offer, the Board of
Directors of the Company determines in good faith, after
consultation with counsel, that it is necessary to do so in
order to comply with its fiduciary duties to the Company's
stockholders under applicable law, the Company may, in
response to an unsolicited Takeover Proposal, and subject to
compliance with Section 6.02(c), (x) furnish information
with respect to the Company to any person pursuant to a
confidentiality agreement in a form approved by Parent (such
approval not to be unreasonably withheld) and (y)
participate in negotiations regarding such Takeover
Proposal. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the
preceding sentence by any director or executive officer of
<PAGE>
54
the Company or any of its subsidiaries or any investment
banker, financial advisor, attorney, accountant or other
representative of the Company or any of its subsidiaries
shall be deemed to be a breach of this Section 6.02(a) by
the Company. For purposes of this Agreement, "Takeover
Proposal" means any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or
purchase of a substantial amount of assets of the Company or
any of its subsidiaries or of over 20% of any class of
equity securities of the Company or any of its subsidiaries,
any tender offer or exchange offer that if consummated would
result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any of its
subsidiaries, any merger, consolidation, business
combination, sale of substantially all the assets,
recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its
subsidiaries, other than the transactions contemplated by
this Agreement, or any other transaction the consummation of
which could reasonably be expected to impede, interfere
with, prevent or materially delay the Offer or the Merger or
which would reasonably be expected to dilute materially the
benefits to Parent of the transactions contemplated hereby.
(b) Except as set forth in this Section 6.02(b),
<PAGE>
55
neither the Board of Directors of the Company nor any
committee thereof shall (x) withdraw or modify, or propose
to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by such Board of Directors or
such committee of the Offer, this Agreement or the Merger,
(y) approve or recommend, or propose to approve or
recommend, any Takeover Proposal or (z) cause the Company to
enter into any agreement with respect to any Takeover
Proposal. Notwithstanding the foregoing, in the event that
prior to the time of acceptance for payment of Shares in the
Offer the Board of Directors of the Company determines in
good faith, after consultation with counsel, that it is
necessary to do so in order to comply with its fiduciary
duties to the Company's stockholders under applicable law,
the Board of Directors of the Company may withdraw or modify
its approval or recommendation of the Offer, this Agreement
and the Merger, approve or recommend a Superior Proposal (as
defined below) or cause the Company to enter into an
agreement with respect to a Superior Proposal, but in each
case only at a time that is after the second business day
following Parent's receipt of written notice (a "Notice of
Superior Proposal") advising Parent that the Board of
Directors of the Company has received a Superior Proposal,
specifying the material terms and conditions of such
<PAGE>
56
Superior Proposal and identifying the person making such
Superior Proposal. In addition, if the Company proposes to
enter into an agreement with respect to any Takeover
Proposal, it shall concurrently with entering into such an
agreement pay, or cause to be paid, to Parent the Expenses
and the Termination Fee (as such terms are defined in
Section 7.07(b)). For purposes of this Agreement, a
"Superior Proposal" means any bona fide Takeover Proposal to
acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than 50% of the
shares of Company Common Stock then outstanding or all or
substantially all the assets of the Company and otherwise on
terms which the Board of Directors of the Company determines
in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation) to be
more favorable to the Company's stockholders than the
Merger.
(c) In addition to the obligations of the Company
set forth in paragraphs (a) and (b) of this Section 6.02,
the Company shall immediately advise Parent orally and in
writing of any request for information or of any Takeover
Proposal, or any inquiry with respect to or which could lead
to any Takeover Proposal, the material terms and conditions
of such request, Takeover Proposal or inquiry and the
<PAGE>
57
identity of the person making such request, Takeover
Proposal or inquiry. The Company will keep Parent fully
informed of the status and details (including amendments or
proposed amendments) of any such request, Takeover Proposal
or inquiry.
(d) Nothing contained in this Section 6.02 shall
prohibit the Company from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders if, in the opinion
of the Board of Directors of the Company, after consultation
with counsel, failure so to disclose would be inconsistent
with its fiduciary duties to the Company's stockholders
under applicable law; provided, however, neither the Company
-------- -------
nor its Board of Directors nor any committee thereof shall,
except as permitted by Section 6.02(b), withdraw or modify,
or propose to withdraw or modify, its position with respect
to the Merger or approve or recommend, or propose to approve
or recommend, a Takeover Proposal.
SECTION 6.03. Other Actions. The Company shall
--------------
not, and shall not permit any of its subsidiaries to, take
any action that would result in (i) any of the
representations and warranties of the Company set forth in
this Agreement that are qualified as to materiality becoming
<PAGE>
58
untrue, (ii) any of such representations and warranties that
are not so qualified becoming untrue in any material respect
or (iii) any of the Offer Conditions not being satisfied
(subject to the Company's right to take actions specifically
permitted by Section 6.02).
ARTICLE VII
Additional Agreements
---------------------
SECTION 7.01. Stockholder Approval; Preparation
---------------------------------
of Proxy Statement. (a) If the Company Stockholder
-------------------
Approval (as hereinafter defined) is required by law, the
Company will, at Parent's request, as soon as practicable
following the expiration of the Offer, duly call, give
notice of, convene and hold a meeting of its stockholders
(the "Stockholders Meeting") for the purpose of approving
and adopting this Agreement (the "Company Stockholder
Approval"). The Company will, through its Board of
Directors, recommend to its stockholders that the Company
Stockholder Approval be given. Notwithstanding the
foregoing, if Sub or any other subsidiary of Parent shall
acquire at least 90% of the outstanding Shares, the parties
shall, at the request of Parent, take all necessary and
appropriate action to cause the Merger to become effective
as soon as practicable after the expiration of the Offer
without a Stockholders Meeting in accordance with
<PAGE>
59
Section 253 of the DGCL. Without limiting the generality of
the foregoing, the Company agrees that its obligations
pursuant to the first sentence of this Section 7.01(a) shall
not be affected by (i) the commencement, public proposal,
public disclosure or communication to the Company of any
Takeover Proposal or (ii) the withdrawal or modification by
the Board of Directors of the Company of its approval or
recommendation of the Offer, this Agreement or the Merger.
(b) If the Company Stockholder Approval is
required by law, the Company will, at Parent's request, as
soon as practicable following the expiration of the Offer,
prepare and file a preliminary Proxy Statement with the SEC
and will use its best efforts to respond to any comments of
the SEC or its staff and to cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as
practicable after responding to all such comments to the
satisfaction of the staff. The Company will notify Parent
promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for
additional information and will supply Parent with copies of
all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff,
on the other hand, with respect to the Proxy Statement or
<PAGE>
60
the Merger. If at any time prior to the Stockholders
Meeting there shall occur any event that should be set forth
in an amendment or supplement to the Proxy Statement, the
Company will promptly prepare and mail to its stockholders
such an amendment or supplement. The Company will not mail
any Proxy Statement, or any amendment or supplement thereto,
to which Parent reasonably objects.
(c) Parent agrees to cause all Shares purchased
pursuant to the Offer and all other Shares owned by Parent
or any subsidiary of Parent to be voted in favor of the
Company Stockholder Approval.
SECTION 7.02. Access to Information. Upon
----------------------
reasonable notice and subject to restrictions contained in
confidentiality agreements to which the Company is subject
(from which it shall use reasonable efforts to be released),
the Company shall afford to Parent and to the officers,
employees, independent accountants, counsel and other
representatives of Parent access, during normal business
hours during the period prior to the Effective Time, to all
its properties, books, contracts, commitments and records
and, during such period, the Company shall (and shall cause
each of its subsidiaries to) furnish promptly to Parent
(a) a copy of each report, schedule, registration statement
and other document filed or received by it during such
<PAGE>
61
period pursuant to the requirements of the Federal
securities laws or the Federal tax laws and (b) all other
information concerning its business, properties and
personnel as Parent may reasonably request (including the
Company's public accountants' work papers). Except as
otherwise agreed to by the Company, unless and until Parent
and Sub shall have purchased at least a majority of the
outstanding Shares pursuant to the Offer, and
notwithstanding termination of this Agreement, Parent will
keep, and will cause its officers, employees, independent
accountants, counsel, financial advisers and other
representatives and affiliates to keep, all Confidential
Information (as defined below) confidential and not to
disclose any Confidential Information to any person other
than Parent's or Sub's directors, officers, employees,
affiliates or agents, and then only on a confidential basis;
provided, however, that Parent or Sub may disclose
-------- -------
Confidential Information (i) as required by law, rule,
regulation or judicial process, including as required to be
disclosed in connection with the Offer and the Merger,
(ii) to its attorneys, accountants and financial advisors or
(iii) as requested or required by any Governmental Entity.
For purposes of this Agreement, "Confidential Information"
shall include all information about the Company which has
<PAGE>
62
been furnished by the Company to Parent or Sub; provided,
--------
however, that Confidential Information does not include
-------
information which (x) is or becomes generally available to
the public other than as a result of a disclosure by Parent
or Sub not permitted by this Agreement, (y) was available to
Parent or Sub on a non-confidential basis prior to its
disclosure to Parent or Sub by the Company or (z) becomes
available to Parent or Sub on a non-confidential basis from
a person other than the Company who, to the knowledge of
Parent or Sub, as the case may be, is not otherwise bound by
a confidentiality agreement with the Company or is not
otherwise prohibited from transmitting the relevant
information to Parent or Sub. Neither Parent nor any of its
affiliates will use any Confidential Information in any
manner detrimental to the Company or the stockholders of the
Company and, in the event of termination of this Agreement
for any reason, Parent shall, and shall cause Sub to,
promptly return all Confidential Information to the Company.
SECTION 7.03. Reasonable Efforts. Each of the
-------------------
Company, Parent and Sub agree to use its reasonable efforts
to take all actions necessary to comply promptly with all
legal requirements which may be imposed on itself with
respect to the Offer and the Merger (which actions shall
include, without limitation, furnishing all information
<PAGE>
63
required under the HSR Act and in connection with approvals
of or filings with any other Governmental Entity) and will
promptly cooperate with and furnish information to each
other in connection with any such requirements imposed upon
any of them or any of their Subsidiaries in connection with
the Offer and the Merger. Each of the Company, Parent and
Sub will, and will cause its Subsidiaries to, use its
reasonable efforts to take all reasonable actions necessary
to obtain (and will cooperate with each other in obtaining)
any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or
private third party required to be obtained or made by
Parent, Sub, the Company or any of their Subsidiaries in
connection with the Offer and the Merger or the taking of
any action contemplated thereby or by this Agreement, except
that no party need take any action that would have any of
the consequences referred to in clauses (i) through (iv) in
paragraph (a) of Exhibit A. Parent shall cause Sub to
comply with its obligations under this Agreement.
SECTION 7.04. [Not used]
SECTION 7.05. Certain Benefits; Company Stock
---------------- -------------
Options. (a) Parent, Sub and the Company shall comply with
--------
the provisions set forth in Exhibit C hereto.
<PAGE>
64
(b) The Company shall amend each of the Company's
stock option plans (the "Company Stock Option Plans") to
provide that each outstanding option to purchase Company
Common Stock (a "Company Stock Option") issued pursuant to a
Company Stock Option Plan, whether vested or unvested, shall
remain outstanding after the Effective Time and shall be
assumed by Parent. Parent shall assume such Company Stock
Options in such manner that Parent (i) is a corporation
"assuming a stock option in a transaction to which
Section 424(a) applied" within the meaning of Section 424 of
the Code, or (ii) to the extent that Section 424 of the Code
does not apply to any such Company Stock Options, would be
such a corporation were Section 424 applicable to such
option. Each Company Stock Option assumed by Parent shall
be exercisable upon the same terms and conditions as under
the applicable Company Stock Option Plan and the applicable
option agreement issued thereunder, except that (i) such
option shall be exercisable for that number of shares of
common stock of Parent equal to the product of (x) the
number of shares of Company Common Stock for which such
option was exercisable and (y) the Merger Consideration
divided by the average closing price of common stock of
Parent on the NYSE Composite Tape for the 30 consecutive
trading days prior to the Effective Date (the "Conversion
<PAGE>
65
Number"), and (ii) the exercise price of such option shall
be equal to the exercise price of such option as of the date
hereof divided by the Conversion Number.
(c) As soon as practicable after the Effective
Time, Parent shall deliver to the holders of the Company
Stock Options appropriate notices setting forth such
holders' rights pursuant to the Company Stock Option Plans
and the agreements evidencing the grants of such Company
Stock Options shall continue in effect on the same terms and
conditions (subject to the adjustments required by this
Section 7.05 after giving effect to the Merger).
Parent shall comply with the terms of the Company
Stock Option Plans and ensure, to the extent required by,
and subject to the provisions of, such Company Stock Option
Plans, that the Company Stock Options which qualified as
qualified stock options prior to the Effective Time continue
to qualify as qualified stock options after the Effective
Time. Parent shall use all reasonable efforts to register
under the Securities Act all shares subject to options that
were formerly Company Stock Options as of the Effective
Time.
(d) Paragraphs (b) and (c) of this Section 7.05
notwithstanding, the Company shall further amend the Company
Stock Option Plans to provide holders of Company Stock
<PAGE>
66
Options, whether or not then exercisable or vested, the
opportunity to elect to receive cash in an amount set forth
below in exchange for each Company Stock Option. Pursuant
to such amendment, Parent and the Company shall take all
actions necessary to provide that, as to those holders who
so elect, on the day after the date on which Sub accepts
Shares for payment and purchase pursuant to the Offer,
(i) each Company Stock Option, so surrendered for cash,
whether or not then exercisable or vested, shall become
fully exercisable and vested, (ii) each such Company Stock
Option shall be cancelled and (iii) in consideration of such
cancellation, and except to the extent that Parent or Sub
and the holder of any such Company Stock Option otherwise
agree, the Company shall pay to each such holder of Company
Stock Options an amount in cash in respect thereof equal to
the product of (1) the excess of the Merger Consideration
over the exercise price thereof and (2) the number of Shares
subject thereto.
(e) Notwithstanding anything to the contrary
herein, if it is determined that compliance with any of the
foregoing would cause any individual subject to Section 16
of the Exchange Act to become subject to the profit recovery
provisions thereof, any Company Stock Options held by such
individual will be cancelled or purchased, as the case may
<PAGE>
67
be, at the Effective Time or at such later time as may be
necessary to avoid application of such profit recovery
provisions and such individual will be entitled to receive
from the Company or the Surviving Corporation an amount
equal to the excess, if any, of the Merger Consideration
over the per Share exercise price of such Company Stock
Option multiplied by the number of Shares subject thereto,
and the parties hereto will cooperate so as to achieve the
intent of the foregoing without giving rise to such profit
recovery.
SECTION 7.06. Directors. Promptly upon the
----------
acceptance for payment of, and payment for, any Shares by
Sub pursuant to the Offer, Sub shall be entitled to
designate such number of directors on the Board of Directors
of the Company as will give Sub, subject to compliance with
Section 14(f) of the Exchange Act, a majority of such
directors, and the Company shall, at such time, cause Sub's
designees to be so elected by its existing Board of
Directors; provided, however, that in the event that Sub's
-------- -------
designees are elected to the Board of Directors of the
Company, until the Effective Time such Board of Directors
shall have at least two directors who are directors on the
date of this Agreement and who are not officers of the
Company (the "Independent Directors"); and provided further
-------- -------
<PAGE>
68
that, in such event, if the number of Independent Directors
shall be reduced below two for any reason whatsoever, the
remaining Independent Director shall designate a person to
fill such vacancy who shall be deemed to be an Independent
Director for purposes of this Agreement or, if no
Independent Directors then remain, the other directors shall
designate two persons to fill such vacancies who shall not
be officers or affiliates of the Company or any of its
subsidiaries, or officers or affiliates of Parent or any of
its subsidiaries, and such persons shall be deemed to be
Independent Directors for purposes of this Agreement.
Subject to applicable law, the Company shall take all action
requested by Parent necessary to effect any such election,
including mailing to its stockholders the Information
Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and the Company agrees to make such mailing with
the mailing of the Schedule 14D-9 (provided that Sub shall
have provided to the Company on a timely basis all
information required to be included in the Information
Statement with respect to Sub's designees). In connection
with the foregoing, the Company will promptly, at the option
of Parent, either increase the size of the Company's Board
of Directors and/or obtain the resignation of such number of
<PAGE>
69
its current directors as is necessary to enable Sub's
designees to be elected or appointed to the Company's Board
of Directors as provided above.
SECTION 7.07. Fees and Expenses. (a) Except as
------------------
provided below in this Section 7.07, all fees and expenses
incurred in connection with the Offer, the Merger, this
Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Offer or the Merger is
consummated.
(b) The Company shall pay, or cause to be paid,
in same day funds to Parent the sum of (x) Parent's Expenses
(as hereinafter defined) in amount up to but not to exceed
$20,000,000 and (y) $100,000,000 (the "Termination Fee")
upon demand if (i) Parent or Sub terminates this Agreement
under Section 9.01(d); (ii) the Company terminates this
Agreement pursuant to Section 9.01(e) or (iii) prior to any
termination of this Agreement (other than by the Company
pursuant to Section 9.01(f)), a Takeover Proposal shall have
been made and within 12 months of such termination, a
transaction constituting a Takeover Proposal is consummated
or the Company enters into an agreement with respect to,
approves or recommends or takes any action to facilitate
such takeover proposal. "Expenses" shall mean documented
<PAGE>
70
out-of-pocket fees and expenses incurred or paid by or on
behalf of Parent in connection with the Offer, the Merger or
the consummation of any of the transactions contemplated by
this Agreement, including all fees and expenses of counsel,
commercial banks, investment banking firms, accountants,
experts and consultants to Parent.
SECTION 7.08. Indemnification; Insurance.
---------------------------
(a) Parent and Sub agree that all rights to indemnification
for acts or omissions occurring prior to the Effective Time
now existing in favor of the current or former directors or
officers of the Company and its subsidiaries as provided in
their respective certificates of incorporation or By-laws or
contractual arrangements or as otherwise provided by
applicable law shall survive the Merger and shall continue
in full force and effect in accordance with their terms.
(b) For six years (or the period of the
applicable statute of limitations, if longer) from the
Effective Time, Parent shall, unless Parent agrees in
writing to guarantee the indemnification obligations set
forth in Section 7.08(a), maintain in effect the Company's
current directors' and officers' liability insurance
covering those persons who are currently covered by the
Company's directors' and officers' liability insurance
policy (a copy of which has been made available to Parent);
<PAGE>
71
provided, however, that in no event shall Parent be required
-------- -------
to expend in any one year an amount in excess of 150% of the
annual premiums currently paid by the Company for such
insurance which the Company represents is $268,975 for the
primary policy and $150,000 for the excess coverage; and,
provided, further, that if the annual premiums of such
-------- -------
insurance coverage exceed such amount, Parent shall be
obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount.
(c) This Section 7.08 shall survive the
consummation of the Merger at the Effective Time, is
intended to benefit the Company, Parent, the Surviving
Corporation and the Indemnified Parties, and shall be
binding on all successors and assigns of Parent and the
Surviving Corporation.
SECTION 7.09. Rights Agreement. Except as
-----------------
otherwise provided in Section 4.13, the Company shall not
redeem the Rights or amend (other than to delay the
Distribution Date (as defined therein) or to render the
Rights inapplicable to the Offer and the Merger) or
terminate the Rights Agreement prior to the Effective Time
unless required to do so by order of a court of competent
jurisdiction.
<PAGE>
72
SECTION 7.10. Certain Litigation. (a) Each
-------------------
party agrees to use reasonable efforts to obtain a dismissal
without prejudice of International Business Machines
Corporation and White Acquisition Corp. v. Lotus Development
Corporation and Jim P. Manzi, with each party bearing its
own costs and attorneys' fees therefor. The Company agrees
that it will not settle any litigation currently pending, or
commenced after the date hereof, against the Company or any
of its directors (other than piracy matters and human
resources/employment matters), without the prior written
consent of Parent.
(b) The Company will not voluntarily cooperate
with any third party which has sought or may hereafter seek
to restrain or prohibit or otherwise oppose the Offer or the
Merger and will cooperate with Parent and Sub to resist any
such effort to restrain or prohibit or otherwise oppose the
Offer or the Merger, unless the Board of Directors of the
Company determines in good faith, after consultation with
counsel, that failing so to cooperate with such third party
or cooperating with Parent or Sub, as the case may be, would
constitute a breach of the Board's fiduciary duties under
applicable law.
SECTION 7.11. Consent Solicitation. Parent and
---------------------
Sub shall immediately terminate the solicitation of Company
<PAGE>
73
stockholder consents, withdraw the related SEC filings and
cease soliciting written consents from the stockholders of
the Company.
ARTICLE VIII
Conditions
----------
SECTION 8.01. Conditions to Each Party's
--------------------------
Obligation To Effect the Merger. The respective obligation
--------------------------------
of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following
conditions:
(a) Company Stockholder Approval. If required by
-----------------------------
applicable law, the Company Stockholder Approval shall
have been obtained.
(b) No Injunctions or Restraints. No statute,
-----------------------------
rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction
or other order issued by any court of competent
jurisdiction or other Governmental Entity or other
legal restraint or prohibition preventing the
consummation of the Merger shall be in effect;
provided, however, that each of the parties shall have
-------- -------
used reasonable efforts to prevent the entry of any
such injunction or other order and to appeal as
<PAGE>
74
promptly as possible any injunction or other order that
may be entered.
(c) Purchase of Shares. Sub shall have
-------------------
previously accepted for payment and paid for Shares
pursuant to the Offer.
ARTICLE IX
Termination and Amendment
-------------------------
SECTION 9.01. Termination. This Agreement may be
------------
terminated at any time prior to the Effective Time, whether
before or after approval of the terms of this Agreement by
the stockholders of the Company:
(a) by mutual written consent of Parent and the
Company;
(b) by either Parent or the Company:
(i) if (x) as a result of the failure of any
of the Offer Conditions the Offer shall have
terminated or expired in accordance with its terms
without Sub having accepted for payment any Shares
pursuant to the Offer or (y) Sub shall not have
accepted for payment any Shares pursuant to the
Offer within 180 days following the date of this
Agreement; provided, however, that the right to
-------- -------
terminate this Agreement pursuant to this
Section 9.01(b)(i) shall not be available to any
<PAGE>
75
party the failure of which (or the failure of the
affiliates of which) to perform any of its
obligations under this Agreement results in the
failure of any such condition or if the failure of
such condition results from facts or circumstances
that constitute a breach of representation or
warranty under this Agreement by such party; or
(ii) if any Governmental Entity shall have
issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or
otherwise prohibiting the acceptance for payment
of, or payment for, shares of Company Common Stock
pursuant to the Offer or the Merger and such
order, decree or ruling or other action shall have
become final and nonappealable;
(c) by Parent or Sub prior to the purchase of
Shares pursuant to the Offer in the event of a breach
by the Company of any representation, warranty,
covenant or other agreement contained in this Agreement
which (A) would give rise to the failure of a condition
set forth in paragraph (e) or (f) of Exhibit A and (B)
cannot be or has not been cured within 20 days after
the giving of written notice to the Company;
<PAGE>
76
(d) by Parent or Sub if either Parent or Sub is
entitled to terminate the Offer as a result of the
occurrence of any event set forth in paragraph (d) of
Exhibit A to this Agreement;
(e) by the Company in connection with entering
into a definitive agreement in accordance with
Section 6.02(b), provided it has complied with all
provisions thereof, including the notice provisions
therein, and that it makes simultaneous payment of the
Expenses and the Termination Fee; or
(f) by the Company, if Sub or Parent shall have
breached in any material respect any of their
respective representations, warranties, covenants or
other agreements contained in this Agreement, which
failure to perform is incapable of being cured or has
not been cured within 20 days after the giving of
written notice to Parent or Sub, as applicable, except,
in any case, such failures which are not reasonably
likely to affect adversely Parent's or Sub's ability to
complete the Offer or the Merger.
SECTION 9.02. Effect of Termination. In the
----------------------
event of a termination of this Agreement by either the
Company or Parent as provided in Section 9.01, this
Agreement shall forthwith become void and there shall be no
<PAGE>
77
liability or obligation on the part of Parent, Sub or the
Company or their respective officers or directors, except
with respect to Section 4.16, Section 5.06, the last three
sentences of Section 7.02, Section 7.07, this Section 9.02
and Article X; provided, however, that nothing herein shall
-------- -------
relieve any party for liability for any breach hereof.
SECTION 9.03. Amendment. This Agreement may be
----------
amended by the parties hereto, by action taken or authorized
by their respective Boards of Directors, at any time before
or after approval of the terms of this Agreement by the
shareholders of the Company (if required by law), but, after
any such approval, no amendment shall be made which by law
requires further approval by such shareholders without such
further approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the
parties hereto. Following the election or appointment of
the Sub's designees pursuant to Section 7.06 and prior to
the Effective Time, the affirmative vote of a majority of
the Independent Directors then in office shall be required
by the Company to (i) amend or terminate this Agreement by
the Company, (ii) exercise or waive any of the Company's
rights or remedies under this Agreement or (iii) extend the
time for performance of Parent and Sub's respective
obligations under this Agreement.
<PAGE>
78
SECTION 9.04. Extension; Waiver. At any time
------------------
prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors,
may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto or (iii), subject to the
proviso of Section 9.03 waive compliance with any of the
agreements or conditions contained herein. Any agreement on
the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument
signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of
these rights.
ARTICLE X
Miscellaneous
-------------
SECTION 10.01. Nonsurvival of Representations,
-------------------------------
Warranties and Agreements. None of the representations and
--------------------------
warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time
or, in the case of the Company, shall survive the acceptance
for payment of, and payment for, shares of Company Common
<PAGE>
79
Stock by Sub pursuant to the Offer. This Section 10.01
shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the
Effective Time of the Merger.
SECTION 10.02. Notices. All notices and other
--------
communications hereunder shall be in writing and shall be
deemed given if delivered personally, telecopied (which is
confirmed) or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses
(or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or Sub, to
International Business Machines Corporation
Old Orchard Road
Armonk, NY 10504
Attention: General Counsel
Telecopy No.: (914) 765-6252
and
(b) if to the Company, to
Lotus Development Corporation
55 Cambridge Parkway
Cambridge, MA 02142
Attention: General Counsel
Telecopy No.: (617) 693-3847
<PAGE>
80
SECTION 10.03. Interpretation. When a reference
---------------
is made in this Agreement to Sections, such reference shall
be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation". The
phrase "made available" in this Agreement shall mean that
the information referred to has been made available if
requested by the party to whom such information is to be
made available. The phrases "the date of this Agreement",
"the date hereof", and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to
June 11, 1995. As used in this Agreement, the term
"subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned
directly or indirectly by such first person. As used in
this Agreement, "material adverse change" or "material
<PAGE>
81
adverse effect" means, when used in connection with the
Company, any change or effect (or any development that,
insofar as can reasonably be foreseen, is likely to result
in any change or effect) that is materially adverse to the
financial condition (other than attributable to a change in
results of operations) or business of the Company and its
subsidiaries taken as a whole.
SECTION 10.04. Counterparts. This Agreement may
-------------
be executed in two or more counterparts, all of which shall
be considered one and the same agreement and shall become
effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it
being understood that all parties need not sign the same
counterpart.
SECTION 10.05. Entire Agreement; No Third Party
--------------------------------
Beneficiaries. This Agreement (including the documents and
--------------
the instruments referred to herein) (a) constitute the
entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (b) except as
provided in Sections 7.05, 7.06 and 7.08, are not intended
to confer upon any person other than the parties hereto any
rights or remedies hereunder.
<PAGE>
82
SECTION 10.06. Governing Law. This Agreement
--------------
shall be governed and construed in accordance with the laws
of the State of New York without regard to any applicable
conflicts of law, except to the extent the DGCL shall be
held to govern the terms of the Merger.
SECTION 10.07. Publicity. Except as otherwise
----------
required by law or the rules of the NYSE or the Nasdaq
National Market, for so long as this Agreement is in effect,
neither the Company nor Parent shall, or shall permit any of
its subsidiaries to, issue or cause the publication of any
press release or other public announcement with respect to
the transactions contemplated by this Agreement without the
consent of the other party, which consent shall not be
unreasonably withheld.
SECTION 10.08. Assignment. Neither this
-----------
Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may
assign, in its sole discretion, any or all of its rights,
interests and obligations hereunder to Parent or to any
<PAGE>
83
direct or indirect wholly owned Subsidiary of Parent.
Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
IN WITNESS WHEREOF, Parent, Sub and the Company
have caused this Agreement to be signed by their respective
officers thereunto duly authorized as of the date first
written above.
INTERNATIONAL BUSINESS MACHINES
CORPORATION,
by
-----------------------------
Name:
Title:
WHITE ACQUISITION CORP.,
by
--------------------------
Name:
Title:
LOTUS DEVELOPMENT CORPORATION,
by
--------------------------
Name:
Title:
<PAGE>
EXHIBIT A
Conditions of the Offer
-----------------------
Notwithstanding any other term of the Offer or
this Agreement, Sub shall not be required to accept for
payment or, subject to any applicable rules and regulations
of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered
Shares after the termination or withdrawal of the Offer), to
pay for any Shares tendered pursuant to the Offer unless,
(i) there shall have been validly tendered and not withdrawn
prior to the expiration of the Offer such number of Shares
which would constitute a majority of the outstanding shares
(determined on a fully diluted basis) of Company Common
Stock (the "Minimum Condition") and (ii) any waiting period
under the HSR Act applicable to the purchase of Shares
pursuant to the Offer shall have expired or been terminated.
Furthermore, notwithstanding any other term of the Offer or
this Agreement, Sub shall not be required to accept for
payment or, subject as aforesaid, to pay for any Shares not
theretofore accepted for payment or paid for, and may
terminate the Offer if, at any time on or after the date of
this Agreement and before the acceptance of such shares for
payment or the payment therefor, any of the following
conditions exists (other than as a result of any action or
inaction of Parent or any of its subsidiaries that
constitutes a breach of this Agreement):
(a) there shall be instituted or pending by any
Governmental Entity any suit, action or proceeding,
(i) challenging the acquisition by Parent or Sub of any
Shares under the Offer or seeking to restrain or
prohibit the making or consummation of the Offer or the
Merger, (ii) seeking to prohibit or materially limit
the ownership or operation by the Company, Parent or
any of their respective subsidiaries of a material
portion of the software business or assets of the
Company and its subsidiaries, taken as a whole, or
Parent and its subsidiaries, taken as a whole, or to
compel the Company or Parent to dispose of or hold
separate any material portion of the software business
or assets of the Company and its subsidiaries, taken as
a whole, or Parent and its subsidiaries, taken as a
whole, as a result of the Offer or any of the other
transactions contemplated by this Agreement,
(iii) seeking to impose material limitations on the
ability of Parent or Sub to acquire or hold, or
exercise full rights of ownership of, any Shares
accepted for payment pursuant to the Offer including,
<PAGE>
2
without limitation, the right to vote such Shares on
all matters properly presented to the stockholders of
the Company or (iv) seeking to prohibit Parent or any
of its subsidiaries from effectively controlling in any
material respect any material portion of the software
business or operations of the Company and its
subsidiaries;
(b) there shall be any statute, rule, regulation,
judgment, order or injunction enacted, entered,
enforced, promulgated or deemed applicable to the Offer
or the Merger, or any other action shall be taken by
any Governmental Entity or court, other than the
application to the Offer or the Merger of applicable
waiting periods under the HSR Act, that is reasonably
likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (iv) of
paragraph (a) above;
(c) any material adverse change (or any
development that, insofar as reasonably can be
foreseen, is reasonably likely to result in any
material adverse change) in the financial condition
(other than attributable to a change in results of
operations) or business of the Company and its
subsidiaries, taken as a whole;
(d) (i) the Board of Directors of the Company or
any committee thereof shall have withdrawn or modified
in a manner adverse to Parent or Sub its approval or
recommendation of the Offer, the Merger or this
Agreement, or approved or recommended any Takeover
Proposal, (ii) the Company shall have entered into any
agreement with respect to any Superior Proposal in
accordance with Section 6.02(b) of this Agreement or
(iii) the Board of Directors of the Company or any
committee thereof shall have resolved to take any of
the foregoing actions;
(e) any of the representations and warranties of
the Company set forth in this Agreement that are
qualified as to materiality shall not be true and
correct or any such representations and warranties that
are not so qualified shall not be true and correct in
any material respect, in each case at the date of this
Agreement and at the scheduled expiration of the Offer;
<PAGE>
3
(f) the Company shall have failed to perform in
any material respect any material obligation or to
comply in any material respect with any material
agreement or material covenant of the Company to be
performed or complied with by it under this Agreement;
(g) there shall have occurred and continued to
exist for at least three business days (i) any general
suspension of trading in, or limitation on prices for,
securities on a national securities exchange in the
U.S. (excluding any coordinated trading halt triggered
solely as a result of a specified decrease in a market
index), (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the
United States, (iv) any limitation (whether or not
mandatory) by any Governmental Entity on, or other
event that materially adversely affects, the extension
of credit by banks or other lending institutions or
(v) in case of any of the foregoing existing on the
date of this Agreement, material acceleration or
worsening thereof;
(h) the Agreement shall have been terminated in
accordance with its terms.
The foregoing conditions are for the sole benefit
of Sub and Parent and may, subject to the terms of the
Agreement, be waived by Sub and Parent in whole or in part
at any time and from time to time in their sole discretion.
The failure by Parent or Sub at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any
such right, the waiver of any such right with respect to
particular facts and circumstances shall not be deemed a
waiver with respect to any other facts and circumstances and
each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
<PAGE>
EXHIBIT B
AMENDMENT TO RIGHTS AGREEMENT
THIS AMENDMENT, dated as of June 11, 1995, is between LOTUS DEVELOPMENT
CORPORATION, a Delaware corporation (the "Company"), and THE FIRST NATIONAL BANK
OF BOSTON, a national banking association (the "Rights Agent").
RECITALS
A. The Company and the Rights Agent are parties to a Rights Agreement dated
as of November 7, 1988, as amended as of April 5, 1990, and as of September 16,
1991 (the "Rights Agreement").
B. International Business Machines Corporation, a New York corporation
("IBM"), White Acquisition Corp., a New York corporation ("Sub"), and the
Company have entered into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which Sub will amend its existing offer to purchase all
outstanding shares of common stock of the Company and, following consummation of
the amended offer, Sub will merge with and into the Company (the "Merger"). The
Board of Directors of the Company has approved the Merger Agreement, the amended
offer and the Merger.
C. Pursuant to Section 27 of the Rights Agreement, the Board of Directors of
the Company has determined that an amendment to the Rights Agreement as set
forth herein is necessary and desirable to reflect the foregoing and the Company
and the Rights Agent desire to evidence such amendment in writing.
Accordingly, the parties agree as follows:
1. Amendment of Section 1(a). Section 1(a) of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
neither IBM nor Sub shall be deemed to be an Acquiring Person solely by
virtue of (i) the announcement or making of the Existing Offer or the
Offer (as such terms are defined in the Merger Agreement), (ii) the
acquisition of Common Shares pursuant to the Offer and the Merger (as
defined in the Merger Agreement), (iii) the execution of the Merger
Agreement or (iv) the consummation of the other transactions contemplated
in the Merger Agreement."
2. Amendment of Section 1(g). Section 1(g) of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary, a
Distribution Date shall not be deemed to have occurred solely as the
result of (i) the announcement or making of the Existing Offer or the
Offer, (ii) the acquisition of Common Shares pursuant to the Offer and
the Merger, (iii) the execution of the Merger Agreement or (iv) the other
transactions contemplated in the Merger Agreement."
3. Amendment of Section 1(j). Section 1(j) of the Rights Agreement is
amended and restated to read as follows:
"(j)(i) 'Final Expiration Date' shall have the meaning set forth in
Section 7 hereof.
(j)(ii) 'IBM' shall mean International Business Machines Corporation,
a New York corporation.
(j)(iii) 'Merger Agreement' shall mean the Agreement and Plan of
Merger dated as of June 11, 1995, among IBM, Sub and the Company, as
amended from time to time."
<PAGE>
4. Amendment of Section 1(r). Section 1(r) of the Rights Agreement is
amended and restated to read as follows:
"(r)(i) 'Shares Acquisition Date' shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring
Person has become such.
(r)(ii) 'Sub' shall mean White Acquisition Corp., a New York
corporation, which is a wholly owned subsidiary of IBM, or any other
subsidiary of IBM that is substituted for Sub pursuant to the Merger
Agreement."
5. Amendment of Section 13. Section 13 of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
(i) the announcement or making of the Existing Offer or the Offer, (ii)
the acquisition of Common Shares pursuant to the Offer and the Merger,
(iii) the execution of the Merger Agreement or (iv) the consummation of
the other transactions contemplated in the Merger Agreement shall not be
deemed to be a Section 13 Event and shall not cause the Rights to be
adjusted or exercisable in accordance with Section 13."
6. Effectiveness. This Amendment shall be deemed effective as of June
11, 1995 as if executed on such date. Except as amended hereby, the Rights
Agreement shall remain in full force and effect and shall be otherwise
unaffected hereby.
7. Miscellaneous. This Amendment shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such state
applicable to contracts to be made and performed entirely within such state.
This Amendment may be executed in any number of counterparts, each of such
counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
If any provision, covenant or restriction of this Amendment is held by a
court of competent jurisdiction or other authority to be invalid, illegal or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment shall remain in full force and effect and
shall in no way be effected, impaired or invalidated.
EXECUTED as of the date set forth above.
Attest: LOTUS DEVELOPMENT CORPORATION
................................. .................................
Name: Name:
Title: Title:
Attest: THE FIRST NATIONAL BANK OF BOSTON
................................. .................................
Name: Name:
Title: Title:
2
<PAGE>
EXHIBIT C
EXECUTIVE SEVERANCE
A severance program will be available for a two-year period following the
closing date of the acquisition of Lotus by IBM for all individuals holding the
titles of corporate vice president, senior president and president as of the
closing. It will apply to executives terminated other than for cause and
executives terminating for reasons of constructive termination as set forth
below. Payment of the separation benefit will be based on total annual
compensation (then current base and MIP target) and computed based on 1 year
plus 4 weeks for every 6 months of tenure. To be capped at two years for senior
vice presidents and above. Benefits (e.g., health and welfare) for the same
period. IBM will provide outplacement, financial counseling and a gross-up for
any excise taxes imposed on any parachute payments and any income taxes or
excise taxes relating to the gross-up payment. No mitigation shall be required,
and no reduction shall be made if a participant finds employment during the
payout period. Payment will be made monthly over a period equal to the length of
the severance calculation, and during such period the recipient (other than
corporate staff) shall not render services for any organization or engage
directly or indirectly in any business which is competitive with the relevant
Lotus business units.
For purposes of executive severance, the following provisions shall apply:
(i) If, at any time after a Change of Control and before the second
anniversary of the Change of Control, a Participant's annual base compensation
is reduced below the higher of (x) the amount in effect on the date Lotus is
acquired by IBM and (y) the highest amount in effect at any time thereafter, a
Participant may terminate his employment within 90 days of the occurrence of
such reduction and be entitled to the Separation Benefits.
(ii) If, at any time after a Change of Control and before the second
anniversary of the Change of Control, a Participant's duties and
responsibilities (including reporting requirements) as an employee are
diminished in comparison to the duties and responsibilities enjoyed by the
Participant on the date Lotus is acquired by IBM, the participant may terminate
his or her employment within 90 days of the occurrence of such reduction and be
entitled to the Separation Benefits.
(iii) If, at any time after a Change of Control and before the second
anniversary of the Change of Control, a Participant is required to be based at a
location more than 15 miles from the location where the Participant was based
and performed services on the date Lotus is acquired by IBM or is required to
travel materially more often or for materially longer trips than that required
prior to the date Lotus is acquired by IBM, the Participant may terminate his or
her employment and be entitled to the Separation Benefits.
GENERAL SEVERANCE
An enhanced severance program will be available for a two year period
following the closing date of the acquisition of Lotus by IBM for all employees
as of the closing. It will be applicable to employees terminated other than for
cause and employees leaving Lotus for reasons of constructive termination, as
described below. Payment of a Separation Benefit for termination under this plan
will be two times Lotus' severance schedule as of the date of this agreement
(employee payments will become 16 weeks of base salary plus an additional two
weeks for each six months of service, and for directors and senior managers
(grade E20 and above), exclusive of those eligible for the executive severance
plan, becomes 24 weeks of base salary and target bonus plus an additional two
weeks for each six months of service). Benefits (health and welfare) will
continue for the severance period and outplacement counseling will be provided.
No mitigation shall be required, and no reduction shall be made if a participant
finds employment during the payout period. Payments will be made monthly over a
period equal to the length of the severance calculation.
For purposes of general severance, the following provisions shall apply:
<PAGE>
(i) If, at any time after a Change of Control and before the second
anniversary of the Change of Control, a Participant's annual base salary is
reduced below the higher of (x) the amount in effect on the date Lotus is
acquired and (y) the highest amount in effect at any time thereafter, a
Participant may terminate his or her employment within 90 days of the occurrence
of such reduction and be entitled to the Separation Benefits.
(ii) If, at any time after a Change of Control and before the second
anniversary of the Change of Control, a Participant's duties, responsibilities
and skills required as an employee are materially diminished or significantly
changed in comparison to the duties, responsibilities or skills required by the
Participant on the date Lotus is acquired, such Participant may terminate his or
her employment within 90 days of the occurrence of such reduction and be
entitled to the Separation Benefits in accordance with Section 4.3.
(iii) If, at any time after a Change of Control and before the second
anniversary of the Change of Control, a Participant is required to be based at a
location more than normal commuting distances from the location where the
Participant was based and performed services on the date Lotus is acquired, such
Participant may terminate his or her employment within 90 days of such
relocation and be entitled to the Separation Benefits.
2
<PAGE>
FOR IMMEDIATE RELEASE
Contact:
Bryan Simmons Rob Wilson
Lotus Development Corp. IBM Corp.
(617) 693-1697 (212) 745-4736
IBM, LOTUS ANNOUNCE AGREEMENT ON IBM TENDER OFFER AT $64 PER LOTUS
SHARE IN CASH
ARMONK, N.Y., and CAMBRIDGE, Mass., June 11, 1995 . . . IBM and Lotus
Development Corp. today announced a definitive merger agreement under which IBM
will pay $64 per Lotus share in cash for all of Lotus' outstanding shares and
preferred share purchase rights. The transaction has a total equity value of
approximately $3.5 billion.
"We're delighted that Lotus and IBM have been able to reach an agreement so
quickly," said IBM Chairman and Chief Executive Officer Louis V. Gerstner, Jr.
"This means we can begin moving ahead rapidly to bring our shared vision of team
computing--and its many powerful benefits--to reality for our customers. I know
I speak on behalf of all IBM employees when I say that we eagerly look forward
to working with our future colleagues at Lotus and its industry partners. We
have much to do, and we are anxious to get started."
"We are excited about this opportunity to partner with IBM," said Jim Manzi,
who will continue in his role as chairman and CEO of Lotus, reporting to Mr.
Gerstner. "We intend to utilize our combined resources to expand our leadership
position in communications software and advance our desktop software business.
After careful consideration, Lotus' Board of Directors believes it has acted in
the best interests of the company's employees, shareholders and customers. We
now look forward to working with IBM to grow our customer base and set our
collective sights on the market opportunities before us."
Mr. Manzi will be named a senior vice president of IBM and will work hand in
hand with John M. Thompson, senior vice president, IBM Software Group, to manage
the transition and day-to-day interface between Lotus and IBM.
Completion of the tender offer is conditioned on the tender of a majority of
the outstanding Lotus shares and expiration of the Hart-Scott-Rodino waiting
periods.
Additional details on today's announcement will be available on the IBM and
Lotus Internet home pages (IBM: http//www.ibm.com. Lotus: http//www.lotus.com).
# # #
061195
EXHIBIT (g)(2)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ----------------------------------------!
!
DAVID SHAEV, !
! C.A. No. 14331
Plaintiff, !
! CLASS ACTION
-against- ! COMPLAINT
!
LOTUS DEVELOPMENT CORP., JIM P. MANZI, !
RICHARD S. BRADDOCK, ELAINE L. CHAO, !
WILLIAM H. GRAY, III, MICHAEL E. !
PORTER, and HENRI A. TERMEER, !
!
Defendants. !
- ----------------------------------------
Plaintiff, by his attorneys, alleges upon information and
belief, except with respect to his ownership of Lotus Development Corp. ("Lotus"
or the "Company") common stock as follows:
PARTIES
-------
1. Plaintiff is the owner of shares of defendant Lotus.
2. Lotus Development Corp. is a Delaware corporation with executive
offices at 55 Cambridge Parkway, Cambridge, Massachusetts 02142-1295.
Lotus develops, manufactures and markets application software products and
services that meet the evolving technology and business application
requirements for individuals, work groups and entire organizations.
<PAGE>
As of February 25, 1995, Lotus had approximately 48,196,000 shares of
common stock outstanding.
3. Defendant Jim P. Manzi is chairman of the Board, President
and a director of Lotus.
4. Defendant Richard S. Braddock is a director of Lotus.
5. Defendant Elaine L. Chao is a director of Lotus.
6. Defendant William H. Gray, III is a director of Lotus.
7. Defendant Michael E. Porter is a director of Lotus.
8. Defendant Henri A. Termeer is a director of Lotus.
9. The foregoing individual directors of Lotus (collectively
the "Director Defendants"), owe fiduciary duties to Lotus and its shareholders.
10. International Business Machines Corp. ("IBM") is a New
York corporation with executive offices at Old Orchard Road, Armonk, New York
10504. IBM, among other things, develops, manufactures and markets a broad line
of computer and office equipment, including work stations, personal computers,
software and various computer peripheral devices.
<PAGE>
CLASS ACTION ALLEGATIONS
------------------------
11. Plaintiff brings this action on his own behalf and as a
class action on behalf of all shareholders of defendant Lotus (except defendants
herein and any person, firm, trust, corporation or other entity related to or
affiliated with any of the defendants) or their successors in interest, who have
been or will be adversely affected by the conduct of defendants alleged herein.
12. This action is properly maintainable as a class action for
the following reasons:
(a) The class of shareholders for whose benefit this action
is brought is so numerous that joinder of all class members is impracticable.
As of February 25, 1995, there were approximately 48,196,026 shares of
defendant Lotus' common stock outstanding owned by thousands of shareholders
scattered throughout the United States.
(b) There are questions of law and fact which are common
to members of the Class and which predominate over any questions affecting
any individual members. The common questions include, inter alia, the following:
i. Whether one or more of the defendants has engaged in a
plan and scheme to entrench themselves at the expense of defendant Lotus'
public stockholders;
<PAGE>
ii. Whether the Lotus Board has properly negotiated with
bidders including IBM to ensure maximization of shareholder value;
iii. Whether the Defendant Directors have breached their
fiduciary duties owed by them to plaintiff and members of the Class, and/or
have aided and abetted in such breach, by virtue of their participation
and/or acquiescence and by their other conduct complained of herein;
iv. Whether the Defendant Directors have wrongfully impeded
maximization of shareholder value such as by wrongful use of Lotus'
shareholder rights plan;
v. Whether plaintiff and the other members of the Class will
be irreparably damaged by the conduct complained of herein; and
vi. Whether defendants have breached or aided and abetted the
breaches of the fiduciary and other common law duties owed by them to
plaintiff and the other members of the Class.
13. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of plaintiff are typical of the claims of the other members of the Class and
plaintiff has the same interest as the other members of the Class.
<PAGE>
Accordingly, plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class.
14. Defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making appropriate injunctive relief with
respect to the Class as a whole.
15. The prosecution of separate actions by individual members
of the Class could create a risk of inconsistent or varying adjudications with
respect to individual members of the Class which would establish incompatible
standards of conduct for defendants or adjudications with respect to individual
members of the Class which would as a practical matter be dispositive of the
interests of the other members not parties to the adjudications.
16. Plaintiff anticipates that there will not be any difficulty in
the management of this litigation.
17. For the reasons stated herein, a class action is superior
to other available methods for the fair and efficient adjudication of this
action.
SUBSTANTIVE ALLEGATIONS
-----------------------
18. On June 5, 1995, IBM announced that on June 6, 1995 it will
begin a $60 per share cash tender offer for all outstanding common shares and
<PAGE>
preferred share purchase rights of Lotus. IBM stated that it would finance
the offer with $10 billion in cash on hand and commence the tender offer
through White Acquisition Corp., a unit IBM created for the acquisition.
On June 2, 1995, the last trading date prior to the announcement, Lotus
stock closed at $32.50 per share. Thus, the IBM transaction represents nearly
an 85% premium over the preannouncement trading price.
19. IBM reportedly has been interested in acquiring Lotus for
some time. However, IBM stated that Lotus has been "unwilling" to pursue an
alliance with IBM. Lotus has a shareholder rights plan (the "Rights Plan") in
place. IBM has reportedly commenced legal action to compel the Lotus Board to
redeem the Rights Plan and to eliminate the applicability to the IBM tender
offer of certain of Lotus' anti-takeover provisions.
20. Defendants, acting in concert, have violated their fiduciary
duties owed to the public shareholders of Lotus and put certain of defendants'
own personal interests ahead of the interests of the Lotus public shareholders.
While the Director Defendants should seek out possible purchasers
of the stock or assets of Lotus in a manner designed to obtain the best
transaction reasonably available for Lotus' shareholders, or seek to enhance
<PAGE>
the value of Lotus for all its current shareholders, and the Director
Defendants are obligated to negotiate in good faith with all bona fide
bidders including IBM, in order to determine the action which is in the
best interest of Lotus' shareholders.
21. Moreover, the Director Defendants have an obligation not
to impede maximization of shareholder value such as by the improper use of
devices such as Lotus' Rights Plan.
22. These tactics pursued by the defendants are, and will
continue to be, wrongful, unfair and harmful to Lotus' public shareholders.
These maneuvers by the defendants will deny members of the Class their right to
share appropriately in the true value of Lotus' assets, future earnings and
businesses.
23. In contemplating, planning and/or effecting the foregoing
conduct, defendants are not acting in good faith toward plaintiff and the Class,
and defendants have breached, and are breaching, their fiduciary duties to
plaintiff and the Class.
24. Because the Defendant Directors (and those acting in concert
with them) dominate and control the business and corporate affairs of Lotus
and are in possession of private corporate information concerning Lotus'
<PAGE>
businesses and future prospects, there exists an imbalance and disparity
of knowledge and economic power between the defendants and the public
shareholders of Lotus which makes it inherently unfair to Lotus' public
shareholders.
25. As a result of the actions of the defendants, plaintiff
and the Class have been and will be damaged in that they will not have the
opportunity to maximize share value, and have been and will be prevented from
properly benefitting from a proper process to maximize shareholder value.
26. Unless enjoined by this Court, the Defendant Directors
will continue to breach their fiduciary duties owed to plaintiff and the Class,
all to the irreparable harm of the Class.
27. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) Declaring that this action may be maintained as a class
action;
(b) Declaring that the conduct of the Lotus Board is unfair,
unjust and inequitable to plaintiff and the other members of the Class;
(c) Enjoining any improper device which impedes maximization of
shareholder value;
<PAGE>
(d) Ordering the Lotus Board to negotiate in good faith with
all bona fide bidders for Lotus;
(e) Requiring defendants to compensate plaintiff and the
members of the Class for all losses and damages suffered and to be suffered
by them as a result of the acts and transactions complained of herein,
together with prejudgment and post-judgment interest;
(f) Awarding plaintiff the costs and disbursements of this
action, including reasonable attorneys', accountants', and experts' fees; and
(g) Granting such other and further relief as may be just
and proper.
Dated: June 5, 1995
CHIMICLES, JACOBSEN & TIKELLIS
/s/ Robert J. Kriner, Jr.
-----------------------------------
Pamela S. Tikellis
James C. Strum
Robert J. Kriner, Jr.
One Rodney Square
P.O. Box 1035
Wilmington, DE 19899
(302) 656-2500
OF COUNSEL:
GOODKIND, LABATON, RUDOFF & SUCHAROW
Jonathan M. Plasse, Esquire
100 Park Avenue, 12th Floor
New York, New York 10017
(212) 907-0700
HANZMAN, CRIDEN, KORGE, HERTZBERG & SCHAYKIN
200 South Biscayne Boulevard
Miami, Florida 33131
EXHIBIT (g)(3)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- --------------------------------------X
:
: CLASS ACTION
: COMPLAINT
JOSEPH E. KASSOWAY TRUST, :
:
JOSEPH E. KASSOWAY and ROBERT :
T. KASSOWAY, Trustees UAD :
4/11/91 :
:
Plaintiff, :
:
v. :
:
JIM P. MANZI, RICHARD S. :
BRADDOCK, ELAINE L. CHAO, :
WILLIAM H. GRAY, III, MICHAEL :
E. PORTER AND HENRI A. :
TERMEER and LOTUS DEVELOPMENT :
CORP. :
:
Defendants. :
- --------------------------------------X
Plaintiff, by its attorneys, alleges upon information
and belief, except for paragraph 2 hereof, which is alleged under
knowledge, as follows:
1. Plaintiff brings this action pursuant to Rule 23 of
the Rules of the Court of Chancery on its behalf and as a class
action on behalf of all persons, other than the defendants and
those in privity with them, who own publicly traded securities of
Lotus Development Corp. ("Lotus" or the "Company").
THE PARTIES
2. Plaintiff Joseph E. Kassoway Trust, Joseph E.
Kassoway and Robert T. Kassoway, Trustees UAD 4/11/91 owns shares
of Lotus common stock.
<PAGE>
3. Defendant Lotus is a corporation organized under
the laws of the State of Delaware. Lotus has its principal place
of business at 55 Cambridge Parkway, Cambridge, Massachusetts
02142-1295. The Company develops, manufactures and markets
applications software products and services that meet the
evolving technology and business application requirements for
individuals, work groups and entire organizations. As of February
25, 1995, Lotus had over 48.1 million shares of common stock
outstanding.
4. Defendants Jim P. Manzi, Richard S. Braddock,
Elaine L. Chao, William H. Gray, III, Michael E. Porter and
Henri A. Termeer are members of the Board of Directors of Lotus
(the "Board"). In addition, Jim P. Manzi is President, Chief
Executive Officer and Chairman of the Board for which he is
compensated at a rate of $909,300 per year. These individuals
shall be collectively referred to herein as the "Individual
Defendants."
5. The Individual Defendants, by reason of their
corporate directorships (and in the case of defendant Manzi, his
executive position), stand in a fiduciary position relative to
the Company's shareholders, which fiduciary relationship, at all
times relevant herein, required the Individual Defendants to
exercise their best judgment, and to act in a prudent manner, and
in the best interests of the Company's shareholders. They were
and are required to use their ability to control and manage the
Company in a fair, just and equitable manner; to act in
furtherance of the best interests of the Company's shareholders;
to refrain from abusing their positions of control; and not to
favor their own interests at the expense of the Company's
shareholders.
<PAGE>
6. Each Individual Defendant herein is sued
individually as an aider and abettor, as well as in his capacity
as an officer and/or director of the Company, and the liability
of each arises from the fact that he has engaged in all or part
of the unlawful acts, plans, schemes, or transactions complained
of herein.
CLASS ACTION ALLEGATIONS
------------------------
7. Plaintiff brings this action on its own behalf and,
pursuant to the Rule 23 of the Rules of the Delaware Chancery
Court, on behalf of all stockholders of the Company (except the
defendants herein, its officers and directors and/or any person,
firm, trust, corporation, or other entity related to or
affiliated with any of the defendants) and their successors in
interest, who are or will be threatened with injury arising from
defendants' actions as more fully described herein (the "Class").
8. This action is properly maintainable as a class
action.
9. The Class is so numerous that joinder of all
members is impracticable. There were over 48.1 million shares of
Lotus common stock issued and outstanding as of February 25, 1995
which shares are traded on the NASDAQ National Market Service.
While the exact number of Class members is unknown to plaintiff
at this time and can only be ascertained through appropriate
discovery, plaintiff believes that there are thousands of members
of the Class.
10. A class action is superior to other methods for
the fair and efficient adjudication of the claims herein asserted
and no unusual difficulties are likely to be
<PAGE>
encountered in the management of this class action. The
likelihood of individual Class members prosecuting separate
claims is remote.
11. There are questions of law and fact which are
common to the Class and which predominate over questions
affecting any individual Class member. The common questions
include, inter alia, the following:
(a) whether defendants have breached their fiduciary
duties by engaging in concerted and continual
action to entrench themselves in their lucrative
positions at the expense of Lotus' public
stockholders;
(b) whether defendants are unlawfully impeding
possible takeover attempts at the expense of
Lotus's public stockholders;
(c) whether defendants have failed and will fail to
negotiate in good faith with prospective
purchasers of the Company; and
(d) whether the plaintiff and other members of the
Class would be irreparably damaged were the
defendants not enjoined from the conduct described
herein below.
12. The prosecution of separate claims would create a
risk of either inconsistent or varying adjudications concerning
individual members of the Class, which would establish
incompatible standards of conduct for the party opposing the
Class, and adjudications concerning individual members of the
Class would, as a practical matter, be dispositive of the
interests of other members of the Class who are not parties to
the adjudications or substantially
<PAGE>
impair or impede the ability of other members of the Class who
are not parties to the adjudications, to protect their interests.
The defendants have acted on grounds generally applicable to all
members of the Class, making relief concerning the Class as whole
appropriate.
13. Plaintiff is committed to prosecuting this action
and has retained competent counsel experienced in litigation of
this nature. The claims of the plaintiff are typical of the
claims of other members of the Class and the plaintiff has the
same interests as the other members of the Class. Plaintiff is an
adequate representative of the Class. A class action poses no
management problems and this case is ideally suited for class
action certification.
SUBSTANTIVE ALLEGATIONS
14. On June 5, 1995, International Business Machines,
Inc. ("IBM") announced it was making a hostile, all-cash tender
offer for Lotus' outstanding shares of common stock at $60 per
share (the "Offer").
15. Lotus' stock price has suffered dramatic decreases
over a period of approximately 14 months. As of March 17, 1994,
Lotus common stock was trading as high as $85.50 per share. From
its $85.50 per share high in March 1994 through June 1, 1995, the
price of Lotus common stock more or less consistently followed a
downward trend - by the end of trading on June 1, 1995, Lotus
common stock closed at $29.25.
16. On June 2, 1995, the last day of trading before
IBM's announcement of the Offer, Lotus's shares closed at $32.50
per share, reflecting a $3.25 per share increase as
<PAGE>
a result of public anticipation of the scope of a restructuring
and reorganization plan, under the defendant Braddock's
leadership. The reorganization plan was apparently a response to
increasing pressure market pressures that, for example, caused
the Company to report an 18% sales decline in the first quarter
of 1995. Despite, the market's marginally positive reaction, on
June 2, 1995, to the anticipated restructuring efforts by the
Company, analysts reported that similar effort "by the company in
the past to cut costs have proved ineffective."
17. In contrast, however, the Offer constitutes a
premium of approximately 85% above Lotus's stock price even after
Lotus' restructuring announcement and proposes a transaction that
is valued at over $3.3 billion. Moreover, there is no uncertainty
associated with the Offer. Whereas the Company's past
restructuring efforts have met with failure, the Offer assures
Lotus stockholders that the value of their shares will be
substantially and materially enhanced. The defendants refusal to
entertain the Offer in good faith is not in accord with any
rational or legitimate business purpose and is not protected by
the business judgment rule.
18. On June 5, 1995, IBM disclosed IBM and Lotus had
been involved in discussions regarding a possible business
combination. That letter stated that, because Lotus had rebuffed
IBM's efforts to proceed with a merger that would maximize Lotus
stockholders' value, IBM initiated the Offer. Defendants, have in
place a poison pill and other defensive devices designed to
thwart any third party acquisition such as the Offer.
<PAGE>
19. The Individual Defendants have acted and are
likely to continue to act in a manner intended to entrench their
positions with Lotus, continuing to thwart any possible
acquisition of Lotus by IBM or by any other person or entity that
would not be on terms providing them maximum personal benefits,
regardless of the benefits to Lotus stockholders.
20. The Individual Defendants have at all times been
fiduciaries of Lotus shareholders. As set forth herein, they have
breached and are continuing to breach their fiduciary duties to
Lotus shareholders in order to entrench themselves in office and
to continue receiving their compensation, fees and emoluments by
failing and/or refusing to adequately consider and evaluate
legitimate offers to buy the outstanding common stock of the
Company at prices which act to maximize shareholder value and,
instead, preferring their own inadequate restructuring effort.
21. Plaintiff and the other members of the Class have
been and will be damaged in that they have been and will continue
to be denied the opportunity to realize a substantial premium for
their shares of Lotus common stock because of the Individual
Defendants' continuing breach of their fiduciary duties.
22. Plaintiff and the Class have no adequate remedy at
law.
WHEREFORE, plaintiff demands judgment, as follows:
A. Declaring this to be a proper class action;
B. Preliminarily and permanently enjoining the
Individual Defendants to carry out their fiduciary duties to
plaintiff and the other members of the Class by announcing their
intention to:
<PAGE>
1. cooperate fully with any person or
entity, having a bona fide interest in proposing
any transaction which would maximize shareholder
value, including, but not limited to, a buyout or
takeover of the Company;
2. undertake an appropriate evaluation of
Lotus's worth as a merger/acquisition candidate;
3. take all appropriate steps to enhance
Lotus's value and attractiveness as a
merger/acquisition candidate;
4. take all appropriate steps to effectively
expose Lotus to the marketplace in an effort to
create an active auction for Lotus;
5. take proper action to maximize the price
that Lotus shareholders will receive for their
shares;
6. act independently so that the interests
of Lotus's public stockholders will be protected;
and
7. adequately ensure that no conflicts of
interest exist between Individual Defendants' own
interest and their fiduciary obligation to
maximize stockholder value or, if such conflicts
exist, to ensure that all conflicts are resolved
in the best interests of Lotus's public
stockholders.
C. Ordering the Individual Defendants to carry out
their fiduciary duties to plaintiff and the Class and requiring
them to respond in good faith to any bona fide potential
acquirors of Lotus;
D. Awarding plaintiff the costs and disbursements of
the action, including a reasonable allowance for plaintiff's
attorneys' and experts' fees; and
<PAGE>
E. Granting such other and further relief as may be
just and proper.
Dated: June 5, 1995
MORRIS AND MORRIS
by
/s/ Patrick F. Morris
-------------------------
Irving Morris
Karen Morris
Abraham Rappaport
Patrick F. Morris
Suite 1600
1105 North Market Street
Post Office Box 2166
Wilmington, Delaware 19899-
2166
(302) 426-0400
Attorneys for Plaintiff
EXHIBIT (g)(4)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ----------------------------------------x
LEONARD SHAPIRO, :
:
Plaintiff, :
:
-against- :
:
JIM P. MANZI, RICHARD S. BRADDOCK, : C.A. No. 14333
ELAINE L. CHAO, WILLIAM H. GRAY III, :
MICHAEL E. PORTER and HENRI A. TERMEER, :
and LOTUS DEVELOPMENT CORPORATION, :
:
Defendants: :
- ----------------------------------------x
CLASS ACTION COMPLAINT
Plaintiff, Leonard Shapiro, by his attorneys,
allege for his Complaint, upon information and belief,
except for paragraph 2 hereof, which is alleged upon
personal knowledge, as follows:
SUMMARY OF ACTION
1. Plaintiff brings this action on behalf of
himself and all other shareholders of defendant Lotus
Development Corp. ("Lotus" or the "Company") against Lotus
and the directors of Lotus, for breaching their fiduciary
duties to Lotus' shareholders. These defendants are causing
the Company to summarily reject an offer to Lotus
shareholders (the "Offer") by International Business Machine
Company ("IBM") to purchase Lotus in a $60 per share all-
<PAGE>
cash tender offer for approximately $3.3 billion, despite the
fact that the Offer (the "Rights Plan") represents a potential
economic opportunity for Lotus' shareholders to realize the full
value of their investment in Lotus. Defendants' summary rejection
of the offer forecloses a potential opportunity for shareholders
to realize the full value of their Lotus shares that would
otherwise not be available to them. Plaintiff seeks, inter alia,
an order enjoining defendants from summarily rejecting or
interfering with the offer without giving it fair consideration,
becoming fully informed as to the basis of the offer and taking
all steps necessary to maximize shareholder value. Plaintiff
further seeks appropriate relief to redeem or invalidate the
Company's Rights Plan and an order compelling defendants to fully
and fairly inform Lotus' shareholders concerning the Offer.
THE PARTIES
2. Plaintiff owns shares of common stock of defendant
Lotus and has been the owner continuously of such shares since
prior to the wrongs complained of herein.
3. Defendant Lotus is a corporation organized and
existing under the laws of the State of Delaware with its
principal place of business located at 55 Cambridge Parkway,
<PAGE>
Cambridge, Mass 02142. Lotus is a leading developer and supplier
of computer software.
4. Defendant Jim P. Manzi ("Manzi") is the Chairman of
the Board of Directors, President and a director of Lotus. Manzi
holds approximately 1.2 million of Lotus shares.
5. Defendant Michael S. Braddock ("Braddock") is a
director of Lotus.
6. Defendant Elaine L. Chao ("Chao") is a director of
Lotus.
7. Defendant William H. Gray III ("Gray") is a
director of Lotus.
8. Defendant Michael E. Porter ("Porter") is a
director of Lotus.
9. Defendant Henri A. Termeer ("Termeer") is a
director of Lotus.
10. The above-named individual defendants
(collectively the "Individual Defendants") as officers and/or
directors of Lotus owe fiduciary duties of good faith, loyalty,
fair dealing, due care, and candor to plaintiff and the other
members of the Class (as defined below).
11. Each of the Individual Defendants receive annual
compensation from Lotus and has a personal and
<PAGE>
financial interest in thwarting any threat to the continued
incumbency and control of Lotus' current management, in
derogation of their fiduciary duties.
12. Defendants' conduct, as more fully described
herein, has been orchestrated to protect the positions and
corresponding perquisites and other benefits received by the
Individual Defendants as officers and/or directors of Lotus.
Defendants are breaching their fiduciary duties to plaintiff and
the members of the Class (as defined below) by summarily
rejecting and/or interfering with the Offer without adequate
investigation or any other procedures to determine whether the
Offer presents an opportunity to maximize the value of Lotus
shares, thus wrongfully depriving plaintiff and the members of
the Class of the full value of their shares.
CLASS ACTION ALLEGATIONS
13. Plaintiff brings this action pursuant to Rule 23
of the Rules of this Court, on behalf of himself and all other
stockholders of Lotus as of June 5, 1995 (the "Class"). Excluded
from the Class are defendants herein, members of their immediate
families, and any subsidiary, firm, trust, corporation, or other
entity related to or affiliated with any of the defendants and
their successors in interest, who are or will be threatened with
injury arising from defendants' actions.
<PAGE>
14. This action is properly maintainable as a class
action for the following reasons:
(a) The Class is so numerous that joinder of all
members is impracticable. While the exact number of class members
is unknown to plaintiff at this time and can only be ascertained
through appropriate discovery, there are more than approximately
48 million shares of Lotus common stock held by hundreds of
shareholders of record who are members of the Class. The holders
of these shares are believed to be geographically dispersed
throughout the United States. Lotus stock is listed and actively
traded on the NASD.
(b) There are questions of law and fact which are
common to members of the Class and which predominate over
questions affecting only individual members. The common questions
include, inter alia, the following:
(i) whether defendants have engaged in conduct
constituting unfair dealing to the detriment of the Class;
(ii) whether defendants' summary rejection or
interference of the Offer is grossly unfair to the Class;
(iii) whether defendants are engaging in a plan
or scheme to thwart and/or summarily reject offers that may
maximize the value of shareholders investment in Lotus, to the
detriment of the Class;
<PAGE>
(iv) whether defendants are engaging in a plan or
scheme to entrench themselves at the expense of the public
stockholders of Lotus and/or unfairly to obtain for themselves
the benefits and business of the Company;
(v) whether plaintiff and the other members of
the Class would be irreparably damaged if defendants' summary
rejection of the Offer is not enjoined;
(vi) whether defendants have breached fiduciary
and other common law duties owed by them to the Class; and
(vii) whether defendants have failed to take
appropriate measures to ensure the realization of the maximum
value of the Lotus stock held by the Class;
(c) The claims of plaintiff are typical of the claims
of the other members of the Class and plaintiff has no interest
that is adverse or antagonistic to the interests of the Class;
(d) Plaintiff is committed to prosecuting this action
and has retained counsel competent and experienced in litigation
of this nature. Plaintiff is an adequate representative of the
Class and will fairly and adequately protect the interests of the
Class;
(e) Plaintiff anticipates that there will be no
difficulty in the management of this litigation; and
<PAGE>
(f) A class action is superior to other available
methods for adjudication of this controversy.
SUBSTANTIVE ALLEGATIONS
The Offer by IBM
15. On June 5, 1995, it was publicly disclosed that
IBM will commence a tender to purchase Lotus in an all-cash
tender valued at $60.00 a share, or approximately $3.3 billion.
The Offer represents about a 100% premium over the $32.50 closing
price of Lotus' common stock on Friday, June 2, 1995, and more
than 100% over the 52-week low of $29.25 as of June 1, 1995.
16. In response to the Offer, Lotus common stock, on
June 5, 1995, rose $27.25 to $59.75.
17. In spite of this offer to Lotus' shareholders by
IBM, it was reported that Lotus executives were not publicly
responding to the Offer. Lotus has been unresponsive to IBM's
friendly overturns of a business combination and has refused to
discuss redemption to the Rights Plan, which plan would block the
realization of the Offer.
<PAGE>
18. The Offer presents plaintiff and the Class an
outstanding opportunity to maximize the value of their Lotus
shares for the following reasons:
(a) Lotus has struggled with declining earnings, and
the Company is not poised for future growth. Indeed, on June 1,
1995, its stock closed at a new 52-week low, illustrating its
poor financial performance.
(b) The market showed great enthusiasm for the
disclosure of IBM's offer. The market price of common shares of
Lotus almost doubled in early trading.
(c) The Offer presents a valuable opportunity to
maximize shareholder value through negotiation of the Offer and
putting Lotus up for auction.
CAUSE OF ACTION AGAINST ALL DEFENDANTS
19. The Individual Defendants have breached their
fiduciary duties to plaintiff and the Class by rejecting the
Offer out-of-hand without fully evaluating or becoming fully
informed with regard to the Offer and without taking any steps to
maximize shareholder value for plaintiff and the members of the
Class.
20. By virtue of the acts and conduct herein, the
Individual Defendants are not acting in good faith and have
breached their fiduciary and other common law duties which they
owe to plaintiff and the other members of the Class,
<PAGE>
have engaged in unfair dealing for their own benefit and the
detriment of the Class, and have pursued a course of conduct
designed to entrench themselves in their positions of
control within the Company.
21. The Individual Defendants have violated their
fiduciary duties owed to plaintiff and the other members of the
Class in that they have not and are not exercising independent
business judgment and have acted and are acting to the detriment
of the Class in order to benefit themselves and solidify their
positions of control and enjoyment of the perquisites of office.
22. As a result of the foregoing, defendants' summary
rejection of the Offer is a breach of the defendants' fiduciary
duties and should be enjoined.
23. Plaintiff lacks an adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this action to be a proper class action
and certifying plaintiff as the representative of the Class;
(b) declaring defendants, rejection of the Offer to be
a breach of defendants' fiduciary duties of loyalty, due care,
good faith, fair dealing, and candor to plaintiff and the Class;
<PAGE>
(c) ordering the Individual Defendants to carry out
their fiduciary duties to plaintiff and the other members of the
Class by:
(i) rescinding, redeeming or invalidating the adoption
or implementation of the Company's Rights Plan;
(ii) requiring defendants to consider the Offer in good
faith, to take all possible measures maximizing the value of
Lotus stock by, for example, engaging in a course of due
diligence and negotiating with IBM, or otherwise maximizing the
value of the Company to plaintiff and the Class; and
(iii) requiring defendants to make full and fair
disclosure of the Offer, the negotiations between Lotus and IBM,
and all other matters concerning a possible acquisition or merger
of Lotus which a reasonable investor would consider important;
(d) ordering defendants, jointly and severally, to pay
to plaintiff and other members of the Class all damages suffered
and to be suffered by them as a result of the acts and
transactions alleged herein;
(e) awarding plaintiff the costs and disbursements of
this action, including a reasonable allowance for plaintiff's
attorneys' and experts' fees; and
<PAGE>
(f) granting such other and further relief as the
Court may deem just and equitable.
Dated: June 5, 1995
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By:
--------------------------------------
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
Of Counsel:
WOLF POPPER ROSS WOLF & JONES, L.L.P.
845 Third Avenue
New York, New York 10022
(212) 759-4600
EXHIBIT (g)(5)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------------:
:
BRICKELL PARTNERS, a Florida :
Partnership, :
:
Plaintiff, :
:
v. : C.A. No. 14334
:
JIM P. MANZI, WILLIAM H. GRAY, III, :
MICHAEL E. PORTER, RICHARD S. :
BRADDOCK, HENRI A. TERMEER, :
ELAINE L. CHAO and LOTUS :
DEVELOPMENT CORP., :
:
Defendants. :
- ------------------------------------:
CLASS ACTION COMPLAINT
----------------------
Plaintiff, by its attorneys, alleges upon personal
knowledge as to its own acts and upon information and belief as
to all other matters, as follows:
NATURE OF THE ACTION
--------------------
1. This is a stockholders, class action lawsuit brought
on behalf of the public stockholders of the Lotus Development
Corp. ("Lotus" or the "Company") who have been, and continue to
be, deprived of the opportunity to realize fully the benefits of
their investment in the Company. The individual defendants have
wrongfully refused to properly consider bona fide acquisition or
other business combination overtures for the Company from the
International Business Machines Corp. ("IBM"). Their actions
constitute unfair dealing
<PAGE>
and a breach of fiduciary duty to maximize shareholder value. The
individual defendants are using their fiduciary positions of
control over Lotus to thwart others in their legitimate attempts
to acquire the Company, and the individual defendants are trying
to entrench themselves in their positions of control with Lotus.
Parties
-------
2. Plaintiff is and, at all relevant times, has been
the owner of shares of Lotus common stock.
3. Lotus is a corporation duly organized and existing
under the laws of the State of Delaware. Lotus develops, makes,
sells, and supports applications software and services including
spreadsheets, word processors, graphics and personal information
database software. Lotus maintains its principal executive
offices at 55 Cambridge Parkway, Cambridge, Massachusetts. Lotus
has approximately 48,196,026 shares of common stock outstanding
and thousands of stockholders of record. Lotus stock trades over
the NASDAQ National Market System.
4. Defendant Jim P. Manzi ("Manzi") is the Chief
Executive Officer, President, and Chairman of the Board of
Directors of Lotus.
<PAGE>
5. Defendants William H. Gray, III, Michael E. Porter,
Richard S. Braddock, Henri A. Termeer, and Elaine L. Chao are
directors of Lotus.
6. The defendants named in paragraphs 4 and 5 are
hereinafter referred to as the "Individual Defendants."
7. The Individual Defendants, by reason of their
corporate directorship and/or executive positions, stand in a
fiduciary position relative to the Company's stockholders, which
fiduciary relationship, at all times relevant herein, required
the defendants to exercise their best judgment, and to act in a
prudent manner and in the best interests of the Company's
stockholders.
CLASS ACTION ALLEGATIONS
------------------------
8. Plaintiff brings this case in its own behalf and as
a class action, pursuant to Rule 23 of the Rules of the Court of
Chancery, on behalf of all stockholders of the Company, except
defendants herein and any person, firm, trust, corporation, or
other entity related to or affiliated with any of the defendants,
who will be threatened with injury arising from defendants'
actions as is described more fully below (the "Class").
9. This action is properly maintainable as a class
action.
<PAGE>
10. The class is so numerous that joinder of all
members is impracticable. The Company has thousands of
stockholders who are scattered throughout the United States.
11. There are questions of law and fact common to the
Class including, inter alia, whether:
a. defendants have breached their fiduciary duties
owed by them to plaintiff and other members of the Class by
failing and refusing to attempt in good faith to maximize
shareholder value in the sale or other business combination
involving Lotus;
b. Lotus's Poison Pill stands as an undue
impediment to any transaction involving Lotus, and whether it
will have the effect of, among other things, entrenching
defendants in their office, thereby depriving Lotus' public
stockholders of the maximum value of their holdings;
c. defendants have breached or aided and abetted
the breach of the fiduciary duties owed by them to plaintiff and
other members of the Class;
d. defendants, through implementation of a Poison
Pill, engaged in a plan and scheme to thwart and reject offers
and proposals from third parties; including IBM; and
e. plaintiff and the other members of the Class
are being and will continue to be injured by the wrongful conduct
alleged herein and,
<PAGE>
if so, what is the proper remedy and/or measure of damages.
12. Plaintiff is committed to prosecuting the action
and has retained competent counsel experienced in litigation of
this nature. Plaintiff's claims is typical of the claims of the
other members of the Class and plaintiff has the same interests
as the other members of the Class. Plaintiff is an adequate
representative of the Class.
13. The prosecution of separate actions by individual
members of the Class would create the risk of inconsistent or
varying adjudications with respect to individual members of the
Class which would establish incompatible standards of conduct for
defendants, or adjudications with respect to individual members
of the Class which would as a practical matter be dispositive of
the interests of the other members not parties to the
adjudications or substantially impair or impede their ability to
protect their interests.
14. The defendants have acted, or refused to act, on
grounds generally applicable to, and causing injury to, the Class
and, therefore, preliminary and final injunctive relief on behalf
of the Class as a whole is appropriate.
<PAGE>
SUBSTANTIVE ALLEGATIONS
-----------------------
15. On June 5, 1995, the Dow Jones News Wire reported
that IBM will begin a cash tender offer beginning the following
day, June 6, 1995, for all the outstanding common shares and
preferred share purchase rights of Lotus at a price of $60 per
share.
16. IBM said that it communicated its offer to Lotus in
a letter to defendant Manzi. In the letter, IBM Chairman and
Chief Executive Officer Louis V. Gerstner Jr. said that IBM had
been interested for a period of time in pursuing a business
combination with Lotus, but said that Lotus has rebuffed those
overtures. Gerstner also said that IBM plans to keep Lotus intact
and managed out of its current headquarters in Cambridge,
Massachusetts, and to make Lotus primarily responsible for key,
complimentary IBM software products.
17. Gerstner further said that IBM and its advisors are
prepared to meet with Manzi and all other members of the Lotus
Board, management and advisors to answer any questions about the
offer.
18. Defendants had previously established a preferred
stock purchase rights plan (the "Poison Pill" or the "Plan").
Under the Plan, shareholders have the right to purchase
one-hundredth of a Junior Participating
<PAGE>
Preferred Stock, Series A at an exercise price of $75.
19. Defendants structured the Poison Pill with a 20%
trigger -- acquisition of 20% of the Company's stock -- to thwart
even the most friendly overture from a third party seeking
control of Lotus.
20. The adoption and implementation of the Poison Pill
has the force and effect of entrenching the Individual Defendants
in their corporate offices against any real or perceived threat
to their control, and dramatically impairs the rights of Class
members to exercise freedom of choice in a proxy contest or to
avail themselves of a bona fide offer to purchase their shares by
an acquiror, such as IBM, unfavored by incumbent management. This
fundamental shift of control of the Company's destiny from the
hands of its shareholders to the hands of the Individual
Defendants results in a heightened fiduciary duty of the
Individual Defendants to consider, in good faith, a third party
bid, such as IBM, and further requires the Individual Defendants
to pursue a third party's interest in acquiring the Company and
to negotiate in good faith with a bidder on behalf of the
Company's stockholders.
21. The purpose, intent and effect of the Poison Pill,
in the face of a pending offer for the Company, is to thwart,
deter, impede, and delay the
<PAGE>
acquisition of Lotus by IBM or any other suitor.
22. IBM has commenced legal action to compel the
Individual Defendants to redeem Lotus' Poison Pill and to
eliminate the applicability of the tender offer to certain of
Lotus' anti-takeover provisions.
23. Defendants' recalcitrance to consider and promptly
act upon IBM's offer has no valid business purpose, and simply
evidences their disregard for the substantial premium being
offered to Lotus stockholders. By failing to meet and negotiate
or offer to meet and negotiate with IBM, defendants are depriving
plaintiff and the Class of the right to share in the assets and
businesses of Lotus and receive the maximum value for their
shares.
24. Lotus represents a highly attractive acquisition
candidate. Defendants' conduct would ensure their continued
positions within the Company but deprive the Company's public
shareholders of the substantial premium that IBM is prepared to
pay, or of the enhanced premium that further negotiation or
exposure of Lotus to the market could provide.
25. Defendants owe fundamental fiduciary obligations to
Lotus' stockholders to take all necessary and appropriate steps
to maximize the value of their shares. In addition, the
Individual Defendants have the
<PAGE>
responsibility to act independently so that the interests of the
Company's public stockholders will be protected, to seriously
consider all bona fide offers for the Company, and to conduct
fair and active bidding procedures or other mechanisms for
checking the market to assure that the highest possible price is
achieved. Further, the directors of Lotus must adequately ensure
that no conflict of interest exists between the Individual
Defendants' own interests and their fiduciary obligations to
maximize stockholder value or, if such conflicts exist, to insure
that all such conflicts will be resolved in the best interests of
the Company's stockholders.
26. Because defendants dominate and control the
business and corporate affairs of Lotus and because they are in
possession of private corporate information concerning Lotus's
assets, businesses and future prospects, there exists an
imbalance and disparity of knowledge of economic power between
defendants and the public stockholders of Lotus. This discrepancy
makes it grossly and inherently unfair for defendants to entrench
themselves at the expense of its public stockholders.
27. The Individual Defendants have breached their
fiduciary and other common law duties owed to plaintiff and other
members of
<PAGE>
the Class in that they have not and are not exercising
independent business judgment and have acted and are acting to
the detriment of the Class.
28. In connection with the conduct described herein,
the Individual Defendants breached their fiduciary duties by,
among other things:
a. failing to properly consider the IBM proposal
proposal without fully informing themselves
about or intentionally ignoring the future
prospects of a combined Lotus/IBM company, or
the intrinsic worth of IBM;
b. failing and refusing to meet with
representatives of IBM; and
c. implementing Lotus' Poison Pill, which was
designed to make it prohibitively expensive
for an unapproved third party from acquiring
the assets or control of the Company.
29. Defendants have refused to take those steps
necessary to ensure that Lotus' stockholders will receive maximum
value for their shares of Lotus stock. Defendants have thus
refused to seriously consider IBM's acquisition overtures, and
have failed to announce any effort to
<PAGE>
maximize shareholder value, including conducting active auction
or open bidding procedures best calculated to maximize
shareholder value in the sale of the Company.
30. The Individual Defendants are acting to entrench
themselves in their offices and positions and maintain their
substantial salaries and perquisites, all at the expense and to
the detriment of the public stockholders of Lotus.
31. By the acts, transactions and courses of conduct
alleged herein, the Individual Defendants, individually and as
part of a common plan and scheme in breach of their fiduciary
duties and obligations, are attempting unfairly to deprive
plaintiff and other members of the Class of the substantial
premium they could realize in an acquisition transaction and to
ensure continuance of their positions as directors and officers,
all to the detriment of Lotus' public stockholders. The
Individual Defendants have been engaged in a wrongful effort to
entrench themselves in their offices and positions of control and
prevent the acquisition of Lotus except on terms that would
further their own personal interests.
32. As a result of the actions of the Individual
Defendants, plaintiff and the other members of the Class have
been and will be damaged in that they have not and will not
receive their fair proportion of the value of
<PAGE>
Lotus' assets and businesses and/or have been and will be
prevented from obtaining a fair and adequate price for their
shares of Lotus' common stock.
33. Plaintiff seeks preliminary and permanent
injunctive relief and declaratory relief preventing defendants
from inequitably and unlawfully depriving plaintiff and the Class
of their rights to realize a full and fair value for their stock
at a substantial premium over the market price, by unlawfully
entrenching themselves in their positions of control, and to
compel defendants to carry out their fiduciary duties to maximize
shareholder value.
34. Only through the exercise of this Court's equitable
powers can plaintiff be fully protected from the immediate and
irreparable injury that defendants' actions threaten to inflict.
Defendants are precluding the stockholders' enjoyment of the full
economic value of their investment by failing to proceed
expeditiously and in good faith to evaluate and pursue a premium
acquisition overture that would provide consideration for all
shares at an attractive price.
35. Unless enjoined by the Court, defendants will
continue to breach their fiduciary duties owed to plaintiff and
the members of the Class,
<PAGE>
and/or aid and abet and participate in such breaches of duty, and
will prevent the sale of Lotus at a substantial premium, all to
the irreparable harm of plaintiff and other members of the Class.
36. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) Declaring this to be a proper class action and
certifying plaintiff as a class representative;
(b) Ordering the individual Defendants to carry out
their fiduciary duties to plaintiff and the other members of the
Class by announcing their intention to:
(i) cooperate fully with any entity or person,
including IBM, having a bona fide interest in proposing any
transactions that would maximize shareholder value, including but
not limited to, a merger or acquisition of Lotus;
(ii) immediately undertake an appropriate
evaluation of Lotus' worth as a merger/acquisition candidate;
(iii) take all appropriate steps to enhance Lotus'
value and attractiveness as a merger/acquisition candidate;
<PAGE>
(iv) take all appropriate steps to effectively
expose Lotus to the marketplace in an effort to create an active
auction of the Company;
(v) act independently so that the interests of the
Company's public stockholders will be protected; and
(vi) adequately ensure that no conflicts of
interest exist between the Individual Defendants' own interest
and their fiduciary obligation to maximize shareholder value or,
in the event such conflicts exist, to ensure that all conflicts
of interest are resolved in the best interests of the public
stockholders of Lotus;
(c) Ordering the Individual Defendants, jointly and
severally to account to plaintiff and the Class for all damages
suffered and to be suffered by them as a result of the acts and
transactions alleged herein;
(d) Preliminarily and permanently enjoining the
implementation of the Company's Poison Pill;
(e) Awarding plaintiff the costs and disbursements of
this action, including a reasonable allowance for plaintiff's
attorneys' and experts' fees; and
<PAGE>
(f) Granting such other and further relief as may be
just and proper.
Dated: June 5, 1995
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: /s/
-------------------------------
First Federal Plaza,
Suite 214
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
WECHSLER SKIRNICK HARWOOD
HALEBIAN & FEFFER LLP
805 Third Avenue
New York, NY 10022
(212) 935-7400
EXHIBIT (g)(6)
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - - - - - - - - - - - - - - - - - - - - x
:
BENJAMIN BROWN, : Civil Action
: No. 14335
Plaintiff, :
:
-against- : CLASS ACTION
: COMPLAINT
:
LOTUS DEVELOPMENT CORP., JAMES P. MANZI :
RICHARD S. BRADDOCK, ELAINE C. CHAO, :
WILLIAM H. GRAY, MICHAEL E. PORTER AND :
HENRY A. TERMEER, :
:
Defendants. :
:
- - - - - - - - - - - - - - - - - - - - - x
Plaintiff, by his attorneys, alleges upon information
and belief (said information and belief being based, in part,
upon the investigation conducted by and through his undersigned
counsel), except with respect to his ownership of Lotus
Development Corp. ("Lotus" or the "Company") common stock, which
is alleged upon his personal knowledge as follows:
THE PARTIES
1. Plaintiff is the owner of shares of defendant Lotus.
2. Defendant Lotus is a corporation organized and
existing under the laws of the State of Delaware. Lotus maintains
its principal offices at 55 Cambridge Parkway, Cambridge,
Massachusetts. Lotus develops, manufactures and markets
applications software products and services.
<PAGE>
3. Defendant James P. Manzi is the Chairman of the
Board, President and Chief Executive Officer of Lotus.
4. Defendants Richard S. Braddock, Elaine C. Chao,
William H. Gray, Michael E. Porter and Henry A. Termeer are
directors of Lotus.
5. The foregoing individual defendants (collectively
referred to herein as the "Director Defendants") are in a
fiduciary relationship with plaintiff and the public stockholders
of Lotus, and owe plaintiff and the Lotus public stockholders the
highest obligations of good faith, fair dealing, due care,
loyalty and full and candid disclosure.
CLASS ACTION ALLEGATIONS
6. Plaintiff brings this action on his own behalf and
as a class action on behalf of all shareholders of defendant
Lotus (except defendants herein and any person, firm, trust,
corporation or other entity related to or affiliated with any of
the defendants) or their successors in interest, who have been or
will be adversely affected by the conduct of defendants alleged
herein.
7. This action is properly maintainable as a class
action for the following reasons:
<PAGE>
(a) the class of shareholders for whose benefit this
action is brought is so numerous that joinder of all Class
members is impracticable. As of March 30, 1995, there were over
50 million shares of Lotus common stock outstanding, owned by
over thousands of shareholders of record scattered throughout the
United States.
(b) there are questions of law and fact which are
common to members of the class and which predominate over any
questions affecting any individual members. The common questions
include, inter alia, the following:
(i) whether the Director Defendants have breached
their fiduciary duties owed by them to plaintiff and members of
the class and/or have aided and abetted in such breach, by virtue
of their participation and/or acquiescence and by their other
conduct complained of herein;
(ii) whether the Director Defendants have
wrongfully failed and refused to seek a purchaser of Lotus and/or
any and all of its various assets or divisions at the best price
obtainable;
(iii) whether plaintiff and the other members of
the Class will be irreparably damaged by defendants' failure to
explore all reasonable alternatives to maximize shareholder
value;
<PAGE>
(iv) whether defendants have breached or aided and
abetted the breaches of the fiduciary and other common law duties
owed by them to plaintiff and the other members of the Class.
8. Plaintiff is committed to prosecuting this action
and has retained competent counsel experienced in litigation of
this nature. The claims of plaintiff are typical of the claims of
the other members of the Class and plaintiff has the same
interest as the other members of the Class. Accordingly,
plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class.
9. Plaintiff anticipates that there will not be any
difficulty in the management of this litigation.
10. For the reasons stated herein, a class action is
superior to other available methods for the fair and efficient
adjudication of this action.
SUBSTANTIVE ALLEGATIONS
11. Lotus is one of the world's leading software
companies. Its business is centered around two main product
lines, the applications business which includes word processing
programs and spreadsheets and the communications business which
includes workgroup software, the most popular program of which is
Notes.
<PAGE>
12. Since at least June of 1994, Lotus has been
experiencing weakness in its applications business. Lately,
specifically in Lotus' 1995 first fiscal quarter, Lotus' sales of
communications products also disappointed analysts. Overall in
its first quarter of 1995, Lotus experienced an 18% sales decline
which resulted in a net loss greater than what had been expected
by the analyst community.
13. As a response to Lotus' declining performance,
defendants have reorganized Lotus' business along product lines
and announced a cost cutting plan. It is the general industry
consensus that Lotus is losing ground to Microsoft's products.
14. Recently, Lotus has received expressions of
interest in a business combination from IBM but Lotus has been
unwilling to consider such a transaction.
15. On Monday, June 5, 1995, IBM announced that it
would commence an unsolicited tender offer for all outstanding
shares of Lotus for $60 per share in cash. The offer is not
subject to IBM's ability to obtain financing. Lotus has
apparently refused to explore any alternatives with IBM despite
the fact that Lotus is protected from any hostile takeover by
various anti-takeover devices including a shareholder rights
plan.
<PAGE>
16. Under the circumstances, the Director Defendants
are obligated to explore all alternatives to maximize shareholder
value. The Director Defendants will be in breach of their
fiduciary duties owed to Lotus' public shareholders if they fail
to fully explore bona fide offers by potential acquirors for the
purchase of the Company.
17. The IBM proposal represents an opportunity to
effect a change in control of Lotus, its business and affairs. In
a change of control transaction, the Director Defendants
necessarily and inherently suffer from a conflict of interest
between their own personal desires to retain their offices in
Lotus, with the emoluments and prestige which accompany those
offices, and their fiduciary obligation to maximize shareholder
value in a change of control transaction. Because of such
conflict of interest, it is unlikely that defendants will be able
to represent the interests of Lotus' public stockholders with the
impartiality that their fiduciary duties require, nor will they
be able to ensure that their conflicts of interest will be
resolved in the best interests of Lotus' public stockholders.
18. Plaintiff and the Class will suffer irreparable
damage unless defendants are enjoined from breaching their
fiduciary duties to maximize shareholder value.
19. Plaintiff has no adequate remedy at law.
<PAGE>
WHEREFORE, plaintiff demands judgement as follows:
A. Declaring this to be a proper class action;
B. Ordering defendants to carry out their fiduciary
duties to plaintiff and the other members of the Class by
announcing their intention to:
(i) undertake an appropriate evaluation of
alternatives designed to maximize value for Lotus' public
stockholders;
(ii) adequately ensure that no conflicts of
interests exist between defendants' own interests and their
fiduciary obligation to the public stockholders or, if such
conflicts exist, to ensure that all of the conflicts would be
resolved in the best interests of Lotus' public stockholders; and
(iii) act independently, by, among other things,
appointing a disinterested committee so that the interests of
Lotus' public stockholders would be protected, or alternatively,
appointing a shareholder committee to review all bona fide
offers.
C. Directing that defendants pay to plaintiff and the
Class all damages caused to them and account for all profits and
any special benefits obtained as a result of their unlawful
conduct;
<PAGE>
D. Awarding to plaintiff the costs and disbursements of
this action, including a reasonable allowance for the fees and
expenses of plaintiff's attorneys and expert; and
G. Granting such other and further relief as may be
just and proper in the premises.
Dated: June 5, 1995
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: /s/ Joseph Rosenthal
-------------------------
Joseph Rosenthal
First Federal Plaza
Suite 214
Wilmington, Delaware 19899
Telephone: (302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
ABBEY & ELLIS
212 East 39th Street
New York, New York 10016
Telephone: (212) 889-3700
EXHIBIT (g)(7)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- --------------------------------------:
BRILLIANT TRADING LTD. :
: C.A. No. 14337
Plaintiff, :
:
v. :
:
LOTUS DEVELOPMENT CORP., JIM P. MANZI,:
RICHARD S. BRADDOCK, ELAINE L. CHAO, :
WILLIAM H. GRAY, III, MICHAEL E. :
PORTER, and HENRI A. TERMEER, :
:
Defendants. :
- --------------------------------------:
COMPLAINT
Plaintiff, by its attorneys, alleges upon information
and belief, except with respect to its ownership of Lotus
Development Corp. ("Lotus" or the "Company") common stock as
follows:
SUMMARY OF ACTION
1. Plaintiff brings this action as a class action on
behalf of itself and all other shareholders of Lotus Development
Corp. ("Lotus" or the "Company") who are similarly situated to
enjoin any and all efforts to impede maximization of Lotus
shareholder value and to require the director-defendants to
properly and adequately consider all bona fide offers or
proposals to acquire the Company.
<PAGE>
Plaintiff also seeks relief arising from the director-
defendants' breaches of fiduciary duty in connection with the
offer to acquire Lotus by International Business Machines Corp.
("IBM"). IBM has offered to acquire Lotus for $3.3 billion in an
all-cash, all-shares tender offer. The director-defendants are
not properly acting in the best interests of Lotus and its
shareholders. Their actions constitute self-dealing, unfair
dealing and a breach of duty to inform themselves and to maximize
shareholder value. The director-defendants are utilizing their
fiduciary positions of control over Lotus to impede maximization
of shareholder value, and the director-defendants are attempting
to entrench themselves in their positions with the Company.
PARTIES
2. Plaintiff Brilliant Trading LTD is the owner of
shares of defendant Lotus.
3. Defendant Lotus is a Delaware corporation with
executive offices at 55 Cambridge Parkway, Cambridge,
Massachusetts 02142-1295. Lotus develops, manufactures and
markets application software products and services.
4. Defendant Jim P. Manzi is Chairman of the Board,
President and a director of Lotus.
<PAGE>
5. Defendants Richard S. Braddock, Elaine L. Chao,
William H. Gray, III, Michael E. Porter, and Henri A. Termeer are
directors of Lotus.
6. The foregoing individuals as directors and officers
of Lotus (collectively the "director-defendants"), owe fiduciary
duties to Lotus and its shareholders, including the duties of
care, loyalty and candor. By reason of their relationships and
offices, the director-defendants are in a fiduciary relationship
with plaintiff and other public shareholders of Lotus and owe to
them the highest obligation of good faith and fair dealing.
7. IBM is a New York corporation with executive offices
at Old Orchard Road, Armonk, New York 10504. IBM, among other
things, develops, manufactures and markets a broad line of
computer and office equipment, including work stations, personal
computers, software and various computer peripheral devices.
CLASS ACTION ALLEGATIONS
8. Plaintiff brings this action on its own behalf and
as a class action on behalf of all shareholders of defendant
Lotus (except defendants herein and any person, firm, trust,
corporation or other entity related to or affiliated with any of
the defendants) or their
<PAGE>
successors in interest, who have been or will be adversely
affected by the conduct of defendants alleged herein.
9. This action is properly maintainable as a class
action for the following reasons:
(a) The class of shareholders for whose benefit
this action is brought is so numerous that joinder of all class
members is impracticable. As of March 10, 1995, there were over
48 million shares of defendant Lotus' common stock outstanding
owned by hundreds of shareholders scattered throughout the United
States. Furthermore, as the damage suffered by individual class
members may be small, the expense and burden of individual
litigation makes it impractical for the Class members,
individually, to redress wrongs done to them.
(b) There are questions of law and fact which are
common to members of the Class and which predominate over any
questions affecting any individual members. The common questions
include, inter alia, the following:
i. Whether one or more of the director-defendants
has engaged in a plan and scheme to entrench themselves at the
expense of defendant Lotus' public stockholders;
<PAGE>
ii. Whether the Lotus Board of Directors has
properly negotiated with all bidders to acquire Lotus, including
IBM, to ensure maximization of shareholder value;
iii. Whether the director-defendants have engaged
in plans and schemes unlawfully to thwart and reject offers and
proposals from third parties;
iv. Whether the director-defendants have breached
their fiduciary duties owed by them to plaintiff and members of
the Class, and/or have aided and abetted in such breach, by
virtue of their participation and/or acquiescence and by their
other conduct complained of herein;
v. Whether the director-defendants have wrongfully
impeded maximization of shareholder value by among other matters,
the wrongful use of Lotus' shareholder rights plan;
vi. Whether plaintiff and the other members of the
Class will be irreparably damaged by the conduct complained of
herein; and
vii. Whether the director-defendants have breached
or aided and abetted the breaches of the fiduciary and other
common law duties owed by them to plaintiff and the other members
of the Class.
<PAGE>
10. Plaintiff is committed to prosecuting this action
and has retained competent counsel experienced in litigation of
this nature. The claims of plaintiff are typical of the claims of
the other members of the Class and plaintiff has the same
interest as the other members of the Class. Accordingly,
plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class.
11. Defendants have acted or refused to act on grounds
generally applicable to the Class, thereby making appropriate
injunctive relief with respect to the Class as a whole.
12. The prosecution of separate actions by individual
members of the Class could create a risk of inconsistent or
varying adjudications with respect to individual members of the
Class which would establish incompatible standards of conduct for
defendants or adjudications with respect to individual members of
the Class which would as a practical matter be dispositive of the
interests of the other members not parties to the adjudications.
13. Plaintiff anticipates that there will not be any
difficulty in the management of this litigation.
<PAGE>
14. For the reasons stated herein, a class action is
superior to other available methods for the fair and efficient
adjudication of this action.
SUBSTANTIVE ALLEGATIONS
15. On June 5, 1995, IBM announced that on June 6, 1995
it will begin a $60 per share cash tender offer for all
outstanding common shares and preferred share purchase rights of
Lotus (the "IBM Offer"). IBM stated that it would finance the
offer from the $10 billion in cash it has on hand and initiate
the tender offer through its acquisition subsidiary White
Acquisition Corp. On June 2, 1995, the last trading date prior to
the announcement, Lotus stock closed at $32.50 per share. Thus,
the IBM transaction represents nearly an 85% premium over the
pre-announcement trading price of Lotus common stock. Lotus
recently announced its first ever operating loss, for the first
quarter 1995.
16. According to a letter from IBM's Chairman Louis V.
Gerstner, Jr. to defendant Manzi, IBM has been interested for
some time in pursuing a business combination with Lotus, but
Lotus has been unwilling to proceed with such a transaction.
<PAGE>
17. Lotus has a shareholder rights plan (the "Rights
Plan"). The IBM Offer will be conditioned on the inapplicability
of the Rights Plan to the offer. Accordingly, IBM reportedly has
commenced legal action to compel the Lotus Board to redeem the
Rights Plan and to eliminate the applicability to the IBM Offer
of certain of Lotus' anti-takeover provisions.
18. IBM reportedly will also solicit written consents
from Lotus shareholders to expedite the tender offer.
19. The director-defendants, acting in concert, have
violated their fiduciary duties owed to the public shareholders
of Lotus and put certain of their own personal interests ahead of
the interests of the Lotus public shareholders. The
director-defendants should seek to enhance the value of Lotus for
all its current shareholders, and are obligated to negotiate in
good faith with all bona fide bidders including IBM, in order to
determine the action which is in the best interest of Lotus'
shareholders.
20. Moreover, the director-defendants have an
obligation not to impede maximization of shareholder value
<PAGE>
including by the improper use of devices such as Lotus'
Rights Plan.
21. If the director-defendants' maintain their position
and the Rights Plan, the Company's shareholders who wish to avail
themselves of a bona fide offer to purchase their shares would be
deprived of the ability to do so.
22. These tactics pursued by the director-defendants
are, and will continue to be, wrongful, unfair and harmful to
Lotus' public shareholders.
23. In contemplating, planning and/or effecting the
foregoing conduct, defendants are not acting in good faith toward
plaintiff and the Class, and the director-defendants have
breached, and are breaching, their fiduciary duties to plaintiff
and the Class.
24. Because the director-defendants (and those acting
in concert with them) dominate and control the business and
corporate affairs of Lotus and are in possession of private
corporate information concerning Lotus' businesses and future
prospects, there exists an imbalance and disparity of knowledge
and economic power between the defendants and the public
shareholders of Lotus
<PAGE>
which makes it inherently unfair to Lotus' public shareholders.
25. As a result of the actions of the director-
defendants plaintiff and the Class have been and will be damaged
in that they will not have the opportunity to maximize share
value, and have been and will be prevented from properly
benefitting from a proper process to maximize shareholder value.
26. Unless enjoined by this Court, the director-
defendants will continue to breach their fiduciary duties owed to
plaintiff and the Class, all to the irreparable harm of the
Class.
27. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) Declaring that this action may be maintained
as a class action;
(b) Declaring that the conduct of the Lotus Board
is unfair, unjust and inequitable to plaintiff and the other
members of the Class;
(c) Enjoining any improper device which impedes
maximization of shareholder value;
(d) Ordering the Lotus Board to negotiate in good
faith with all bona fide bidders for Lotus;
<PAGE>
(e) Requiring defendants to compensate plaintiff
and the members of the Class for all losses and damages suffered
and to be suffered by them as a result of the acts and
transactions complained of herein, together with prejudgment and
post-judgment interest;
(f) Awarding plaintiff the costs and disbursements
of this action, including reasonable attorneys', accountants',
and experts' fees; and
(g) Granting such other and further relief as may
be just and proper.
Dated: June 5, 1995 CHIMICLES, JACOBSEN & TIKELLIS
/s/ James C. Strum
-----------------------------
Pamela S. Tikellis
James C. Strum
Robert J. Kriner, Jr.
One Rodney Square
P.O. Box 1035
Wilmington, DE 19899
(302) 656-2500
OF COUNSEL:
HANZMAN, CRIDEN, KORGE, HERTZBERG & CHAYKIN
200 South Biscayne Boulevard
Miami, Florida 33131
EXHIBIT (g)(8)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ----------------------------------------:
:
GORDON OPPENHEIM, on behalf of himself :
and all others similarly situated, :
: Civil Action No. 14338
Plaintiff, :
:
-against- :
: CLASS ACTION COMPLAINT
LOTUS DEVELOPMENT CORPORATION, JIM P. :
MANZI, WILLIAM H. GRAY, III, MICHAEL :
E. PORTER, RICHARD S. BRADDOCK, HENRI :
A. TERMEER, and ELAINE L. CHAO, :
:
Defendants. :
- ----------------------------------------:
Plaintiff alleges upon information and belief except as to paragraph
1, which is alleged on knowledge, as follows:
THE PARTIES
1. Plaintiff is and at all times relevant hereto has been
the owner of shares of the common stock of Lotus Development Corporation
("Lotus" or the "Company").
2. Lotus is a corporation organized and existing under
the laws of the State of Delaware with offices in Cambridge, Massachusetts.
As of February 25, 1995, Lotus had over 48 million shares of common stock
issued and outstanding which trade on the NASDAQ over-the-counter quotation
system.
<PAGE>
3. (a) Defendant Jim P. Manzi ("Manzi") is and has been since
1986 the Chairman of the Board of Lotus, and is and has been since 1984
President and a director of Lotus. Manzi is also Lotus' Chief Executive
Officer.
(b) Defendant William H. Gray, III ("Gray") is and has
been at all relevant times a director of the Company.
(c) Defendant Michael E. Porter ("Porter") is and has been
at all relevant times a director of the Company.
(d) Defendant Richard S. Braddock ("Braddock") is and has
been at all relevant times a director of the Company.
(e) Defendant Henri A. Termeer ("Termeer") is and has been
at all relevant times a director of the Company.
(f) Defendant Elaine L. Chao ("Chao") is and has been at
all relevant times a director of the Company.
4. The Individual Defendants set forth in paragraph 3
above are officers and/or directors of Lotus and, as such, are in a
fiduciary relationship with plaintiff and the other public stockholders of
Lotus and owe to plaintiff and other members of the class the highest
obligations of good faith, fair dealing and full disclosure.
<PAGE>
CLASS ACTION ALLEGATIONS
5. Plaintiff brings this case on his own behalf and as a
class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on
behalf of all public stockholders of Lotus, and their successors in
interest, who are or will be threatened with injury arising from
defendants' actions as more fully described herein (the "Class"). Excluded
from the Class are defendants herein and any person, firm, trust,
corporation, or other entity related to or affiliated with any of the
defendants.
6. This action is properly maintainable as a class action.
7. The class is so numerous that joinder of all members
is impracticable. As of December 31, 1994, there were approximately 34,000
stockholders of record located throughout the United States.
8. There are questions of law and fact which are common
to the class and which predominate over questions affecting any individual
class member.
9. Plaintiff is committed to prosecuting this action and
has retained competent counsel experienced in litigation of this nature.
The claims of plaintiff are typical of the claims of other members of the
class and plaintiff has the same interests as the other members of the
<PAGE>
class. Accordingly, plaintiff is an adequate representative of the class
and will fairly and adequately protect the interests of the class.
CLAIM FOR RELIEF
10. Lotus develops, makes and sells applications software
and services. The Company's products include spreadsheets, word processing,
graphics, end-user databases, and personal information management software.
11. On or about June 5, 1995, International Business
Machines Corp. ("IBM") announced that it had made a proposal to Lotus
pursuant to which IBM offered to purchase the Company for $60 cash per
share or approximately $3.3 billion (the "IBM proposal").
12. In a June 5, 1995 press release, IBM revealed that
Lotus had been approached by IBM concerning a business combination between
the two companies but that Lotus and, in particular, Manzi, "have been
unwilling to proceed with [an IBM-Lotus business combination.]" IBM
indicated that due to Lotus' refusal to enter into such a combination, IBM
would publicly announce the IBM proposal.
13. In response to the IBM proposal, Lotus said it was surprised
by the IBM proposal since the two companies have been engaged in
"discussions and negotiations on contracts and joint development . . .
for several months,"
<PAGE>
and further publicly announced that it would study the IBM proposal with
legal and financial advisors.
14. However, the Individual Defendants have failed to
negotiate in good faith with IBM and instead have continued to secure their
positions of control over Lotus.
15. Lotus maintains a shareholder rights plan (more
commonly known as a "poison pill"). In summary, the terms of the Lotus
poison pill state that if a tender offer for 15% or more of the outstanding
shares of the Company is made, each shareholder of record may purchase
stock purchase rights (at the rate of one stock purchase right for each
share of common stock held) which permit that shareholder to acquire Lotus
common stock at a 50% discount from its then current market value.
16. Improper use of Lotus' poison pill has the effect of
entrenching the Individual Defendants in control of Lotus. The Individual
Defendants apparently have refused to rescind, waive or otherwise abolish
the terms of the Lotus poison pill for an IBM transaction.
17. IBM's tender offer will be for 100% of Lotus'
outstanding stock, which, in turn, will invoke the poison pill. This will
make IBM's tender offer prohibitively expensive, may well discourage IBM
from continuing its tender offer.
<PAGE>
18. Defendants' failure duly to negotiate with IBM and
act in the best interest of Lotus' shareholders constitutes breaches of
defendants' fiduciary duties owed to plaintiff and other members of the
Class. Moreover, improper use of the poison pill will have the effect of
making the IBM proposal, or other proposals, cost-prohibitive, and
therefore may discourage IBM and other potential bidders from undertaking
and consummation transactions to maximize Lotus share value.
19. At all times herein, Defendants were and are
obligated to adequately consider, in a timely fashion and on an informed
basis, any reasonable proposal from any party, not to place their own
self-interests and personal considerations ahead of the interests of the
stockholders and to make corporate decisions in good faith. The actions of
the Individual Defendants in refusing to do so and wrongfully impeding
maximization of shareholder value to further their own self-interests and
objectives, and correspondingly to preserve and protect their emoluments
and positions in the Company, are in violation of their fiduciary duties
and to the detriment of the shareholders of the Company.
20. Defendants' fiduciary obligations require
them to:
<PAGE>
(a) undertake an appropriate evaluation of any bona fide
offers, and take appropriate steps to solicit all potential
bids for the Company or its assets or consider strategic alternatives;
(b) act independently, so that the interests of Lotus'
public stockholders would be protected;
(c) adequately ensure that no conflicts of interest exist
between defendants' own interests and their fiduciary obligations to the
public stockholders of Lotus;
(d) refrain from improperly impeding maximization of
shareholder value such as by wrongful use of the poison pill.
21. By virtue of the acts and conduct alleged herein, the
Individual Defendants, who direct the actions of the Company, are carrying
out a preconceived plan and scheme to entrench themselves in office and to
protect and advance their own proposal parochial interests at the expense
of Lotus. Defendants' conduct threatens wrongfully to disenfranchise the
Company's stockholders in their ability to exercise their choice to
maximize share value.
22. As a result of the foregoing, the Individual Defendants have
breached and/or aided and abetted breaches of fiduciary duties.
<PAGE>
23. Unless enjoined by this Court, defendants will breach
their fiduciary duties owed to plaintiff and the other members of the Class
and may benefit themselves in their corporate offices, all to the
irreparable harm of the Class, as aforesaid.
24. Plaintiff and the other members of the Class have no adequate
remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this to be a proper class action;
(b) ordering the Individual Defendants to carry out their
fiduciary duties to plaintiff and the other members of the Class by
announcing their intention to:
(i) undertake an appropriate evaluation of alternatives
designed to maximize value for Lotus' public stockholders;
(ii) adequately ensure that no conflicts of interests
exist between defendants' own interests and their fiduciary obligations to
public stockholders or, if such conflicts exist, to ensure that all the
conflicts would be resolved in the best interests of Lotus' public
stockholders; and
<PAGE>
(iii) act independently to review this and other
alternatives, so that the interests of Lotus' public stockholders would be
protected;
(c) ordering defendants, jointly and severally, to account
to plaintiff and the other members of the Class for all damages suffered
and to be suffered by them as a result of the acts and transactions
alleged herein;
(d) declaring that the Individual Defendants and each of
them have violated their fiduciary duties to the Class;
(e) awarding plaintiff the costs and disbursements of the
action, including a reasonable allowance for plaintiff's attorney's fees
and experts' fees; and
(f) granting such other and further relief as this Court
may deem to be just and proper.
Dated: June 5, 1995
CHIMICLES, JACOBSEN & TIKELLIS
/s/ Robert J. Kriner, Jr.
-------------------------------
Pamela S. Tikellis
James C. Strum
Robert J. Kriner, Jr.
One Rodney Square
Wilmington, Delaware 19801
(302) 656-2500
<PAGE>
OF COUNSEL:
WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP
Jeffrey G. Smith
270 Madison Avenue
New York, New York 10016
(212) 545-4600
EXHIBIT (g)(9)
COMMONWEALTH OF MASSACHUSETTS
MIDDLESEX, ss. Superior Court Department
of the Trial Court
- -----------------------------------------:
: Civil Action
MARJORIE SLATER, TRUSTEE FOR RITA : No.
SLATER, :
:
Plaintiff, :
:
-against- :
:
JIM P. MANZI, RICHARD S. BRADDOCK, :
ELAINE L. CHAO, WILLIAM H. GRAY, III :
MICHAEL E. PORTER, HENRI A. TERMEER, :
EDWIN J. GILLIS, JOHN B. LANDRY, JUNE :
L. ROKOFF, ROBERT K. WEILER and LOTUS :
DEVELOPMENT CORP., :
:
Defendants. :
:
- -----------------------------------------:
CLASS ACTION COMPLAINT
----------------------
Plaintiff, individually and on behalf of all others
similarly situated, by her undersigned attorneys, for her
complaint, alleges below based upon personal knowledge as to
herself and her own acts, and upon information and belief as to
all other matters, based upon, inter alia, the investigation made
by and through her attorneys, which investigation included, among
other things, a review of public documents, published reports and
news articles.
1. Plaintiff Marjorie Slater, Trustee for Rita Slater,
brings this class action on behalf of herself and the public
stockholders of Lotus Development Corp. ("Lotus" or the
"Company") against defendants herein for failing to insure that
the shareholders of the Company receive maximum value for their
shares of the common stock of the Company.
<PAGE>
2. The Company has refused to negotiate an offer of
International Business Machines Corp. ("IBM") to buy Lotus for
$60 per share, or about $3.3 billion in cash. The cash tender
offer price represents almost a $100% premium over the last
closing price of Lotus shares prior to the announced tender
offer. Defendants, through the use of a shareholder rights plan
or "poison pill," have effectively impeded bids for the Company's
shares and removed the possibility of the Company's shareholders
receiving the best possible valuation of their shares. Plaintiff
seeks to recover damages from the Director Defendants, as defined
below, for breach of fiduciary duty to maximize shareholder value
in connection with IBM's tender offer.
3. The Company and the Director Defendants owe to the
Company's stockholders the highest fiduciary obligations of
fidelity, trust, loyalty and due care and to act in furtherance
of the best interests of the Company and its stockholders. In an
effort to entrench themselves in their positions with the
Company, and to preserve their lucrative compensation (defendant
Manzi earned in excess of $800,000 in 1994, and defendants
Gillis, Landry, Rokoff and Weiler each earned in excess of
$400,000 in 1994), the Director Defendants are using their
fiduciary positions of control over the Company to the
disadvantage of the Company's public stockholders. The actions
taken or intended to be taken by defendants to prevent the
proposed takeover of the Company constitutes self dealing, unfair
dealing, and a breach of their fiduciary duty to maximize
shareholder value.
<PAGE>
THE PARTIES
-----------
4. Plaintiff Marjorie Slater, Trustee for Rita Slater,
who resides in Newton, Middlesex County, Massachusetts, owns
common stock of Lotus, and owned such stock at all times relevant
hereto up to and including the time of the announced tender
offer.
5. Defendant Lotus is a Delaware corporation with its
principal executive offices located at 55 Cambridge Parkway,
Cambridge, Massachusetts 02142. The Company purports to develop,
make, sell and support applications software and services. The
Company's products consist primarily of desktop applications,
which include spreadsheets, word processing, graphics, end-user
database and personal information management software, and
communications products and services. The Company has
approximately 48 million shares of common stock outstanding,
which are traded on the NASDAQ Exchange.
6. (a) Defendant Jim P. Manzi ("Manzi") is Chairman of
the Board of Directors, President, and Chief Executive Officer of
Lotus;
(b) Defendant Edwin J. Gillis is the Company's
Senior Vice President of Finance and Operations, Chief Financial
Officer and a member of the Board of Directors;
(c) Defendant John B. Landry is the Company's
Senior Vice President of Communications Development, Chief
Technology Officer and a member of the Board of Directors;
(d) Defendant Robert K. Weiler is the Company's
Senior Vice President of Worldwide Sales and Marketing and a
member of the Board of Directors; and
<PAGE>
(e) Defendants Richard S. Braddock, Elaine L.
Chao, William H. Gray, III, Michael E. Porter, and Henri A.
Termeer are members of the Board of Directors of Lotus.
7. The above named defendants (the "Director
Defendants") constitute the entire Board of Directors of the
Company.
8. By reason of their relationships and offices, the
Director Defendants are in a fiduciary relationship with the
plaintiff and the other public shareholders of the Company and
owe to them the highest obligations of good faith, loyalty and
fair dealing. They are sued herein because they have breached
these fiduciary duties.
CLASS ACTION ALLEGATIONS
------------------------
9. Plaintiff brings this action for declaratory,
injunctive and other relief on her own behalf and as a class
action, pursuant to Rule 23 of Massachusetts Rules of Civil
Procedure, on behalf of all common stockholders of Lotus (except
the defendants herein, members of their immediate families and
any firm, trust, corporation or other entity controlling,
controlled by or under common control with any of the defendants)
or their successors in interest, who
<PAGE>
are being deprived of the opportunity to maximize the value of
their Lotus shares by the wrongful acts of defendants described
herein (the "Class").
10. This action is properly maintainable as a Class
action for the following reasons:
(a) The Class for whose benefit this action is
brought is so numerous that joinder of all Class
members is impracticable. There are more than 48
million common shares of Lotus stock outstanding, owned
by thousands of stockholders. Members of the Class are
scattered throughout the United States.
(b) There are questions of law and fact which are
common to members of the Class and which predominate
over any questions affecting only individual members,
including whether the Directors have breached and are
breaching the fiduciary duties owed by them to
plaintiff and members of the Class by reason of the
acts alleged herein and thereby preventing Lotus'
public shareholders from maximizing the value of their
holdings.
(c) The claims of plaintiff are typical of the
claims of the other members of the Class and plaintiff
has no interests that are adverse or antagonistic to
the interests of the Class.
(d) Plaintiff is committed to the vigorous
prosecution of this action and has retained competent
counsel experienced in litigation of this nature.
Accordingly, plaintiff is adequate
<PAGE>
representative of the Class and will fairly
and adequately protect the interests of the Class.
(e) The prosecution of separate actions by
individual members of the Class would create a risk of
inconsistent or varying adjudications with respect to
individual members of the Class which would establish
incompatible standards of conduct for the party
opposing the Class.
(f) Defendants have acted and are about to act on
grounds generally applicable to the Class, thereby
making appropriate final injunctive or corresponding
declaratory relief with respect to the Class as a
whole.
(g) For the reasons stated herein, a class action
is superior to all other available methods for the fair
and efficient adjudication of this action.
FACTUAL BACKGROUND
------------------
11. Lotus' stock has been languishing over the last
several quarters because of the poor performance of its
communications and desktop applications segments. After reaching
a high of $60 per share twelve months ago, Lotus' stock price has
fallen precipitously to a low of $25 per share on April 21, 1995.
The stock price has averaged below $40 per share for the last
twelve months.
12. According to an analyst report released prior to
the Company's announcement of first quarter 1995 results, the
Company's immediate future did not appear to be sanguine:
<PAGE>
* INVESTMENT CONCLUSION: We continue to see
downside risk to Lotus's stock as investors
begin to appreciate both the extent to
which Lotus's applications business will
decline (we foresee 25%-30% in 1995 to
roughly $450 million versus a 20% decline
in 1994) and the competitive and economic
factors that will begin to affect the
momentum in Lotus's communications
business, led by Notes . . . .
Oppenheimer & Co., Inc., Company Report, April 12, 1995.
13. According to analysts' reports published after the
Company reported very disappointing first quarter 1995 financial
performance, other analysts held similar views of the Company's
prospects:
The company remains a strong takeover
candidate....At a price between $50 and
$60, the stock would be valued between 4x
and 5x the communications business plus
cash.... [W]e are startled by the magnitude
of the 1Q's shortfall .... We are setting a
price target of $45, or a multiple of 30x
our 1996 EPS estimate....
Wertheim Schroder & Co. Inc., Company Report, April 28, 1995.
We believe that the stock has downside to
$25. In our opinion, Lotus should be valued
for the communications business alone (we
do not believe that investors will or
should pay for the failing applications
business). Using three times forward 12
months revenue of $400 for the
communications segment implies a price
range of $25-$26. Using our optimistic
revenue assumptions for its communications
business of $550, three times revenue would
imply a $34 price point. In our opinion,
the applications business will continue to
drag the other segments for the next few
quarters, and our $550 estimate assumes
that the Notes
<PAGE>
business bounces back seamlessly.... We
maintain our Hold investment code on the
shares of Lotus.
Salomon Brothers Inc., Company Report, April 21, 1995.
14. On June 5, 1995, International Business Machines
Corp. announced that it made an unsolicited bid to buy Lotus for
$60 per share, or about $3.3 billion in cash. The cash tender
offer price represents almost a $100% premium over the last
closing price of Lotus shares prior to the announced tender
offer. The reason for IBM making the unsolicited bid to acquire
Lotus is, according to a letter from the chairman of IBM to
defendant Manzi, that Lotus was unwilling to proceed with a
friendly business combination with IBM.
15. IBM further announced that it had commenced legal
action to compel Lotus' Board of Directors to redeem the
Company's poison pill and to eliminate the applicability of
certain of the Company's anti-takeover provisions to the tender
offer.
SUBSTANTIVE ALLEGATIONS
-----------------------
16. The Director Defendants, by virtue of the acts and
conduct alleged herein, are carrying out a preconceived plan and
scheme to entrench themselves in office and to thwart legitimate
offers to acquire the Company, regardless of the benefit to the
Company's public shareholders. In so doing, the Director
Defendants are acting in total disregard of their fiduciary
duties to Plaintiff and the other members of the Class.
<PAGE>
17. The Director Defendants have refused to accept
IBM's tender offer which represents a premium of almost
one-hundred percent over the stock's trading price prior to the
announced tender offer, without properly exploring the offer and
rejecting it out of hand.
18. The Director Defendants have acted without regard
to their fiduciary duties to the shareholders by rejecting IBM's
all cash tender offer.
19. If the poison pill designed to discourage a
takeover attempt is permitted to survive, the Company's
shareholders who wish to avail themselves of this bona fide offer
to purchase their shares for fair value at a tremendous premium
would be deprived of the ability to do so.
20. By adopting and retaining the poison pill and other
procedures, the Director Defendants, without shareholder
approval, caused a shift of power from the shareholders to
themselves. These actions permit the Company's directors to act
as the primary negotiators of -- and, in effect, to preclude --
any and all offers to acquire the Company that do not provide
unfair and unreasonable compensation for the directors or permit
them to stay in power over the Company.
21. By assuming power to consider or reject potential
takeovers of the Company, the Director Defendants have also
assumed a heightened fiduciary obligation to consider all offers
in good faith, without regard to personal interests but with
regard only to the interests of the public shareholders, and to
negotiate in good faith with bidders on behalf of the public
shareholders.
<PAGE>
22. In order to entrench themselves in office and to
continue receiving their compensation, fees and emoluments of
office, the Director Defendants have not acted in good faith
toward plaintiff and the Class; have breached and are breaching
their fiduciary duties to plaintiff and the Class; and have
willfully participated in unfair dealing toward plaintiff and the
Class.
23. As a result of the actions of the Director
Defendants, plaintiff and other members of the Class have been
and will be damaged in that they are the victims of unfair
dealing and are not receiving the fair value of their interests
in the Company.
24. Unless enjoined by this Court, the Director
Defendants will continue to breach their fiduciary duties owed to
plaintiff and the Class, and succeed in their plan to entrench
themselves in their corporate offices, all to the irreparable
harm of the plaintiff and the Class.
25. The plaintiff and the Class have no adequate remedy
at law.
WHEREFORE, plaintiff, on behalf of herself and the
Class, prays for judgment and relief as follows:
A. Declaring that this action is properly maintainable
as a Class action and certifying the plaintiff as the
representative of the Class;
B. Declaring that the Director Defendants have
committed a gross abuse of trust and have breached their
fiduciary duties to plaintiff and the Class;
C. Preliminarily and permanently enjoining defendants
and their counsel, agents, employees and all persons acting
under, in concert with, or for them, from enforcing the
challenged anti-takeover procedures or otherwise
<PAGE>
violating their fiduciary duties to plaintiff and the Class;
D. Requiring defendants to fulfill their fiduciary
duties to maximize shareholder values by exploring interest and
accepting the highest offer obtainable for the public
shareholders or by permitting the shareholders to make that
decision free from any coercion;
E. Awarding plaintiff and the Class compensatory
damages, together with appropriate prejudgment interest at the
maximum rate allowable by law;
F. Awarding plaintiff and the Class their costs and
expenses for the litigation including reasonable attorneys' fees
and other disbursements; and
G. Granting such other and further relief as this Court
deems to be just and proper.
Dated: June 6, 1995
BERMAN, DEVALERIO & PEASE
By: /s/ Norman Berman
--------------------------------
Glen DeValerio (BBO #122010)
Norman Berman (BBO #040460)
One Liberty Square
Boston, MA 02109
(617) 542-8300
POMERANTZ HAUDEK BLOCK
& GROSSMAN
Stanley M. Grossman
Michael A. Schwartz
100 Park Avenue
New York, NY 10017-5516
(212) 661-1100
LAW OFFICES OF RICHARD VITA
Richard J. Vita
Two Oliver Street, 8th Floor
Boston, MA 02109
(617) 426-6566
Attorneys for Plaintiff
EXHIBIT (g)(10)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ----------------------------------------!
!
MOISE KATZ, ! C. A. No. 14341
!
Plaintiff, !
!
-against- !
!
JIM P. MANZI, WILLIAM H. GRAY, III, !
MICHAEL E. PORTER, RICHARD S. BRADDOCK, !
HENRI A. TERMEER, ELAINE L. CHAO and !
LOTUS DEVELOPMENT CORP., !
!
!
Defendants. !
- ----------------------------------------!
CLASS ACTION COMPLAINT
----------------------
Plaintiff, by his attorneys, alleges upon personal knowledge
as to his own acts and upon information and belief as to all other
matters, as follows:
NATURE OF THE ACTION
--------------------
1. This is a stockholders' class action lawsuit brought on
behalf of the public stockholders of the Lotus Development Corp.
("Lotus" or the "Company") who have been, and continue to be, deprived
of the opportunity to realize fully the benefits of their investment
in the Company. The individual defendants have wrongfully refused to
properly consider bona fide acquisition or other business combination
overtures for the Company from the International Business Machines
<PAGE>
Corp. ("IBM"). Their actions constitute unfair dealing and a breach of
fiduciary duty to maximize shareholder value. The individual
defendants are using their fiduciary positions of control over Lotus
to thwart others in their legitimate attempts to acquire the Company,
and the individual defendants are trying to entrench themselves in
their positions of control with Lotus.
Parties
-------
2. Plaintiff is and, at all relevant times, has been the
owner of shares of Lotus common stock.
3. Lotus is a corporation duly organized and existing under
the laws of the State of Delaware. Lotus develops, makes, sells, and
supports applications software and services including spreadsheets,
word processors, graphics and personal information database software.
Lotus maintains its principal executive offices at 55 Cambridge
Parkway, Cambridge, Massachusetts. Lotus has approximately 48,196,026
shares of common stock outstanding and thousands of stockholders of
record. Lotus stock trades over the NASDAQ National Market System.
4. Defendant Jim P. Manzi ("Manzi") is the Chief Executive
Officer, President and Chairman of the Board of Directors of Lotus.
<PAGE>
5. Defendants William H. Gray, III, Michael E. Porter,
Richard S. Braddock, Henri A. Termeer and Elaine L. Chao are directors
of Lotus.
6. The defendants named in paragraphs 4 and 5 are
hereinafter referred to as the "Individual Defendants."
7. The Individual Defendants, by reason of their corporate
directorship and/or executive positions, stand in a fiduciary position
relative to the Company's stockholders, which fiduciary relationship,
at all times relevant herein, required the defendants to exercise
their best judgment, and to act in a prudent manner and in the best
interests of the Company's stockholders.
CLASS ACTION ALLEGATIONS
------------------------
8. Plaintiff brings this case in his own behalf and as a
class action, pursuant to Rule 23 of the Rules of the Court of
Chancery, on behalf of all stockholders of the Company, except
defendants herein and any person, firm, trust, corporation or other
entity related to or affiliated with any of the defendants, who will
be threatened with injury arising from defendants' actions as is
described more fully below (the "Class").
9. This action is properly maintainable as a class action.
<PAGE>
10. The class is so numerous that joinder of all members is
impracticable. The Company has thousands of stockholders who are
scattered throughout the United States.
11. There are questions of law and fact common to the Class
including, inter alia, whether:
a. defendants have breached their fiduciary duties owed by
them to plaintiff and other members of the Class by failing and
refusing to attempt in good faith to maximize shareholder value in the
sale or other business combination involving Lotus;
b. Lotus's Poison Pill stands as an undue impediment to any
transaction involving Lotus, and whether it will have the effect of,
among other things, entrenching defendants in their office, thereby
depriving Lotus' public stockholders of the maximum value of their
holdings;
c. defendants have breached or aided and abetted the breach
of the fiduciary duties owed by them to plaintiff and other members of
the Class;
d. defendants, through implementation of a Poison Pill,
engaged in a plan and scheme to thwart and reject offers and proposals
from third parties, including IBM; and
e. plaintiff and other members of the Class are being and
will continue to be injured by the wrongful conduct alleged herein
and,
<PAGE>
if so, what is the proper remedy and/or measure of damages.
12. Plaintiff is committed to prosecuting the action and has
retained competent counsel experienced in litigation of this nature.
Plaintiff's claims is typical of the claims of the other members of
the Class and plaintiff has the same interests as the other members of
the Class. Plaintiff is an adequate representative of the Class.
13. The prosecution of separate actions by individual
members of the Class would create the risk of inconsistent or varying
adjudications with respect to individual members of the Class which
would establish incompatible standards of conduct for defendants, or
adjudications with respect to individual members of the Class which
would as a practical matter be dispositive of the interests of the
other members not parties to the adjudications or substantially impair
or impede their ability to protect their interests.
14. The defendants have acted, or refused to act, on grounds
generally applicable to, and causing injury to, the Class and,
therefore, preliminary and final injunctive relief on behalf of the
Class as a whole is appropriate.
<PAGE>
SUBSTANTIVE ALLEGATIONS
-----------------------
15. On June 5, 1995, the Dow Jones News Wire reported that
IBM will begin a cash tender offer beginning the following day, June
6, 1995, for all the outstanding common shares and preferred share
purchase rights of Lotus at a price of $60 per share.
16. IBM said that it communicated its offer to Lotus in a
letter to defendant Manzi. In the letter, IBM Chairman and Chief
Executive Officer Louis V. Gerstner, Jr., said that IBM had been
interested for a period of time in pursuing a business combination
with Lotus, but said that Lotus has rebuffed those overtures. Gerstner
also said that IBM plans to keep Lotus intact and managed out of its
current headquarters in Cambridge, Massachusetts, and to make Lotus
primarily responsible for key, complimentary IBM software products.
17. Gerstner further said that IBM and its advisors are
prepared to meet with Manzi and all other members of the Lotus Board,
management and advisors to answer any questions about the offer.
18. Defendants had previously established a preferred stock
purchase rights plan (the "Poison Pill" or the "Plan"). Under the
Plan, shareholders have the right to purchase one-hundredth of a
<PAGE>
Junior Participating Preferred Stock, Series A, at an exercise price of $75.
19. Defendants structured the Poison Pill with a 20% trigger
- -- acquisition of 20% of the Company's stock -- to thwart even the
most friendly overture from a third party seeking control of Lotus.
20. The adoption and implementation of the Poison Pill has
the force and effect of entrenching the Individual Defendants in their
corporate offices against any real or perceived threat to their
control, and dramatically impairs the rights of Class members to
exercise freedom of choice in a proxy contest or to avail themselves
of a bona fide offer to purchase their shares by an acquiror, such as
IBM, unfavored by incumbent management. This fundamental shift of
control of the Company's destiny from the hands of its shareholders to
the hands of the Individual Defendants results in a heightened
fiduciary duty of the Individual Defendants to consider, in good
faith, a third party bid, such as IBM, and further requires the
Individual Defendants to pursue a third party's interest in acquiring
the Company and to negotiate in good faith with a bidder on behalf of
the Company's stockholders.
21. The purpose, intent and effect of the Poison Pill, in
the face of a pending offer for the Company, is to thwart, deter,
<PAGE>
impede and delay the acquisition of Lotus by IBM or any
other suitor.
22. IBM has commenced legal action to compel the Individual
Defendants to redeem Lotus' Poison Pill and to eliminate the
applicability of the tender offer to certain of Lotus' anti-takeover
provisions.
23. Defendants' recalcitrance to consider and promptly act
upon IBM's offer has no valid business purpose, and simply evidences
their disregard for the substantial premium being offered to Lotus
stockholders. By failing to meet and negotiate or offer to meet and
negotiate with IBM, defendants are depriving plaintiff and the Class
of the right to share in the assets and businesses of Lotus and
receive the maximum value for their shares.
24. Lotus represents a highly attractive acquisition
candidate. Defendants' conduct would ensure their continued positions
within the Company but deprive the Company's public shareholders of
the substantial premium that IBM is prepared to pay, or of the
enhanced premium that further negotiation or exposure of Lotus to the
market could provide.
25. Defendants owe fundamental fiduciary obligations to
Lotus' stockholders to take all necessary and appropriate steps to
maximize the value of their shares. In addition, the Individual
<PAGE>
Defendants have the responsibility to act independently so that the
interests of the Company's public stockholders will be protected, to
seriously consider all bona fide offers for the Company, and to
conduct fair and active bidding procedures or other mechanisms for
checking the market to assure that the highest possible price is
achieved. Further, the directors of Lotus must adequately ensure that
no conflict of interest exists between the Individual Defendants' own
interests and their fiduciary obligations to maximize stockholder
value or, if such conflicts exist, to insure that all such conflicts
will be resolved in the best interests of the Company's stockholders.
26. Because defendants dominate and control the business and
corporate affairs of Lotus and because they are in possession of
private corporate information concerning Lotus' assets, businesses and
future prospects, there exists an imbalance and disparity of knowledge
of economic power between defendants and the public stockholders of
Lotus. This discrepancy makes it grossly and inherently unfair for
defendants to entrench themselves at the expense of its public
stockholders.
27. The Individual Defendants have breached their fiduciary
and other common law duties owed to plaintiff and other members of the
<PAGE>
Class in that they have not and are not exercising independent business
judgment and have acted and are acting to the detriment of the Class.
28. In connection with the conduct described herein, the
Individual Defendants breached their fiduciary duties by, among other
things:
a. failing to properly consider the IBM proposal
without fully informing themselves about or
intentionally ignoring the future prospects of a
combined Lotus/IBM company, or the intrinsic
worth of IBM;
b. failing and refusing to meet with representatives
of IBM; and
c. implementing Lotus' Poison Pill, which was
designed to make it prohibitively expensive for
an unapproved third party from acquiring the
assets or control of the Company.
29. Defendants have refused to take those steps necessary to
ensure that Lotus' stockholders will receive maximum value for their
shares of Lotus stock. Defendants have thus refused to seriously
consider IBM's acquisition overtures, and have failed to announce any
<PAGE>
effort to maximize shareholder value, including conducting active
auction or open bidding procedures best calculated to maximize
shareholder value in the sale of the Company.
30. The Individual Defendants are acting to entrench
themselves in their offices and positions and maintain their
substantial salaries and perquisites, all at the expense and to the
detriment of the public stockholders of Lotus.
31. By the acts, transactions and courses of conduct alleged
herein, the Individual Defendants, individually and as part of a
common plan and scheme in breach of their fiduciary duties and
obligations, are attempting unfairly to deprive plaintiff and other
members of the Class of the substantial premium they could realize in
an acquisition transaction and to ensure continuance of their
positions as directors and officers, all to the detriment of Lotus'
public stockholders. The Individual Defendants have been engaged in a
wrongful effort to entrench themselves in their offices and positions
of control and prevent the acquisition of Lotus except on terms that
would further their own personal interests.
32. As a result of the actions of the Individual Defendants,
plaintiff and the other members of the Class have been and will be
damaged in that they have not and will not receive their fair
<PAGE>
proportion of the value of Lotus' assets and businesses and/or have been
and will be prevented from obtaining a fair and adequate price for
their shares of Lotus' common stock.
33. Plaintiff seeks preliminary and permanent injunctive
relief and declaratory relief preventing defendants from inequitably
and unlawfully depriving plaintiff and the Class of their rights to
realize a full and fair value for their stock at a substantial premium
over the market price, by unlawfully entrenching themselves in their
positions of control, and to compel defendants to carry out their
fiduciary duties to maximize shareholder value.
34. Only through the exercise of this Court's equitable
powers can plaintiff be fully protected from the immediate and
irreparable injury that defendants' actions threaten to inflict.
Defendants are precluding the stockholders' enjoyment of the full
economic value of their investment by failing to proceed expeditiously
and in good faith to evaluate and pursue a premium acquisition
overture that would provide consideration for all shares at an
attractive price.
35. Unless enjoined by the Court, defendants will continue
to breach their fiduciary duties owed to plaintiff and the members of
<PAGE>
the Class, and/or aid and abet and participate in such breaches of
duty, and will prevent the sale of Lotus at a substantial premium, all
to the irreparable harm of plaintiff and other members of the Class.
36. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) Declaring this to be a proper class action and
certifying plaintiff as a class representative;
(b) Ordering the Individual Defendants to carry out their
fiduciary duties to plaintiff and the other members of the Class by
announcing their intention to:
(i) cooperate fully with any entity or person, including
IBM, having a bona fide interest in proposing any transactions that
would maximum shareholder value, including but not limited to, a
merger or acquisition of Lotus;
(ii) immediately undertake an appropriate evaluation of
Lotus' worth as a merger/acquisition candidate;
(iii) take all appropriate steps to enhance Lotus' value and
attractiveness as a merger/acquisition candidate;
<PAGE>
(iv) take all appropriate steps to effectively expose Lotus
to the marketplace in an effort to create an active auction of the
Company;
(v) act independently so that the interests of the Company's
public stockholders will be protected; and
(vi) adequately ensure that no conflicts of interest exist
between the Individual Defendants' own interest and their fiduciary
obligation to maximize shareholder value or, in the event such
conflicts exist, to ensure that all conflicts of interest are resolved
in the best interests of the public stockholders of Lotus;
(c) Ordering the Individual Defendants, jointly and
severally to account to plaintiff and the Class for all damages
suffered and to be suffered by them as a result of the acts and
transactions alleged herein;
(d) Preliminarily and permanently enjoining the
implementation of the Company's Poison Pill;
(e) Awarding plaintiff the costs and disbursements of this
action, including a reasonable allowance for plaintiff's attorneys'
and expert' fees, and
<PAGE>
(f) Granting such other and further relief as may be just
and proper.
Dated: June 6, 1995
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By:
---------------------------------------
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
GARWIN BRONZAFT GERSTEIN & FISHER
1501 Broadway
New York, NY 10036
(212) 398-0055
EXHIBIT (g)(11)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -----------------------------------------:
:
JOSEPH WALD, :
: C.A. No. 14344
Plaintiff, :
:
-against- :
:
JIM P. MANZI, RICHARD S. BRADDOCK, :
ELAINE L. CHAO, WILLIAM H. GRAY III, :
MICHAEL E. PORTER and HENRI A. TERMEER, :
and LOTUS DEVELOPMENT CORPORATION, :
:
Defendants. :
- -----------------------------------------:
CLASS ACTION COMPLAINT
----------------------
Plaintiff, Joseph Wald, by his attorneys, alleges for his
Complaint, upon information and belief, except for paragraph 2 hereof,
which is alleged upon personal knowledge, as follows:
SUMMARY OF ACTION
-----------------
1. Plaintiff brings this action on behalf of himself and all
other shareholders of defendant Lotus Development Corp. ("Lotus" or
the "Company") against Lotus and the directors of Lotus, for breaching
their fiduciary duties to Lotus' shareholders. These defendants are
causing the Company to summarily reject an offer to Lotus shareholders
(the "Offer") by International Business Machine Company ("IBM") to
<PAGE>
purchase Lotus in a $60 per share all-cash tender offer for
approximately $3.3 billion, despite the fact that the Offer (the
"Rights Plan") represents a potential economic opportunity for Lotus'
shareholders to realize the full value of their investment in Lotus.
Defendants' summary rejection of the Offer forecloses a potential
opportunity for shareholders to realize the full value of their Lotus
shares that would otherwise not be available to them. Plaintiff seeks,
inter alia, an order enjoining defendants from summarily rejecting or
interfering with the Offer without giving it fair consideration,
becoming fully informed as to the basis of the Offer and taking all
steps necessary to maximize shareholder value. Plaintiff further seeks
appropriate relief to redeem or invalidate the Company's Rights Plan
and an Order compelling defendants to fully and fairly inform Lotus'
shareholders concerning the Offer.
THE PARTIES
-----------
2. Plaintiff owns shares of common stock of defendant Lotus
and has been the owner continuously of such shares since prior to the
wrongs complained of herein.
3. Defendant Lotus is a corporation organized and existing
under the laws of the State of Delaware with its principal place of
business located at 55 Cambridge Parkway, Cambridge, Mass 02142.
<PAGE>
Lotus is a leading developer and supplier of computer software.
4. Defendant Jim P. Manzi ("Manzi") is the Chairman of the
Board of Directors, President and a director of Lotus. Manzi holds
approximately 1.2 million of Lotus shares.
5. Defendant Michael S. Braddock ("Braddock") is a director
of Lotus.
6. Defendant Elaine L. Chao ("Chao") is a director of Lotus.
7. Defendant William H. Gray III ("Gray") is a director of
Lotus.
8. Defendant Michael E. Porter ("Porter") is a director of
Lotus.
9. Defendant Henri A. Termeer ("Termeer") is a director of
Lotus.
10. The above-named individual defendants (collectively the
"Individual Defendants") as officers and/or directors of Lotus owe
fiduciary duties of good faith, loyalty, fair dealing, due care, and
candor to plaintiff and the other members of the Class (as defined
below).
11. Each of the Individual Defendants receive annual
compensation from Lotus and has a personal and financial interest
<PAGE>
in thwarting any threat to the continued incumbency and control
of Lotus' current management, in derogation of their fiduciary
duties.
12. Defendants' conduct, as more fully described herein, has
been orchestrated to protect the positions and corresponding
perquisites and other benefits received by the Individual Defendants
as officers and/or directors of Lotus. Defendants are breaching their
fiduciary duties to plaintiff and the members of the Class (as defined
below) by summarily rejecting and/or interfering with the Offer
without adequate investigation or any other procedures to determine
whether the Offer presents an opportunity to maximize the value of
Lotus shares, thus wrongfully depriving plaintiff and the members of
the Class of the full value of their shares.
CLASS ACTION ALLEGATIONS
------------------------
13. Plaintiff brings this action pursuant to Rule 23 of the
Rules of this Court, on behalf of himself and all other stockholders
of Lotus as of June 5, 1995 (the "Class"). Excluded from the Class are
defendants herein, members of their immediate families, and any
subsidiary, firm, trust, corporation, or other entity related to or
affiliated with any of the defendants and their successors in
interest, who are or will be threatened with injury arising from
defendants' actions.
<PAGE>
14. This action is properly maintainable as a class action
for the following reasons:
(a) the Class is so numerous that joinder of all members is
impracticable. While the exact number of class members is unknown to
plaintiff at this time and can only be ascertained through appropriate
discovery, there are more than approximately 48 million shares of
Lotus common stock held by hundreds of shareholders of record who are
members of the Class. The holders of these shares are believed to be
geographically dispersed throughout the United States. Lotus stock is
listed and actively traded on the NASD.
(b) there are questions of law and fact which are common to
members of the Class and which predominate over questions affecting
only individual members. The common questions include, inter alia, the
following:
(i) whether defendants have engaged in conduct constituting
unfair dealing to the detriment of the Class;
(ii) whether defendants' summary rejection or interference
of the Offer is grossly unfair to the Class;
(iii) whether defendants are engaging in a plan or scheme to
thwart and/or summarily reject offers that may maximize the value of
shareholders' investment in Lotus, to the detriment of the Class;
<PAGE>
(iv) whether defendants are engaging in a plan or scheme to
entrench themselves at the expense of the public stockholders of Lotus
and/or unfairly to obtain for themselves the benefits and business of
the Company;
(v) whether plaintiff and the other members of the Class
would be irreparably damaged if defendants' summary rejection of the
Offer is not enjoined;
(vi) whether defendants have breached fiduciary and other
common law duties owed by them to the Class; and
(vii) whether defendants have failed to take appropriate
measures to ensure the realization of the maximum value of the Lotus
stock held by the Class;
(c) the claims of plaintiff are typical of the claims of the
other members of the Class and plaintiff has no interest that is
adverse or antagonistic to the interests of the Class;
(d) plaintiff is committed to prosecuting this action and
has retained counsel competent and experienced in litigation of this
nature. Plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class;
(e) plaintiff anticipates that there will be no difficulty
in the management of this litigation; and
<PAGE>
(f) a class action is superior to other available methods
for adjudication of this controversy.
SUBSTANTIVE ALLEGATIONS
-----------------------
The Offer by IBM
- ----------------
15. On June 5, 1995, it was publicly disclosed that IBM
will commence a tender to purchase Lotus in an all-cash tender valued
at $60.00 a share, or approximately $3.3 billion. The Offer represents
about a 100% premium over the $32.50 closing price of Lotus' common
stock on Friday, June 2, 1995, and more than 100% over the 52 week low
of $29.25 as of June 1, 1995.
16. In response to the Offer, Lotus common stock, on June 5,
1995, rose $27.25 to $59.75.
17. In spite of this Offer to Lotus' shareholders by IBM, it
was reported that Lotus executives were not publicly responding to the
Offer. Lotus has been unresponsive to IBM's friendly overturns of a
business combination and has refused to discuss redemption to the
Rights Plan, which plan would block the realization of the Offer.
<PAGE>
18. The Offer presents plaintiff and the Class an
outstanding opportunity to maximize the value of their Lotus shares
for the following reasons:
(a) Lotus' has struggled with declining earnings, and the
Company is not poised for future growth. Indeed, on June 1, 1995, its
stock closed at a new 52 week low, illustrating its poor financial
performance.
(b) The market showed great enthusiasm for the disclosure of
IBM's offer. The market price of common shares of Lotus almost doubled
in early trading.
(c) the Offer presents a valuable opportunity to maximize
shareholder value through negotiation of the Offer and putting Lotus
up for auction.
CAUSE OF ACTION AGAINST ALL DEFENDANTS
--------------------------------------
19. The Individual Defendants have breached their fiduciary
duties to plaintiff and the Class by rejecting the Offer out-of-hand
without fully evaluating or becoming fully informed with regard to the
Offer and without taking any steps to maximize shareholder value for
plaintiff and the members of the Class.
20. By virtue of the acts and conduct herein, the Individual
Defendants are not acting in good faith and have breached their
fiduciary and other common law duties which they owe to plaintiff and
the other members of the Class, have engaged in unfair dealing for
<PAGE>
their own benefit and the detriment of the Class, and have
pursued a course of conduct designed to entrench themselves in their
positions of control within the Company.
21. The Individual Defendants have violated their fiduciary
duties owed to plaintiff and the other members of the Class in that
they have not and are not exercising independent business judgment and
have acted and are acting to the detriment of the Class in order to
benefit themselves and solidify their positions of control and
enjoyment of the perquisites of office.
22. As a result of the foregoing, defendants' summary
rejection of the Offer is a breach of the defendants' fiduciary duties
and should be enjoined.
23. Plaintiff lacks an adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this action to be a proper class action and
certifying plaintiff as the representative of the Class;
(b) declaring defendants' rejection of the Offer to be a
breach of defendants' fiduciary duties of loyalty, due care, good
faith, fair dealing, and candor to plaintiff and the Class;
<PAGE>
(c) ordering the Individual Defendants to carry out their
fiduciary duties to plaintiff and the other members of the Class by:
(i) rescinding, redeeming or invalidating the adoption or
implementation of the Company's Rights Plan;
(ii) requiring defendants to consider the Offer in good
faith, to take all possible measures maximizing the value of Lotus
stock by, for example, engaging in a course of due diligence and
negotiating with IBM, or otherwise maximizing the value of the Company
to plaintiff and the Class; and
(iii) requiring defendants to make full and fair disclosure
of the Offer, the negotiations between Lotus and IBM, and all other
matters concerning a possible acquisition or merger of Lotus which a
reasonable investor would consider important;
(d) ordering defendants, jointly and severally, to pay to
plaintiff and other members of the Class all damages suffered and to
be suffered by them as a result of the acts and transactions alleged
herein;
(e) awarding plaintiff the costs and disbursements of this
action, including a reasonable allowance for plaintiff's attorneys and
experts' fees; and
<PAGE>
(f) granting such other and further relief as the Court may
deem just and equitable.
Dated: June 5, 1995
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By:
---------------------------
First Federal Plaza,
Suite 214
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
Of Counsel:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, New York 10016
(212) 779-1414
EXHIBIT (g)(12)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ----------------------------------------x
ANNETTE SIEGEL, :
:
Plaintiff, :
:
-against- :
: C.A. No. 14345
JIM P. MANZI, RICHARD S. :
BRADDOCK, ELAINE L. CHAO, :
WILLIAM H. GRAY III, MICHAEL :
E. PORTER and HENRI A. TERMEER, :
and LOTUS DEVELOPMENT CORPORATION, :
:
Defendants. :
- ----------------------------------------X
CLASS ACTION COMPLAINT
Plaintiff, Annette Siegel, by her attorneys, alleges for her
Complaint, upon information and belief, except for paragraph 2 hereof,
which is alleged upon personal knowledge, as follows:
SUMMARY OF ACTION
1. Plaintiff brings this action on behalf of herself
and all other shareholders of defendant Lotus Development Corp.
("Lotus" or the "Company") against Lotus and the directors of
Lotus, for breaching their fiduciary duties to Lotus'
shareholders. These defendants are causing the Company to
summarily reject an offer to Lotus shareholders (the "Offer")
by International Business Machine
<PAGE>
Company ("IBM") to purchase Lotus in a $60 per share all-cash tender
offer for approximately $3.3 billion, despite the fact that the Offer
(the "Rights Plan") represents a potential economic opportunity for
Lotus' shareholders to realize the full value of their investment in
Lotus. Defendants' summary rejection of the Offer forecloses a
potential opportunity for shareholders to realize the full value of
their Lotus shares that would otherwise not be available to them.
Plaintiff seeks, inter alia, an order enjoining defendants from
summarily rejecting or interfering with the Offer without giving it
fair consideration, becoming fully informed as to the basis of the
Offer and taking all steps necessary to maximize shareholder value.
Plaintiff further seeks appropriate relief to redeem or invalidate the
Company's Rights Plan and an Order compelling defendants to fully and
fairly inform Lotus' shareholders concerning the Offer.
THE PARTIES
2. Plaintiff owns shares of common stock of defendant Lotus
and has been the owner continuously of such shares since prior to the
wrongs complained of herein.
3. Defendant Lotus is a corporation organized and existing
under the laws of the State of Delaware with its
<PAGE>
principal place of business located at 55 Cambridge Parkway,
Cambridge, Mass 02142. Lotus is a leading developer and supplier of
computer software.
4. Defendant Jim P. Manzi ("Manzi") is the Chairman of the
Board of Directors, President and a director of Lotus. Manzi holds
approximately 1.2 million of Lotus shares.
5. Defendant Michael S. Braddock ("Braddock") is a
director of Lotus.
6. Defendant Elaine L. Chao ("Chao") is a director of
Lotus.
7. Defendant William H. Gray III ("Gray") is a director
of Lotus.
8. Defendant Michael E. Porter ("Porter") is a director
of Lotus.
9. Defendant Henry A. Termeer ("Termeer") is a director
of Lotus.
10. The above-named individual defendants (collectively
the "Individual Defendants") as officers and/or directors of
Lotus owe fiduciary duties of good faith, loyalty, fair dealing,
due care, and candor to plaintiff and the other members of the
Class (as defined below).
<PAGE>
11. Each of the Individual Defendants receive annual
compensation from Lotus and has a personal and financial interest
in thwarting any threat to the continued incumbency and control
of Lotus' current management, in derogation of their fiduciary
duties.
12. Defendants' conduct, as more fully described
herein, has been orchestrated to protect the positions and
corresponding perquisites and other benefits received by the
Individual Defendants as officers and/or directors of Lotus.
Defendants are breaching their fiduciary duties to plaintiff and
the members of the Class (as defined below) by summarily
rejecting and/or interfering with the Offer without adequate
investigation or any other procedures to determine whether the
Offer presents an opportunity to maximize the value of Lotus
shares, thus wrongfully depriving plaintiff and the members of
the Class of the full value of their shares.
CLASS ACTION ALLEGATIONS
13. Plaintiff brings this action pursuant to Rule 23 of
the Rules of this Court, on behalf of herself and all other
stockholders of Lotus as of June 5, 1995 (the "Class"). Excluded
from the Class are defendants herein, members of their immediate
families, and any subsidiary, firm, trust, corporation, or other
entity related to or
<PAGE>
affiliated with any of the defendants and their successors in
interest, who are or will be threatened with injury arising from
defendants' actions.
14. This action is property maintainable as a class
action for the following reasons:
(a) The Class is so numerous that joinder of all
members is impracticable. While the exact number of class members
is unknown to plaintiff at this time and can only be ascertained
through appropriate discovery, there are more than approximately
48 million shares of Lotus common stock held by hundreds of
shareholders of record who are members of the Class. The holders
of these shares are believed to be geographically dispersed
throughout the United States. Lotus stock is listed and actively
traded on the NASD.
(b) there are questions of law and fact which are
common to members of the Class and which predominate over
questions affecting only individual members. The common questions
include, inter alia, the following:
(i) whether defendants have engaged in conduct
constituting unfair dealing to the detriment of the Class;
(ii) whether defendants' summary rejection or
interference of the Offer is grossly unfair to the Class;
(iii) whether defendants are engaging in a plan or
scheme to thwart and/or summarily reject offers that may
<PAGE>
maximize the value of shareholders' investment in Lotus, to
the detriment of the Class;
(iv) whether defendants are engaging in a plan or
scheme to entrench themselves at the expense of the public
stockholders of Lotus and/or unfairly to obtain for themselves
the benefits and business of the Company;
(v) whether plaintiff and the other members of the
Class would be irreparably damaged if defendants' summary
rejection of the Offer is not enjoined;
(vi) whether defendants have breached fiduciary and
other common law duties owed by them to the Class; and
(vii) whether defendants have failed to take
appropriate measures to ensure the realization of the maximum
value of the Lotus stock held by the Class;
(c) the claims of plaintiff are typical of the claims
of the other members of the Class and plaintiff has no interest
that is adverse or antagonistic to the interest of the Class;
(d) plaintiff is committed to prosecuting this action
and has retained counsel competent and experienced in litigation
of this nature. Plaintiff is an adequate representative of the
Class and will fairly and adequately protect the interests of the
Class;
<PAGE>
(e) plaintiff anticipates that there will be no
difficulty in the management of this litigation; and
(f) a class action is superior to other available
methods for adjudication of this controversy.
SUBSTANTIVE ALLEGATIONS
The Offer by IBM
15. On June 5, 1995, it was publicly disclosed that IBM
will commence a tender to purchase Lotus in an all-cash tender
valued at $60.00 a share, or approximately $3.3 billion. The
Offer represents about a 100% premium over the $32.50 closing
price of Lotus' common stock on Friday, June 2, 1995, and more
than 100% over the 52 week low of $29.25 as of June 1, 1995.
16. In response to the Offer, Lotus common stock, on
June 5, 1995, rose $27.25 to $59.75.
17. In spite of this Offer to Lotus' shareholders by
IBM, it was reported that Lotus executives were not publicly
responding to the Offer. Lotus has been unresponsive to IBM's
friendly overturns of a business combination and has refused to
discuss redemption to the Rights Plan, which plan would block the
realization of the Offer.
<PAGE>
18. The Offer presents plaintiff and the Class an
outstanding opportunity to maximize the value of their Lotus
shares for the following reasons:
(a) Lotus' has struggled with declining earnings, and
the Company is not poised for future growth. Indeed, on June 1,
1995, its stock closed at a new 52 week low, illustrating its
poor financial performance.
(b) The market showed great enthusiasm for the
disclosure of IBM's offer. The market price of common shares of
Lotus almost doubled in early trading.
(c) the Offer presents a valuable opportunity to
maximize shareholder value through negotiation of the Offer and
putting Lotus up for auction.
CAUSE OF ACTION AGAINST ALL DEFENDANTS
19. The Individual Defendants have breached their
fiduciary duties to plaintiff and the Class by rejecting the
Offer out-of-hand without fully evaluating or becoming fully
informed with regard to the Offer and without taking any steps to
maximize shareholder value for plaintiff and the members of the
Class.
20. By virtue of the acts and conduct herein, the
Individual Defendants are not acting in good faith and have
breached their fiduciary and other common law duties which
<PAGE>
they owe to plaintiff and the other members of the Class, have
engaged in unfair dealing for their own benefit and the detriment
of the Class, and have pursued a course of conduct designed to
entrench themselves in their positions of control within the
Company.
21. The Individual Defendants have violated their
fiduciary duties owned to plaintiff and the other members of the
Class in that they have not and are not exercising independent
business judgment and have acted and are acting to the detriment
of the Class in order to benefit themselves and solidify their
positions of control and enjoyment of the perquisites of office.
22. As a result of the foregoing, defendants' summary
rejection of the Offer is a breach of the defendants' fiduciary
duties and should be enjoined.
23. Plaintiff lacks an adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this action to be a proper class action
and certifying plaintiff as the representative of the Class;
(b) declaring defendants' rejection of the Offer to be
a breach of defendants' fiduciary duties of loyalty, due care,
good faith, fair dealing, and candor to plaintiff and the Class;
<PAGE>
(c) ordering the Individual Defendants to carry out
their fiduciary duties to plaintiff and the other members of the
Class by:
(i) rescinding, redeeming or invalidating the adoption
or implementation of the Company's Rights Plan;
(ii) requiring defendants to consider the Offer in good
faith, to take all possible measures maximizing the value of
Lotus stock by, for example, engaging in a course of due
diligence and negotiating with IBM, or otherwise maximizing the
value of the Company to plaintiff and the Class; and
(iii) requiring defendants to make full and fair
disclosure of the Offer, the negotiations between Lotus and IBM,
and all other matters concerning a possible acquisition or merger
of Lotus which a reasonable investor would consider important;
(d) ordering defendants, jointly and severally, to pay
to plaintiff and other members of the Class all damages suffered
and to be suffered by them as a result of the acts and
transactions alleged herein;
(e) awarding plaintiff the costs and disbursements of
this action, including a reasonable allowance for plaintiff's
attorneys and experts' fees; and
<PAGE>
(f) granting such other and further relief as the Court
may deem just and equitable.
Dated: June 6, 1995
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By:
------------------------
First Federal Plaza,
Suite 214
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
Of Counsel:
FARUQI & FARUQI
415 Madison Avenue
New York, New York 10017
(212) 986-1074
ROBERT C. SUSSER, P.C.
6 East 43rd Street
Suite 1900
New York, New York 10017
EXHIBIT (g)(13)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
-----------------------------------x
JOSEPH E. KASSOWAY TRUST, :
JOSEPH E. KASSOWAY and ROBERT :
T. KASSOWAY, Trustees UAD :
4/11/91 : Civil Action
: No. 14332
Plaintiff, :
:
v. :
:
JIM P. MANZI, RICHARD S. :
BRADDOCK, ELAINE L. CHAO, :
WILLIAM H. GRAY, III, MICHAEL :
E. PORTER AND HENRI A. :
TERMEER and LOTUS DEVELOPMENT :
CORP. :
Defendants. :
-----------------------------------x
AMENDED CLASS ACTION COMPLAINT
Plaintiff, by its attorneys, alleges upon information
and belief, except for paragraph 6 hereof, which is alleged
upon knowledge, as follows:
1. Plaintiff brings this action pursuant to Rule 23
of the Rules of the Court of Chancery on its behalf and as a
class action on behalf of all persons (other than the
defendants and those in privity with them) and entities who
own publicly traded securities of Lotus Development Corp.
("Lotus" or the "Company").
<PAGE>
2
BACKGROUND
----------
2. Lotus, once the preeminent designer and
manufacturer of desktop applications software, has suffered
a substantial decline in earnings and stock value over the
last year under the management of defendant Jim Manzi
("Manzi"), the President, CEO and Chairman of the Board of
Lotus. From a 24-month high of $85.50 on March 17, 1994,
Lotus common stock recently traded as low as $29.25. In
line with the Company's apparently inexorable downward
spiral of earnings and market share, on January 25, 1995,
the Company announced a 51% drop in net income for its
fourth quarter ended December 31, 1994, and a 30% decrease
in earnings for the year compared to 1993 results.
3. Manzi and the other directors of Lotus have
improperly conditioned their willingness to consider or
pursue offers on Manzi maintaining independent control over
the Company. Thus, in the past Manzi and the other
directors have proven intractable to overtures by the
International Business Machines Corporation ("IBM") and have
apparently failed to pursue other potential purchasers.
Following months of unsuccessful negotiations between IBM
and Lotus, on June 5, 1995, IBM announced that its plans to
commence a hostile, $60 per share all-cash tender offer for
all outstanding common shares of Lotus stock (the "Offer").
<PAGE>
3
4. The directors have a fiduciary duty to fully
apprise themselves of all reasonably available options to
maximize shareholder value,, including the Offer, resumption
of merger negotiations with IBM for a better price and
soliciting companies other than IBM which might have
interest in acquiring Lotus and its assets. The directors'
failure to do so violates their duty of due care to the
shareholders of Lotus.
THE PARTIES
-----------
5. Plaintiff Joseph E. Kassoway Trust, Joseph E.
Kassoway and Robert T. Kassoway, Trustees UAD 4/11/91 (the
"Plaintiff"), owns shares of Lotus common stock.
6. Defendant Lotus is a corporation organized under
the laws of the State of Delaware. Lotus has its principal
place of business at 55 Cambridge Parkway, Cambridge,
Massachusetts 02142-1295. The Company develops,
manufactures and markets applications software products and
services, with particular emphasis in the area of multiple-
user software. As of February 25, 1995, Lotus had over 48.1
million shares of common stock outstanding.
7. Defendant Manzi is, and has been since 1984,
President of Lotus and, since 1986, Chairman of the Board
and Chief Executive Officer of Lotus. In 1994, Manzi was
compensated in the amount of $909,300.
<PAGE>
4
8. Defendant Richard S. Braddock ("Braddock") is a
director of Lotus.
9. Defendant Elaine L. Chao ("Chao") is a director of
Lotus.
10. Defendant William H. Gray, III ("Gray") is a
director of Lotus.
11. Defendant Michael E. Porter ("Porter") is a
director of Lotus.
12. Defendant Henri A. Termeer ("Termeer") is a
director of Lotus.
13. Manzi, Braddock, Chao, Gray, Porter and Termeer
are collectively referred to herein as the "Individual
Defendants."
14. The Individual Defendants, by reason of their
corporate directorships (and in the case of defendant Manzi,
his executive position), stand in a fiduciary position
relative to the Company's shareholders, which fiduciary
relationship, at all times relevant herein, required the
Individual Defendants to exercise their best judgment, and
to act in a prudent manner, and in the best interests of the
Company's shareholders. They were and are required to use
their ability to control and manage the Company in a fair,
just and equitable manner; to act in furtherance of the best
interests of the Company's shareholders; to refrain from
<PAGE>
5
abusing their positions of control; to act in an informed
manner in responding to offers or expressions of interest to
acquire Lotus or its assets; and not to favor their own
interests at the expense of the Company's shareholders.
15. Each Individual Defendant herein is sued
individually as an aider and abettor, as well as in his
capacity as an officer and/or director of the Company, and
the liability of each arises from the fact that he has
engaged in all or part of the unlawful acts, plans, schemes,
or transactions complained of herein.
CLASS ACTION ALLEGATIONS
------------------------
16. Plaintiff brings this action on its own behalf
and, pursuant to the Rule 23 of the Rules of the Delaware
Chancery Court, on behalf of all stockholders of the Company
(except the defendants herein, its officers and directors
and/or any person, firm, trust, corporation, or other entity
related to or affiliated with any of the defendants) and
their successors in interest, who are or will be threatened
with injury arising from defendants' actions as more fully
described herein (the "Class").
17. This action is properly maintainable as a class
action. The Class is so numerous that joinder of all
members is impracticable. Lotus common stock trades on the
<PAGE>
6
NASDAQ National Market Service. As of February 25, 1995,
there were over 48.1 million shares of Lotus common stock
issued and outstanding. While the exact number of class
members is unknown to the Plaintiff at this time and can
only be ascertained through appropriate discovery, Plaintiff
believes that there are thousands of members of the Class.
18. A class action is superior to other methods for
the fair and efficient adjudication of the claims herein
asserted and no unusual difficulties are likely to be
encountered in the management of this class action. The
likelihood of individual Class members prosecuting separate
claims is remote.
19. There are questions of law and fact which are
common to the Class and which predominate over questions
affecting any individual Class member. The common questions
include, inter alia, the following:
----- ----
(a) whether defendants have breached their fiduciary
duties by failing to reasonably and fairly apprise
themselves of the terms and conditions of the
Offer in order to determine the course of conduct
in the best interest of Lotus shareholders;
(b) whether defendants have and are continuing to
unlawfully impede possible takeover attempts at
the expense of Lotus' public stockholders;
<PAGE>
7
(c) whether defendants have failed and will fail to
negotiate in good faith with prospective
purchasers of the Company; and
(d) whether the Plaintiff and other members of the
Class would be irreparably damaged were the
defendants not enjoined from the conduct described
herein below.
20. The prosecution of separate claims would create a
risk of either inconsistent or varying adjudications
concerning individual members of the Class, which would
establish incompatible standards of conduct for the party
opposing the Class, and adjudications concerning individual
members of the Class would, as a practical matter, be
dispositive of the interests of other members of the Class
who are not parties to the adjudications or substantially
impair or impede the ability of other members of the Class
who are not parties to the adjudications, to protect their
interests. The defendants have acted on grounds generally
applicable to all members of the Class, making relief
concerning the Class as a whole appropriate.
21. Plaintiff is committed to prosecuting this action
and has retained competent counsel experienced in litigation
of this nature. The claims of the Plaintiff are typical of
the claims of other members of the Class and the Plaintiff
<PAGE>
8
has the same interests as the other members of the Class.
Plaintiff is an adequate representative of the Class. A
class action poses no management problems and this case is
ideally suited for class action certification.
SUBSTANTIVE ALLEGATIONS
-----------------------
22. Lotus was one of first major software companies to
successfully design and manufacture desktop applications
products, one of the most famous being the spreadsheet
software, Lotus 1-2-3. Once the market giant, Lotus, under
the control and direction of Manzi and the current board,
has continually declined in stock price and earnings. For
example, the stock, which traded at a 24-month high of
$85.50 on March 17, 1994, has fallen as low as $29.25 in
past weeks.
23. This steady drop in stock price directly
correlates with the Company's dismal financial earnings and
profitability. Specifically, on January 25, 1995, the
Company announced a 51% drop in net income (from $29.6
million, or 64 cents per share to $14.4 million, or 30 cents
per share) for its fourth quarter ended December 31, 1994,
as compared to the same period, 1993. Likewise, the
Company's year-end earnings declined 30% from the year prior
<PAGE>
9
period, from $75.4 million, or $1.69 per share, to $52.8
million, or $1.08 per share.
24. The Investor Business Daily noted in a June 6,
-----------------------
1995 article that:
Lotus, the world's third-largest personal computer
software company after Microsoft and Novell Inc.,
once owned the market for spreadsheet software.
But Microsoft has overtaken it and has severely
eaten into Lotus' market share in PC software.
***
The company lost $17 million, or 36 cents a Share,
in the first quarter [1995], against net income of
$21.3 million, or 45 cents, a year earlier.
Revenue fell 18% to $203 million from $247
million. Lotus' revenue for desktop software
applications dropped sharply in the latest
quarter, to $118 million from $178 million.
25. Lotus has been "for sale" for some time. A New
---
York Times column, dated June 7, 1995, stated:
----------
There is no doubt Lotus is for sale. Mr. Manzi is
known to have offered the company last year to
AT&T for $100 per share.
Similarly, The Wall Street Journal reported on June 6, 1995
-----------------------
that "One associate of Mr. Manzi says that he recently
commented he wouldn't sell out for less than $80 a share."
26. In the face of Company's willingness to be
acquired, IBM was unsuccessful in its efforts to negotiate a
friendly acquisition of the Company over the past five
months. During the period from August 1994 through March
1995, IBM and Lotus representatives discussed a variety of
<PAGE>
10
potential agreements between the companies. During these
discussions, Manzi repeatedly stated that he was not
interested in IBM's acquiring all or a substantial portion
of the Company's stock. In an apparent effort to maintain
control, Manzi indicated that would object to IBM's holding
greater than a 15% equity interest in the Company and to
agreeing to IBM's having any Board representation at Lotus.
As the result of Manzi's recalcitrant refusal to deal with
IBM, on June 5, 1995, IBM announced it was making a hostile,
all-cash tender offer for Lotus' outstanding shares of
common stock at $60 per share.
27. The Dow Jones News Wire reported on June 5, 1995
-------------------
that:
International Business Machines Corp. (IBM) said
that it had tried unsuccessfully for five months
to convince Lotus Development Corp. (LOTS) to
sell. During the press conference, IBM Chief
Executive Louis V. Gerstner Jr. said he hoped to
return to the table rather than proceed with [the]
hostile tender offer ... .
28. The Los Angeles Times said on June 6, 1995 that:
---------------------
Whether the acquisition remains a hostile one will
likely be up to Manzi, a strong-willed, often-
criticized executive who dominates the company
board. His reluctance to accept IBM's lucrative
offer raised more than a few eyebrows in the
computer business, where Manzi -- a one-time
journalist -- has long been held in low esteem.
During Manzi's watch, Lotus lost its lucrative
franchise in spreadsheet. Notes revenues have
failed to compensate for the rapidly declining
sales of Lotus 1-2-3. The company surprised Wall
<PAGE>
11
Street last quarter by reporting a $21.3 million loss.
A painful restructuring, including layoffs, has
followed.
'Morale is very low,' said Jeffrey Tarter, editor
of Softletter, an industry newsletter. 'This may
be the first case where the employees open the
gates to let in the invader.'
29. Manzi, is the single largest individual
shareholder of Lotus, presently holding approximately 1.1
million shares, or 2% of the outstanding shares, after
recently selling over 22,000 shares.
30. The Wall Street Journal Europe offered one
------------------------------
explanation for Manzi's intractable attitude toward IBM and
the Offer. By article dated June 7, 1995, The Wall Street
---------------
Journal Europe reported that should the Offer be consummated
--------------
or Lotus otherwise come to an agreement to merge with IBM,
Manzi will likely be forced to step down as the head of
Lotus:
Lotus President and Chief Executive Officer Jim P.
Manzi is clearly dismayed by the offer, and is
unlikely to stay on.
Indeed, relevant to the Individual Defendants' attitude
toward other potential offerors of the Company, a New York
--------
Times article dated June 8, 1995 stated that friends of
-----
Manzi described him as being "emotionally devastated by the
prospect of losing control of Lotus."
<PAGE>
12
31. Ironically in considering the best interests of
the shareholders and employees, The Wall Street Journal
-----------------------
Europe article went on to state:
------
But most key employees would be willing to stay.
'The truth is, 99% of the company, as soon as
Manzi walks out the door, they're doing
handsprings,' says one person familiar with Lotus'
executive suite.
32. On June 2, 1995 Lotus announced a restructuring
and reorganization plan, under the defendant Braddock's
leadership. The reorganization plan was apparently a
response to increasing market pressures resulting from the
Company's abysmal recent performance, including the first-
quarter 1995 18% sales decline. Analysts noted that similar
restructuring efforts "by the company in the past to cut
costs have proved ineffective."
33. In contrast, however, the Offer constitutes a
premium of approximately 85% above Lotus' stock price even
after Lotus' restructuring announcement and proposes a
transaction that is valued at over $3.3 billion. Moreover,
there is no uncertainty associated with the Offer. Whereas
the Company's past restructuring efforts have met with
failure, the all-cash, fully financed Offer assures Lotus
stockholders that the value of their shares will be
substantially and materially enhanced. Moreover, the Offer
is subject to a "minimum tender" condition, i.e., it is
----
<PAGE>
13
conditioned on there being tendered a majority of all
outstanding shares on a fully diluted basis. Thus, the
Offer will not be consummated unless holders of a majority
of the Company's shares support it.
34. In addition to the IBM Offer, the Company has
apparently failed to pursue overtures or potential interest
from certain other sources to acquire Lotus based, in part,
on what The New York Times calls "Mr. Manzi's desire to keep
------------------
the company independent." (June 8, 1994 article).
35. Manzi and the other Individual Defendants are
required to resolve any conflicts of interest, such as
preserving the prestige of his position as the power and
force behind Lotus, in favor of the shareholders of the
Company.
36. The other Individual Defendants of Lotus likewise
have a fiduciary duty to work for the best interests of the
Company shareholders which, at a minimum, imposes on them
the responsibility to fully apprise themselves of all the
terms and conditions of the Offer and to actively explore
other expressions of interest or potential interest for the
acquisition of the Company. Any failure or refusal to do
so on the part of the Individual Defendants could not be in
accord with any rational or legitimate business purpose and
thus could not be protected by the business judgment rule.
<PAGE>
14
37. Defendants have in place a poison pill and other
defensive devices designed to thwart any third-party
acquisition such as the Offer.
38. The Individual Defendants may not act with respect
to any merger overtures from IBM or interest or potential
interest from certain other companies in a manner intended
to entrench their positions of power and control with Lotus,
to the potential detriment of Lotus shareholders.
39. Any arguments by Manzi or the other Individual
Defendants that they can protect the best interests of the
Company or offer the best value for shareholders by
maintaining their control, through the proposed
restructuring or some other yet to be disclosed plan, is not
credible. The June 8, 1995 The New York Times article
------------------
quoted Lanette Donovan, senior securities analyst at the
College Retirement Equities Fund (which owns more than
900,000 Lotus shares) as stating:
'I'd have to understand what Lotus thinks they
could achieve being quasi-independent instead of
having I.B.M.'s $10 billion behind them. ...
Current management has not been able to realize
that value for shareholders, and given its
history, it would be difficult to believe that
Manzi could execute a strategy to realize that
value for shareholders.
40. The Individual Defendants have at all times been
fiduciaries of Lotus shareholders. As set forth herein,
they have breached and are continuing to breach their
<PAGE>
15
fiduciary duties to Lotus shareholders in order to entrench
themselves in office, to continue receiving their
compensation, fees and emoluments and to enjoy the power and
prestige of controlling the Company by failing and/or
refusing to adequately consider and evaluate legitimate
offers to buy the outstanding common stock of the Company at
prices which act to maximize shareholder value and, instead,
preferring their own inadequate restructuring effort.
41. Plaintiff and the other members of the Class have
been and will be damaged in that they are being denied the
opportunity to realize a substantial premium for their
shares of Lotus common stock.
42. Plaintiff and the Class have no adequate remedy at
law.
WHEREFORE, Plaintiff demands judgment, as follows:
A. Declaring this to be a proper class action;
B. Preliminarily and permanently enjoining the
Individual Defendants to carry out their fiduciary duties to
Plaintiff and the other members of the class to:
1. cooperate fully with any person or entity, having
a bona fide interest in proposing any transaction which
---- ----
would maximize shareholder value, including, but not
limited to, a buyout or takeover of the Company;
<PAGE>
16
2. undertake an appropriate evaluation of Lotus'
worth as a merger/acquisition candidate;
3. take all appropriate steps to enhance Lotus' value
and attractiveness as a merger/acquisition candidate;
4. take all appropriate steps to effectively expose
Lotus to the marketplace in an effort to create an
active auction for Lotus;
5. take proper action to maximize the price that
Lotus shareholders will receive for their shares;
6. act independently so that the interests of Lotus'
public stockholders will be protected; and
7. adequately ensure that no conflicts of interest
exist between Individual Defendants' own interest and
their fiduciary obligation to maximize stockholder
value or, if such conflicts exist, to ensure that all
conflicts are resolved in the best interests of Lotus'
public stockholders.
C. Ordering the Individual Defendants to carry out
their fiduciary duties to Plaintiff and the Class and
requiring them to respond in good faith to any bona fide
---- ----
potential acquirors of Lotus;
D. Awarding Plaintiff the costs and disbursements of
the action, including a reasonable allowance for Plaintiff's
attorneys' and experts' fees; and
<PAGE>
17
E. Granting such other and further relief as may be
just and proper.
Dated: June 9, 1995
MORRIS AND MORRIS
By: /s/ Morris and Morris
---------------------
Irving Morris
Karen Morris
Abraham Rappaport
Patrick F. Morris
Suite 1600
1105 North Market Street
Post Office Box 2166
Wilmington, Delaware 19899-2166
(302) 426-0400
Attorneys for Plaintiff
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
-----------------------------------x
JOSEPH E. KASSOWAY TRUST, :
JOSEPH E. KASSOWAY and ROBERT :
T. KASSOWAY, Trustees UAD :
4/11/91 : Civil Action
: No. 14332
Plaintiff, :
:
v. :
:
JIM P. MANZI, RICHARD S. :
BRADDOCK, ELAINE L. CHAO, :
WILLIAM H. GRAY, III, MICHAEL :
E. PORTER AND HENRI A. :
TERMEER and LOTUS DEVELOPMENT :
CORP. :
Defendants. :
-----------------------------------x
CERTIFICATE OF SERVICE
----------------------
I, Patrick F. Morris hereby certify that on June 9,
1995, I caused one copy of the foregoing Amended Class
Action Complaint, as well as a redlined version of the
Amended Class Action complaint, to be served by hand on,
Registered Agent, The Prentice-Hall Corporation System,
Inc., 32 Loockerman Square, Suite L100, Dover, Delaware
19901, the Registered Agent for the following defendants:
a. JIM P. MANZI,
b. RICHARD S. BRADDOCK,
c. ELAINE L. CHAO,
d. WILLIAM H. GRAY, III,
e. MICHAEL E. PORTER,
f. HENRI A. TERMEER, and
g. LOTUS DEVELOPMENT CORP.
/s/ Patrick F. Morris
---------------------
EXHIBIT (g)(14)
UNITED STATES DISTRICT COURT
DISTRICT OF DELAWARE
------------------------------
STEVEN G. COOPERMAN, )
) Civil Action
Plaintiff,) No. 95-346
)
-against- ) CLASS ACTION
------------
) COMPLAINT
---------
LOTUS DEVELOPMENT CORPORATION,)
JIM P. MANZI, RICHARD S. )
BRADDOCK, ELAINE L. CHAO, )
WILLIAM H. GRAY III, ) JURY TRIAL DEMANDED
MICHAEL E. PORTER and HENRI A.) -------------------
TERMEER, )
)
Defendants.)
)
------------------------------
Plaintiff, by his undersigned attorneys, for his
complaint against defendants (the "Complaint"), alleges the
following upon information and belief, except as to
Paragraph 11 hereof, which is alleged upon personal
knowledge. Plaintiff's information and belief is based
upon, among other things, the investigation made by
plaintiff's attorneys, which investigation included, without
limitation: (a) review and analysis of filings made by
defendants with the Securities Exchange Commission ("SEC");
(b) review and analysis of securities analysts' reports
concerning defendant Lotus Development Corporation ("Lotus"
or the "Company"); (c) review and analysis of press releases
distributed by defendants; and (d) review and analysis of
<PAGE>
various reports concerning the Company which have appeared
in newspapers, magazines and trade publications. Certain
facts relevant to the causes of action alleged herein are in
the exclusive custody and control of the defendants and are
unavailable to plaintiff because, inter alia, (a) such
----- ----
matters are reflected or memorialized in internal documents
that are not publicly available and (b) plaintiff has not
had the opportunity to gain access to this information
through discovery or by other means.
Nature of the Action
--------------------
1. This is a shareholders' class action lawsuit
on behalf of the public shareholders of defendant Lotus.
These shareholders are currently being deprived of the
opportunity to realize the full benefits of their investment
in Lotus.
2. On June 5, 1995, International Business
Machines Corporation ("IBM") and its wholly-owned subsidiary
White Acquisition Corp. ("White Acquisition") jointly
announced their intention to commence an all-cash tender
offer for all outstanding shares of Lotus common stock at a
price of $60 per share (the "Offer"). That price
represented an 85% premium over the trading price of the
Company's shares before the Offer was announced and in
excess of a 100% premium over the price at which Lotus
-2-
<PAGE>
common stock had traded only a week earlier. IBM and White
Acquisition simultaneously announced their intention to
conduct a consent solicitation to remove and replace Lotus'
incumbent directors with other candidates and to pursue
other measures intended to facilitate a sale of the Company.
3. Instead of taking all reasonable steps to
assure the maximization of shareholder value, including the
implementation of bidding mechanisms to foster a fair
auction of the Company to the highest bidder or the
exploration of strategic alternatives which will return
greater or comparable short-term and long-term value to
plaintiff and the class, the Individual Defendants, the
directors of Lotus, have wrongfully refused to properly
consider a bona fide offer for the Company at a price that
---- ----
is almost double the market price of Lotus common stock
prior to the announcement of the Offer. Defendants' conduct
is in abrogation of their fundamental fiduciary duties to
the public stockholders of Lotus to seek to maximize the
value of the Company's stock.
4. Plaintiff has also brought this action to
ensure that he and other Lotus public shareholders are not
unconstitutionally deprived of the rights and protection
they enjoy under Section 14 of the Securities Exchange Act
(the "Exchange Act") in connection with the Offer. It is a
-3-
<PAGE>
condition of the Offer that the Massachusetts Control Share
Acquisition Statute, Mass. Gen. L. ch. 110E ("Chapter 110E")
be rendered invalid or otherwise inapplicable with respect
to the Offer. However, Lotus and its directors, in an
effort to thwart the sale of the Company, are likely to
invoke the protections of Chapter 110E to block the Offer
and/or the Consent Solicitation. Lotus also has available
and may also seek to utilize the restrictions imposed by the
Massachusetts Anti-Takeover Statute, Mass. Gen. L. ch. 110C
("Chapter 110C"). As a result, both on their face and/or as
applied in these circumstances, Chapters 110E and 110C
threaten to unlawfully interfere with the manner and process
of plaintiff's and other class members' exercise of the
voting rights associated with their Lotus stock and the free
transferability of their shares in interstate commerce.
5. The conduct complained of herein is designed
by the Individual Defendants and other members of Lotus
senior management to entrench the officers and directors of
Lotus in the management and control of Lotus and to advance
their own personal defendants' interests at the expense of
Lotus' public shareholders. Indeed, defendants' present
conduct represents the culmination of a series of steps
which the Individual Defendants have taken to deter and
ultimately thwart any efforts to acquire the Company which
-4-
<PAGE>
they have not initiated or approved. In furtherance of
these efforts, the Individual Defendants have adopted and
utilized, among other defensive weapons, a stockholder
rights plan, dated November 7, 1988, known in the parlance
of the financial marketplace as a "poison pill," which is
designed to deter unsolicited acquisition offers by creating
severe economic penalties for any person attempting to
effect a business combination with Lotus without the
approval of the Individual Defendants.
6. Plaintiff also brings this action pursuant to
Section 14(a) of the William Act and Rule 14a-9 promulgated
thereunder seeking a determination that the election of
directors and Lotus' annual meeting held on May 2, 1995 was
invalid and void because the proxy statement disseminated in
connection therewith omitted material facts in breach of the
Lotus' directors' fiduciary duties of disclosure. The Court
should, inter alia, order a new annual meeting to be held
----- ----
forthwith after full disclosure of all material facts.
7. Preliminary and permanent injunctive relief
are sought to protect Lotus public shareholders from the
imminent and/or immediately threatened breach of duties owed
to them by the Individual Defendants.
-5-
<PAGE>
JURISDICTION AND VENUE
----------------------
8. The claims asserted herein arise pursuant to
Section 14(a) of the Exchange Act, 15 U.S.C. Sec. 78n(a), and
the rules and regulations promulgated by the SEC thereunder,
the Constitution of the United States of America and under
applicable state law.
9. This Court has subject matter jurisdiction
over this section pursuant to (a) Section 27 of the Exchange
Act, 15 U.S.C. Sec. 78aa; and (b) 28 U.S.C. Sec.Sec. 1331(a),
1332, 1337(a), 1343(a), 1367(a), and 2201. To plaintiff's
knowledge, he is a citizen of a state in which no defendant
is a citizen. The matter in controversy exceeds the sum of
$50,000, exclusive of interest and costs.
10. Venue is appropriate in this District pursuant
to 28 U.S.C. Sec. 1391(b) and (c). Defendant Lotus is
incorporated in the State of Delaware and certain of the
acts and occurrences underlying this Complaint have occurred
in this District.
PARTIES
-------
11. Plaintiff Steven G. Cooperman is an owner of
Lotus common stock who has been damaged and is threatened
with further injury by the wrongful actions of the
defendants as set forth herein. Plaintiff brings this
-6-
<PAGE>
action as a class action on behalf of the public
shareholders of Lotus.
12. (a) Defendant Lotus is a Delaware corporation
with its principal executive office at 55 Cambridge Parkway,
Cambridge, Massachusetts 02142.
(b) The Company and its subsidiaries are
engaged in the development, manufacture, licensing,
marketing and support of software products and services for
individuals and businesses. The Company's products and
services principally consist of desktop applications
products and communications products and services.
(c) The Company introduced its Lotus Notes
software in 1990 to position itself to capitalize on the
increasing trend toward networked computing and information
sharing in an organization setting. Notes has been widely
acclaimed and has established widespread and increasing
consumer acceptance for client-server applications.
(d) As of February 25, 1995, there were
48,196,026 shares of Lotus common stock outstanding.
13. (a) Defendants Jim P. Manzi ("Manzi"),
Richard S. Braddock, Elaine L. Chao, William H. Gray III,
Michael E. Porter and Henri A. Termeer (collectively, the
"Individual Defendants") constitute the full Board of
Directors of Lotus (the "Board").
-7-
<PAGE>
(b) Defendant Manzi also serves as Chairman
of the Board, President and Chief Executive Officer. In the
year ended December 31, 1994, defendant Manzi received
$909,300 in salary and other compensation from Lotus and
200,000 stock options.
(c) Each of the Individual Defendants
receives substantial annual compensation from defendant
Lotus. In addition, in derogation of their fiduciary duties
to the Company's stockholders, each has personal and
financial interests in thwarting any threat to the continued
incumbency and control exercised by Lotus' senior
management. Each non-management director receives an annual
fee of $24,000 and on January 1, 1995, each of these persons
additionally received an option to acquire 10,000 shares of
Lotus common stock at $40.50 per share, among other
substantial benefits and perquisites of office.
(d) As of February 1, 1995, Lotus' directors
and officers owned beneficially 1,594,572 shares, or 3.3% of
the Company's common stock.
14. By virtue of their positions as directors
and/or officers of Lotus and their exercise of control over
the business and corporate affairs of Lotus, the Individual
Defendants have, and at all relevant times had, the power to
control and influence, and did control and influence and
-8-
<PAGE>
cause Lotus to engage in the practices complained of herein.
Each Individual Defendant owed and owes Lotus and its
stockholders fiduciary obligations and were and are required
to use their ability to control and manage Lotus in a fair,
just and equitable manner; act in furtherance of the best
interests of Lotus and its stockholders to maximize
stockholder value; govern Lotus in such a manner as to heed
the expressed views of its public shareholders; refrain from
abusing their positions of control; and refrain from
advancing their own interests at the expense of Lotus and
its stockholders.
15. By virtue of the acts and conduct alleged
herein, the Individual Defendants, who control the actions
of Lotus, are breaching their fiduciary duties to the public
shareholders of Lotus.
16. The Individual Defendants are sued
individually and as co-conspirators and (as to non-Exchange
Act claims) aiders and abettors, an well as in their
capacity as officers and/or directors of Lotus, and the
liability of each arises from the fact that they have
engaged in all or part of the unlawful acts, plans, schemes,
or transactions complained of herein.
-9-
<PAGE>
CLASS ACTION ALLEGATIONS
------------------------
17. Plaintiff brings this action on behalf of
himself and as a class action pursuant to Rule 23 of the
Federal Rules of Civil Procedure on behalf of all
stockholders of the Company (except the defendants herein
and any person, firm, trust, corporation, or other entity
related to or affiliated with any of the defendants and
their successors in interest, who are or will be threatened
with injury arising from defendants' actions as more fully
described herein (the "Class").
18. This action is properly maintainable as a
class action for the following reasons:
(a) The Class is so numerous that joinder of
all members is impracticable. As of February 25, 1995,
Lotus had in excess of 48,000,000 shares Of common stock
outstanding held by thousands of shareholders of record and
beneficial owners scattered throughout the United States.
(b) The parties opposing the Class have
acted or refused to act on grounds generally applicable to
the Class, thereby making appropriate the final injunctive
and declaratory relief requested herein. Plaintiff and the
Class have a common and undivided interest in obtaining the
injunctive and declaratory relief requested herein.
-10-
<PAGE>
(c) There are questions of law and fact
which are common to the Class and which predominate over
questions affecting any individual Class member. These
common questions include, inter alia, the following:
----- ----
(i) whether the Individual Defendants have
breached the fiduciary and other common law duties owed by
them to plaintiff and other members of the Class by, inter
-----
alia, failing and refusing to attempt in good faith to
----
maximize shareholder value in the contemplated acquisition
of Lotus by a third party;
(ii) whether defendants are wrongfully impeding
takeover attempts at the expense of Lotus' public
stockholders;
(iii) whether Chapter 110E and Chapter 110C
unconstitutionally violate the Commerce Clause and the
Supremacy Clause of the United States Constitution;
(iv) whether defendants have engaged and are
continuing to engage in a plan and scheme to entrench
themselves in their positions of control within Lotus at the
expense of Lotus' public stockholders;
(v) whether the election of directors at the
Company's May 2, 1995 annual meeting was invalid;
(vi) whether plaintiff and the other members
of the Class would be irreparably damaged were the
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Individual Defendants not enjoined from continuing in the
conduct described in this Complaint; and
(vii) whether plaintiff and the other members
of the Class are being or will continue to be injured by the
wrongful conduct alleged herein and, if so, what is the
proper rendering and/or measure of damages.
19. The claims of plaintiff are typical of the
claims of other members of the Class and plaintiff has the
same interests as the other members of the Class. Plaintiff
is an adequate representative of the Class and has retained
counsel experienced in class and shareholder litigation.
Plaintiff will fairly and adequately protect the interests
of the Class.
20. A class action in superior to other available
methods for the fair and efficient adjudication of this
action, and no unusual difficulties are likely to be
encountered in the management of this class action. The
likelihood of individual class members prosecuting separate
claims is remote.
SUBSTANTIVE ALLEGATIONS
-----------------------
IBM Attempts To Interest Lotus
In A Friendly Transaction
------------------------------
21. IBM, which has unsuccessfully tried to develop
its own software and networking product lines over the past
few years, views Lotus as a natural match for its own
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<PAGE>
efforts in the computer and software industries. According
to an article appearing in The Wall Street Journal on
-----------------------
June 6, 1995, "IBM's broadside came after two years of
cajoling and coaxing of Lotus and Mr. Manzi". The Wall
--------
Street Journal added: "Various top IBM executives,
--------------
including James Cannavino, who recently left the position of
top strategist, had made the trek to Cambridge to woo
Mr. Manzi over the past year. The idea was to put Lotus in
charge of developing IBM's networking products -- an
approach IBM reiterated yesterday -- while putting IBM's
marketing muscle and access to larger corporate accounts
behind Lotus. 'It's a win-win for both,' Mr. Cannavino
says."
22. In August 1994, when Cannavino met with Manzi
to discuss additional opportunities for the two companies to
work together, Manzi suggested a joint venture in the
desktop application area, and also expressed interest in
selling this division of Lotus to IBM. IBM declined that
offer, but the companies continued to discuss possible
collaboration.
23. In January 1995, when IBM Senior Vice
President John M. Thompson took over control of a newly
consolidated software group, he met with Manzi. At that
time Manzi again proposed that IBM acquire the Company's
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desktop application business or enter into a joint venture
with respect to that business. Mr. Thompson again expressed
IBM's interest in acquiring the entire Company, but
Mr. Manzi indicated that Lotus (as opposed to the desktop
application business) was not for sale.
24. In February and March 1995, Manzi and Thompson
continued to discuss a possible transaction. Thompson
indicated that IBM would be interested in acquiring an
interest in Lotus' communications business, but Manzi
rejected IBM's owning more than a small minority share in
that business. Discussions also continued regarding a 50/50
joint venture with respect to the desktop application
business and IBM's acquisition of a 15-20% interest in the
entire Company.
25. In March 1995, the two executives again
reviewed possible transactions, with Manzi continuing to
firmly resist an acquisition by IBM of the entire Company.
26. Later that month, in a letter, Thompson
mentioned IBM's having board representation to accompany an
equity position. Manzi responded that he never agreed to
permit IBM to have a board position.
The 1995 Annual Meeting of Shareholders
---------------------------------------
27. On May 2, 1995, pursuant to a proxy statement
issued on or about March 20, 1995, Lotus held its annual
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<PAGE>
meeting of shareholders. At that meeting, each of the
Individual Defendants was elected or re-elected to the Lotus
Board. In addition, at that meeting, the directors obtained
shareholder approval of an amendment to the 1992 Stock
Option Plan to increase the authorized number of shares of
Lotus common stock that may be offered under the plan from
6,000,000 to 12,000,000. As of February 1, 1995, only
295,000 shares of common stock remained available for grant
pursuant to the 1992 Stock Option Plan.
28. Defendant Manzi, speaking at the meeting,
reportedly "apologized to shareholders, saying 'there are no
excuses' for the Company's recent first quarter loss and
[he] vowed that the ax has already begun to fall on about
$50 million in expenses." According to published reports,
"Manzi dismissed a rumor that the Company may be preparing
to sell off the desktop unit. 'We're going to fight like
crazy in the desktop business,'" Manzi stated. Manzi did
not disclose any of the Company's recent contacts with IBM
whereby he had proposed to sell to IBM the desktop
application business, among other material transactions
under discussion.
29. Nor was there any disclosure in the proxy
statement or orally at the meeting with respect to IBM's
serious and repeated expressions of interest in the
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<PAGE>
acquisition of the entire Company in a friendly transaction
and Lotus' and the Individual Defendants' adamant refusal to
consider any such transaction. The shareholders, therefore,
voted to re-elect the directors and to enhance the 1992
Stock Option Plan without access to those material facts.
IBM's Acquisition Proposal
--------------------------
30. According to the Wall Street Journal, "With
-------------------
Mr. Manzi's position seemingly intractable . . . IBM
internally began to view a hostile offer more seriously.
The official decision to make the Offer was sealed in mid-
May, and the board, at a secret meeting in New York last
Wednesday [May 31], approved the decision."
31. On June 5, 1995, IBM Chairman of the Board and
Chief Executive Office, Louis V. Gerstner, Jr., had a letter
delivered to Manzi informing him that, "[b]ecause you have
been unwilling to proceed [with an acquisition], we are
announcing this morning our intention to buy all of Lotus
Development corporation's outstanding common shares. . . .
We believe this is now the fastest, most efficient way to
bring our companies together."
32. On June 6, 1995, IBM and White Acquisition
commenced an unsolicited tender offer for all outstanding
shares of Lotus common stock (together with the associated
preferred share purchase rights issued in connection with
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<PAGE>
Lotus' poison pill) at a price of $60 per share, or
approximately $3.3 billion.
33. The Offer represents a substantial premium
over prevailing market prices. Lotus' stock closed at
$29 1/4 on June 1, 1995, rose to $32 1/2 on June 2 and
soared to $61 7/16 on June 5, after IBM's Offer was
announced.
34. The fact that the market price closed above
the tender offer price indicates that the market believes
that either IBM or another bidder will pay even more than
$60 per share to acquire Lotus.
35. IBM's bid represents a highly attractive
option to Lotus shareholders inasmuch as Lotus -- despite
its development of the innovative and increasingly popular
Notes software product line -- has been unable to generate
consistent growth or profits. In fiscal 1994, Lotus had net
losses of $0.44 per share on net sales of $970,723,000.
Lotus reported a net loss of $0.36 per share for its fiscal
1995 first quarter, a 182% decrease from net income of $21.3
million, or $0.45 per share, in the comparable 1994 period.
First quarter revenues totalled $202.6 million, an 18%
decrease from $247 million in the corresponding 1994 period.
36. In addition to the high offering price, Lotus
can be expected to derive substantial benefit from a
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business combination with a strategic bidder like IBM, since
IBM's powerful financial, technical and marketing
capabilities could greatly enhance the development and
marketing of Lotus' advanced software products and services
while Lotus' sophisticated software and networking expertise
could significantly strengthen IBM in its development of
informational and communications products and services for
its broad customer base.
Lotus' Defensive Mechanism
--------------------------
37. Lotus and the Individual Defendants have
indicated no willingness to negotiate with IBM for a higher
price and have failed to implement any bidding or other
market check mechanisms designed to elicit a superior offer.
38. Indeed, it is reported that Lotus has retained
the services of Wachtell Lipton Rosen & Katz, a New York law
firm which specializes in aiding companies defending against
takeovers, and has also retained the investment bank Lazard
Freres to assist in Lotus' takeover defense.
39. Lotus has a number of defenses available for
use against hostile bids, including its poison pill
shareholder rights plan, provisions of Delaware corporation
law which preclude hostile bidders from merging acquired
businesses until three years after they have gained control
(the "Delaware Business Combination Statute"), 8 Del. Ch.
--------
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<PAGE>
Sec. 203, and Chapters 110E and 110C of the Massachusetts
corporation law. IBM has made its Offer conditional upon
the invalidation of such defenses or their being rendered
inapplicable to the Offer. Absent such action, the Offer
cannot proceed to consummation.
40. Lotus' failure to open meaningful negotiations
with IBM, coupled with the reported meetings with lawyers
and advisors specializing in anti-takeover defense
strategies, indicate that Lotus' Board is not seeking to
maximize shareholder value, as is its duty, but rather is
taking steps to entrench existing management and the
existing Board.
41. In a situation such as this, it is the duty of
the Board to negotiate in good faith to remove obstacles to
potential deals which are in the best interests of the
Company's public shareholders. For one thing, it is within
the power of the Board to redeem the poison pill. Under the
poison pill, which was implemented on November 7, 1988,
stockholders received a dividend of one preferred share
purchase right (a "Right") per share of Common stock owned.
The Rights become exercisable, inter alia, upon a person or
----- ----
group acquiring 15% or more of the Company's shares. Each
Right entitles the holder to purchase from the Company one-
hundredth of a share of a new issue of Lotus preferred stock
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at a price of $75 per unit. If the Rights are
"triggered" -- inter alia, by an acquisition of 15% or more
----- ----
of Lotus' common stock after the Rights become
exercisable -- the Rights will be modified so as to entitle
the holder to receive Lotus common stock (or in certain
circumstances, cash, assets or other securities of Lotus),
having a market value of twice the exercise price of each
Right. Under a "sterilizing" provision of the poison pill,
in the event of an unsolicited takeover, any Rights held by
the acquiror will be null and void.
42. The Rights are redeemable at one cent per
Right by the Company at any time prior to a public
announcement that 15% or more of the Company's common shares
have been acquired, or alternatively, Lotus' Board can amend
the poison pill to make the Rights inapplicable to a
proposed acquisition.
43. The purpose of Lotus' poison pill is to make
hostile bids for the Company unduly expensive. In some
circumstances, such poison pill plans may deter unfair
offers. Here, however, where a bidder has made an all-cash
offer at a substantial premium over market price,
negotiations with the bidder regarding redemption of the
poison pill and a possible higher acquisition price should
be initiated without delay by the Board of Lotus, which owes
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<PAGE>
the Company's public shareholders unwavering duties of care
and loyalty. These duties prohibit the directors from
unjustifiably blocking proposed transactions which may
maximize shareholder value.
44. The Board also has a duty to enter into
negotiations regarding possible approval of the bid by IBM
and to consider alternatives to the IBM bid, including the
solicitation of higher bids from other offerors.
45. If the Board withholds its approval of IBM's
proposed bid, the bid may also be blocked by operation of
Sec. 203 of the Delaware Business Combination Statute, which
would preclude an acquiror from consummating a merger until
three years after it has acquired control of the Company,
unless the merger was pre-approved by the Company's Board.
Defendants have and will utilize this potent defensive
mechanism for entrenchment purposes and have failed and
refused to apply its protections for the purpose of
facilitating an auction or other open bidding procedures
designed to maximize shareholder value.
46. Chapter 110E, entitled "Regulation of Control
Share Acquisitions of Foreign Corporations," purports to
apply to any foreign corporation (defined as an "issuing
public corporation") operating in Massachusetts whose bylaws
provide for such application and which satisfies one or more
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highly expansive jurisdictional requirements. Consistent
with those requirements, the provisions of Chapter 110E
purport to apply to acquisitions of shares of foreign
corporations where up to 90% of the shareholders of the
foreign corporation are located outside Massachusetts or
-------
where the owners of up to 90% of the shares of the foreign
corporation are located outside Massachusetts.
-------
47. Section 5 of Chapter 110E provides that shares
in an issuing public corporation which are acquired in a
control share acquisition shall have voting rights only to
the extent authorized by a majority of stockholders other
-----
than holders of interested shares (defined to include shares
which are beneficially owned by any person who has made or
proposes to make a control share acquisition). A control
share acquisition is defined as the acquisition of
beneficial ownership of only one-fifth or more of all voting
power -- the definition exempts any friendly acquisition.
48. The effect of Chapter 110E is, therefore, that
shares acquired in an unsolicited tender offer shall only
possess voting rights to the extent authorized by holders of
shares other than those already acquired in the tender
offer.
49. In short, the purpose and effect of
Massachusetts' Chapter 110E is to deter and prevent
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<PAGE>
takeovers of foreign corporations, such as Lotus, with up to
90% foreign stockholders or share ownership, by depriving
any person who seeks to acquire control of such a Company
without Board approval of many of the substantial benefits
and incentives of such an acquisition.
50. Chapter 110C, entitled "Regulation of Takeover
Bids in the Acquisition of Corporations," purports to apply,
inter alia, to takeover bids for any corporation that has
----- ----
its principal place of business in Massachusetts. Section 2
thereof provides that no offeror can make a "takeover
bid" -- again defined to exclude any friendly transaction --
unless, among other things, the offeror complies with
several onerous filing and reporting requirements enforced
by the Massachusetts Secretary of state and related waiting
periods. Such requirements are in addition to the
comprehensive disclosure obligations already imposed by the
Williams Act.
51. Despite the tremendous value presented by the
IBM Offer to Lotus' shareholders and the evidence of the
seriousness of the Offer, the Individual Defendants, by
virtue of their prior entrenching tactics and their failure
to announce an immediate and receptive response, are acting
without regard to the fiduciary duties they owe to Lotus'
shareholders to maximize shareholder value and act loyally
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<PAGE>
and diligently in the bast interests of the common
stockholders.
52. The defendants' unwillingness to seriously
consider IBM's Offer stems from their desire to entrench
themselves in their positions of control of the Company and
thereby escape the consequences of their unsatisfactory
stewardship of the Lotus, which has severely depressed the
market price of the Company's common stock, and continue to
reap the very generous economic benefits which are
contingent upon their continued control of the Lotus.
Instead of proceeding with alacrity and diligence to
negotiate further the IBM Offer or consider developing other
strategic alternatives, the Company's Board is proceeding on
a course of resistance and is refusing to negotiate. Rather
than moving with dispatch to secure a definitive agreement
with IBM or to negotiate for a superior price or engage in
an auction or market check of the Company designed to secure
maximum value for shareholders, defendants are instead
frustrating the IBM Offer without any negotiations of any
kind.
Without The Relief Requested Herein, Lotus'
Stockholders Will Suffer Irreparable Injury
-------------------------------------------
53. The preliminary and permanent injunctive
relief requested herein is necessary to prevent Lotus'
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<PAGE>
stockholders from suffering irreparable injury for which
there is no adequate remedy at law as follows:
(a) Lotus' stockholders may be deprived of
any opportunity to receive the benefits of IBM's all-cash
premium Offer;
(b) Lotus' stockholders will be deprived of
the opportunity to choose for themselves whether to receive
the benefits of IBM's all-cash premium Offer or remaining
stockholders of an independent Lotus; and
(c) Lotus' stockholders will be deprived of
the opportunity to receive the maximum value possible for
their Lotus stock as a result of the Individual Defendants'
refusal to negotiate with IBM or seek alternatives in order
to maximize short-term and long-term value.
FIRST CLAIM
-----------
54. Plaintiff repeats and realleges each
allegation contained in paragraphs 1 through 53 as if fully
set forth herein.
55. This claim arises under the Commerce and
Supremacy Clauses of the United States Constitution, U.S.
Const. art. 1, Sec. 8, cl. 3, and art. 6, Sec. 2, respectively.
56. The Offer constitutes a substantial securities
transaction in interstate commerce, employing interstate
instrumentalities and facilities in the communication of the
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<PAGE>
Offer, and in transactions for the purchase and sale of
Lotus' securities occurring across state lines.
57. The extraterritorial application of
Chapters 110E and 110C to the Offer invades Delaware's
regulatory authority over its domestic corporations, and
subjects non-Massachusetts corporations to inconsistent
regulation. Massachusetts is but one of numerous states
with which Lotus has significant contacts. To allow
Massachusetts to regulate an acquisition of a Delaware
corporation with significant contacts in states other than
Massachusetts is to guarantee inconsistent regulation, in
violation of the Commerce Clause.
58. Chapters 110E and 110C also violate the
Commerce Clause because they impose direct, substantial and
adverse burdens on interstate commerce that are excessive in
relation to the local interests purportedly served by the
statutes. Among other things, Chapters 110E and 110C
inhibit the making and consummation of nationwide control
share acquisitions and takeover bids involving purely out-
of-state shares and share transactions. Chapter 110E deters
out-of-state control share acquisitions because of the risk
or actuality that an acquiror will not gain voting rights in
the corporation even if the acquisition is otherwise
successful and because of the delay necessary to consummate
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<PAGE>
the acquisition. Chapter 110C deters out-of-state takeover
bids by imposing substantial filing and disclosure burdens
on bidders and by delaying consummation of bids or creating
uncertainty with respect to the status of share transactions
entered into pursuant to such bids.
59. Chapters 110E and 110C do not serve any
legitimate local interests sufficient to justify the burdens
they impose on interstate commerce. Massachusetts has no
legitimate interest in the purely out-of-state sales and
purchases of shares in a Delaware corporation acquired
pursuant to a tender offer or in the voting rights attendant
upon these shares to balance against the substantial burdens
that Chapters 110E and 110C place on interstate commerce.
Massachusetts also has no interest in protecting nonresident
shareholders of foreign corporations. There are no local
benefits that arise from the statutes' application to such
persons.
60. Chapters 110E and 110C are unconstitutional
and null and void on their face under the Commerce Clause.
In addition, Chapters 110E and 110C are unconstitutional and
null and void under the Commerce Clause in their application
under the circumstances of this case. Lotus is a foreign
corporation with numerous foreign shareholders to whom these
statutes purport to apply, and IBM and White Acquisition are
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<PAGE>
both non-Massachusetts corporations. Accordingly, the risk
of inconsistent regulation and the undue burden on
interstate commerce that are created by these statutes have
a direct and substantial impact in this case.
61. Chapter 110C also violates the Supremacy
Clause of the United States Constitution. The Offer is
subject to the federal laws and regulations governing tender
offers, including the Williams Act amendments to the
Securities Exchange Act, 15 U.S.C. Sec.Sec. 78m and 78n, and the
rules and regulations promulgated thereunder. The Williams
Act is intended to establish evenhanded regulation of tender
offers which favors neither the offeror nor incumbent
management of the target but leaves the decision concerning
the merits of the offer to the target's stockholders.
62. By establishing policies, standards and
procedures that conflict with and are obstacles to the
policies implemented by Congress by means of the Williams
Act and the rules and regulations promulgated thereunder,
Chapters 110E and 110C of the Massachusetts corporation law
are invalid and unconstitutional as applied to the Offer
under the Supremacy Clause of the United States
Constitution, art. VI, cl. 2, which accords supremacy to
federal law over conflicting state law, and violate and are
preempted by Section 28(a) of the Exchange Act, 15 U.S.C.
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<PAGE>
Sec. 78bb, which prohibits and preempts state regulation that
conflicts with the provisions of the Exchange Act and the
rules and regulations thereunder.
63. Plaintiff seeks declaratory relief with
respect to the unconstitutionality of Chapters 110E and
110C, pursuant to the Federal Declaratory Judgments Act,
28 U.S.C. Sec. 2201, and injunctive relief against the
application and enforcement of these unconstitutional
statutes.
64. Plaintiff and the Class have no adequate
remedy at law.
SECOND CLAIM
------------
65. Plaintiff repeats and realleges each
allegation contained in paragraphs 1 through 64 as if fully
set forth herein.
66. This claim alleges violations of fiduciary and
other common law duties on the part of the Individual
Defendants.
67. The Individual Defendants owe fundamental
fiduciary obligations to the Company's shareholders to take
all necessary and appropriate steps to maximize the value of
Lotus' common stock. In addition, the Individual Defendants
are obligated to act independently so that the interests of
Lotus' public stockholders will be protected, to consider
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<PAGE>
seriously all bona fide offers for the Company, and to
---- ----
conduct fair and active bidding procedures or other
mechanisms for checking the market to assure that the
highest value available to Lotus shareholders is achieved.
Further, the directors of the Company must adequately insure
that no conflict of interest exists between defendants' own
interests and their fiduciary obligations to maximize
stockholder value or, if such conflicts exist, to insure
that all such conflicts are resolved in the best interests
of the Company's public stockholders.
66. Lotus represents a highly attractive
acquisition candidate. Defendants' conduct has deprived and
will continue to deprive the Company's public shareholders
of the very substantial control premium now being offered
and which further exposure of the Company to the market
could provide.
69. The Individual Defendants have breached the
fiduciary and other common law duties they owe to plaintiff
and other members of the Class in that they have not and are
not exercising independent business judgment and have acted
and are acting to the detriment of the Class in order to
benefit themselves and other members of Lotus' senior
management and Board.
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<PAGE>
70. Moreover, the Individual Defendants have
refused to take those steps necessary to ensure that the
Company's shareholders will receive maximum value for their
shares of Lotus stock. Defendants have refused to seriously
consider the pending IBM Offer, and have failed to announce
any active auction or open bidding procedures best
calculated to maximize shareholder value in selling the
Company.
71. The Individual Defendants are acting to
entrench themselves in their offices and positions and
maintain their substantial salaries and perquisites, all at
the expense of the detriment of the public shareholders of
Lotus.
72. By virtue of the acts and conduct alleged
herein, the Individual Defendants, who control the actions
of the Company, have carried out a preconceived plan and
scheme to place their own personal interests ahead of the
interests of the shareholders of Lotus and thereby entrench
themselves in their offices and positions within the
Company. The Individual Defendants have violated their
fiduciary duties owed to plaintiff and the Class in that
they have not and are not exercising independent business
judgment and have acted and are acting to the detriment of
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<PAGE>
the Company's public shareholders for their own personal
benefit.
73. As a result of the actions of the Individual
Defendants, plaintiff and other members of the Class have
been and will be damaged in that they have not and will not
receive their fair proportion of the value of Lotus' assets
and businesses and/or have been and will be prevented from
obtaining a fair and adequate price for their shares of
Lotus common stock.
74. Plaintiff seeks preliminary and permanent
injunctive relief and declaratory relief preventing
defendants from inequitably and unlawfully depriving
plaintiff and the Class of their rights to realize a full
and fair value for their stock at a substantial premium over
the market price and to compel defendants to carry out their
fiduciary duties to maximize shareholder value in selling
Lotus.
75. Only through the exercise of this Court's
equitable powers can plaintiff be fully protected from the
immediate and irreparable injury which the defendants'
actions threaten to inflict.
76. Unless enjoined by the Court, defendants will
continue to breach the fiduciary duties they owe to
plaintiff and the members of the Class, and/or to aid and
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<PAGE>
abet and participate in such breaches of duty, and will
prevent the sale of Lotus at a substantial premium, all to
the irreparable harm of plaintiff and the other members of
the Class.
77. Plaintiff and the class have no adequate
remedy at law.
THIRD CLAIM
-----------
78. Plaintiff repeats and realleges each
allegation contained in paragraphs 1 through 77 as if fully
set forth herein.
79. This claim arises under Section 14(a) of the
Exchange Act and Rule 14a-9 promulgated thereunder and
related common law.
80. Section 14(a) and Rule 14a-9 require proxy
statements to fully and fairly disclose all information
necessary for the investor to make an informed decision
regarding how to vote his or her shares. Specifically,
Rule 14a-9 prohibits the use of false or misleading
statements or omissions of material fact in the solicitation
of proxies. Delaware law similarly requires complete candor
when directors solicit the votes of a company's
shareholders.
81. Lotus and the Individual Defendants
disseminated a proxy statement dated March 20, 1995 to
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Lotus' stockholders of record on March 10, 1995, in
connection with Lotus' May 2, 1995 annual meeting.
Directors Manzi, Chao Gray, Porter and Termeer were
nominated for re-election at the annual meeting. An
amendment to the 1992 Stock Option Plan to double the number
of shares authorized for issuance under that plan was also
submitted for shareholder approval. At that meeting, all
Individual Defendants received the requisite majority vote
for election to the Lotus Board and the amendment to the
1992 Stock Option Plan was similarly approved.
82. The facts that Lotus had offered its desktop
application business for sale to IBM, that IBM had expressed
strong and continuing interest in a friendly acquisition of
the entire Company and that the Individual Defendants had
refused to entertain such proposal were material facts
defendants were required to disclose in connection with the
May 2, 1995 vote to re-elect the Individual Defendants as
directors of Lotus and to approve the proposed amendment to
the 1992 Stock Option Plan. Those facts were not disclosed.
83. Slightly more than one month after the
meeting, those facts were publicly disclosed for the first
time in connection with IBM's and White Acquisition's tender
offer materials. If Lotus' stockholders had been apprised
of those facts by defendants in a timely manner, they could
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<PAGE>
have voted against the election of the individual defendants
as directors or the proposed amendment to enhance the
provisions of the 1992 Stock Option Plan and clearly
conveyed to Lotus' Board that its entrenchment tactics,
course of self-dealing and refusal to entertain premium
offers were neither fair nor acceptable to the public
stockholders.
84. Because of defendants' defective disclosure,
the election of directors and other matters voted on at the
1995 annual meeting were not properly voted upon in
accordance with applicable federal and state law.
Accordingly, the election of directors at the 1995 annual
meeting should be invalidated and the approval of the
amendment to the 1992 Stock Option Plan should be similarly
revoked.
85. Plaintiff and the Class have no adequate
remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) Declaring this to be a proper class
action and certifying plaintiff as the class representative;
(b) Ordering the Individual Defendants to
carry out their fiduciary duties to plaintiff and the other
members of the Class by announcing their intention to:
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(i) cooperate fully with any entity or
person, including IBM, having a bona fide interest in
---- ----
proposing any transaction which would maximize shareholder
value, including but not limited to, a buy-out or takeover
of the Company;
(ii) immediately undertake an appropriate
evaluation of Lotus' worth as a merger/acquisition
candidate;
(iii) take all appropriate steps necessary
to enhance the Company's value and attractiveness as a
merger/acquisition candidate;
(iv) take all appropriate steps necessary
to effectively expose Lotus to the marketplace in an effort
to create an active auction for control of the Company;
(v) act independently so that the
interests of the Company's public shareholders will be
protected; and
(vi) adequately ensure that no conflicts
of interest exist between the Individual Defendants' own
interests and their fiduciary obligation to maximize
shareholder value or, in the event such conflicts exist, to
ensure that all conflicts of interest are resolved in the
best interests of the public shareholders of Lotus;
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<PAGE>
(c) Ordering the Individual Defendants to
take steps to facilitate a premium acquisition in accordance
with a Del. C. Sec. 203 and by redeeming the poison pill
rights;
(d) Declaring and adjudging that
Chapter 110E and Chapter 110C violate the Constitution of
the United States and that they are null and void on their
face and as applied in this case, and enjoining Lotus, the
Individual Defendants and their employees, agents, and all
persons acting in concert with them from taking any actions
to enforce or apply Chapter 110E or Chapter 110C in
connection with IBM's and White Acquisition's Offer;
(e) Voiding the election of directors at the
May 2, 1995, annual meeting and invalidating all other
matters considered at that meeting, including the amendment
to the 1992 Stock Option Plan, and directing that defendants
issue appropriate disclosures with respect to all such
matters;
(f) Ordering the Individual Defendants,
jointly and severally to account to plaintiff and the Class
for all damages suffered and to be suffered by them as a
result of the acts and transactions alleged herein;
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(g) Awarding plaintiff the costs and
disbursements of this action, including a reasonable
allowance for plaintiff's attorneys' and experts' fees; and
(h) Granting such other and further relief
as may be just and proper.
JURY DEMAND
-----------
Plaintiff hereby demands a trial by jury.
Dated: June 9, 1995
HEIMAN, ABER & GOLDLUST
------------------------------
Gary W. Aber, DSB# 754
First Federal Plaza
702 King Street
P.O. Box 1675
Wilmington, Delaware 19899
(302) 658-1800
Of Counsel:
Melvyn I. Weiss
Steven G. Schulman
MILBERG WEISS BERSHAD HYNES
& LERACH
One Pennsylvania Plaza
New York, New York 10119
(212) 594-5300
-38-
