<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
HMT Technology Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5. Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
- --------------------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3. Filing Party:
- --------------------------------------------------------------------------------
4. Date Filed:
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<PAGE> 2
HMT TECHNOLOGY CORPORATION
1055 PAGE AVENUE
FREMONT, CA 94538
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 26, 1996
TO THE STOCKHOLDERS OF HMT TECHNOLOGY CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of HMT
Technology Corporation, a Delaware corporation (the "Company" or "HMT"), will be
held on Thursday, September 26, 1996 at 9:30 a.m. local time at Embassy Suites
Hotel, 901 East Calaveras Boulevard, Milpitas, California 95035 for the
following purpose:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To ratify the selection of Coopers & Lybrand L.L.P., as independent
auditors of the Company for its fiscal year ending March 31, 1997.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on August 19, 1996,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ Peter S. Norris
Peter S. Norris
Vice President, Finance, Chief
Financial Officer,
Treasurer and Assistant Secretary
Fremont, California
August 22, 1996
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
HMT TECHNOLOGY CORPORATION
1055 PAGE AVENUE
FREMONT, CA 94538
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 26, 1996
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of HMT
Technology Corporation, a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on September 26, 1996, at 9:30 a.m.
local time (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at Embassy Suites Hotel, 901
East Calaveras Boulevard, Milpitas, California 95035. The Company intends to
mail this proxy statement and accompanying proxy card on or about August 22,
1996, to all stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on August
19, 1996 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on August 19, 1996, the Company had outstanding and entitled
to vote 40,410,789 shares of Common Stock. Each holder of record of Common Stock
on such date will be entitled to one vote for each share held on all matters to
be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 1055 Page
Avenue, Fremont, California 94538, a written notice of revocation or a duly
executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
<PAGE> 4
STOCKHOLDERS PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1997 Annual Meeting of Stockholders must be received by the Company
not later than July 29, 1997 in order to be included in the proxy statement and
proxy relating to that Annual Meeting. Stockholders are also advised to review
the Company's By-laws, which contain additional requirements with respect to
advance notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
Pursuant to the Company's Certificate of Incorporation, the number of
directors constituting the whole Board of Directors is fixed exclusively by
resolution of the Board of Directors. The Board of Directors is presently
comprised of six members. Mr. Shotaro Takemoto has advised the Company that he
does not wish to stand for re-election to the Board of Directors. As a result,
the Board has reduced the number of authorized directors to five, effective as
of the date of the Annual Meeting.
There are five nominees for the five Board positions presently authorized.
Each director to be elected will hold office until the next annual meeting of
stockholders and until his successor is elected and has qualified, or until such
director's earlier death, resignation or removal. Each nominee listed below is
currently a director of the Company, five directors having been elected by the
stockholders.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote. Shares represented by executed
proxies will be voted, if authority to do so is not withheld, for the election
of the five nominees named below. In the event that any nominee should be
unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected and
management has no reason to believe that any nominee will be unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES FOR ELECTION FOR A ONE-YEAR TERM EXPIRING AT THE 1997 ANNUAL MEETING
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD WITH THE COMPANY
-------------------------------------- --- --------------------------------------
<S> <C> <C>
Ronald L. Schauer..................... 51 President, Chief Executive Officer and
Chairman of the Board
Bruce C. Edwards...................... 42 Director
Neil M. Garfinkel..................... 30 Director
Walter G. Kortschak................... 37 Director
Robert G. Teal........................ 52 Director
</TABLE>
Ronald L. Schauer joined the Company as President and Chief Executive
Officer and as a member of the Board of Directors in February 1994. From June
1993 to February 1994, he was the owner, President and Chief Executive Officer
of PAWS, Inc., a plastics manufacturing company. From June 1991 to June 1993, he
was President and Chief Operating Officer of Magnetic Data, Inc., a contract
manufacturer of disk drives and computers. From June 1983 to May 1991, he was
Corporate Vice President and General Manager of the Memory Products Division of
Stolle Corporation, a wholly owned subsidiary of Alcoa, a diversified aluminum
manufacturing company. From 1972 to May 1983, Mr. Schauer held various technical
and general management positions in the Data Recording Products Division at 3M
Company, a diversified manufacturing company. Mr. Schauer holds a B.S. in
Electrical Engineering from South Dakota State University.
2
<PAGE> 5
Bruce C. Edwards joined the Company's Board of Directors in January 1996.
Mr. Edwards was employed by AST Research, Inc. as Senior Vice President and
Chief Financial Officer from 1988 until July 1994 and as Executive Vice
President, Chief Financial Officer and a director from July 1994 to December
1995. Since February 1996, he has been President, Chief Executive Officer and a
director of Powerwave Technologies, Inc. (formerly Milcom International Inc.), a
manufacturer of power amplifiers for wireless telecommunications applications.
Mr. Edwards is also a director of Diamond Multimedia Systems, Inc. and Xircom,
Inc.
Neil M. Garfinkel joined the Company's Board of Directors in January 1996.
Since June 1995, he has been a Senior Associate of Summit Partners, L.P., a
venture capital partnership. From May 1994 to May 1995, he was an associate at
Wilson Sonsini Goodrich & Rosati, Professional Corporation, a law firm. From
September 1992 to April 1994, he was an associate at Cravath, Swaine & Moore, a
law firm.
Walter G. Kortschak joined the Company's Board of Directors in November
1995. Since August 1991, he has been a General Partner of Summit Partners, L.P.,
a venture capital partnership, where he has been employed since June 1989. From
June 1986 to June 1989, he was a Vice President at Crosspoint Venture Partners,
a venture capital partnership. He is also a director of McAfee Associates, Inc.,
Mecon, Inc., Diamond Multimedia Systems, Inc. and several privately held
companies.
Robert G. Teal joined the Company's Board of Directors in January 1996.
Since July 1988, he has been a General Partner of Capform Partners, a venture
capital limited partnership. From April 1982 to February 1988, he was a Senior
Vice President of Maxtor, which he co-founded. Mr. Teal has been Chairman of the
Board of Directors of Portable Energy Products, Inc., a battery manufacturer,
since September 1995, where he has served as a director since May 1990 and
served as President and Chief Executive Officer from February 1993 to September
1995. Portable Energy Products, Inc. filed for federal bankruptcy protection in
1994 and emerged from bankruptcy in July 1995. Since April 1996, Mr. Teal has
served as Vice President and Chief Financial Officer of Quinta Corporation, a
company he co-founded to develop new high density recording technology for the
data storage industry. Mr. Teal is also a director of MITTA Technology, Inc.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended March 31, 1996 the Board of Directors held six
meetings. The Board has an Audit Committee and a Compensation Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the accountants' comments as to controls, adequacy of
staff and management performance and procedures in connection with audit and
financial controls. The Audit Committee is composed of two non-employee
directors: Messrs. Edwards and Kortschak. It met four times during such fiscal
year.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. In connection with the award of stock options to employees and
consultants, the Committee has delegated limited authority to the Company's
Chief Executive Officer for making such awards to non-officer employees. The
Compensation Committee is composed of three non-employee directors: Messrs.
Kortschak, Takemoto and Teal. It met four times during such fiscal year.
The Company does not have a standing Nominating Committee.
During the fiscal year ended March 31, 1996, all current directors except
Mr. Takemoto attended at least 75% of the aggregate of the requisite meetings of
the Board and of the committees on which he served held during the period for
which they were a director or committee member, respectively.
3
<PAGE> 6
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Coopers & Lybrand L.L.P. as the
Company's independent auditors for the fiscal year ending March 31, 1997 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Coopers & Lybrand
L.L.P. has audited the Company's financial statements since December 1995.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at the
Annual Meeting, will have an opportunity to make a statement if they so desire
and will be available to respond to appropriate questions.
Stockholder ratification of the selection of Coopers & Lybrand L.L.P. as
the Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of Coopers & Lybrand
L.L.P. to the stockholders for ratification as a matter of good corporate
practice. If the stockholders fail to ratify the selection, the Audit Committee
and the Board will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee and the Board in their discretion may
direct the appointment of different independent auditors at any time during the
year if they determine that such a change would be in the best interests of the
Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Coopers & Lybrand L.L.P.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
In December 1995, the Company decided to retain Coopers & Lybrand L.L.P. as
the independent accountants for the Company and dismissed Ernst & Young L.L.P.,
the Company's former accountants. The decision to change independent accountants
was approved by the Company's Board of Directors and was made in connection with
the leveraged recapitalization of the Company in November 1995. There were no
disagreements with the former accountants regarding any matters with respect to
accounting principles or practices, financial statement disclosure or auditing
scope or procedures through December 1995, or with respect to the Company's
financial statements for the fiscal years ended March 31, 1994 and 1995. The
former accountants' reports as of and for the fiscal years ended March 31, 1994
and 1995 are not a part of the consolidated financial statements of the Company
included in its annual report on Form 10-K and the related consolidated
financial statement schedules. Such reports did not contain an adverse opinion
or disclaimer of an opinion or qualifications as to uncertainty, audit scope or
accounting principles. Prior to retaining Coopers & Lybrand L.L.P., the Company
had not consulted with Coopers & Lybrand L.L.P. regarding accounting principles.
However, Hitachi Metals, Ltd. ("Hitachi Metals") and certain stockholders of HMT
had consulted Coopers & Lybrand L.L.P. for the limited purpose of determining
appropriate accounting treatment of the leveraged recapitalization of the
Company completed in November 1995.
4
<PAGE> 7
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 30, 1996 by (i) each person
(or group of affiliated persons) known to the Company to be the beneficial owner
of more than 5% of the Company's Common Stock, (ii) each director, (iii) each
Named Executive Officer and (iv) all of the Company's directors and executive
officers as a group.
<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIALLY SHARES
OWNED(1) BENEFICIALLY
5% STOCKHOLDERS, DIRECTORS AND OFFICERS NUMBER OWNED(1)
------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Summit Partners, L.P.(2)..................................... 14,720,691 36.5%
499 Hamilton Avenue, Suite 200
Palo Alto, CA 94301
Walter G. Kortschak(2)....................................... 14,720,691 36.5
Neil M. Garfinkel............................................ -- --
Hitachi Metals, Ltd.(3)...................................... 5,146,744 12.8
Chiyoda Building, 2nd Floor
1-2 Marunouchi
2-Chome Chiyoda-ku
Tokyo 100 Japan
Bruce C. Edwards(4).......................................... 46,500 *
Shotaro Takemoto(3).......................................... 5,146,744 12.8
Robert G. Teal(5)............................................ 46,500 *
Ronald L. Schauer(6)......................................... 3,441,000 8.5
c/o HMT Technology Corporation
1055 Page Avenue
Fremont, CA 94538
Ronald J. Buschur(7)......................................... 992,000 2.4
George J. Hall(8)............................................ 781,200 2.0
Michael A. Russak(9)......................................... 899,635 2.2
All directors and executive officers
as a group (11 persons)(10)................................ 27,097,270 67.2
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
Percentage of beneficial ownership is based on 40,297,929 shares of Common
Stock outstanding as of June 30, 1996.
(2) Includes (i) 6,778,429 shares beneficially owned by Summit Ventures III,
L.P. ("Summit III"), (ii) 6,778,429 shares beneficially owned Summit
Venture IV, L.P. ("Summit IV"), (iii) 253,952 shares beneficially owned by
Summit Investors II, L.P. ("Summit Investors II") and (iv) 909,881 shares
beneficially owned by Summit Subordinated Debt Fund, L.P. ("Summit Sub Debt
Fund"). Mr. Kortschak, a director of the Company, is a general partner of
Summit Partners, L.P., the general partner of Summit III, Summit IV, Summit
Investors II and Summit Sub Debt Fund. Mr. Kortschak disclaims beneficial
ownership of such shares held by Summit III, Summit IV, Summit Investors II
and Summit Sub Debt Fund, except to the extent of his pecuniary interest
therein.
(3) Mr. Takemoto, a director of the Company, is a principal of Hitachi Metals.
Mr. Takemoto disclaims beneficial ownership of such shares held by Hitachi
Metals.
5
<PAGE> 8
(4) Includes 11,625 shares that are subject to a right of repurchase in favor
of the Company that expires on January 1997 and 34,875 shares that are
subject to a right of repurchase in favor of the Company which expires
ratably beginning January 1997 through January 2000.
(5) Includes 11,625 shares that are subject to a right of repurchase in favor
of the Company that expires on January 1997 and 34,875 shares that are
subject to a right of repurchase in favor of the Company which expires
ratably beginning January 1997 through January 2000.
(6) Represents 3,441,000 shares held by The Schauer Living Trust under
agreement dated March 15, 1996 ("Schauer Living Trust"). Mr. Schauer is
co-trustee of the Schauer Living Trust. Includes 1,526,524 shares that are
subject to a right of repurchase in favor of the Company which expires
ratably through November 1999 and 308,200 shares that are subject to a
right of repurchase in favor of the Company which expires upon the earlier
of the Company achieving certain performance goals or ratably beginning
December 2000 through December 2004.
(7) Represents 953,560 shares held by The Buschur Living Trust under agreement
dated March 11, 1996 ("Buschur Living Trust"), 19,220 shares held by the
Ryan Buschur 1996 Irrevocable Trust under agreement dated February 9, 1996
("Ryan Buschur Trust") and 19,220 shares held by the Lynsey Buschur 1996
Irrevocable Trust under agreement dated February 6, 1996 ("Lynsey Buschur
Trust"). Mr. Buschur is a co-Trustee of the Buschur Living Trust. Ryan
Buschur, the beneficiary of the Ryan Buschur Trust, and Lynsey Buschur
Trust, are the children of Mr. Buschur. Mr. Buschur disclaims beneficial
ownership of the shares held in the Ryan Buschur Trust and the Lynsey
Buschur Trust. Includes 421,019 shares that are subject to a right of
repurchase in favor of the Company which expires ratably through November
1999 and 84,971 shares that are subject to a right of repurchase in favor
of the Company which expires upon the earlier of the Company achieving
certain performance goals or ratably beginning December 2000 through
December 2004.
(8) Represents 781,200 shares held by The George J. Hall Family Trust ("Hall
Family Trust"). Mr. Hall is a co-trustee of the Hall Family Trust. Includes
421,019 shares that are subject to a right of repurchase in favor of the
Company that expires ratably through November 1999 and 84,971 shares that
are subject to a right of repurchase which expires upon the earlier of the
Company achieving certain performance goals or ratably beginning December
2000 through December 2004.
(9) Includes 31,000 shares held by Mary Lynn Russak 1996 Irrevocable Trust
("Mary Lynn Russak Trust") and 635 shares held by Dr. Russak's spouse. Mary
Lynn Russak, the beneficiary of the Mary Lynn Russak Trust, is a daughter
of Dr. Russak. Dr. Russak disclaims beneficial ownership of the shares held
in the Mary Lynn Russak Trust. Includes 421,019 shares that are subject to
a right of repurchase in favor of the Company that expires ratably through
November 1999 and 84,971 shares that are subject to a right of repurchase
which expires upon the earlier of the Company achieving certain performance
goals or ratably beginning December 2000 through December 2004.
(10) Includes 3,546,665 shares that are subject to a right of repurchase in
favor of the Company that expires ratably through November 1999 and 610,855
shares that are subject to a right of repurchase which expires upon the
earlier of the Company achieving certain performance goals or ratably
beginning December 2000 through December 2004.
Certain of the Company's security holders may sell shares of Common Stock
in the Common Stock Offering pursuant to the Underwriters' over-allotment
options.
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
6
<PAGE> 9
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended March 31, 1996, all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with except that one report,
covering one transaction, was filed late by Mr. Buschur.
During fiscal 1996, Mr. Buschur filed a timely Form 3, but was required to
file a corrected Form 3 to reflect a transfer of Common Stock to a trust.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Non-employee directors are paid $1,500 per meeting for attendance at
meetings of the Board of Directors and $500 per meeting for attendance at
meetings of any committee thereof. Directors are reimbursed for reasonable
out-of-pocket expenses incurred in connection with attendance at such meetings.
In January 1996, Messrs. Edwards and Teal each received an option to purchase
46,500 shares of the Company's Common Stock at an exercise price per share of
$0.10 pursuant to the 1995 Stock Option Plan described under the Section
entitled "Employee Benefit Plans."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------- ------------
OTHER SECURITIES
NAME AND FISCAL ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS(#) COMPENSATION(2)
- --------------------------- ------ -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Ronald L. Schauer...... 1996 $249,995 $113,557 --184,542 3,596,000 $ 3,592
President and Chief 1995 220,001 15,000 $ -- --
Executive Officer
Mr. Ronald J.Buschur....... 1996 136,844 37,530 -- 992,000 2,910
Vice President, 1995 -- -- -- -- --
Quality Assurance
Mr. George J. Hall......... 1996 165,675 63,811 -- 992,000 3,012
Vice President, 1995 -- -- -- -- --
Operations
Dr. Michael A. Russak...... 1996 176,673 18,360 73,331 992,000 3,043
Vice President, Research 1995 163,652 15,000 54,035 -- --
and Development
</TABLE>
- ---------------
(1) Consists of relocation payments.
(2) Includes (i) life insurance premiums paid by the Company in the amounts of
$306 for each of Mr. Schauer, Mr. Hall and Dr. Russak, and $279 for Mr.
Buschur, and (ii) $3,286, $2,737, $2,706 and $2,631 to the Company's 401(k)
tax qualified employee savings and retirement plan on behalf of Mr. Schauer,
Dr. Russak, Mr. Hall and Mr. Buschur, respectively.
The compensation of each of Messrs. Anderson and Norris, who joined the
Company in fiscal 1996, is currently in excess of $100,000 on an annualized
basis.
7
<PAGE> 10
STOCK OPTION GRANTS AND EXERCISES
The following table provides certain information concerning grants of
options to purchase shares of Common Stock made during the fiscal year ended
March 31, 1996 to the Named Executive Officers. All grants were made under the
Company's 1995 Management Stock Option Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES IN EXERCISE OPTION TERM(3)
GRANTED FISCAL PRICE EXPIRATION --------------------
NAME (#) YEAR(1) ($/SH)(2) DATE 5% 10%
- ---------------------- ---------- ------------ --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Ronald L. Schauer..... 2,568,660(4) 21.2 $0.03 11/29/05 $52,110 $132,058
1,027,340(5) 8.5 0.03 11/29/05 20,842 52,817
Ronald J. Buschur..... 708,660(4) 5.9 0.03 11/29/05 14,377 36,433
283,340(5) 2.3 0.03 11/29/05 5,748 14,567
George J. Hall........ 708,660(4) 5.9 0.03 11/29/05 14,377 36,433
283,340(5) 2.3 0.03 11/29/05 5,748 14,567
Michael A. Russak..... 708,660(4) 5.9 0.03 11/29/05 14,377 36,433
283,340(5) 2.3 0.03 11/29/05 5,748 14,567
</TABLE>
- ---------------
(1) Based on 12,098,150 options granted in fiscal 1996.
(2) All stock options were granted with exercise prices equal to the fair market
value, as determined by the Board of Directors, on the grant date.
(3) These amounts are based on compounded annual rates of stock price
appreciation of five and ten percent over the 10-year term of the options,
are mandated by the rules of the Securities and Exchange Commission and are
not indicative of expected stock performance. Actual gains, if any, on
stock option exercises are dependent on future performance of the Common
Stock, overall market conditions, as well as the option holders continued
employment throughout the vesting period. The amounts reflected in this
table may not necessarily be achieved or may be exceeded. The indicated
amounts are net of the option exercise price but before taxes that may be
payable upon exercise.
(4) Of the options, 30.4% vested immediately upon grant, and the remaining 69.6%
of the options vest monthly over a four-year period on a pro-rata basis.
(5) These options vest monthly over a four-year period on a pro-rata basis
beginning on December 31, 2000. The options have performance-based vesting
provisions, which accelerate the vesting of the options based on the
attainment of certain performance benchmarks.
8
<PAGE> 11
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR,
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------- --------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Ronald L. Schauer(2)....................... 2,568,660 $0 -- $--
1,027,340 0 -- --
Ronald J. Buschur(3)....................... 708,660 0 -- --
283,340 0 -- --
George J. Hall(4).......................... 708,660 0 -- --
283,340 0 -- --
Michael A. Russak(5)....................... 708,660 0 -- --
283,340 0 -- --
</TABLE>
- ---------------
(1) Based on the fair market value of the Company's Common Stock on the dates of
exercise minus the exercise price of the options.
(2) Options exercised pursuant to an Early Exercise Stock Purchase Agreement
executed by Mr. Schauer and the Company. As of March 31, 1996, 1,980,647 of
Mr. Schauer's shares were subject to the Company's right of repurchase.
(3) Options exercised pursuant to an Early Exercise Stock Purchase Agreement
executed by Mr. Buschur and the Company. As of March 31, 1996, 546,251 of
Mr. Buschur's shares were subject to the Company's right of repurchase.
(4) Options exercised pursuant to an Early Exercise Stock Purchase Agreement
executed by Mr. Hall. As of March 31, 1996, 546,251 of Mr. Hall's shares
were subject to the Company's right of repurchase.
(5) Options exercised pursuant to an Early Exercise Stock Purchase Agreement
executed by Dr. Russak. As of March 31, 1996, 546,251 of Dr. Russak's
shares were subject to the Company's right of repurchase.
EMPLOYEE BENEFIT PLANS
1995 Management Stock Option Plan and 1995 Stock Option Plan. In November
1995, the Board of Directors adopted and the stockholders approved the 1995
Management Stock Option Plan (the "1995 Management Plan") and the 1995 Stock
Option Plan (the "1995 Plan," and together with the 1995 Management Plan, the
"Stock Plans") and reserved an aggregate of 12,400,000 shares of Common Stock
for issuance under the Stock Plans. The Stock Plans provide for the grant to
employees of the Company of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
for the grant to employees, directors and consultants of the Company of
nonstatutory stock options. As of March 31, 1996, the Company had granted
options to purchase an aggregate of 12,284,150 shares of Common Stock, of which
options to purchase 3,917,723 shares remained outstanding, and an aggregate of
115,850 shares remained available for grant.
The Stock Plans are administered by the Compensation Committee of the Board
of Directors, which determines the terms of any option granted, including the
exercise price, number of shares subject to the option and the exercisability
thereof. In connection with the award of stock options, the Company has
delegated limited authority to the Company's Chief Executive Officer for making
such awards to non-officer employees. No option may be transferred by the
optionee other than by will or the laws of descent or distribution or, in
certain limited instances, pursuant to a qualified domestic relations order.
9
<PAGE> 12
The term of a stock option granted under the Stock Plans generally may not
exceed 10 years. The exercise price of options granted under the Stock Plans is
determined by the Board of Directors, but in the case of an incentive stock
cannot be less than 100% of the fair market value of the Common Stock on the
date of grant or, in the case of 10% stockholders, not less than 110% of the
fair market value of the Common Stock on the date of grant. Shares covered by
currently outstanding options under the Stock Plans typically vest at the rate
of 1/4 of the shares subject to the option on the first anniversary of the date
of grant and 1/48 of such shares at the end of each calendar month thereafter.
Certain of the shares exercisable under the 1995 Management Plan have a
performance accelerated vesting feature. The remaining unvested shares vest upon
the achievement of certain specified performance goals. Any shares that do not
become subject to the acceleration feature will vest over a four year period at
a rate of 1/48 of such shares at the end of each calendar month beginning on
December 31, 2000.
Upon any merger, consolidation or similar transaction in which the Company
is not the surviving corporation, all outstanding awards under the Stock Plans
shall either be assumed or substituted by the surviving entity. If the surviving
entity determines not to assume or substitute such options, the time during
which such options may be exercised will be accelerated and the options
terminated if not exercised prior to the transaction, except that those options
granted under the 1995 Management Plan that contain a vesting acceleration
feature will accelerate upon such a change in control only if the consideration
received in connection with the transaction equals or exceeds specified
thresholds.
The Board of Directors determined that no further options would be granted
under the Stock Plans after completion of the initial public offering of the
Company.
1996 Equity Incentive Plan. In January 1996, the Board of Directors
adopted, and in February 1996 the stockholders approved, the 1996 Equity
Incentive Plan (the "Incentive Plan") and reserved 3,000,000 shares of Common
Stock for issuance under the Incentive Plan, less shares granted under the 1996
Non-Employee Directors' Stock Option Plan. The Incentive Plan provides for
grants of incentive stock options to employees (including officers and employee
directors) and nonstatutory stock options, restricted stock purchase awards,
stock bonuses and stock appreciation rights to employees (including officers and
employee directors) and consultants of the Company. As of June 30, 1996, the
Company had granted 85,700 options to purchase the Company's Common Stock under
the Incentive Plan. The Incentive Plan is administered by the Compensation
Committee, which determines recipients and types of awards to be granted,
including the exercise price, number of shares subject to the award and the
exercisability thereof. In connection with the award of stock options, the
Company has delegated limited authority to the Company's Chief Executive Officer
for making such awards to non-officer employees.
The term of a stock option granted under the Incentive Plan generally may
not exceed 10 years. The exercise price of options granted under the Incentive
Plan is determined by the Board of Directors, but, in the case of an incentive
stock option cannot be less than 100% of the fair market value of the Common
Stock on the date of the grant or, in the case of 10% stockholders, not less
than 110% of the fair market value of the Common Stock on the date of grant.
Options granted under the Incentive Plan to new employees and consultants
generally will vest at the rate of 1/4 of the shares subject to option on the
first anniversary of the date of grant and 1/48th of such shares at the end of
each calendar month thereafter. No option may be transferred by the optionee
other than by will or the laws of descent or distribution or, in certain limited
instances, pursuant to a qualified domestic relations order. An optionee whose
relationship with the Company or any related corporation ceases for any reason
(other than by death or permanent and total disability) may exercise options in
the three-month period following such cessation (unless such options terminate
or expire sooner by their terms) or in such longer period as may be determined
by the Board of Directors.
Shares subject to options which have lapsed or terminated may again be
subject to options granted under the Incentive Plan. Furthermore, the Board of
Directors may offer to exchange new options for existing options, with the
shares subject to the existing options again becoming available for grant under
the Incentive Plan. In the event of a decline in the value of the Company's
Common Stock, the Board of Directors has the authority to offer optionees the
opportunity to replace outstanding higher priced options with new lower priced
options.
10
<PAGE> 13
Restricted stock purchase awards granted under the Incentive Plan may be
granted pursuant to a repurchase option in favor of the Company in accordance
with a service vesting schedule determined by the Board. The purchase price of
such awards will be at least 85% of the fair market value of the Common Stock on
the date of grant. Stock bonuses may be awarded in consideration for past
services without a purchase payment. Stock appreciation rights authorized for
issuance under the Incentive Plan may be tandem stock appreciation rights,
concurrent stock appreciation rights or independent stock appreciation rights.
Upon any merger, consolidation or similar transaction in which the Company
is not the surviving corporation, all outstanding awards under the Incentive
Plan shall either be assumed or substituted by the surviving entity. If the
surviving entity determines not to assume or substitute such awards, the time
during which such awards may be exercised shall be accelerated and the awards
terminated if not exercised prior to the transaction. The Incentive Plan will
terminate in January 2006, unless terminated sooner by the Board of Directors.
Employee Stock Purchase Plan. In January 1996, the Board of Directors
adopted, and in February 1996 the stockholders approved, the Employee Stock
Purchase Plan (the "Purchase Plan") covering an aggregate of 500,000 shares of
Common Stock. The Purchase Plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Code. Under the Purchase
Plan, the Board of Directors may authorize participation by eligible employees,
including officers, in periodic offerings following the adoption of the Purchase
Plan. The offering period for any offering will be no more than 27 months.
Employees are eligible to participate if they are employed by the Company,
or an affiliate of the Company designated by the Board of Directors, for at
least 20 hours per week and are employed by the Company or a subsidiary of the
Company designated by the Board of Directors for at least five months per
calendar year. Employees who participate in an offering can have up to 15% of
their earnings withheld pursuant to the Purchase Plan. The amount withheld will
then be used to purchase shares of the Common Stock on specified dates
determined by the Board of Directors. The price of Common Stock purchased under
the Purchase Plan will be equal to 85% of the lower of the fair market value of
the Common Stock on the commencement date of each offering period or the
specified purchase date. Employees may end their participation in an offering at
any time during the offering period. Participation ends automatically on
termination of employment with the Company.
Upon any merger, consolidation or similar transaction in which the Company
is not the surviving corporation, the Board of Directors has discretion to
provide that each right to purchase Common Stock will be assumed or an
equivalent right substituted by the surviving entity, or the Board may shorten
the offering period and provide for all sums collected by payroll deductions to
be applied to purchase stock immediately prior to such merger or other
transaction. The Purchase Plan will terminate at the Board's discretion. The
Board has the authority to amend or terminate the Purchase Plan, subject to the
limitation that no such action may adversely affect any outstanding rights to
purchase Common Stock.
1996 Non-Employee Directors' Stock Option Plan. In January 1996, the Board
adopted, and in February 1996 the stockholders approved, the 1996 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan") to provide for the
automatic grant of options to purchase shares of Common Stock to non-employee
directors of the Company (other than employees or affiliates of Summit Partners,
L.P. or Hitachi Metals) and reserved 3,000,000 shares of Common Stock for
issuance under the Directors' Plan, less shares granted under the Incentive
Plan. As of June 30, 1996, no options had been granted under the Directors'
Plan. The Directors' Plan is administered by the Board of Directors, unless the
Board delegates administration to a committee comprised of members of the Board.
Pursuant to the terms of the Directors' Plan, each director of the Company
not otherwise employee by the Company and who is first elected as a non-employee
director after the completion of this offering (other than employees or
affiliates of Summit Partners, L.P. or Hitachi Metals) automatically will be
granted an option to purchase 8,000 shares of Common Stock upon such election.
Each director who continues to serve as a non-employee director (other than
employees or affiliates of Summit Partners, L.P. or Hitachi Metals) will be
granted an additional option to purchase 2,000 shares of Common Stock on each
anniversary of the date of
11
<PAGE> 14
his or her initial grant or, in the case of current non-employee directors,
annually commencing with the fourth anniversary of the initial public offering.
The term of stock options granted under the Directors' Plan generally may
not exceed 10 years. The exercise price of options granted under the Directors'
Plan will be equal to 100% of the fair market of the Common Stock on the date of
grant. Options granted under the Directors' Plan generally vest at the rate of
1/4 of the shares subject to the option on the first anniversary of the date of
the grant and 1/48 of such shares at the end of each calendar month thereafter.
Upon any merger, consolidation or similar transaction, the time during
which such options may be exercised will be accelerated and the options
terminated if not exercised prior to the transaction. The Directors' Plan will
terminate in January 2006, unless earlier terminated by the Board.
401(k) Plan. Effective January 1, 1992, the Company adopted a
tax-qualified employee savings and retirement plan (the "401(k) Plan") covering
all of the Company's employees who have attained the age of 21 and have
completed six months of service with the Company. Pursuant to the 401(k) Plan,
employees may elect to reduce their current compensation by up to the lesser of
15% of eligible compensation or the annual statutory limit ($9,500 in 1996) and
have the amount of such reduction contributed to the 401(k) Plan. The 401(k)
Plan permits, but does not require, a Company matching contribution equal to the
employee's deferred amount, generally up to a maximum of 4% of such employee's
annual compensation. The employee's contributions are fully vested and
nonforfeitable at all times. The Company's matching contributions, if any, vest
at a rate of 100% after the two years of service. The trustee under the 401(k)
Plan, at the discretion of each participant, invests the assets of the 401(k)
Plan in any of several investment options. The 401(k) Plan is intended to
qualify under Section 401 of the Code so that contributions by employees to the
401(k) Plan, and income earned on plan contributions, are not taxable to
employees until withdrawn, and so that the contributions by employees will be
deductible by the Company when made.
Severance Plan. In January 1996, the Company adopted an Executive
Severance Plan (the "Severance Plan") providing for certain benefits to
executive officers of the Company in the event an executive's employment is
involuntarily terminated without cause (generally meaning without any misconduct
on the executive's part) or that the executive voluntarily terminates employment
with good reason (generally meaning that the executive's responsibilities, title
or compensation was materially reduced). Upon the occurrence of such an event,
the Severance Plan provides for salary continuation for a period no greater than
one year. In addition, the Severance Plan provides for continued health benefits
coverage to the extent permitted by the Consolidated Omnibus Budget
Reconciliation Act of 1985 and the Company's group health policies.
Bonus Plan. The Company has a discretionary bonus program for certain
designated key employees of the Company, including all executive officers,
pursuant to which such employees are paid cash bonuses based upon the attainment
of certain specified corporate goals for the year established by the Board of
Directors. The amount of the bonus to which each such employee is entitled is
determined by the Board of Directors.
Profit Sharing Plan. In May 1996, the Board of Directors approved an
incentive-based profit sharing plan for employees of the Company, including all
executive officers. Under this Plan, employees are paid cash bonuses on a
quarterly basis based upon the attainment of certain specified corporate goals
determined by the Board of Directors.
12
<PAGE> 15
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION(1)
During fiscal 1996, the Board of Directors established the compensation
programs for all employees, including executive officers. Upon completion of the
leveraged recapitalization of the Company in November 1995, the Compensation
Committee of the Board of Directors ("Committee"), composed of Messrs.
Kortschak, Takemoto and Teal, none of whom are currently officers or employees
of the Company, was established. The Committee is responsible for establishing
the Company's compensation programs for all employees, including executives. For
executive officers, the Committee evaluates performance and determines
compensation policies and levels.
COMPENSATION PHILOSOPHY
The goals of the compensation program are to align compensation with
business objectives and performance and to enable the Company to attract, retain
and reward executive officers and other key employees who contribute to the
long-term success of the Company and to motivate them to enhance long-term
stockholder value. Key elements of this philosophy are as follows:
- The Company pays competitively with comparable technology companies, both
inside and outside its industry, with which the Company competes for
talent. To ensure that compensation is competitive, the Company compares
its practices with data storage companies and sets its parameters based
on this comparison.
- The Company maintains short- to long-term incentive opportunities
sufficient to provide motivation to achieve specific operating goals and
to generate rewards that bring total compensation to competitive levels.
- The Company provides significant equity-based incentives for executives
and other key employees to ensure that they are motivated over the
long-term to respond to the Company's business challenges and
opportunities as owners and not just as employees.
Base Salary. The Committee annually reviews each executive officer's base
salary. When reviewing base salaries, the Committee considers individual and
corporate performance, levels of responsibility, prior experience, breadth of
knowledge and competitive pay practices.
Near-Term Incentives. In May 1996, the Company adopted the HMT Employee
Quarterly Profit Sharing Plan, an incentive award plan for certain designated
key employees of the Company, including all executive officers. The actual
incentive award earned depends on the achievement of specified financial goals
of the Company and individual performance objectives. The Committee and the full
Board of Directors review and approve the annual performance objectives for the
Company and individual officers. The Company's objectives consist of operating,
strategic and financial goals that are considered to be critical to the
Company's fundamental long-term goal of building stockholder value.
The Company has also adopted a Key Employee Quarterly Bonus Plan for
employees of the Company, including all executive officers. Cash bonuses are
paid on a quarterly basis based upon achievement of certain specified corporate
goals. The Board of Directors determines the percentage of salary to be paid on
an individual basis.
Long-Term Incentives. The Company's long-term incentive program consists
of the 1995 Management Plan, the 1995 Plan, the Incentive Plan and the Purchase
Plan. As of March 31, 1996, 8,339,000 shares have been awarded to certain key
officers of the Company under the 1995 Management Plan, and 3,945,150 shares
have been granted under the 1995 Stock Plan. The Management Stock Plan utilizes
a combination of vesting plans designed to enhance the long-term goals of the
Company. A portion of the options have a performance-based vesting provision
which allows the acceleration of vesting based upon the attainment of a number
of performance milestones. The remainder of the options have a time-based
vesting provision which encourages
- ---------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the 1934 Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
13
<PAGE> 16
employees to remain with the Company. The Stock Plan options vest on a monthly
basis, which the Company believes provides a strong incentive for employees to
remain with the Company. Through option grants, executives and employees receive
significant equity incentives to build long-term stockholder value. Grants are
made at 100% of fair market value on the date of grant. Executives receive value
from these grants only if the Company's Common Stock appreciates over the
long-term. The size of option grants was initially determined at the discretion
of the Board of Directors, which adopted the Stock Plans in connection with the
leveraged recapitalization of the Company in November 1995. The Board awarded
grants in order to provide significant links between executive compensation and
stockholder interests. Such grants were intended to provide incentive to
successfully complete the initial public offering, to successfully achieve
certain specified revenue and profitability targets and to maximize stockholder
value over the next several years.
The Board has elected not to grant any further options under the Stock
Plans. Future grants will be made under the Incentive Plan. Employees will also
be allowed to participate in the Purchase Plan.
CORPORATE PERFORMANCE AND CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Schauer's base salary during fiscal 1996 as President and Chief
Executive Officer was $249,995. His bonus for the fiscal year was $113,557. Both
Mr. Schauer's salary and bonus were determined prior to the Company's leveraged
recapitalization, in which the sole stockholder of the Company, Hitachi Metals,
sold all of the outstanding shares of the Company back to the Company and the
Company subsequently issued and sold capital stock to a group of outside
investors and Hitachi Metals ("Leveraged Recapitalization"). Mr. Schauer's
compensation was determined pursuant to an Employment Agreement with Hitachi
Metals, which was subsequently terminated upon the completion of the Leveraged
Recapitalization. Comparing Mr. Schauer's salary to comparable companies, the
Board of Directors determined that Mr. Schauer's compensation rate should be
maintained for the balance of fiscal 1996. Similarly, Mr. Schauer's bonus was
determined based upon reaching certain established performance goals set in his
Employment Agreement with Hitachi Metals.
The Board of Directors also determined that it should supplement Mr.
Schauer's cash compensation with long-term incentives. In doing so, the Board of
Directors took into account (i) its belief that Mr. Schauer is one of the
leading chief executive officers of the data storage industry who has
significant and broad-based experience, (ii) the scope of Mr. Schauer's
responsibility, especially following the Leveraged Recapitalization and his
election as Chairman of the Board, (iii) the Board's confidence in Mr. Schauer
to lead the Company's continued development and (iv) the overall compensation
package, including salary, bonus and equity incentives. Considering these
factors, and as part of the change in the Company's status from that of a
wholly-owned subsidiary to an independent company, including establishing an
equity incentive structure consistent with those of similar companies in the
technology industry, Mr. Schauer was granted an option to purchase shares of
Common Stock as an incentive for future performance. As with the other executive
officers receiving grants in fiscal 1996, Mr. Schauer is not expected to receive
a similar level of stock option grants in the near-term.
CONCLUSION
Through the plans described above, a significant portion of the Company's
compensation program and Mr. Schauer's compensation are contingent on Company
performance, and realization of benefits is closely linked to increases in
long-term stockholder value. The Company remains committed to this philosophy of
pay for performance, recognizing that the competitive market for talented
executives and the volatility of the Company's business may result in highly
variable compensation for a particular time period.
LIMITATION ON DEDUCTION OF COMPENSATION PAID TO CERTAIN EXECUTIVE OFFICERS
Section 162(m) of the Internal Revenue Code (the "Code") limits the Company
to a deduction for federal income tax purposes of no more than $1 million of
compensation paid to certain Named Executive Officers in a taxable year.
Compensation above $1 million may be deducted if it is "performance-based
compensation" within the meaning of the Code.
14
<PAGE> 17
The statute containing this law and the applicable proposed Treasury
regulations offer a number of transitional exceptions to this deduction limit
for pre-existing compensation plans, arrangements and binding contracts. As a
result, the Compensation Committee believes that at the present time it is quite
unlikely that the compensation paid to any Named Executive Officer in a taxable
year which is subject to the deduction limit will exceed $1 million. Therefore,
the Compensation Committee has not yet established a policy for determining
which forms of incentive compensation awarded to its Named Executive Officers
shall be designed to qualify as "performance-based compensation."
BOARD OF DIRECTORS
Ronald L. Schauer
Bruce C. Edwards
Neil M. Garfinkel
Walter G. Kortschak
Shotaro Takemoto
Robert G. Teal
15
<PAGE> 18
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows the total stockholder return of an investment of
$100 in cash on March 13, 1996 for (i) the Company's Common Stock, (ii) the
Nasdaq Composite (the "NASDAQ Composite") and (iii) the Nasdaq Computer
Manufacturers Index.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG HMT TECHNOLOGY CORPORATION, THE NASDAQ COMPOSITE
AND THE NASDAQ COMPUTER MANUFACTURER INDEX
<TABLE>
<CAPTION>
HMT TECHNOL- NASDAQ
MEASUREMENT PERIOD OGY COR- NASDAQ STOCK COMPUTER
(FISCAL YEAR COVERED) PORATION MARKET MANUFACTURER
<S> <C> <C> <C>
3/13/96 100 100 100
3/31/96 104 101 98
</TABLE>
- ---------------
* $100 invested on 03/13/96 in stock or index -- including reinvestment of
dividends. Fiscal year ending March 31.
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the 1934 Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
16
<PAGE> 19
CERTAIN TRANSACTIONS
LEVERAGED RECAPITALIZATION
On November 30, 1995, the Company effected the Leveraged Recapitalization.
The Leveraged Recapitalization and related transactions consisted of: (i) the
repurchase by the Company from Hitachi Metals of shares of Common Stock
representing all the outstanding capital stock of the Company for an aggregate
purchase price of $52.1 million in cash; (ii) the recapitalization of the
Company through the sale of 21,968,057 shares of Common Stock for an aggregate
purchase price of approximately $0.7 million, 5,900,000 shares of Series A
Preferred Stock for an aggregate purchase price of approximately $59.0 million
and $47.0 million of Subordinated Notes; and (iii) the grant of options to
purchase 11,451,865 shares of Common Stock under the Stock Plans to certain
officers and employees of the Company. The purchasers of the Company's
securities in the Leveraged Recapitalization included certain investment funds
affiliated with Summit Partners and certain other investment funds, the
Company's management and employees and Hitachi Metals. Messrs. Kortschak and
Garfinkel, directors of the Company, are a General Partner and an employee of
Summit Partners, respectively. The Leveraged Recapitalization was undertaken in
order to provide liquidity to Hitachi Metals with respect to a portion of its
ownership interest in the Company.
The following table shows the aggregate number of shares of Common Stock,
Series A Preferred Stock and Subordinated Notes received by affiliates of the
Company in connection with the recapitalization of the Company and the amount of
cash paid:
<TABLE>
<CAPTION>
PURCHASE
SHARES OF PRICE FOR PRINCIPAL
PURCHASE MANDATORILY MANDATORILY AMOUNT OF
PRICE REDEEMABLE REDEEMABLE SUBORDINATED
SHARES OF FOR SERIES A SERIES A PROMISSORY
COMMON COMMON PREFERRED PREFERRED NOTES
STOCK STOCK STOCK STOCK PURCHASED TOTAL
---------- -------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Entities affiliated with Summit
Partners, L.P. ................. 14,720,691 $474,861 4,110,425 $41,104,250 $ 20,078,262 $ 61,657,373
Hitachi Metals, Ltd............... 5,146,744 166,024 1,382,269 13,822,690 11,011,286 25,000,000
Other investors................... 2,100,622 67,762 407,306 4,073,060 15,910,447 20,051,269
---------- -------- ---------- ----------- ----------- ------------
Total.................... 21,968,057 $708,647 5,900,000 $59,000,000 $ 46,999,995 $106,708,642
========== ======== ========== =========== =========== ============
</TABLE>
The Leveraged Recapitalization constituted a leveraged transaction. As of
November 30, 1995 (immediately prior to the reorganization), the Company had
approximately $98.5 million of assets and approximately $122.7 million of
liabilities. Immediately following the reorganization, the Company had $110.9
million in assets, $132.1 million in liabilities (including a $60.0 million
senior bank term loan and $47.0 million of Subordinated Notes) plus $59.0
million of Series A Preferred Stock.
In connection with the Leveraged Recapitalization, the Company entered into
an agreement with Hitachi Metals providing for the reimbursement of California
franchise taxes paid by Hitachi Metals America, an affiliate of Hitachi Metals,
for the benefit of the Company in respect of fiscal 1995 and the period between
April 1, 1995 through November 30, 1995. The Company also paid Y7.0 million
(equivalent to approximately $65,000 based on Y107.0 per dollar as of May 24,
1996) to Hitachi Metals in consideration of the assignment of certain Japanese
patent rights held by Hitachi Metals to the Company.
HITACHI METALS, LTD. AND AFFILIATES
Prior to the Leveraged Recapitalization, HMT was a wholly owned subsidiary
of Hitachi Metals. As a corporate parent of HMT, Hitachi Metals and its
affiliates provided certain support services, such as research and development
assistance, technical support and the guarantee of certain Company obligations.
During fiscal 1996, HMT paid $514,000 for research and development and technical
support. The Company terminated these agreements by the end of fiscal 1996.
Hitachi Metals or affiliates of Hitachi Metals provided bank guaranties, which
were released upon completion of the Leveraged Recapitalization, relating to an
aggregate principal amount of $117.5 million in debt.
17
<PAGE> 20
The Company has secured distribution and sales support services from
Hitachi Metals Trading and Hitachi Kizoku Shoji, affiliates of Hitachi Metals,
for sales into the Japanese market. During fiscal 1996, sales of the Company's
products through Hitachi Metals Trading totalled $19,000.
The Company purchases various manufacturing materials from Hitachi Metals
and its affiliates. During fiscal 1996, the Company purchased $8.8 million of
nickel-plated polished substrates through Hitachi Metals Trading. During the
same period, the Company purchased $2.3 million of sputtering process targets
and other parts from Hitachi Metals America, an affiliate of Hitachi Metals.
The Company believes that these transactions with Hitachi Metals and its
affiliates were in the best interests of the Company and were on terms no less
favorable to HMT than could be obtained from unaffiliated third parties.
Nevertheless, the Board of Directors has adopted a policy that all future
material transactions with affiliates will be on terms no less favorable to the
Company than those available from unaffiliated third parties and will be subject
to review and approval by a majority of the disinterested members of the Board
of Directors.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ Peter S. Norris
Peter S. Norris
Vice President, Finance, Chief
Financial Officer,
Treasurer and Assistant Secretary
August 22, 1996
18
<PAGE> 21
PROXY
HMT TECHNOLOGY CORPORATION
1055 PAGE AVENUE
FREMONT, CALIFORNIA 94538
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints Ronald L. Schauer and Peter S. Norris as
proxies, each with full power of substitution, and hereby authorizes them or
either of them to represent and to vote as designated below all the shares of
Common Stock of HMT Technology Corporation, held of record by the undersigned on
August 19, 1996 at the Annual Meeting of Stockholders to be held September 26,
1996 or at any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED IN FAVOR OF ELECTING THE NOMINEES LISTED AS DIRECTORS AND "FOR" ITEM 2
ON THE REVERSE SIDE.
See Reverse Side
Continued and to be signed on reverse side
/X/ Please mark votes as in this example.
1. ELECTION OF FIVE DIRECTORS
Nominees: Ronald L. Schauer, Bruce C. Edwards, Neil M. Garfinkel, Walter G.
Kortschak, Robert G. Teal
<TABLE>
<S> <C> <C>
/ / FOR / / WITHHELD / / FOR ALL NOMINEES
EXCEPT AS NOTED ABOVE
2. Ratification of appointment of independent accountants.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
/ / MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
</TABLE>
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY FORM PROMPTLY USING THE ENCLOSED
SELF-ADDRESSED ENVELOPE.
Please sign exactly as your name appears on your stock certificates. If shares
are held by joint tenants, both should sign. Which signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. If
shares are held of record by a corporation, please sign in full corporate name
by president or other authorized officer. Partnerships should sign in
partnership name by an authorized signatory.
