<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
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
DIGITAL EQUIPMENT CORPORATION
--------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
N/A
--------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which 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:*
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
/ / 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:
------------------------------------------------------------------------
<PAGE> 2
[DIGITAL LOGO]
September 18, 1995
Dear Fellow Stockholder:
You are cordially invited to attend our Annual Meeting of Stockholders,
which will be held this year on Thursday, November 9, 1995, at 11:00 A.M., at
the World Trade Center, Commonwealth Pier, 164 Northern Avenue, Boston,
Massachusetts.
We are very pleased that Frank P. Doyle, an Executive Vice President at
General Electric Company, became a member of our Board on August 24, 1995.
Philip Caldwell will be retiring from the Board of Directors on November 9,
1995. We are extremely grateful to him for his many contributions to Digital
during his 15 years of service as a Director and we will miss his participation
on the Board.
The notice of meeting and proxy statement that follow describe the business
to be conducted at the meeting. We also will give a presentation on the current
status of our business.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. After reading the enclosed Notice of
Annual Meeting and Proxy Statement, I urge you to complete, sign, date and
return your proxy ballot in the envelope provided. If the address on the
accompanying material is incorrect, please advise our Investor Services
Department in writing at 111 Powdermill Road, Maynard, Massachusetts 01754.
For the Board of Directors,
/s/ ROBERT B. PALMER
--------------------------------------
ROBERT B. PALMER
Chairman of the Board, President and
Chief Executive Officer
DIGITAL EQUIPMENT CORPORATION, 111 POWDERMILL ROAD, MAYNARD, MASSACHUSETTS 01754
YOUR VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE> 3
DIGITAL EQUIPMENT CORPORATION
--------------------------------------------------------------------------------
NOTICE OF 1995 ANNUAL MEETING
--------------------------------------------------------------------------------
To the Stockholders of DIGITAL EQUIPMENT CORPORATION:
Notice is hereby given that the Annual Meeting of Stockholders of Digital
Equipment Corporation, a Massachusetts corporation, will be held on Thursday,
November 9, 1995, at 11:00 A.M., at the World Trade Center, Commonwealth Pier,
164 Northern Avenue, Boston, Massachusetts, for the following purposes:
1. To elect three members to the Board of Directors to serve for a
three-year term as Class III Directors.
2. To consider and act upon a proposal to approve the 1995 Equity Plan.
3. To consider and act upon a proposal to approve the 1995 Stock Option
Plan for Nonemployee Directors.
4. To ratify the selection of the firm of Coopers & Lybrand L.L.P. as
auditors for the fiscal year ending June 29, 1996.
5. To consider and act upon a stockholder proposal relating to
declassification of the Board of Directors.
6. To transact such other business as may properly come before the meeting.
Stockholders entitled to notice of and to vote at the meeting shall be
determined as of the close of business on September 11, 1995, the record date
fixed by the Board of Directors for such purpose.
By Order of the Board of Directors,
/s/ GAIL S. MANN
---------------------------------
GAIL S. MANN, Clerk
September 18, 1995
--------------------------------------------------------------------------------
STOCKHOLDERS ARE REQUESTED TO SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE TO DIGITAL EQUIPMENT CORPORATION,
P.O. BOX 1006, NEW YORK, NEW YORK 10269.
<PAGE> 4
------------------------------
PROXY STATEMENT
------------------------------
INTRODUCTION
Proxies in the form enclosed with this proxy statement are solicited by the
Board of Directors of Digital Equipment Corporation (the "Corporation") for use
at the 1995 Annual Meeting of Stockholders (the "Meeting").
An Annual Report to Stockholders, containing financial statements for the
fiscal year ended July 1, 1995, has been sent to all stockholders entitled to
vote. This proxy statement and form of proxy were first sent to stockholders on
or about the date of the accompanying Notice of 1995 Annual Meeting.
Only common stockholders of record as of the close of business on September
11, 1995 will be entitled to vote at the Meeting and any adjournments thereof.
As of that date, 150,443,245 shares of Common Stock of the Corporation were
issued and outstanding. Each share outstanding as of the record date will be
entitled to one vote, and stockholders may vote in person or by proxy. Execution
of a proxy will not in any way affect a stockholder's right to attend the
meeting and vote in person. Any stockholder giving a proxy has the right to
revoke it at any time before it is exercised by written notice to the Clerk of
the Corporation. In addition, stockholders attending the Meeting may revoke
their proxies at that time.
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the meeting is necessary
to constitute a quorum for the transaction of business. Votes withheld from any
nominee for election as director, abstentions and broker "non-votes" are counted
as present or represented for purposes of determining the presence or absence of
a quorum for the meeting. A "non-vote" occurs when a nominee holding shares for
a beneficial owner votes on one proposal, but does not vote on another proposal
because, in respect of such other proposal, the nominee does not have
discretionary voting power and has not received instructions from the beneficial
owner. An automated system administered by the Corporation's solicitation agent
tabulates the votes. The vote on each matter submitted to stockholders is
tabulated separately. Abstentions are included in the number of shares present
or represented and voting on each matter. Broker "non-votes" are not so
included.
<PAGE> 5
The persons named as attorneys in the proxies are directors and/or officers
of the Corporation. All properly executed proxies returned in time to be cast at
the Meeting, if no contrary instruction is indicated, will be voted as stated
below under "Election of Directors." In addition to the election of Class III
Directors, the stockholders will consider and vote upon proposals to (i) approve
the 1995 Equity Plan; (ii) approve the 1995 Stock Option Plan for Nonemployee
Directors; and (iii) ratify the selection of auditors. Where a choice has been
specified on the proxy with respect to these matters, the shares represented by
the proxy will be voted in accordance with the specification and will be voted
FOR if no specification is indicated. Directors are elected by a plurality of
votes cast and the affirmative vote of a majority of the shares present or
represented at the Meeting and voting on such matter is required for approval of
these other matters.
The stockholders will also consider and act upon a stockholder proposal
relating to declassification of the Board of Directors. The Board of Directors
recommends a vote against this proposal. Where a choice has been specified on
the proxy with respect to the stockholder proposal, the shares represented by
the proxy will be voted in accordance with the specification and will be voted
AGAINST if no specification is indicated. The affirmative vote of a majority of
the shares present or represented at the Meeting and voting on such matter is
required for approval of this stockholder proposal.
The Corporation knows of no other matter to be presented at the Meeting. If
any other matter should be presented at the Meeting upon which a vote properly
may be taken, shares represented by all proxies received by the Corporation will
be voted with respect thereto in accordance with the judgment of the persons
named as attorneys in the proxies.
ELECTION OF DIRECTORS
The Board of Directors of the Corporation is divided into three classes.
Each class serves three years, with the terms of office of the respective
classes expiring in successive years. The directors in Class I will be nominees
for election to three-year terms at the 1996 Annual Meeting of Stockholders and
the directors in Class II will be nominees for election to three-year terms at
the 1997 Annual Meeting of Stockholders.
The present term of office for the directors in Class III ("Class III
Directors") expires at the Meeting. Colby H. Chandler, Arnaud de Vitry and
Thomas P. Gerrity were each elected at the Annual Meeting of Stockholders held
November 5, 1992, and are nominees for re-election to a three-year term as Class
III Directors. If re-elected, the Class III Director nominees will
2
<PAGE> 6
hold office until the Annual Meeting of Stockholders to be held in 1998 and
until their successors have been duly elected and have qualified. Shares
represented by all proxies received by the Board of Directors and not so marked
as to withhold authority to vote for any individual nominee will be voted
(unless one or more nominees is unable or unwilling to serve) for the election
of all nominees for Class III Directors. The Board of Directors knows of no
reason why any such nominee should be unable or unwilling to serve, but if such
should be the case, proxies will be voted for the election of some other person
or the Board of Directors will fix the number of directors at a lesser number.
Set forth below is information with respect to each nominee for a Class III
Director to be elected at the Meeting and for each Class I Director and Class II
Director. With the exception of Frank P. Doyle, all of the directors were
previously elected by the stockholders.
NOMINEES TO SERVE AS DIRECTORS FOR A THREE-YEAR TERM EXPIRING AT THE 1998 ANNUAL
MEETING (CLASS III DIRECTORS)
COLBY H. CHANDLER
Mr. Chandler, age 70, retired as Chairman of the Board and Chief
Executive Officer of Eastman Kodak Company ("Kodak") in May 1990. Prior
to that time he had been Chief Executive Officer, Chairman of the Board
and Chairman of the Executive Committee of Kodak since July 1983. He
assumed the presidency of Kodak in January 1977. Mr. Chandler was a
director of Kodak from 1974 to 1993. He is also a director of Citicorp,
Ford Motor Company and J. C. Penney Company, Inc. Mr. Chandler has been
a director of the Corporation since 1989 and is a member of the Audit
Committee and Nominating Committee.
ARNAUD DE VITRY
Mr. de Vitry, age 69, is an engineering consultant. From 1980 to 1990,
Mr. de Vitry was Chairman of the Board and Chief Executive Officer of
Eureka SICAV, France, an investment company. He is a director of Ionics,
Incorporated. Mr. de Vitry has been a director of the Corporation since
1957 and is Chairman of the Nominating Committee.
THOMAS P. GERRITY
Dr. Gerrity, age 54, has served as Dean of the Wharton School of the
University of Pennsylvania since July 1990. From 1969 to 1989, Dr.
Gerrity was chief executive
3
<PAGE> 7
officer of Index Group, Inc. ("Index"), an information technology
consulting company he founded. In 1988, Index became part of Computer
Sciences Corporation ("CSC") and Dr. Gerrity was subsequently appointed
president of CSC's commercial professional services group, CSC
Consulting. Dr. Gerrity is presently a director of the Federal National
Mortgage Association, Melville Corporation, Reliance Group Holdings,
Inc. and Sun Company, Inc. He has been a director of the Corporation
since 1992, and is a member of the Compensation and Stock Option
Committee and Strategic Direction Committee.
DIRECTORS SERVING A TERM EXPIRING AT THE 1996 ANNUAL MEETING (CLASS I DIRECTORS)
FRANK P. DOYLE
Mr. Doyle, age 64, has been an Executive Vice President of General
Electric Company and a member of its corporate executive office since
July 1992 and was a Senior Vice President from 1981 to July 1992. He is
a director of the Paine Webber Group Inc. Mr. Doyle was elected a
director of the Corporation on August 24, 1995.
KATHLEEN F. FELDSTEIN
Dr. Feldstein, age 54, has been President of Economics Studies, Inc., an
economics consulting firm, since 1987. Dr. Feldstein is presently a
director of Bank America Corporation, Conrail Corporation and The John
Hancock Mutual Life Insurance Company. Dr. Feldstein has been a director
of the Corporation since 1993 and is a member of its Audit Committee.
ROBERT B. PALMER
Mr. Palmer, age 55, has been President and Chief Executive Officer of
the Corporation since October 1992, and Chairman of the Board since May
1995. Mr. Palmer joined the Corporation in 1985 and served as Vice
President, Semiconductor and Interconnect Technology until 1990, and as
Vice President, Manufacturing, Logistics and Component Engineering from
1990 to 1992. From 1983 to 1985, he was Executive Vice President of
Semiconductor Operations at Mostek Corporation ("Mostek"), a subsidiary
of United Technologies Corporation. Mr. Palmer was a co-founder of
Mostek, where he held a series of senior management positions prior to
its acquisition in 1980 by United Technologies Corporation. Mr. Palmer
has been a director of the Corporation since 1992 and is Chairman of the
Strategic Direction Committee.
4
<PAGE> 8
DIRECTORS SERVING A TERM EXPIRING AT THE 1997 ANNUAL MEETING (CLASS II
DIRECTORS)
VERNON R. ALDEN
Mr. Alden, age 72, was Chairman of the Board and Executive Committee of
The Boston Company, Inc., a financial services company, from 1969 to
1978. He was President of Ohio University from 1962 to 1969. Mr. Alden
is a director of Augat, Inc., Colgate-Palmolive Company, Intermet
Corporation and Sonesta International Hotels Corporation. He is also a
trustee of several cultural and educational organizations. He has been a
director of the Corporation since 1959 and is a member of the Audit
Committee and Nominating Committee.
ROBERT R. EVERETT
Mr. Everett, age 74, is an engineering consultant. He retired as
President of the Mitre Corporation, a federal contract research center,
in 1986. Mr. Everett has been a director of the Corporation since 1986
and is a member of the Compensation and Stock Option Committee and
Strategic Direction Committee.
THOMAS L. PHILLIPS
Mr. Phillips, age 71, retired as Chairman of the Board and Chief
Executive Officer of Raytheon Company ("Raytheon") in March 1991, having
served as Chief Executive Officer since 1968, and as Chairman of the
Board since 1975. He has been a director of Raytheon since 1962. Mr.
Phillips is also a director of The John Hancock Mutual Life Insurance
Company, SRA International, Inc., State Street Research and Management
Co. and Knight-Ridder, Inc. Mr. Phillips has been a director of the
Corporation since 1991. He is Chairman of the Compensation and Stock
Option Committee and is a member of the Nominating Committee.
DELBERT C. STALEY
Mr. Staley, age 71 , was Chairman, Chief Executive Officer and a
director of NYNEX Corporation ("NYNEX") from 1983 until his retirement
in September 1989. He continued serving as a director of NYNEX and
served as Chairman of NYNEX International Management Committee until
October 1991. Mr. Staley is a director of The John Hancock Mutual Life
Insurance Company and Polaroid Corporation. Mr. Staley has been a
director of the Corporation since September 1993 and is a member of the
Compensation and Stock Option Committee and Strategic Direction
Committee.
5
<PAGE> 9
<TABLE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Shown below is certain information as of August 14, 1995, with respect to
beneficial ownership of shares of the Corporation's Common Stock and of
Depositary Shares, each representing one-fourth of a share of the Corporation's
Series A 8 7/8% Cumulative Preferred Stock (the "Depositary Shares"), by each
director (including the three nominees for Class III Directors), by each
executive officer named in the Summary Compensation Table set forth on page 12
and by all directors and executive officers as a group. Unless otherwise
indicated, the named person or members of the group possess sole voting and
investment power with respect to the shares.
<CAPTION>
BENEFICIAL OWNER SHARES BENEFICIALLY OWNED
---------------- -------------------------
<S> <C>
Vernon R. Alden................................ 49,502(1)(2)
4,000(3)
Philip Caldwell................................ 6,200(1)
6,706(4)
Colby H. Chandler.............................. 10,000(1)
4,254(4)
Arnaud de Vitry................................ 113,260(1)(5)
Frank P. Doyle................................. 0(6)
Robert R. Everett.............................. 6,300(1)
1,502(4)
Kathleen F. Feldstein.......................... 3,000(7)
Thomas P. Gerrity.............................. 15,000(8)
Robert B. Palmer............................... 439,119(9)
Thomas L. Phillips............................. 9,000(10)
Delbert C. Staley.............................. 4,000(11)
Charles F. Christ.............................. 70,975(12)
Enrico Pesatori................................ 53,250(13)
John J. Rando.................................. 47,722(14)
William D. Strecker............................ 77,845(15)
All directors and executive officers as a group
(21 persons)................................. 1,057,443(16)
<FN>
---------------
(1) Includes 5,000 shares of Common Stock which the director has the right
to acquire by exercise of a stock option granted pursuant to the Corporation's
1990 Stock Option Plan for Nonemployee Directors ("1990 Nonemployee Directors
Plan").
</TABLE>
6
<PAGE> 10
(2) Includes 22,873 shares of Common Stock held by Mr. Alden's wife, as to
which shares Mr. Alden disclaims beneficial ownership.
(3) Represents 4,000 Depositary Shares. These Depositary Shares represent
less than 1% of the Corporation's issued and outstanding Depositary Shares and
Preferred Stock.
(4) Represents Common Stock units under the directors' deferred
compensation plan described on pages 10 and 11. Under the plan, nonemployee
directors may elect to defer receipt of all or a portion of their compensation
in the form of Common Stock units. Common Stock units carry no voting rights.
(5) Includes 104,660 shares of Common Stock held by Mr. de Vitry's wife,
as to which shares Mr. de Vitry disclaims beneficial ownership.
(6) Mr. Doyle was elected a Director of the Corporation on August 24,
1995.
(7) Includes 2,000 shares of Common Stock which Dr. Feldstein has the
right to acquire by exercise of a stock option granted pursuant to the
Corporation's 1990 Nonemployee Directors Plan.
(8) Includes 3,000 shares of Common Stock which Dr. Gerrity has the right
to acquire by exercise of a stock option granted pursuant to the Corporation's
1990 Nonemployee Directors Plan.
(9) Includes 417,900 shares of Common Stock which Mr. Palmer has the right
to acquire by exercise of stock options, 199,050 of which are subject to
restrictions on disposition which lapse over time. Also includes 13,375 shares
awarded as restricted stock under the Corporation's 1990 Equity Plan.
(10) Includes 4,000 shares of Common Stock which Mr. Phillips has the right
to acquire by exercise of a stock option granted pursuant to the Corporation's
1990 Nonemployee Directors Plan.
(11) Includes 2,000 shares of Common Stock which Mr. Staley has the right
to acquire by exercise of a stock option granted pursuant to the Corporation's
1990 Nonemployee Directors Plan.
(12) Consists of 63,800 shares of Common Stock which Mr. Christ has the
right to acquire by exercise of stock options, 36,800 of which are subject to
restrictions on disposition which lapse over time. Also includes 7,125 shares of
Common Stock awarded as restricted stock under the Corporation's 1990 Equity
Plan.
(13) Includes 37,750 shares of Common Stock which Mr. Pesatori has the
right to acquire by exercise of stock options, 18,000 of which are subject to
restrictions on disposition which
7
<PAGE> 11
lapse over time. Also includes 15,500 shares of Common Stock awarded as
restricted stock under the Corporation's 1990 Equity Plan.
(14) Includes 42,875 shares of Common Stock which Mr. Rando has the right
to acquire by exercise of stock options, 13,505 of which are subject to
restrictions on disposition which lapse over time. Also includes 3,375 shares of
Common Stock awarded as restricted stock under the Corporation's 1990 Equity
Plan.
(15) Includes 68,000 shares of Common Stock which Mr. Strecker has the
right to acquire by exercise of stock options, 22,450 of which are subject to
restrictions on disposition which lapse over time. Also includes 2,185 shares of
Common Stock held by Mr. Strecker's wife, as to which shares Mr. Strecker
disclaims beneficial ownership. In addition, includes 6,250 shares awarded as
restricted stock under the Corporation's 1990 Equity Plan.
(16) The group is comprised of the executive officers named in the Summary
Compensation Table on page 12 and those persons who were directors and executive
officers of the Corporation on August 14, 1995 and Mr. Doyle, who was elected a
director of the Corporation on August 24, 1995. Mr. Doyle did not beneficially
own any shares of the Corporation's Common Stock nor any rights to acquire such
stock by exercise of stock options on either August 14, 1995 or August 24, 1995.
Includes 754,775 shares of Common Stock which the directors and executive
officers as a group have the right to acquire by exercise of stock options
granted under the Corporation's stock plans, 321,825 of which are subject to
restrictions on disposition which lapse over time. In addition, includes 130,474
shares held by family members of officers or directors, as to which shares the
applicable officer or director disclaims beneficial ownership. Also includes
64,375 shares awarded as restricted stock under the Corporation's 1990 Equity
Plan. Excludes 4,000 Depositary Shares held by such directors and executive
officers. The 1,057,443 shares held by all directors and executive officers as a
group would represent approximately .7% of the Corporation's issued and
outstanding Common Stock, assuming exercise of the stock options.
8
<PAGE> 12
<TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of the recent most practicable date as to
the group, who to the knowledge of management, beneficially owned more than 5%
of the shares of Common Stock of the Corporation.
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------------------------ ---------- ----------
<S> <C> <C>
FMR Corp. .......................................... 18,673,510(1)(2) 13.08%(2)
82 Devonshire Street
Boston, Massachusetts 02109
<FN>
---------------
(1) FMR Corp. disclaims beneficial ownership of 132,400 of such shares held by Fidelity
International Limited ("FIL"). Prior to June 30, 1980, FIL was a majority-owned subsidiary
of FMR Corp. On that date, the shares of FIL held by Fidelity were distributed as a dividend
to the shareholders of FMR Corp. FIL currently operates as an entity independent of FMR Corp.
(2) Represents the number of shares beneficially owned and the percent of class as of
December 31, 1994.
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Philip Caldwell, who is retiring from the Board of Directors on November 9,
1995, is Senior Managing Director of Lehman Brothers, one of the Corporation's
investment bankers. Lehman Brothers performs financial and investment banking
services for the Corporation for which it receives usual and customary
compensation. Mr. Caldwell's son-in-law is a middle management employee of the
Corporation and receives the usual and customary compensation for the position
he serves.
COMMITTEES OF THE BOARD
The Board of Directors has an Audit Committee, a Compensation and Stock
Option Committee, a Nominating Committee and a Strategic Direction Committee.
The Audit Committee selects the independent auditors to be employed by the
Corporation, subject to ratification by the Corporation's stockholders, reviews
generally the internal and external audit plans and the results thereof, and
reviews generally the Corporation's internal controls with the internal and
external auditors. The members of the Audit Committee are Mr. Caldwell,
Chairman, and Mr. Alden, Mr. Chandler and Dr. Feldstein.
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<PAGE> 13
The Compensation and Stock Option Committee reviews and recommends to the
Board the compensation of directors, reviews the compensation of senior
management and reviews and recommends to the Board the adoption of any
compensation plans in which directors and officers are eligible to participate.
The Committee also administers and interprets the Corporation's stock plans and,
subject to the provisions of the plans, selects the employees who are to
participate in such plans and determines the terms of their participation. The
members of the Compensation and Stock Option Committee are Mr. Phillips,
Chairman, and Mr. Everett, Dr. Gerrity and Mr. Staley.
The Nominating Committee is responsible for nominations to the Board of
Directors. The members of the Nominating Committee are Mr. de Vitry, Chairman,
and Messrs. Alden, Chandler, and Phillips. The Nominating Committee will
consider highly qualified candidates proposed in writing by stockholders.
Stockholders who wish to propose a nomination should submit the person's name
and background information to the Clerk of the Corporation.
The Strategic Direction Committee reviews and makes recommendations to the
Board on alternative strategic initiatives for the Corporation, taking into
account competitive and industry factors, technical developments, corporate
goals and the corporate resources necessary to implement alternative
initiatives. The members of the Strategic Direction Committee are Mr. Palmer,
Chairman, and Mr. Everett, Dr. Gerrity and Mr. Staley.
The Board of Directors held twelve meetings during the fiscal year ended
July 1, 1995, the Audit Committee met five times, the Compensation and Stock
Option Committee met six times, the Nominating Committee met two times and the
Strategic Direction Committee met two times. All directors attended more than
75% of the total number of meetings of the Board and the committees on which
they serve.
COMPENSATION OF DIRECTORS
Each director who is not also an employee of the Corporation received a
retainer of $25,000 for his or her services during the fiscal year ended July 1,
1995, plus $1,000 for each Board meeting and each committee meeting attended.
Directors are also reimbursed for out-of-pocket expenses incurred in attending
Board and committee meetings.
Directors may defer all or any part of their retainer or meeting fees
pursuant to a deferred compensation plan. Pursuant to the plan, nonemployee
directors of the Corporation may elect to defer receipt of all or a specified
portion of their compensation in the form of cash, with an interest rate related
to Treasury bills, or in the form of units, the value of each unit initially
10
<PAGE> 14
being equal to the fair market value of one share of the Common Stock of the
Corporation on the date the compensation being deferred would otherwise be
payable. The plan provides that compensation deferred under the plan, whether in
the form of cash or units, will be paid out in cash after termination of service
as a director. Directors may elect that compensation so deferred be paid out in
a lump sum or in up to ten annual installments. Payment of compensation deferred
under the plan commences in January of the year following the year in which
service as a director terminates.
Pursuant to a retirement plan for nonemployee directors adopted in May
1987, each nonemployee director of the Corporation on the date of adoption of
the plan, and every other nonemployee director who is 70 years of age or older
and who has completed at least five years of service on the Board is entitled
upon termination of service to an annualized benefit for life which is equal to
the annual retainer for nonemployee directors in effect on the date of
termination of service. The plan also provides for coordinated disability
benefits for all nonemployee directors equal to the annual retainer in effect on
the date of total disability. Effective upon and subject to adoption of the 1995
Stock Option Plan for Nonemployee Directors described below, only those
individuals who commenced service as a director prior to January 1, 1995 will be
entitled to participate and receive benefits under this Plan.
Each nonemployee director of the Corporation also participates in the 1990
Stock Option Plan for Nonemployee Directors ("1990 Nonemployee Directors Plan"),
which provides for a one-time grant of an option to purchase 5,000 shares of the
Corporation's Common Stock at a price per share equal to 100% of the fair market
value of the stock on the date of grant. Eligibility for and the grant of
options under the 1990 Nonemployee Directors Plan is automatic in nature,
occurring as of the date of commencement of service as a nonemployee director.
The options become exercisable at the rate of 20% per year beginning on the
first anniversary of the date the director begins service, with credit given for
all past service by directors who were serving as of the date of approval of the
1990 Nonemployee Directors Plan. The options expire ten years from the date of
grant, unless terminated earlier in accordance with the terms of the Plan. The
1990 Nonemployee Directors Plan authorizes the issuance of a maximum of 100,000
shares of Common Stock.
Upon approval by the stockholders, the 1995 Stock Option Plan for
Nonemployee Directors (the "1995 Nonemployee Directors Plan") will replace the
1990 Nonemployee Directors Plan. Upon such approval, the 1995 Nonemployee
Director Plan provides that annually, on the date of the Annual Meeting of
Stockholders, (i) each director who commenced service as a director of the
Corporation prior to January 1, 1995 and whose service as a
11
<PAGE> 15
director will continue after such Annual Meeting, would receive an option to
purchase 1,000 shares of the Corporation's Common Stock at a price equal to 100%
of the fair market value of the Corporation's Common Stock on the date of grant
and (ii) any director who commences service as a director of the Corporation
after January 1, 1995 and whose service as a director will continue after such
Annual Meeting would receive an option to purchase 2,500 shares of the
Corporation's Common Stock at a price equal to 100% of the fair market value of
the Corporation's Common Stock on the date of grant. The options become
exercisable at the rate of 33% on the first and second anniversaries of the date
of grant and 34% on the third anniversary of the date of grant. See "Proposal to
Approve the 1995 Stock Option Plan for Nonemployee Directors."
12
<PAGE> 16
<TABLE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows compensation for the Chief Executive Officer and the four other
most highly compensated executive officers for the fiscal year ended July 1, 1995.
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
----------------------------------- ------------------------------------
OTHER RESTRICTED ALL
ANNUAL STOCK STOCK OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) (4) ($) (#) ($) (6)
--------------------- ---- -------- -------- ------------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert B. Palmer..... 1995 $900,016 $375,000(3) $ 0 $399,609(5) 300,000 $ 0
Chairman of the 1994 900,016 0 0 0 120,000 0
Board, President, 1993 738,469(1) 0 0 0 345,000 9,000
Chief Executive
Officer(1)
Charles F. Christ.... 1995 425,006 175,000(3) 0 338,859(5) 135,000 (7) 0
Vice President 1994 315,016 0 0 0 60,000 0
1993 306,654 0 106,259 0 30,000 0
Enrico Pesatori...... 1995 650,000 220,000(3) 31,919 191,813(5) 150,000 (7)
Vice President(2) 1994 569,242 0 116,899 195,620(9) 75,000 0
1993 228,468(2) 100,000(8) 86,913 350,000(9) 30,000 0
John J. Rando........ 1995 348,089 175,000(3) 0 143,859(5) 125,000 (7) 0
Vice President 1994 259,052 0 0 0 50,000 0
1993 173,274 40,000 0 0 19,250 0
William D.
Strecker........... 1995 450,008 110,000(3) 0 95,906(5) 60,000 (7) 0
Vice President 1994 427,891 0 0 0 50,000 0
1993 357,704 60,000 0 0 29,000 13,500
<FN>
---------------
(1) Mr. Palmer was elected President and Chief Executive Officer of the Corporation effective October 1, 1992.
Salary reflected in the table includes compensation paid to Mr. Palmer in all capacities during fiscal year 1993.
(2) Mr. Pesatori joined the Corporation in March 1993. Mr. Pesatori's reported salary for fiscal year 1993
reflects the salary earned during the portion of such fiscal year that he was employed by the Corporation.
(3) Represents a cash bonus earned by such individual in fiscal year 1995 and paid during the first quarter of
fiscal year 1996.
(4) Represents customary one-time relocation and allowance payments to executives joining the Corporation. Mr.
Pesatori's compensation for each of the fiscal years ended July 1,
</TABLE>
13
<PAGE> 17
1995 and July 2, 1994 includes 20% of the original principal amount of a
$150,000 loan from the Corporation, and for each fiscal year, accrued interest,
which amounts were forgiven.
(5) Represents the dollar value on August 14, 1995, the award date, of an
award to such individual of restricted Common Stock (i) in recognition of the
significant effort expended during fiscal year 1995 to improve the Corporation's
financial performance and (ii) to provide an additional incentive for such
executive officer to remain with the Corporation. On such date, the fair market
value of the Common Stock was $42.625. Each of Messrs. Palmer, Christ, Pesatori,
Rando and Strecker were granted 9,375, 3,375, 4,500, 3,375 and 2,250 shares of
restricted Common Stock, respectively. Restrictions with respect to 50% of these
shares will lapse on February 14, 1996 and the remaining restrictions will lapse
on February 14, 1997. In the case of Mr. Christ, also represents the dollar
value on October 7, 1994, the award date, of an award of 7,500 shares of
restricted Common Stock. On such date, the fair market value of the Common Stock
was $26.00. Restrictions with respect to 50% of these shares lapsed on April 7,
1995 and the remaining restrictions will lapse on October 7, 1995. Mr. Christ
actually held 3,750 shares of restricted stock at the end of fiscal year 1995.
The value of these shares at June 30, 1995, the last business day of the fiscal
year, was $152,344. If the Corporation were to begin to pay dividends on its
Common Stock, holders of restricted Common Stock would receive cash dividends on
the shares of restricted Common Stock held by them. The amount ultimately
realized by any named executive officer in respect of restricted Common Stock
depends upon the value of the Corporation's Common Stock when the executive
officer sells the shares, which can only occur after the restrictions lapse.
(6) With respect to Messrs. Palmer and Strecker, consists of cash received
at the rate of $3.00 per unexercised option share in exchange for cancellation
of stock options granted during fiscal year 1988 at an exercise price of $153.00
per share.
(7) Shortly after the end of the fiscal year, on August 14, 1995, each of
Messrs. Christ, Pesatori, Rando and Strecker were granted options to purchase
125,000, 150,000, 125,000 and 60,000 shares, respectively, of the Corporation's
Common Stock. See "Option/SAR Grants in Last Fiscal Year."
(8) The Corporation agreed to pay this amount to Mr. Pesatori as an
inducement for his commencing employment with the Corporation. See "Employment
Arrangements."
(9) The amount shown for Mr. Pesatori for fiscal year 1994 represents the
dollar value on the date of grant of 10,000 shares of restricted Common Stock
awarded to Mr. Pesatori during fiscal year 1994. The restrictions with respect
to 50% of these shares lapsed December 16, 1994 and the remaining restrictions
will lapse on December 16, 1995. The amount shown for
14
<PAGE> 18
Mr. Pesatori for fiscal year 1993 represents the dollar value on the date of
grant of 10,000 shares of restricted Common Stock awarded to Mr. Pesatori during
fiscal year 1993. Mr. Pesatori actually held 11,000 shares of restricted stock
at the end of fiscal year 1995. The value of these shares at June 30, 1995, the
last business day of the fiscal year, was $446,875. If the Corporation were to
begin to pay dividends on its Common Stock, holders of restricted Common Stock
would receive cash dividends on the shares of restricted Common Stock held by
them. The amount ultimately realized by any named executive officer in respect
of restricted Common Stock depends upon the value of the Corporation's Common
Stock when the executive officer sells the shares, which can only occur after
the restrictions lapse.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows information regarding grants of stock options
during the fiscal year ended July 1, 1995 to the named executive officers and
also includes grants of stock options to the named executive officers on August
14, 1995. The Corporation did not grant any stock appreciation rights during
fiscal year 1995 nor during the period from the end of such fiscal year through
August 14, 1995.
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF STOCK
-------------------------------------------------------------------------- PRICE APPRECIATION
% OF TOTAL EXERCISE FOR OPTION
OPTIONS/SARS OR BASE TERM(2)(3)
OPTIONS/SARS GRANTED TO PRICE EXPIRATION --------------------------
NAME GRANTED EMPLOYEES(5) ($/SH) DATE 5%($) 10%($)
---- ------------ ------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert B. Palmer........... 300,000(1) 4.2 $48.187 8/20/05 $ 9,376,361 $ 23,930,921
Charles F. Christ.......... 10,000(1) 0.1 26.00 1/5/05 168,638 430,409
125,000(4) 1.7 42.625 8/14/05 3,350,829 8,491,659
Enrico Pesatori............ 150,000(4) 2.1 42.625 8/14/05 4,020,995 10,189,991
John J. Rando.............. 125,000(4) 1.7 42.625 8/14/05 3,350,829 8,491,659
William D. Strecker........ 60,000(4) 0.8 42.625 8/14/05 1,608,398 4,075,996
All Stockholders(3)........ 5.6 billion 12.8 billion
<FN>
---------------
(1) Stock option granted under the Corporation's 1990 Equity Plan at an exercise price equal to the fair
market value of the Corporation's Common Stock on the date of grant. The option has a term of ten years and
90 days and becomes exercisable ratably over three years from date of grant.
</TABLE>
15
<PAGE> 19
(2) Amounts reported in these columns represent amounts that may be
realized upon exercise of the options immediately prior to the expiration of
their term assuming the specified compounded rates of appreciation on the
Corporation's Common Stock over the term of the options. These numbers are
calculated based on rules promulgated by the Securities and Exchange Commission
and do not reflect the Corporation's estimates of future stock price growth.
Actual gains, if any, on stock option exercises and Common Stock holdings are
dependent on the timing of such exercise and sale of the shares and the future
performance of the Corporation's Common Stock. There can be no assurances that
the rates of appreciation assumed in this table can be achieved or that the
amounts reflected will be received by the individuals.
(3) The amounts shown as potential realizable values for all stockholders
represent the corresponding increases from June 30, 1995, the last business day
of the fiscal year, in the market value of 149,777,573 shares of the
Corporation's Common Stock outstanding on such date.
(4) Represents stock options granted to each of Messrs. Christ, Pesatori,
Rando and Strecker on August 14, 1995 under the Corporation's 1990 Equity Plan
at exercise prices equal to the fair market value of the Corporation's Common
Stock on the date of grant. These options each have a term of ten years and
become exercisable ratably over three years from the date of grant.
(5) Reflects percentage of total options granted to all employees from July
3, 1994 through August 14, 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table summarizes for each of the named executive officers the
number of stock options, if any, exercised during the fiscal year ended July 1,
1995, the aggregate dollar value realized upon exercise, and the dollar value of
in-the-money, unexercised options held at July 1, 1995. None of the named
executive officers hold any SARs. Value realized upon exercise is the difference
between the fair market value of the underlying stock on the exercise date and
the exercise price of the option. The value of unexercised, in-the-money options
at fiscal year-end is the difference between the exercise price and the fair
market value of the underlying stock on June 30, 1995, the last business day of
the fiscal year. The closing price of the Corporation's Common Stock on the New
York Stock Exchange on such date was $40.625.
16
<PAGE> 20
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS/SARS AT IN-THE-MONEY OPTIONS/
SHARES FY-END (#) SARS AT FY-END ($)
UNDERLYING VALUE ------------------------------- ---------------------------
OPTIONS/SARS REALIZED RESTRICTED/ RESTRICTED/
NAME EXERCISED(#) ($) EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert B. Palmer......... 0 $ 0 205,600 632,700 $837,495 $1,693,547
Charles F. Christ........ 0 0 44,200 99,800(2) 423,297 992,983(2)
Enrico Pesatori.......... 12,000 120,324 24,750 68,250(2) 521,309 1,058,416(2)
John J. Rando............ 0 0 28,990 47,385(2) 350,970 705,611(2)
William D. Strecker...... 0 0 44,100 87,400(2) 350,240 706,286(2)
<FN>
---------------
(1) A portion of these options represent immediately exercisable restricted stock options, with restrictions on disposition
of the underlying shares lapsing ratably over periods of three to ten years from date of grant. The number of underlying shares
subject to such options on July 1, 1995 for the named executive officers is as follows: Mr. Palmer, 212,300; Mr. Christ, 19,600;
Mr. Pesatori, 18,000; Mr. Rando, 13,885 and Mr. Strecker, 23,900. 40,000, 30,000 and 30,000 of the remaining options held by Messrs.
Palmer, Christ and Strecker, respectively, were granted during fiscal year 1992 and become exercisable at the rate of 20% per year
but may not be exercised unless and until the Corporation's stock price averages at least $100 over 90 consecutive trading days. The
remaining options held by Messrs. Palmer, Christ, Pesatori, Rando and Strecker were granted during fiscal years 1994 and 1995 and
become exercisable ratably over three years.
(2) Does not include options granted to such executive officers on August 14, 1995. See "Summary Compensation Table" and
"Option/SAR Grants in Last Fiscal Year."
</TABLE>
PENSION PLANS
The Corporation and its subsidiaries have pension plans covering
substantially all of their employees. Benefits under the Corporation's defined
benefit pension plan (the "Pension Plan") for its U.S. employees are based upon
the employee's earnings during service with the Corporation and are payable
after retirement in the form of annuities or lump sum benefits. The annual
amount payable upon retirement at age 65 is, in general, 1.5% of the aggregate
amount of the participant's compensation earned on and after July 1, 1989. Those
persons who were active participants on July 1, 1989, or who later become active
participants credited with prior service, are also eligible to receive 1.5% of
the average of the participant's annual compensation between July 1, 1984 and
July 1, 1989, multiplied by the number of years of accredited service prior to
July 1, 1989. For purposes of calculating a participant's pension
17
<PAGE> 21
benefit, annual compensation is currently limited to $150,000, subject to
adjustment to reflect cost of living increases. A participant's annual pension
may not exceed the lesser of the maximum allowable dollar limit, or 100% of the
participant's average compensation for the participant's three highest paid
consecutive years of service with the Corporation.
The Digital Equipment Corporation Restoration Pension Plan (the
"Restoration Plan"), adopted effective as of May 1, 1992, compensates the
Corporation's employees for reductions in the benefits calculated under the
Pension Plan due to legislative and regulatory limitations. The Restoration
Plan, which is a non-qualified plan under the Internal Revenue Code of 1986, as
amended, and which is unfunded, provides additional retirement compensation
equal to the difference between the benefit a participant would receive under
the Pension Plan without the legislative and regulatory limitations and the
benefit actually payable to the participant under the Pension Plan.
Estimated annual retirement benefits payable as a straight life annuity
under the Pension Plan and Restoration Plan at age 65 based on projected
compensation and continued employment for the following individuals would be:
Mr. Palmer, $194,641; Mr. Christ, $75,549; Mr. Pesatori, $114,260; Mr. Rando,
$196,200; and Mr. Strecker, $183,394.
EMPLOYMENT ARRANGEMENTS
In connection with his offer of employment in 1993, the Corporation (i)
agreed to pay Mr. Pesatori a base salary of $550,000 a year, which was
subsequently increased to $650,000 in recognition of his assumption of
additional responsibilities; (ii) awarded Mr. Pesatori 10,000 shares of
restricted Common Stock with restrictions on disposition lapsing over five years
and granted him a restricted stock option with respect to 30,000 shares of
Common Stock at an exercise price of $35.00 per share, with restrictions lapsing
ratably over five years, (iii) agreed to pay Mr. Pesatori a guaranteed bonus of
$100,000 at the end of fiscal 1993 as an inducement for his commencing
employment with the Corporation; and (iv) loaned Mr. Pesatori $150,000 for the
purchase of a principal residence in connection with his relocation to the
Boston area. If Mr. Pesatori were no longer to be employed by the Corporation,
such loan would bear interest at the minimum rate necessary to avoid imposition
of interest income under the United States Internal Revenue Code of 1986, as
amended. The loan is secured by a subordinated second mortgage. One-fifth of the
original principal amount of the loan was forgiven on each of February 3, 1994
and February 3, 1995, and an additional one-fifth of the original principal
amount of the loan will be forgiven on each anniversary thereof if Mr. Pesatori
is still employed by the Corporation on each such date. In the event Mr.
Pesatori's
18
<PAGE> 22
employment is terminated without cause within the first four years of his
employment with the Corporation, he would receive his then current salary for
twenty-four months unless he were to accept employment with a competitor of the
Corporation.
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the five-year return for the Corporation's
Common Stock against the Standard & Poor's ("S&P") 500 Stock Index and the S&P
Computer Systems Index. The graph assumes $100 was invested on June 30, 1990 in
the Corporation's Common Stock and $100 was invested at that time in each of the
S&P indexes. The comparative data assumes that all dividends, if any, were
reinvested.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
DIGITAL EQUIPMENT CORPORATION, S&P 500, AND S&P COMPUTER SYSTEMS
<CAPTION>
PLOTTED DATA
----------------------------------------------------
DIGITAL EQUIPMENT S&P COMPUTER
FY CORPORATION S&P 500 SYSTEMS
-- ----------------- ------- ------------
<S> <C> <C> <C>
1990 $100 $100 $100
1991 $ 70 $107 $ 85
1992 $ 41 $122 $ 86
1993 $ 48 $138 $ 58
1994 $ 22 $140 $ 62
1995 $ 48 $177 $103
</TABLE>
19
<PAGE> 23
COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee (the "Committee") of the Board
of Directors is composed of four independent non-employee directors. The
Committee is responsible for approving executive officer compensation and for
administering the cash incentive and equity participation plans that govern the
variable compensation paid to senior management of the Corporation. The
following report describes the Corporation's executive compensation practices
and the actions of the Committee regarding compensation paid to executive
officers for fiscal year 1995.
The Corporation's executive compensation programs are designed to link the
level of executive compensation to corporate, organizational and individual
performance, and to variations in shareholder value. In addition, these programs
are intended to motivate executives to improve the Corporation's financial
performance and to make executives accountable for the performance of the
business units or functions for which they are responsible. It is also a goal of
these programs to attract and retain talented executives. The Corporation's
compensation philosophy provides that variable short and long-term incentive
compensation, particularly stock options, will constitute a significant portion
of executive compensation.
The Committee's compensation decisions and awards for fiscal year 1995
generally were weighted toward vehicles which would provide incentives for
executives to improve the Corporation's financial performance and link the level
of executive compensation to variations in shareholder value. As in past years,
the Committee reviewed the total compensation of executive officers relative to
the compensation of executives of large and competitor companies, including
companies in the Standard & Poor's Computer Systems Index, others in the
Corporation's industry and select cross-industry "Fortune 100" companies, all of
which shall be referred to as the "Comparison Group." The Committee also
reviewed each executive officer's performance and the performance of the
business unit or function for which such officer was responsible.
20
<PAGE> 24
The Corporation's standard executive compensation program consists of three
major elements: base salary, short-term cash and other incentives and long-term
incentives in the form of fair market value stock options. The Committee
combines these elements to address the following objectives:
- attract and retain talented executives by paying them a competitive base
salary;
- reward targeted and superior corporate, organizational and individual
performance through cash and other short-term incentives;
- motivate and encourage performance that increases shareholder value and
contributes to the future success of the Corporation through grants of stock
options.
Base Salaries. Base salary levels are determined relative to external
market and Comparison Group practices, the internal scope and impact of the
job, the overall performance of the Corporation and the performance of the
business unit or function for which the executive officer is responsible.
Whereas the Corporation strives to set base salary levels at the
competitive median to attract and retain key talent and from time to time
adjusts the salaries of executive officers to achieve these objectives, the
Corporation's compensation philosophy is to reward individual performance
principally through short and long-term incentives rather than permanent
increases to base salary.
Mr. Rando's salary was increased during fiscal year 1995 in order to
bring his salary in line with competitive salary ranges for his position.
No other named executive officer received a salary increase in fiscal year
1995.
Cash Incentives. The purpose of the Corporation's Cash Incentive Plan
is to motivate and reward participants, including executive officers,
relative to corporate, organizational and individual performance for any
given year. The program for fiscal year 1995 provided for cash awards based
partly on achievement of corporate-wide financial objectives related to
operating income and partly on meeting performance targets and objectives
established at the beginning of fiscal year 1995 for the business
organization or function for which the executive officer or other
participant was responsible. The Corporation achieved a level of
corporate-wide performance necessary to pay bonuses under the Plan. The
cash bonus awards listed in the Summary Compensation Table above reflect
payouts under the Cash Incentive Plan which correspond to the level of
corporate, organizational and individual performance achieved. In setting
the level of payout for executive officers, the Committee considered
multiple factors, including achievement of stated financial objectives.
21
<PAGE> 25
Equity Participation Plans. Stock options continue to be a major
component of the Corporation's compensation strategy because this
compensation vehicle closely aligns the interests of management with those
of stockholders. Stock options are periodically granted to executive
officers based on an assessment of each officer's potential to contribute
to the future success of the Corporation and relative to practices of
companies in the Comparison Group. In determining the size and vesting
schedules of these grants, the Committee considered the challenges facing
the Corporation as it implements its restructuring plan and improves
financial performance, as well as the practices of companies in the
Comparison Group. Consistent with its articulated compensation philosophy,
shortly after the end of the fiscal year, the Corporation granted to all
executive officers, including each of the named executive officers,
incentive and non-qualified stock options, with a ten-year term, that
become exercisable ratably over three years at an exercise price equal to
the fair market value of the Common Stock on the date of grant.
The Corporation periodically awards a small number of individuals,
including certain executive officers, restricted stock in recognition of
outstanding performance. Restricted stock awards also have been used and
may continue to be used to attract and retain certain key individuals.
Executive officers, including the named executive officers as reflected and
described in the Summary Compensation Table and footnotes above, received
restricted stock awards after the close of the fiscal year, in recognition
of the significant individual and team effort expended by each such
executive officer to improve the Corporation's financial performance and to
provide additional incentive for such executive officer to remain with the
Corporation.
Chief Executive Compensation. Mr. Palmer's annual base salary for fiscal
year 1995 remained at $900,000. As noted in the Summary Compensation Table, Mr.
Palmer also participates in the Cash Incentive Plan and received a cash award
under the plan. In addition, Mr. Palmer received a restricted stock award after
the close of the fiscal year, as reflected in the Summary Compensation Table, in
recognition of his personal effort in leading the Corporation's management team
in their efforts to improve the Corporation's financial performance and in
setting a direction for the future.
The Committee believes that the total compensation package for the Chief
Executive Officer should provide significant incentives to improve corporate
performance and increase shareholder value. Accordingly, coincident with his
election as Chairman in May 1995, Mr. Palmer was awarded a stock option to
purchase 300,000 shares of the Corporation's
22
<PAGE> 26
Common Stock, at an exercise price equal to the fair market value of the Common
Stock on the date of grant and exercisable ratably over three years. In
determining the size and vesting schedule of Mr. Palmer's grant, the Committee
considered the challenges facing the Chief Executive Officer as he leads the
Corporation and its management team in their efforts to achieve sustainable
improved financial performance. The Committee also considered the practices of
companies in the Comparison Group.
The Committee periodically reviews Mr. Palmer's total compensation, as well
as the components thereof, with an outside compensation consultant. The
Committee believes that Mr. Palmer's total compensation is appropriate, taking
into account the significance of his responsibilities, the performance of the
Corporation and the compensation of chief executive officers of companies within
the Comparison Group.
Compensation Deductibility. The Committee has reviewed the potential
consequences for the Corporation of Internal Revenue Code section 162(m), which
imposes a limit on tax deductions for annual compensation in excess of one
million dollars paid to any of the five most highly compensated executive
officers of a corporation. This provision excludes certain forms of
"performance-based compensation" from the compensation taken into account for
purposes of that limit, such as the value of stock options and restricted stock
awards granted under the Corporation's 1990 Equity Plan, or, if approved by the
stockholders, the proposed 1995 Equity Plan. Payments under the Corporation's
Cash Incentive Plan are not so excluded. Section 162(m) had no impact on the
Corporation's consolidated results of operations for fiscal year 1995. The
Committee will continue to monitor the impact of this provision on the
Corporation.
Compensation and Stock Option Committee:
Thomas L. Phillips, Chairman
Robert R. Everett
Thomas P. Gerrity
Delbert C. Staley
PROPOSAL TO APPROVE THE 1995 EQUITY PLAN
On August 24, 1995, the Board of Directors adopted the Digital Equipment
Corporation 1995 Equity Plan (the "1995 Plan"), subject to stockholder approval.
Upon approval by the stockholders, the 1995 Plan will replace the Corporation's
1990 Equity Plan as the Corporation's principal equity incentive plan for key
employees of the Corporation and its subsidiaries.
23
<PAGE> 27
The 1990 Plan is scheduled to expire December 31, 1995. The 1995 Plan is
intended to advance the interests of the Corporation and its stockholders by
providing equity-based incentives to better align the interests of key employees
with those of stockholders, and to attract, retain and motivate such employees.
The 1995 Plan authorizes the grant of awards from the date of its adoption
by the Board of Directors until December 31, 1998, subject to approval of the
1995 Plan by the stockholders prior to August 24, 1996.
DESCRIPTION OF PROPOSED PLAN
The following summary description is qualified in its entirety by reference
to the full text of the 1995 Plan, which is attached to this Proxy Statement as
Exhibit A.
AVAILABLE SHARES
Subject to adjustment for stock dividends, stock splits and similar events,
the maximum number of shares of the Corporation's Common Stock available for
grants of awards under the 1995 Plan will be (i) until June 29, 1996, the
maximum number of shares available for issuance under the Corporation's 1990
Equity Plan (the "1990 Plan") as of the date of approval of the 1995 Plan by the
Corporation's stockholders, plus any shares of Stock subject to Awards under the
1990 Equity Plan that expire unexercised or are forfeited, terminated, canceled
(in whole or in part), or in any other manner not issued to an Employee at any
time ("Carryover Shares") and (ii) for each fiscal year subsequent to the fiscal
year ending June 29, 1996, but prior to the beginning of the fiscal year
commencing on June 28, 1998, the Carryover Shares, plus 2% of the issued shares
of the Corporation's Common Stock (including treasury shares) as of the first
day of such fiscal year, plus any Stock tendered to the Corporation as full or
partial payment for the exercise of any option under the 1990 Plan or the Plan
and the payment of any withholding taxes arising therefrom. As of August 14,
1995, under the 1990 Plan, there were 2,755,823 shares available for additional
grants of awards, 13,260,406 shares subject to outstanding options, and 805,710
shares of restricted stock outstanding. On such date, the fair market value of
the Common Stock was $42.625 per share. No more than 5,000,000 shares of Stock
shall cumulatively be available for the issuance of ISOs (as defined below)
under the Plan, nor shall more than 1,000,000 shares of Stock be cumulatively
available for grant pursuant to Restricted Stock Awards, Unrestricted Stock
Awards and Stock Unit Awards (as defined below). As of August 14, 1995, 2% of
the issued shares of the Corporation's Common Stock equaled 3,015,084 shares. No
employee may be granted, during any fiscal year commencing July 2, 1995, awards
under the 1995 Plan relating to, in the aggregate, more than 1,000,000 shares of
Common Stock.
24
<PAGE> 28
Under the 1995 Plan, all shares of Common Stock available for grants of
awards in any fiscal year (or portion thereof) that are not used in the grant of
awards in such fiscal year will be available for use in subsequent years. Shares
subject to any unexercised or undistributed portion of any terminated, expired
or forfeited award also will be available for future award under the 1995 Plan.
ADMINISTRATION
The 1995 Plan will be administered by the Compensation and Stock Option
Committee of the Board of Directors (the "Committee") consisting of not fewer
than two members of the Board of Directors, none of whom is an employee of the
Corporation. Subject to the terms of the 1995 Plan, the Committee will have the
authority to establish rules for the administration of the Plan; to select the
employees to whom awards are granted; to determine the type of awards to be
granted and the number of shares covered by such awards; to set the terms and
conditions of such awards; and to determine whether any option granted shall be
an incentive stock option ("ISO") or a non-qualified stock option ("NQO"). The
Committee's authority to take certain actions under the 1995 Plan will include
authority to accelerate payment or vesting under, or waive the restrictions
applicable to, any 1995 Plan award. The Board of Directors may also establish a
committee of one or more members of the Corporation's Board of Directors who are
also officers of the Corporation for the purposes of administering grants of
awards under the 1995 Plan to employees who are not subject to the provisions of
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
ELIGIBILITY
Employees, including officers, of the Corporation or any of its
subsidiaries are eligible to receive awards under the 1995 Plan. Directors who
are also employees are eligible to receive awards if they are not members of the
Committee. Awards may be granted to the same employee on more than one occasion.
STOCK OPTIONS
The 1995 Plan permits the granting of stock options that qualify as ISOs
under the Code and those that do not so qualify, NQOs. The exercise price of
each option is determined by the Committee, but cannot be less than the fair
market value of the stock on the date of grant. The Committee has the discretion
to establish as the grant date of an option the date on which Committee action
approving the option is taken, or any later date specified by the Committee.
25
<PAGE> 29
Options may be exercised by payment in full of the purchase price in cash,
or by delivery of an assignment to the Corporation of the proceeds from the sale
of Common Stock acquired upon exercise together with an authorization to the
broker or selling agent to pay that amount to the Corporation. At the discretion
of the Committee, the exercise price of options may be paid in whole or in part
by the tendering of unrestricted shares of Common Stock of the Corporation
having a fair market value on the exercise date equal to the exercise price.
The Committee will determine at what time or times options may be
exercised, the term of each option, provided that the term may not exceed ten
years, and the restrictions, if any, applicable to options or the shares of
Common Stock subject to such options.
STOCK APPRECIATION RIGHTS
The 1995 Plan authorizes the grant of stock appreciation rights ("SARs")
which entitle the recipient upon exercise to receive with respect to each share
of Common Stock to which the SAR relates, an amount, in cash or restricted or
unrestricted Common Stock, or a combination thereof (at the Committee's
discretion) equal to the appreciation, if any, in the fair market value per
share of the Corporation's Common Stock from the date of grant of the SAR to the
date of its payment or settlement. The award price is determined by the
Committee and cannot be less than the fair market value per share of the
Corporation's Common Stock on the date the SAR is granted.
RESTRICTED STOCK AND UNRESTRICTED STOCK
The 1995 Plan authorizes the Committee to award to recipients shares of
Common Stock subject to restrictions ("Restricted Stock Awards"), as well as
shares of Common Stock which are free from any restrictions ("Unrestricted Stock
Awards"). Common Stock issued pursuant to such awards may be acquired without
payment to the Corporation, consistent with applicable state law. Holders of
Restricted Stock Awards are entitled to vote and receive dividends, if any, with
respect to any shares of restricted stock.
Restricted Stock Awards entitle the recipient to acquire shares of
restricted stock subject to restrictions against disposition and such other
restrictions, conditions and contingencies as determined by the Committee. In
the event of termination of employment for reasons other than death, disability
or retirement (unless otherwise provided by the Committee or in the award
instrument), the shares of restricted stock as to which the restrictions have
not lapsed shall be forfeited to the Corporation.
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The Committee may provide that the Common Stock deliverable or issuable
pursuant to any award granted under the 1995 Plan will be restricted.
STOCK UNIT AWARDS
The 1995 Plan authorizes the grant of awards which entitle the recipient to
receive, without payment, stock units in the form of phantom shares of stock
("Stock Unit Awards"). The stock units are valued at the Committee's discretion
in whole or in part by reference to the fair market value of the Corporation's
Common Stock. The Committee will determine the terms and conditions applicable
to Stock Unit Awards, including any applicable restrictions, conditions or
contingencies, which may be related to individual, corporate or other categories
of performance. Stock Unit Awards are payable in shares of Common Stock or cash,
or any combination thereof, at the discretion of the Committee. An employee who
receives a Stock Unit Award may be given rights to dividend equivalents, payable
in cash, stock, or additional stock units, subject to any conditions the
Committee may impose.
PERFORMANCE CRITERIA
In its discretion, the Committee may grant Awards contingent on the
satisfaction of performance criteria, consistent with Section 162(m) of the
Code, based on levels of revenue, operating income, profit after tax, earnings
per share, cash flow, return on equity or return on assets. In addition, the
Committee may also grant Awards contingent on the satisfaction of other
performance criteria established in its discretion.
GENERAL
Except as otherwise determined by the Committee or as otherwise provided in
the applicable award instrument, unexercised awards or awards subject to
restrictions or conditions which have not lapsed or been satisfied shall be
forfeited under the 1995 Plan upon termination of employment for reasons or
conditions other than death, permanent disability or retirement.
The 1995 Plan provides that the Committee, in its sole discretion, upon the
request of a recipient of an award, may defer the date of payment of cash or
stock under such award. In the event of stock dividends, stock splits and
similar events, the Committee will make appropriate adjustments to the maximum
number of shares of Common Stock that may be delivered under the 1995 Plan, the
maximum number of shares that may be issued for certain types of awards,
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the number of shares covered by outstanding awards, and the grant, purchase or
exercise price with respect to any award.
The Committee may also make appropriate adjustments to take into account
material changes in law or accounting matters or certain other corporate changes
or events. The Board of Directors may make appropriate adjustments to take into
account a change in control of the Corporation.
The Board of Directors may at any time terminate the 1995 Plan or suspend
the grant of awards under the 1995 Plan. The Board may amend the 1995 Plan or
any outstanding award at any time for any lawful purpose, provided that no
amendment, without the approval of the Corporation's stockholders, can increase
the maximum number of shares that may be issued under the 1995 Plan or issued in
the aggregate pursuant to certain kinds of awards, and no amendment, without
stockholder approval (where such approval would be necessary to satisfy
applicable securities or tax law or stock exchange rules), can extend the period
during which awards may be granted or change the group of persons eligible to
receive awards under the 1995 Plan.
TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE
Incentive Stock Options. Generally, no taxable income is recognized by the
optionee upon the grant or exercise of an ISO if certain requirements are met.
However, the exercise of an ISO may result in alternative minimum tax liability
for the optionee. If no disposition of shares issued to an optionee pursuant to
the exercise of an ISO is made by the optionee within two years from the date of
grant or within one year after the date of exercise, then upon sale of such
shares, any amount realized in excess of the exercise price (the amount paid for
the shares) will be taxed to the optionee as a long-term capital gain and any
loss sustained will be a long-term capital loss, and no deduction will be
allowed to the Corporation for Federal income tax purposes.
If shares of Common Stock acquired upon the exercise of an ISO are disposed
of prior to the expiration of the two-year and one-year holding periods
described above (a "disqualifying disposition"), generally the optionee will
recognize ordinary income in the year of disposition in an amount equal to the
excess (if any) of the fair market value of the shares on the date of exercise
(or, if less, the amount realized on an arms-length sale of such shares) over
the exercise price thereof, and the Corporation will be entitled to a
corresponding deduction. Any gain realized from the sale of shares in excess of
the amount taxed as ordinary income will be taxed as capital gain and will not
be deductible by the Corporation.
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Generally, an ISO will not be eligible for the tax treatment described
above if either the required holding periods or certain other requirements are
not met. For example, if an ISO is exercised more than three months following
termination of employment (one year following termination of employment by
reason of permanent and total disability), except in certain cases where the ISO
is exercised after the death of the optionee, then it will no longer qualify for
the tax treatment described above and the option is treated as a non-qualified
option.
Non-Qualified Options. No taxable income is recognized by the optionee at
the time a NQO is granted under the 1995 Plan. Generally, on the date of
exercise of a NQO, ordinary income is recognized by the optionee in an amount
equal to the difference between the exercise price and the fair market value of
the shares on the date of exercise, and the Corporation receives a tax deduction
for the same amount. Upon disposition of the shares acquired, an optionee
generally recognizes the appreciation or depreciation on the shares after the
date of exercise as either short-term or long-term capital gain or loss
depending on how long the shares have been held.
If restricted stock is received upon exercise of an option or stock
appreciation right, the income and the deduction, if any, associated with such
award may be deferred in accordance with the rules described below for
restricted stock.
Stock Appreciation Rights. No income will be realized by an optionee in
connection with the grant of a stock appreciation right. When the stock
appreciation right is exercised, the optionee will generally be required to
include as taxable ordinary income in the year of such exercise an amount equal
to the amount of cash received and the fair market value of any stock received.
The Corporation will generally be entitled to a deduction equal to the amount
includable as ordinary income by such optionee.
Restricted Stock. A recipient of restricted stock generally will be
subject to tax at ordinary income rates on the excess of the fair market value
of the stock (measured at the time the stock is either transferable or is no
longer subject to forfeiture) over the amount, if any, paid for such stock.
However, a recipient who elects under Section 83(b) of the Code within 30 days
of the date of issuance of the restricted stock to be taxed at the time of
issuance of the restricted stock will recognize ordinary income on the date of
issuance equal to the fair market value of the shares of restricted stock at
that time (measured as if the shares were unrestricted and could be sold
immediately), minus any amount paid for such stock. If the shares subject to
such election are forfeited, the recipient will be entitled to a capital loss
for tax purposes only for the amount paid for the forfeited shares, not the
amount recognized as ordinary income as a result of the Section 83(b) election.
The holding period to determine whether the recipient
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has long-term or short-term capital gain or loss upon sale of shares begins when
the forfeiture period expires (or upon issuance of the shares, if the recipient
elected immediate recognition of income under Section 83(b)).
Unrestricted Stock; Stock Units. A recipient of unrestricted stock or
stock units will generally be subject to tax at ordinary income rates on any
cash received and on the fair market value of any Common Stock issued pursuant
to such an award, and the Corporation will generally be entitled to a deduction
equal to the amount of ordinary income realized by the recipient. Any cash
received and the fair market value of any Common Stock received will generally
be included in income (and a corresponding deduction will generally be available
to the Corporation) at time of receipt. The capital gain or loss holding period
for any Common Stock distributed under an award will begin when the recipient
recognizes ordinary income in respect of that distribution.
Performance Criteria. Section 162(m) of the Code limits otherwise
allowable tax deductions for annual compensation (including compensation
attributable to Awards) in excess of one million dollars paid to any of the five
most highly compensated executives of the Corporation unless that compensation
is determined with reference to performance criteria consistent with that
section. Awards granted to such executives that are not based on performance
criteria consistent with Section 162(m) of the Code generally will not result in
a tax deduction for the Corporation. However, given the Corporation's total
operating revenues and expenses, as well as the amount of the Corporation's net
operating loss carryforwards, any inability to take such a deduction is not
currently expected to have a material impact on the Corporation's consolidated
results of operations.
The Board of Directors recommends a vote FOR approving the 1995 Plan.
PROPOSAL TO APPROVE THE 1995 STOCK OPTION PLAN
FOR NONEMPLOYEE DIRECTORS
On August 24, 1995, the Board of Directors adopted the 1995 Stock Option
Plan for Nonemployee Directors (the "1995 Nonemployee Directors Plan"),
effective upon and subject to stockholder approval. The Plan is intended to more
closely align the interests of the Corporation's nonemployee directors with
those of stockholders, by increasing the stock component of the directors'
compensation package. Upon approval by the stockholders the 1995 Nonemployee
Directors Plan will replace the 1990 Nonemployee Directors Plan.
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DESCRIPTION OF THE 1995 NONEMPLOYEE DIRECTORS PLAN
The following summary description is qualified in its entirety by reference
to the full text of the 1995 Nonemployee Directors Plan, which is attached to
this Proxy Statement as Exhibit B.
The Compensation and Stock Option Committee of the Board of Directors (the
"Committee") has the authority to administer, interpret and make determinations
under the 1995 Nonemployee Directors Plan. Eligibility for and the grant of
options under the 1995 Nonemployee Directors Plan is automatic in nature. Each
eligible nonemployee director who joins the Board on or after January 1, 1995
will receive annually an option to purchase the same fixed number (2,500) of
shares under the 1995 Nonemployee Directors Plan and each eligible nonemployee
director who served on the Board prior to January 1, 1995, will receive annually
an option to purchase the same fixed number (1,000) of shares under the 1995
Nonemployee Directors Plan. Therefore, the Committee will not have any
discretion with respect to the amount of or the terms of any individual grant
under the 1995 Nonemployee Directors Plan.
Upon approval of the 1995 Nonemployee Directors Plan by the Corporation's
stockholders, 50,000 shares of the Corporation's Common Stock, plus the number
of shares of Common Stock available for issuance under the Corporation's 1990
Nonemployee Directors Plan on the date of approval of the 1995 Nonemployee
Directors Plan by the Corporation's stockholders, will be available for issuance
under the 1995 Nonemployee Directors Plan, subject to automatic adjustment in
the event of a stock dividend, stock split or similar events. If any options
granted under the 1990 Nonemployee Directors Plan or the 1995 Nonemployee
Directors Plan expire or terminate without exercise, in whole or in part, the
shares reserved therefor will revert to the option pool to be available under
the Plan. As of August 24, 1995, options to purchase 55,000 shares of Common
Stock were outstanding under the 1990 Nonemployee Directors Plan and 45,000
shares were available for issuance.
The exercise price of an option will be 100% of the fair market value per
share of Common Stock of the Corporation on the date the option is granted,
payable by (i) delivery of cash, bankdraft, money order or check to the order of
the Corporation, (ii) by delivery of shares of Common Stock of the Corporation
owned by the nonemployee director which have a fair market value equal to the
exercise price of the option being exercised, (iii) if permitted by applicable
law, through the delivery of an assignment to the Corporation of a sufficient
amount of the proceeds from the sale of Common Stock acquired upon exercise to
pay for all of the Common Stock so acquired and an authorization to the broker
or selling agent to pay that to the Corporation, or (iv) by any combination of
these methods.
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Options granted to nonemployee directors ("Participants") under the 1995
Nonemployee Directors Plan will become exercisable at the rate of 33% on the
first and second anniversaries of the date of grant and 34% on the third
anniversary of the date of grant. Options will be granted annually on the date
of the Corporation's Annual Meeting of Stockholders to each director whose
service will continue after such meeting. Options granted under the 1995
Nonemployee Directors Plan will expire ten years from the date of grant, unless
terminated earlier in accordance with the 1995 Nonemployee Directors Plan.
However, any option granted to a Participant who ceases to be a director of the
Corporation because of death will expire one year from the date of the
Participant's death.
If a Participant ceases to be a member of the Board because of permanent
disability or death or by reason of retirement from the Board of Directors so
long as such Participant is at least 70 years of age and has completed at least
five years of service as a Director at the time of such retirement, his or her
option will become immediately exercisable in full. If a Participant ceases to
be a member of the Board after his or her option becomes exercisable, the option
will remain exercisable in accordance with its terms. If a Participant ceases to
be a member of the Board for any reason other than those described above prior
to the time his or her option becomes fully exercisable, the option will
terminate with respect to the shares as to which the option is not then
exercisable.
The Board of Directors may amend, modify or terminate the 1995 Nonemployee
Directors Plan at any time, subject to certain restrictions described in the
Plan, and provided that prior approval by the stockholders of the Corporation
must be obtained to increase the number of shares available for grant. If
required by law, prior stockholder approval must be obtained to (i) change the
eligibility requirements under the 1995 Nonemployee Directors Plan, (ii)
increase the number of shares subject to any option, (iii) change the purchase
price of the shares subject to any option, (iv) extend the period during which
options may be granted, (v) materially increase the benefits to Participants or
(vi) cause Rule 16b-3 under the Securities Exchange Act of 1934, as amended, to
become inapplicable under the Plan. In addition, the provisions of the 1995
Nonemployee Director Plan specified in Rule 16b-3(c)(2)(ii)(A) under the 1934
Act may not be amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act of 1974,
as amended, or the rules thereunder. The 1995 Nonemployee Directors Plan will
terminate on December 31, 2000, unless terminated earlier by the Board of
Directors.
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TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE
No taxable income will be recognized by a Participant at the time the
option is granted. Generally, at exercise, ordinary income will be recognized by
the Participant in an amount equal to the difference between the option exercise
price and the fair market value of the shares on the date of exercise, and the
Corporation will receive a tax deduction for the same amount. At disposition,
appreciation or depreciation after the date of exercise will be treated as
either short-term or long-term capital gain or loss depending on how long the
shares have been held.
The Board of Directors recommends a vote FOR approving the 1995 Nonemployee
Directors Plan.
RATIFICATION OF SELECTION OF AUDITORS
The Audit Committee of the Board of Directors has selected the firm of
Coopers & Lybrand L.L.P., independent accountants, to serve as auditors for the
fiscal year ending June 29, 1996, subject to ratification by the stockholders.
Coopers & Lybrand L.L.P. has served as the Corporation's auditors since the
organization of the Corporation. The Board of Directors recommends a vote FOR
ratification of this selection. It is expected that a member of the firm of
Coopers & Lybrand L.L.P. will be present at the Meeting, will have an
opportunity to make a statement if so desired and will be available to respond
to appropriate questions.
STOCKHOLDER PROPOSAL REGARDING THE
ELECTION OF DIRECTORS BY CLASSES
Kenneth Steiner, 14 Stoner Avenue, Great Neck, New York 11021, the owner of
100 shares of Common Stock, has notified the Corporation of his intention to
introduce the proposal set forth below for consideration and action by the
stockholders at the Annual Meeting. Mr. Steiner's proposed resolution and
supporting statement, for which the Board of Directors and the Corporation
accept no responsibility, are set forth below. The Board of Directors opposes
this proposal for the reasons stated after such proposal.
"RESOLVED, that the stockholders of the Company request that the Board of
Directors take the necessary steps, in accordance with state law, to declassify
the Board of Directors so that all directors are elected annually, such
declassification to be effected in a manner that does not affect the unexpired
terms of directors previously elected."
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SUPPORTING STATEMENT
"The election of directors is the primary avenue for stockholders to
influence corporate governance policies and to hold management accountable for
implementation of those policies. I believe that the classification of the Board
of Directors, which results in only a portion of the Board being elected
annually, is not in the best interests of the Company and its stockholders.
The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. I believe that the Company's classified Board of
Directors maintains the incumbency of the current Board and therefore of current
management, which in turn limits management's accountability to stockholders.
The elimination of the Company's classified Board would require each new
director to stand for election annually and allow stockholders an opportunity to
register their views on the performance of the Board collectively and each
director individually. I believe this is one of the best methods available to
stockholders to insure that the Company will be managed in a manner that is in
the best interests of the stockholders.
I am a founding member of the Investors Rights Association of America and I
believe that concerns expressed by companies with classified boards that the
annual election of all directors could leave companies without experienced
directors in the event that all incumbents are voted out by stockholders, are
unfounded. In my view, in the unlikely event that stockholders vote to replace
all directors, this decision would express stockholder dissatisfaction with the
incumbent directors and reflect the need for change.
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION."
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE AGAINST THIS
PROPOSAL FOR THE FOLLOWING REASONS:
In 1990, pursuant to legislation enacted in Massachusetts, the Board of
Directors of the Corporation was classified into three classes of directors,
with the terms of office of the respective classes expiring in successive years.
This legislation, entitled "An Act to Provide Protection to Massachusetts
Corporations" (the "Act"), provides that publicly-held corporations organized
under Massachusetts law are required to have a classified board of directors
consisting of three classes as nearly equal in size as possible. The stated
purpose of this legislation is to provide protection to Massachusetts
corporations, including their stockholders,
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employees, suppliers and customers and the communities in which the
corporations' facilities are located.
The Board of Directors believes that its classified Board serves the
Corporation and its stockholders well and is consistent with the public policy
articulated by the Commonwealth of Massachusetts, the state in which the
Corporation is organized. The Board does not believe that directors elected for
staggered terms are any less accountable to stockholders than they would be if
elected annually, since the same standards of performance apply regardless of
the term of service. Moreover, it believes that a classified board enhances the
likelihood of continuity and stability in the conduct of Board business since
generally two-thirds of the Directors will have had prior experience and
familiarity with the business of the Corporation. The Board believes that this
contributes to more effective long-term strategic planning.
The classified Board is intended to encourage persons who may seek to
acquire control of the Corporation to initiate such action through negotiations
with the Board. At least two meetings of stockholders generally would be
required to replace a majority of the Board. By reducing the threat of an abrupt
change in the composition of the entire Board, classification of directors would
give the Board sufficient time to review any takeover proposal, study
appropriate alternatives and achieve the best result for stockholders. The Board
believes that although a classified Board enhances the ability to negotiate
favorable terms with a proponent of an unsolicited proposal, it does not
necessarily discourage takeover offers.
The Act provides that a corporation may elect to be exempt from its
classified Board provisions by a vote of the directors, or by a vote of the
holders of two-thirds of the outstanding voting stock. Therefore, the adoption
of this proposal would not in itself eliminate the classified Board, but would
only amount to an advisory recommendation to the Board that it take the
necessary steps to achieve that outcome.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST THIS PROPOSAL.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Corporation. In
addition to soliciting stockholders through its regular employees, the
Corporation will request banks and brokers to solicit customers of theirs who
have shares of Common Stock of the Corporation registered in the name of a
nominee. The Corporation will reimburse such banks and brokers for their
reasonable out-of-pocket costs, at the rates suggested by the New York Stock
Exchange. Solicitation by officers and employees of the Corporation may also be
made of some
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stockholders in person, or by mail, telephone or telegraph, following the
original solicitation. Georgeson & Company Inc. has been retained by the
Corporation to assist with the solicitation of proxies at a cost to the
Corporation estimated not to exceed $20,000.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Proposals of stockholders intended for inclusion in the proxy statement to
be mailed to all stockholders entitled to vote at the 1996 Annual Meeting of
Stockholders of the Corporation must be received at the Corporation's principal
executive offices not later than May 20, 1996. In order to curtail controversy
as to the date on which a proposal was received by the Corporation, proponents
should submit their proposals by Certified Mail -- Return Receipt Requested.
September 18, 1995
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EXHIBIT A
DIGITAL EQUIPMENT CORPORATION
1995 EQUITY PLAN
SECTION 1 -- PURPOSE
The Digital Equipment Corporation 1995 Equity Plan (the "Plan") is intended
to advance the interests of Digital Equipment Corporation ("Corporation") and
its stockholders by providing equity-based incentives to better align the
interests of key employees with those of stockholders, and to attract, retain
and motivate such employees.
SECTION 2 -- ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board of
Directors of the Corporation (the "Committee"), which shall consist of not fewer
than two members of the Corporation's Board of Directors. All members of the
Committee must be "disinterested administrators" within the meaning of Rule
16b-3 or any successor provision ("Rule 16b-3") under the Securities Exchange
Act of 1934, as amended (the "1934 Act") and "outside directors" within the
meaning of Section 162(m) or any successor provision of the Internal Revenue
Code of 1986, as amended (the "Code"), if required for compliance with Rule
16b-3 or Section 162(m) of the Code, as the case may be. Any authority or power
granted in the Plan to the Committee shall also be deemed to be granted to the
Board of Directors, and any action permitted to be taken or determination
permitted to be made by the Committee may also be taken or made by the Board of
Directors; provided, however, that to the extent required by Rule 16b-3 and/or
Section 162(m) of the Code with respect to specific grants of Awards, such power
or authority shall only reside in and such actions or determinations shall only
be made by an administrator or administrators in compliance with Rule 16b-3 or
Section 162(m) of the Code, as the case may be. The Board of Directors may also
establish a committee of one or more members of the Corporation's Board of
Directors who are also officers of the Corporation for the purposes of
administering grants of Awards under the Plan to Employees who are not subject
to the provisions of Section 16 of the 1934 Act. If such a committee is
established, it shall have all the power and authority of the Committee under
the Plan with respect to such Awards.
Subject to the provisions of the Plan, the Committee shall have the
authority to select the Employees who are eligible to participate in the Plan,
to determine the Awards to be granted to each Employee, to determine the time or
times when Awards shall be exercisable or when
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restrictions, conditions and contingencies shall lapse, to establish any other
restrictions, conditions and contingencies on Awards in addition to those
prescribed by the Plan and to determine whether any Option granted shall be an
ISO or a Non-Qualified Option. The Committee shall also prescribe the form of
agreements or other instruments under the Plan and the legends, if any, to be
affixed to the certificates representing shares of Stock to be issued.
The Committee shall have full authority to interpret the Plan, to grant
waivers of Plan restrictions, to amend the provisions of Award instruments and
to adopt such rules, regulations and guidelines for carrying out the Plan as it
may deem necessary or proper, all of which powers shall be executed in the best
interests of the Corporation and in keeping with the purposes of the Plan. Such
powers shall include, but shall not be limited to, the power to modify or amend
the Plan and to adopt such procedures, subplans and the like as may be necessary
to comply with provisions of the laws of other countries in which the
Corporation or any subsidiary of the Corporation may operate in order to assure
the viability of Awards granted under the Plan and to enable Employees employed
in such other countries to receive advantages and benefits under the Plan and
consistent with such laws.
The determinations of the Committee in the administration of the Plan shall
be final and conclusive unless otherwise determined by the Board of Directors.
SECTION 3 -- SHARES OF STOCK SUBJECT TO THE PLAN
(a) Shares Available for Issuance. The shares of stock available for
issuance under the Plan shall be authorized but unissued shares of the
Corporation's Common Stock or previously issued shares of the Corporation's
Common Stock reacquired by the Corporation in any manner and held in its
treasury ("Stock"). No fractional shares of Stock shall be delivered under the
Plan.
(b) Maximum Number of Shares Available for Issuance. Subject to adjustment
as provided in Section 7.7 below, the maximum number of shares of Stock
available for the grant of Awards under the Plan from the date of its adoption
by the Board of Directors until June 29, 1996, shall be the maximum number of
shares of Stock available for issuance under the Corporation's 1990 Equity Plan
(the "1990 Plan") as of the date of approval of the Plan by the Corporation's
stockholders, plus any shares of Stock subject to Awards under the 1990 Plan
that expire unexercised or are forfeited, terminated, cancelled (in whole or in
part) or in any other manner are not issued to an Employee at any time. Subject
to adjustment as provided in Section 7.7 below, the maximum number of shares of
Stock available for the grant of Awards
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under the Plan for each fiscal year subsequent to the fiscal year ending on June
29, 1996, but prior to the beginning of the fiscal year commencing on June 28,
1998, shall be two percent (2%) of the total number of issued shares of the
Corporation's Common Stock (including treasury shares) as of the first day of
such fiscal year. Such maximum number of shares shall be increased in any fiscal
year by the number of shares of Stock available for the grant of Awards
hereunder in the previous fiscal year or years but not covered by Awards granted
hereunder in such fiscal year or years since the adoption of the Plan, plus any
shares of Stock subject to Awards under the 1990 Plan or the Plan that expire
unexercised or are forfeited, terminated, cancelled (in whole or in part), or in
any other manner are not issued to an Employee, plus any shares of Stock
tendered to the Corporation as full or partial payment for the exercise of any
Option under the 1990 Plan or the Plan and the payment of any withholding taxes
arising therefrom.
(c) Limitations on Issuance. Notwithstanding any other provision of the
Plan, in no event shall more than 5,000,000 shares of Stock be cumulatively
available for the issuance of Stock pursuant to ISO's granted under the Plan,
nor shall more than 1,000,000 shares of Stock be cumulatively available for
grant pursuant to Restricted Stock Awards, Unrestricted Stock Awards and Stock
Unit Awards. Notwithstanding any other provision of the Plan, no Employee may be
granted in any fiscal year beginning with the fiscal year commencing July 2,
1995, in the aggregate, Awards relating to, in the aggregate, more than one
million (1,000,000) shares of Stock. In all events, determinations under the
preceding sentence shall be made in a manner that is consistent with Section
162(m) of the Code and the regulations promulgated thereunder.
(d) Dividends. Notwithstanding the foregoing, any dividend or dividend
equivalent paid or credited to an Employee in shares of Stock or Stock Units
pursuant to Sections 5.4(b) or 5.5 below shall not be subtracted from the
maximum number of shares available for the grant of Awards under the Plan or the
cumulative aggregate number of shares available for grant pursuant to Restricted
Stock Awards, Unrestricted Stock Awards and Stock Unit Awards.
(e) Expiration, Forfeiture, Cancellation or Settlement in Cash. Shares of
Stock subject to Awards that expire unexercised or are forfeited, terminated,
canceled (in whole or in part), or in any other manner are not issued to an
Employee (including shares of Stock that are not issued to an Employee pursuant
to Awards settled in cash in lieu thereof), shall become available immediately
for the future grant of Awards under the Plan.
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SECTION 4 -- ELIGIBILITY
Awards may be granted under the Plan only to Employees of the Corporation
or of a subsidiary of the Corporation. The term "Employees" shall include
officers as well as all other employees of the Corporation or of a subsidiary of
the Corporation. Members of the Committee and members of the Board of Directors
who are not Employees of the Corporation or of a subsidiary of the Corporation
shall not be eligible to participate in the Plan. Awards may be granted to the
same Employee on more than one occasion.
SECTION 5 -- TYPES OF AWARDS
5.1 AUTHORITY.
The Committee shall have the authority to grant Awards singly, in
combination or in tandem. The term "Awards" includes options, stock appreciation
rights, awards of Stock of the Corporation and awards of stock units or phantom
shares of stock, all on the terms and conditions hereinafter established.
5.2 OPTIONS.
(a) Definition of Options. An "Option" is an Award entitling the recipient
upon exercise of the Option to purchase Stock at a specified price for a
specified period of time. Both "incentive stock options" ("ISO's"), as defined
in Section 422 of the Code, or any successor provision, and Options that are not
incentive stock options ("Non-Qualified Options"), may be granted under the
Plan. Instruments evidencing ISO's shall contain such terms and conditions as
are required under applicable provisions of the Code.
(b) Exercise Price. The Committee shall determine the exercise price of an
Option which shall not be less than 100% of the Fair Market Value per share of
the Stock on the date the Option is granted. For purposes of the Plan, "Fair
Market Value" of a share of Stock on a given date will be the average of the
high and low selling prices of the Corporation's Common Stock in the New York
Stock Exchange Composite Transactions Index on such date, or if not a business
day, as of the last business day for which prices are available prior to such
date.
(c) Duration of Options. The Committee shall determine the latest date on
which an Option may be exercised which shall be no later than the date that is
ten years after the date the Option was granted.
(d) Exercise of Options. Subject to the applicability of Section 7.3
below, an Option shall become exercisable at such time or times, and on such
conditions, as the Committee may
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<PAGE> 44
specify. The Committee may at any time accelerate the time at which all or any
part of an Option may be exercised.
An Employee electing to exercise an Option shall give written or electronic
notice to the Corporation or its agent of the election and of the number of
shares of Stock that the Employee elects to acquire, accompanied by any
documents or instruments required by the Corporation or its agent and payment in
full for the Stock purchased, together with provision for the amount of any
taxes due in respect of the sale and issue thereof.
(e) Payment for Stock. Stock purchased by an Employee upon exercise of an
Option may be paid for in any legal manner so specified by the Committee,
including the following methods, which may be used in combination if specified
by the Committee:
(1) In cash or by check, bank draft or money order payable to the
order of the Corporation.
(2) If permitted by applicable law, through the delivery of an
assignment to the Corporation of a sufficient amount of the proceeds from
the sale of unrestricted Stock acquired upon exercise to pay for all of the
Stock so acquired and any tax withholding obligation resulting from such
exercise; and an authorization to the broker or selling agent to pay that
amount to the Corporation.
(3) Through the delivery of an amount of previously acquired shares of
unrestricted Stock having in the aggregate a Fair Market Value equal to the
exercise price, provided that such method is consistent with applicable tax
laws, policies and eligibility criteria established by the Committee.
Employees may further apply the Stock acquired upon such exercise to
satisfy the exercise price for additional Stock.
With respect to ISO's, acceptable methods of payment for stock upon exercise of
an Option shall be set forth in the Award instrument granting the applicable
ISO.
(f) Special Rules for ISO's. The aggregate Fair Market Value (determined
as of the date of grant) of the shares of Stock covered by ISO's granted under
this Plan or any other equity plan of the Corporation and its subsidiaries, that
becomes exercisable for the first time by the Employee in any calendar year
shall not exceed $100,000. Nothing in this special rule shall be construed as
limiting the exercisability of any Option unless the Committee provides for a
limitation at the time of grant.
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<PAGE> 45
5.3 STOCK APPRECIATION RIGHTS.
(a) Description of Stock Appreciation Rights. A "Stock Appreciation Right"
("SAR") is an Award entitling the recipient upon exercise of the Right to
receive an amount, in cash or Stock, or a combination thereof (at the
Committee's discretion), equal to the appreciation, if any, in the Fair Market
Value of a share of the Corporation's Common Stock from the date of the grant of
the SAR to the date of its payment or settlement.
(b) Other Terms and Conditions of Stock Appreciation Rights. The Award
price per SAR shall not be less than the Fair Market Value of a share of the
Corporation's Common Stock on the date the SAR is granted. An Employee electing
to exercise a Stock Appreciation Right must give written or electronic notice to
the Corporation or its agent of the election, accompanied by any documents or
instruments required by the Corporation or its agent, together with provision
for the amount of any taxes due with respect thereto.
5.4 RESTRICTED AND UNRESTRICTED STOCK.
(a) Definition of Restricted Stock Awards. A "Restricted Stock Award"
entitles the recipient to acquire shares of Restricted Stock subject to such
restrictions, conditions and contingencies as may be determined by the Committee
in its sole discretion.
(b) Rights as a Stockholder. At the discretion of the Committee, an
Employee who receives Restricted Stock will have all the rights of a stockholder
with respect to the Restricted Stock, including voting and dividend rights,
subject to the restrictions described in paragraph (c) below and any other
restrictions, conditions and contingencies imposed by the Committee at the time
of grant. The Committee may require that dividends be paid in additional shares
of Restricted Stock or in Stock Units.
(c) Restrictions and Obligations of Resale. "Restricted Stock" is Stock
subject to restrictions against disposition as specified by the Committee in the
Award instrument and may not be sold, transferred, or otherwise disposed of, and
shall not be pledged or otherwise hypothecated, except as provided in the Award
instrument. Except as otherwise provided in the Award instrument, in the event
of termination of employment for any reason other than as specified in Section
6.1 or 6.2, Restricted Stock shall be forfeited to the Corporation, except that
it shall be offered for resale to the Corporation at its original acquisition
price if the Restricted Stock was issued for monetary consideration.
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<PAGE> 46
(d) Other Awards Settled with Restricted Stock. The Committee may, at the
time any Award described in this Section 5 is granted, provide that any or all
of the Stock delivered or issuable pursuant to the Award will be Restricted
Stock.
(e) Unrestricted Stock Awards. The Committee may, in its sole discretion,
award to any eligible Employee unrestricted shares of Stock under the Plan
("Unrestricted Stock Award"). Any Employee who receives an Unrestricted Stock
Award will have all the rights of a stockholder, including voting and dividend
rights.
(f) Price of Restricted and Unrestricted Stock. Grants of Restricted Stock
and Unrestricted Stock shall be made at such purchase price as the Committee
shall determine in its sole discretion, and may be issued for no monetary
consideration, subject to applicable state law.
5.5 STOCK UNITS.
(a) A "Stock Unit Award" entitles the recipient to receive, without
payment, "Stock Units" in the form of phantom shares of stock which are valued
at the Committee's discretion in whole or in part by reference to, or otherwise
based on, the Fair Market Value of the Corporation's Common Stock.
(b) An Employee who receives Stock Units may be given rights to dividend
equivalents, subject to any conditions imposed by the Committee at the time of
grant. The Committee may provide that any such dividend equivalents be paid in
cash, in shares of stock or in additional Stock Units.
5.6 PERFORMANCE CRITERIA.
The Committee in its discretion may grant Awards contingent on satisfaction
of performance criteria established by the Committee consistent with Section
162(m) of the Code. Such performance criteria shall be based on level of
revenue, operating income, profit after tax, earnings per share, cash flow,
return on equity or return on assets. The Committee may select one criterion or
multiple criteria, and the measurement may be based on Corporation or business
unit performance, or on comparative performance with that of other companies or
units thereof.
The Committee in its discretion may also grant Awards contingent on
satisfaction of performance criteria other than those specified in the paragraph
above.
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SECTION 6 -- TERMINATION OF EMPLOYMENT
6.1 DEATH OR DISABILITY OF EMPLOYEE.
Unless otherwise specified in the Award instrument, if an Employee (i) dies
while employed by the Corporation or any subsidiary of the Corporation (or upon
the death of an Employee after termination of employment), or (ii) ceases to be
employed by the Corporation or any subsidiary by reason of his or her permanent
and total disability ("Disability"), as determined by the Committee, the
following rules shall apply:
(a) Each Option and Stock Appreciation Right held by the Employee
immediately prior to his or her death shall become fully exercisable and
may be exercised only until one year after his or her death (whether or not
this period ends after expiration of the exercise period specified in the
Award instrument, but in the case of an ISO, in no event later than the
expiration of the ISO under its original terms) by the Employee's executor
or administrator, or if not so exercised, by the legatees or distributees
of his or her estate or by such other person or persons to whom the
Employee's rights under such Option or Stock Appreciation Right shall pass
by will or by the applicable laws of descent and distribution.
(b) Each Option and Stock Appreciation Right held by the Employee when
his or her employment ends due to Disability shall become fully exercisable
and shall continue to be exercisable in accordance with the terms set forth
in the Award instrument relating to such Award.
(c) Each share of Restricted Stock and each Stock Unit covered by an
Award held by the Employee immediately prior to his or her death or
Disability will immediately become free of all restrictions, conditions and
contingencies thereon.
6.2 RETIREMENT.
If an Employee ceases to be employed by the Corporation or any subsidiary
of the Corporation by reason of his or her retirement at or after age 55, the
Employee's rights with respect to Awards held by him or her as of such
retirement date shall be as set forth in the Award instrument relating to each
such Award. Retirement, including early retirement, under any pension plan of
the Corporation or any subsidiary of the Corporation shall not by itself
constitute retirement for purposes of the Plan.
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<PAGE> 48
6.3 TERMINATION OF EMPLOYMENT.
Unless otherwise provided in the Award instrument, if an Employee ceases to
be employed by the Corporation or any subsidiary of the Corporation for any
reason other than the reasons specified in Sections 6.1 and 6.2 above, the
following rules shall apply:
(a) Each Option and Stock Appreciation Right held by the Employee that
is unexercised when his or her employment ends shall expire upon such
termination of employment.
(b) Each share of Restricted Stock held by the Employee on which all
restrictions, conditions and contingencies have not lapsed shall be
forfeited or offered for resale to the Corporation in accordance with
Section 5.4 above, and each Stock Unit as to which all restrictions,
conditions and contingencies have not lapsed or been performed shall be
forfeited.
6.4 COMMITTEE DETERMINATIONS.
Any question as to whether there has been a retirement, Disability or
termination of employment shall be determined by the Committee, and its
determination of such question shall be final.
SECTION 7 -- GENERAL PROVISIONS
7.1 TERM AND AMENDMENT.
Unless earlier terminated by the Board of Directors, the Plan shall
terminate on December 31, 1998, and no Awards shall be granted under the Plan
after such date; provided, however, that Awards payable or requiring exercise
which are granted on or before this date shall remain payable or exercisable in
accordance with their respective terms after the termination of the Plan; and
provided, further that the authority of the Committee to take actions with
respect to any such Awards as contemplated herein shall extend beyond
termination of the Plan.
The Board of Directors may at any time terminate the Plan or suspend the
grant of Awards under the Plan. The Board of Directors may at any time amend the
Plan or any outstanding Award for any lawful purpose; provided, that no
amendment, without the approval of the Corporation's stockholders, shall
increase the maximum number of shares of Stock that may be issued under the Plan
or issued in the aggregate pursuant to the certain Awards listed in Section 3
above (except as permitted by the last paragraph of Section 3 above and Section
7.7
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<PAGE> 49
below); and provided, further, that no amendment, without the approval of the
Corporation's stockholders (where such approval is necessary to satisfy
then-applicable requirements of federal securities laws, the Code or rules of
any stock exchange on which the Corporation's Common Stock is listed), shall
extend the period during which Awards may be granted under the Plan or amend the
eligibility provisions of Section 4 above.
7.2 NON-TRANSFERABILITY OF AWARDS.
(a) Except to the extent permitted by Rule 16b-3 and as otherwise provided
in the Award instrument, no Award (other than Stock or cash transferred to an
Employee under the Plan without restrictions) may be transferred other than by
will or by the laws of descent and distribution, and during an Employee's
lifetime an Award requiring exercise may be exercised only by him or her (or in
the event of incapacity, the person or persons properly appointed to act on his
or her behalf).
(b) Notwithstanding anything contained herein to the contrary, in the event
an Employee terminates his or her employment to assume a position with a
governmental, charitable or educational institution, the Committee, in its sole
discretion and provided such arrangement is in accordance with applicable law,
may authorize a third party, including but not limited to a "blind" trust,
acceptable to the applicable governmental, charitable or educational
institution, the Employee and the Committee, to act on behalf and for the
benefit of such Employee with respect to any Awards.
7.3 DOCUMENTATION OF AWARDS.
Awards shall be evidenced by written instruments which shall describe the
Award and the terms and conditions thereof. The granting of an Award may be
subject to, and conditioned upon, the Employee's execution of any Award
instrument required by the Committee. Each Award instrument shall contain such
provisions as the Committee shall determine in its sole discretion. The
instruments may be in the form of agreements to be executed by both the Employee
and the Corporation or certificates, letters or similar instruments, which need
not be executed by the Employee but acceptance of which will evidence agreement
to the terms of the Award.
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<PAGE> 50
7.4 RIGHTS AS A STOCKHOLDER.
Except as specifically provided in the Plan, the receipt of an Award will
not give an Employee rights as a stockholder; the Employee will obtain such
rights, subject to any limitations imposed by the Plan or the Award instrument,
upon actual receipt of Stock.
7.5 TAX WITHHOLDING.
The Corporation will withhold from any cash payment made pursuant to an
Award an amount sufficient to satisfy all federal, state and local withholding
tax requirements (the "withholding tax requirements").
In the case of an Award delivered in Stock, the Committee will have the
right to require that the Employee or other appropriate person remit to the
Corporation an amount sufficient to satisfy the withholding tax requirements or
make other arrangements satisfactory to the Committee with regard to such
requirements prior to the event giving rise to such withholding tax requirement.
If and to the extent that withholding is required, the Committee may permit the
Employee or other appropriate person to elect, at the time and in the manner as
the Committee provides, to have the Corporation hold back from the Stock to be
delivered, or to deliver to the Corporation, Stock having a value calculated to
satisfy the withholding tax requirements.
7.6 DEFERRAL OF PAYMENTS.
The Committee may, in its sole discretion, either in the terms of an Award
instrument or upon the request of an Employee holding an Award, defer the date
on which any payment of cash or Stock under such an Award shall be made. The
Committee may also establish rules and procedures for the crediting of interest
on deferred cash payments and dividends or dividend equivalents for deferred
payments denominated in Stock or Stock Units. Any deferral, whether requested by
the Employee or specified in the Award instrument or otherwise by the Committee,
may be subject to forfeiture in accordance with terms established by the
Committee.
7.7 ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Corporation's capitalization, or other
distribution with respect to holders of the Corporation's Common Stock other
than normal cash dividends, the Committee shall make appropriate adjustments to
the maximum number of shares of Stock that may be
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<PAGE> 51
delivered under the Plan and to the maximum number of shares of Stock that may
be issued pursuant to certain Awards, all as set forth in Section 3 above.
(b) In any event referred to in paragraph (a), the Committee shall also
make any appropriate adjustments to the number and kind of shares of Stock
subject to Awards then outstanding or subsequently granted, any exercise or
purchase prices relating to Awards and any other provisions of Awards affected
by such change. The Committee may also make adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions, repurchases or similar corporate
transactions, or any other event, if it is determined by the Committee that
adjustments are appropriate to avoid distortion in the operation of the Plan.
(c) Any adjustments made pursuant to paragraphs (a) or (b) with respect to
ISO's shall be made only after the Committee, after consulting with the
Corporation's counsel, determines whether such adjustments would constitute a
"modification" of the ISO's (as that term is defined in Section 422 of the Code)
or would otherwise cause any adverse tax consequences for the holders of the
ISO's. If the Committee determines that such adjustments to be made with respect
to ISO's would constitute a modification of the ISO's, it may refrain from
making such adjustments.
7.8 EMPLOYMENT RIGHTS.
Neither the adoption of the Plan nor the grant of Awards shall confer upon
any person any right to continued employment with the Corporation or any
subsidiary of the Corporation or affect in any way the right of the Corporation
or any subsidiary of the Corporation to terminate an employment relationship at
any time. Except as specifically provided by the Committee, the Corporation
shall not be liable for the loss of existing or potential profit in Awards
granted under the Plan in the event of termination of an employment relationship
even if the termination is in violation of an obligation of the Corporation or
any subsidiary of the Corporation to the Employee.
7.9 CHANGE IN CONTROL.
(a) In order to maintain Employees' rights in the event of any Change in
Control of the Corporation, the Board of Directors (as constituted on the date
the Award is granted or as constituted immediately prior to the Change in
Control) may, in its sole discretion, as to any Award, either on the date an
Award is granted or any time thereafter, take any one or more of the following
actions:
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(1) Provide for the acceleration of any time periods relating to the
exercise or realization of or lapse of restrictions, conditions and
contingencies under any Award so that the Award may be exercised or
realized in full on or before a date fixed by the Board of Directors.
(2) Provide for the purchase of any Award, upon the Employee's
request, for an amount of cash equal to the amount that could have been
obtained upon the exercise of the Award or realization of the Employee's
rights thereunder had the Award been currently exercisable or payable.
(3) Make such adjustment to any Award then outstanding as the Board of
Directors deems appropriate to reflect the Change in Control.
(4) Cause any Award then outstanding to be assumed, or new rights
substituted therefor, by the acquiring or surviving corporation after the
Change in Control.
Subject to this Section 7.9, the Committee may, in its discretion, include
further provisions and limitations relating to the Change in Control in any
Award instrument as it may deem equitable and in the best interests of the
Corporation.
(b) A "Change in Control" is defined to mean any of the following events:
(1) The acquisition by any person (including a group, within the
meaning of Sections 13(d)(3) or 14(d)(2) of the 1934 Act), other than the
Corporation or any subsidiary of the Corporation, of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or
more of the combined voting power of the Corporation's outstanding voting
securities.
(2) The first purchase under a tender offer or exchange offer, other
than an offer by the Corporation or any subsidiary of the Corporation,
pursuant to which shares of the Corporation's Common Stock have been
purchased.
(3) During any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the
Corporation cease for any reason (other than death or disability) to
constitute at least a majority thereof, unless the election or the
nomination for election by stockholders of the Corporation of each new
Director was approved by a vote of at least two-thirds of the Directors
then still in office who were Directors at the beginning of the period.
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<PAGE> 53
(4) Approval by stockholders of the Corporation of a merger,
consolidation, liquidation or dissolution of the Corporation, or the sale
of all or substantially all of the assets of the Corporation.
7.10 APPROVALS.
Anything in the Plan to the contrary notwithstanding, the effectiveness of
the Plan and of the grant of all Awards is subject to, and the Plan and the
Awards granted under it shall be of no force and effect unless and until, and no
Awards granted shall in any way vest or become exercisable, unless and until the
Plan is approved by the affirmative vote of a majority of the shares of the
Corporation's Common Stock present in person or by proxy and entitled to vote at
a meeting of stockholders at which the Plan is presented for approval. The date
the Plan is approved by the stockholders of the Corporation shall be the
Effective Date of the Plan. The Effective Date must occur within one year after
approval of the Plan by the Board of Directors. Any grant of an Award prior to
the approval by the stockholders of the Corporation shall be void if such
approval is not obtained. The Corporation's obligation to sell and deliver
shares of Stock under the Plan is subject to the approval of any governmental
authority required in connection with the authorization, issuance or sale of the
Stock.
7.11 SUCCESSORS AND ASSIGNS.
The Plan shall be binding upon all successors and assigns of an Employee
receiving an Award under the Plan, including, without limitation, the estate of
any such Employee and the executors, administrators or trustees of such estate,
and any receiver, trustee in bankruptcy or representative of the creditors of
any such Employee.
7.12 1990 PLAN.
Upon approval of the Plan by the Corporation's stockholders, the authority
to grant additional Awards under the Corporation's 1990 Plan shall expire.
Awards granted pursuant to the 1990 Plan shall remain outstanding and
exercisable and subject to the Award instruments relating thereto, or in
accordance with such other terms and conditions as the Committee shall
determine.
7.13 GOVERNING LAW.
The Plan and all determinations made and related actions taken by the
Committee or the Board of Directors, to the extent not otherwise governed by the
Code or the securities laws of
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<PAGE> 54
the United States, shall be governed by the laws of the Commonwealth of
Massachusetts and shall be construed accordingly.
<TABLE>
7.14 DEFINITIONS.
As used in the Plan, the following terms shall have the following meanings:
<CAPTION>
SECTION IN WHICH
TERM TERM IS DEFINED
---- ----------------
<S> <C>
"Awards"............................................. Section 5.1
"Change in Control".................................. Section 7.9(b)
"Code"............................................... Section 2
"Committee".......................................... Section 2
"Corporation"........................................ Section 1
"Disability"......................................... Section 6.1
"Employee"........................................... Section 4
"Fair Market Value".................................. Section 5.2(b)
"ISO"................................................ Section 5.2(a)
"1990 Plan".......................................... Section 3(b)
"1934 Act"........................................... Section 2
"Non-Qualified Option"............................... Section 5.2(a)
"Option"............................................. Section 5.2(a)
"Plan"............................................... Section 1
"Restricted Stock"................................... Section 5.4(c)
"Restricted Stock Award"............................. Section 5.4(a)
"Rule 16b-3"......................................... Section 2
"SAR"................................................ Section 5.3(a)
"Stock".............................................. Section 3(a)
"Stock Appreciation Right"........................... Section 5.3(a)
"Stock Units"........................................ Section 5.5(a)
"Stock Unit Award"................................... Section 5.5(a)
"Unrestricted Stock Award"........................... Section 5.4(e)
</TABLE>
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<PAGE> 55
EXHIBIT B
DIGITAL EQUIPMENT CORPORATION
1995 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
SECTION 1 -- PURPOSE
The purpose of the 1995 Stock Option Plan for Nonemployee Directors (the
"Plan") is to increase the proprietary interest of nonemployee members of the
Board of Directors in the continued success of Digital Equipment Corporation
(the "Corporation") and to provide them with an incentive to continue to serve
as directors.
SECTION 2 -- ADMINISTRATION
The Plan shall be administered by the Compensation and Stock Option
Committee of the Board of Directors of the Corporation, or any successor
committee thereto. The Committee shall have responsibility finally and
conclusively to interpret the provisions of the Plan and to decide all questions
of fact arising in its application. No member of the Committee shall be liable
for any action or determination made in good faith with respect to the Plan.
SECTION 3 -- TYPE OF OPTIONS
Options granted pursuant to the Plan shall be nonstatutory options which
are not intended to meet the requirements of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
SECTION 4 -- ELIGIBILITY
Directors of the Corporation who are not employees of the Corporation or
any subsidiary or affiliate thereof ("Nonemployee Directors") shall be eligible
to participate in the Plan. Each Nonemployee Director to whom options are
granted hereunder shall be a participant ("Participant") under the Plan.
Nonemployee Directors who were serving as directors of the Corporation on
January 1, 1995 are referred to herein as "Existing Nonemployee Directors."
Nonemployee Directors who commence service as directors of the Corporation after
January 1, 1995 are referred to herein as "New Nonemployee Directors."
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<PAGE> 56
SECTION 5 -- STOCK AVAILABLE UNDER THE PLAN
Subject to adjustment as provided in Section 9 below, an aggregate of
50,000 shares of the Corporation's Common Stock, plus the number of shares of
Common Stock available for issuance under the Corporation's 1990 Stock Option
Plan for Nonemployee Directors as of the date of approval of the Plan by the
Corporation's stockholders, shall be available for issuance pursuant to the
provisions of the Plan. Such shares may be authorized and unissued shares or may
be shares issued and thereafter acquired by the Corporation. If an option
granted under the Plan or under the 1990 Plan shall expire or terminate for any
reason without having been exercised in whole or in part, the unpurchased shares
subject to such option shall again be available for subsequent option grants
under the Plan.
SECTION 6 -- AUTOMATIC GRANT OF OPTIONS
(a) Each year, on the date of the Corporation's Annual Meeting of
Stockholders, each Existing Nonemployee Director who continues in office after
said Annual Meeting, shall receive automatically and without further action by
the Board of Directors or the Committee, a grant of an option to purchase 1,000
shares of Common Stock of the Corporation in accordance with the provisions of
Section 7, and subject to adjustment as provided in Section 9.
(b) Each year, on the date of the Corporation's Annual Meeting of
Stockholders, each New Nonemployee Director who continues in office after said
Annual Meeting, shall receive automatically and without further action by the
Board of Directors or the Committee, a grant of an option to purchase 2,500
shares of Common Stock of the Corporation in accordance with the provisions of
Section 7, and subject to adjustment as provided in Section 9.
SECTION 7 -- TERMS AND CONDITIONS OF OPTIONS
7.1 EXERCISE OF OPTIONS.
(a) Each option granted under the Plan shall be exercisable at the rate of
33% on the first and second anniversaries of the date such option was granted
and 34% on the third anniversary of the date such option was granted, subject to
the provisions of Section 8 hereof.
(b) Notwithstanding the provisions of paragraph (a) above, an option
granted to any Participant shall become immediately exercisable in full upon the
first to occur of:
(1) The death of any Participant, in which case the option may be
exercised by the Participant's executor or administrator, or if not so
exercised, by the legatees or distribu-
B-2
<PAGE> 57
tees of his or her estate or by such other person or persons to whom the
Participant's rights under the option shall pass by will or by the
applicable laws of descent and distribution;
(2) Such time as the Participant ceases to be a director of the
Corporation by reason of his or her permanent disability; or
(3) Such time as the Participant retires from the Board of Directors
so long as he or she is at least 70 years of age and has completed at least
five years of service as a Director at the time of such retirement.
(c) In the event that the Participant ceases to be a director of the
Corporation for any reason other than those specified in paragraph (b) above
prior to the time a Participant's option becomes fully exercisable, the option
will terminate with respect to the shares as to which the option is not then
exercisable and all rights of the Participant to such shares shall terminate
without further obligation on the part of the Corporation.
(d) In the event that the Participant ceases to be a director of the
Corporation after his or her option has become exercisable in whole or in part,
such option shall remain exercisable in whole or in part, as the case may be, in
accordance with the terms hereof.
(e) Options granted under the Plan shall expire ten years from the date on
which the option is granted, unless terminated earlier in accordance with the
Plan; provided, however, that in the event a Participant ceases to be a director
of the Corporation by reason of death, including without limitation in the event
that a Participant dies after ceasing to be a director of the Corporation by
reason of disability or retirement, any option granted to such Participant
hereunder shall expire one year from the date of the Participant's death
(whether or not this period ends after expiration of the exercise period).
7.2 EXERCISE PRICE.
The exercise price of an option shall be 100% of the fair market value per
share of Common Stock of the Corporation on the date the option is granted. For
purposes of the Plan, "fair market value" of a share of stock on any date shall
mean the average of the high and low selling prices of the Corporation's Common
Stock on the New York Stock Exchange Composite Transactions Index as of the date
of grant, or if the date of grant is not a business day, as of the last business
day for which prices are available prior to the date of grant.
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7.3 PAYMENT OF EXERCISE PRICE.
(a) Subject to the terms and conditions of the Plan and the documentation
of the options pursuant to Section 7.5 hereof, an option granted hereunder
shall, to the extent then exercisable, be exercisable in whole or in part by
giving written notice to the Corporation stating the number of shares with
respect to which the option is being exercised, accompanied by payment in full
for such shares; provided, however, that there shall be no such exercise at any
one time as to fewer than one hundred (100) shares or all of the remaining
shares then purchasable by the person or persons exercising the option, if fewer
than one hundred (100) shares.
(b) Options granted under the Plan may be paid for by (i) delivery of cash,
bank draft, money order or a check to the order of the Corporation in an amount
equal to the exercise price of such options, (ii) by delivery to the Corporation
of shares of Common Stock of the Corporation already owned by the Participant
having a fair market value equal in amount to the exercise price of the option
being exercised, provided that such method is consistent with applicable tax
laws, (iii) if permitted by applicable law, through the delivery of an
assignment to the Corporation of a sufficient amount of the proceeds from the
sale of Common Stock of the Corporation acquired upon exercise to pay for all of
the Common Stock so acquired and an authorization to the broker or selling agent
to pay that to the Corporation, or (iv) by any combination of such methods of
payment.
7.4 RIGHTS AS A STOCKHOLDER.
Except as specifically provided by the Plan, the grant of an option will
not give a Participant rights as a stockholder; the Participant will obtain such
rights, subject to any limitations imposed by the Plan, upon actual receipt of
Common Stock of the Corporation.
7.5 DOCUMENTATION OF OPTION GRANTS.
Option grants shall be evidenced by written instruments prescribed by the
Committee from time to time. The instruments may be in the form of agreements to
be executed by both the Participant and the Corporation or certificates, letters
or similar instruments, which need not be executed by the Participant but
acceptance of which will evidence agreement to the terms of the grant.
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7.6 NONTRANSFERABILITY OF OPTIONS.
No option granted under the Plan shall be assignable or transferable by the
Participant to whom it is granted, either voluntarily or by operation of law,
except by will or the laws of descent and distribution. During the life of the
Participant, the option shall be exercisable only by such person (or in the
event of incapacity, by the person or persons properly appointed to act on his
or her behalf).
7.7 APPROVALS.
The effectiveness of the Plan and of the grant of all options is subject to
the approval of the Plan by the affirmative vote of a majority of the shares of
the Corporation's Common Stock present in person or by proxy and entitled to
vote at a meeting of the stockholders at which the Plan is presented for
approval. Notwithstanding anything to the contrary in the Plan, no Options
granted hereunder shall become exercisable until such approval has been
received.
The Corporation's obligation to sell and deliver shares of stock under the
Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of the stock.
SECTION 8 -- REGULATORY COMPLIANCE AND LISTING
(a) The issuance or delivery of any shares of stock subject to exercisable
Options hereunder may be postponed by the Committee for such period as may be
required to comply with any applicable requirements under the Federal securities
laws, any applicable listing requirements of any national securities exchange or
any requirements under any law or regulation applicable to the issuance or
delivery of such shares. The Corporation shall not be obligated to issue or
deliver any such shares if the issuance or delivery thereof would constitute a
violation of any provision of any law or of any regulation of any governmental
authority or any national securities exchange.
(b) Should any provision of this Plan require modification or be
unnecessary to comply with the requirements of Section 16 of and Rule 16b-3
under the Securities Exchange Act of 1934, as amended ("1934 Act"), the
Committee may waive such provision and/or amend this Plan to add to or modify
the provisions hereof accordingly.
(c) It is the Corporation's intent that the Plan comply in all respects
with Rule 16b-3 of the 1934 Act (or any successor or amended provisions thereof)
and any applicable Securities
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and Exchange Commission interpretations thereof. If any provision of this Plan
is deemed not to be in compliance with Rule 16b-3, the provision shall be null
and void.
SECTION 9 -- ADJUSTMENT IN EVENT OF CHANGES IN CAPITALIZATION
In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Corporation's capitalization, or other
distribution with respect to holders of the Corporation's Common Stock other
than normal cash dividends, automatic adjustment shall be made in the number and
kind of shares as to which outstanding options or portions thereof then
unexercised shall be exercisable and in the available shares set forth in
Section 5 hereof, to the end that the proportionate interest of the option
holder shall be maintained as before the occurrence of such event. Such
adjustment in outstanding options shall be made without change in the total
price applicable to the unexercised portion of such options and with a
corresponding adjustment in the option price per share. Automatic adjustment
shall also be made in the number and kind of shares subject to options
subsequently granted under the Plan.
SECTION 10 -- NO RIGHT TO REELECTION
Nothing in the Plan shall be deemed to create any obligation on the part of
the Board of Directors or standing Committee thereof to nominate any Nonemployee
Director for reelection by the Corporation's stockholders, nor confer upon any
Nonemployee Director the right to remain a member of the Board of Directors for
any period of time, or at any particular rate of compensation.
SECTION 11 -- AMENDMENT AND TERMINATION
(a) The Board of Directors shall have the right to amend, modify or
terminate the Plan at any time and from time to time; provided, however, that
unless required by law, no such amendment or modification shall (a) affect any
right or obligation with respect to any grant theretofore made; or (b) unless
previously approved by the stockholders, increase the number of shares of Common
Stock available for grants as provided in Section 5 hereof (as adjusted pursuant
to Section 9 hereof). In addition, no such amendment shall, unless previously
approved by the stockholders (where such approval is necessary to satisfy then
applicable requirements of federal securities laws, the Code or rules of any
stock exchange on which the Corporation's Common Stock is listed), (i) in any
manner affect the eligibility requirements set forth in Section 4 hereof, (ii)
except to the extent provided for in Section 9 hereof, increase the number of
shares of Common Stock subject to any option, (iii) except to the
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extent provided for in Section 9 hereof, change the purchase price of the shares
of Common Stock subject to any option, (iv) extend the period during which
options may be granted under the Plan, (v) materially increase the benefits to
Participants under the Plan, (vi) in any manner cause Rule 16b-3 under the 1934
Act (or any successor provision thereof) to become inapplicable to this Plan;
and provided further that, except to the extent permitted by Rule 16b-3, the
provisions of this Plan specified in Rule 16b-3(c)(2)(ii)(A) (or any successor
or amended provision thereof) under the 1934 Act (including without limitation,
provisions of eligibility, amount, price and timing of awards) may not be
amended more than once every six months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder.
(b) Unless earlier terminated by the Board of Directors, the Plan shall
terminate on December 31, 2000; provided, however, that options which are
granted on or before this date shall remain exercisable in accordance with their
respective terms after the termination of the Plan.
SECTION 12 -- 1990 PLAN
Upon approval of the Plan by the Corporation's stockholders, the authority
to grant options under the 1990 Stock Option Plan for Nonemployee Directors
shall expire. Options granted pursuant to the 1990 Stock Option Plan for
Nonemployee Directors shall remain outstanding and exercisable and subject to
the option agreement related thereto, or in accordance with such other terms and
conditions as the Committee shall determine.
SECTION 13 -- GOVERNING LAW
The Plan shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts.
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SOLICITED BY BOARD OF DIRECTORS
DIGITAL EQUIPMENT CORPORATION
PROXY FOR 1995 ANNUAL MEETING
The undersigned hereby appoints Robert B. Palmer and Thomas C. Siekman, and
each of them, as attorneys of the undersigned, with full power of substitution,
to vote all shares of stock which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of Digital Equipment Corporation to be held on
November 9, 1995, at 11:00 A.M. at the World Trade Center, Commonwealth Pier,
164 Northern Avenue, Boston, Massachusetts, and at any adjournment thereof, upon
the matters set forth in the proxy statement for such Annual Meeting. The
foregoing attorneys are authorized to vote, in their discretion, upon such other
business as may properly come before the meeting or any adjournment thereof.
ELECTION OF CLASS III DIRECTORS: THE NOMINEES FOR THE BOARD OF DIRECTORS TO
SERVE FOR A THREE-YEAR TERM AS CLASS III
DIRECTORS ARE:
Colby H. Chandler, Arnaud de Vitry and Thomas P. Gerrity
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below. (To vote or
withhold authority for all nominees, see below.)
--------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS SPECIFIED, OR WHERE NO DIRECTION IS GIVEN, WILL BE
VOTED FOR THE ELECTION OF CLASS III DIRECTORS, FOR THE PROPOSALS IN ITEMS 2, 3
AND 4 AND AGAINST THE PROPOSAL IN ITEM 5.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND THE
PROPOSALS IN ITEMS 2, 3 AND 4.
<TABLE>
<S> <C> <C> <C>
1. To elect three members of the Board of Directors for a three-year term as
Class III Directors consisting of the foregoing nominees. / / FOR / / WITHHOLD AUTHORITY
(continued and to be signed and dated on other side)
2. To approve the 1995 Equity Plan. / / FOR / / AGAINST / / ABSTAIN
3. To approve the 1995 Stock Option Plan for Nonemployee Directors. / / FOR / / AGAINST / / ABSTAIN
4. To ratify the selection of Coopers & Lybrand L.L.P. as auditors for the
fiscal year ending June 29, 1996. / / FOR / / AGAINST / / ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE STOCKHOLDER PROPOSAL IN ITEM 5.
5. To approve a stockholder proposal relating to declassification of the
Board of Directors. / / FOR / / AGAINST / / ABSTAIN
</TABLE>
The undersigned plans to attend the Annual Meeting / /
Signature(s)
.................................
.................................
Date......................., 1995
NOTE: SIGNATURE(S) SHOULD AGREE
WITH NAME(S) AS PRINTED ON THIS
PROXY. IF SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE GIVE YOUR
FULL TITLE AS SUCH.
PLEASE SIGN AND RETURN PROMPTLY
IN ENCLOSED ENVELOPE
