SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ______________)
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
QUANTUM CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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IMAGE OMITTED
IMAGE: "QUANTUM"
QUANTUM CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 3, 1996
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Quantum
Corporation (the "Company" or "Quantum"), a Delaware corporation, will be held
on Tuesday, September 3, 1996 at 3:00 p.m., local time, at Quantum Corporation's
corporate headquarters, 500 McCarthy Boulevard, Milpitas, California 95035, for
the following purposes:
1. To elect six directors to serve until the next Annual Meeting of
Stockholders or until their successors are elected and qualified;
2. To approve and ratify the adoption of the Annual Incentive Plan for
the Company's Chief Executive Officer;
3. To approve and ratify the adoption of the 1996 Board of Directors
Stock Option Plan;
4. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending March 31, 1997; and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on July 10, 1996 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to vote,
sign, date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she previously returned a Proxy.
Sincerely,
/s/ Andrew Kryder
Andrew Kryder
General Counsel and
Assistant Secretary
Milpitas, California
July 25, 1996
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QUANTUM CORPORATION
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PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of Quantum Corporation (the
"Company" or "Quantum") for use at the Annual Meeting of Stockholders to be held
Tuesday, September 3, 1996 at 3:00 p.m., or at any adjournment thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Stockholders. The Annual Meeting will be held at the Company's headquarters
located at 500 McCarthy Boulevard, Milpitas, California 95035.
The Company's telephone number is (408) 894-4000.
These proxy solicitation materials were mailed on or about July 25, 1996 to
all stockholders entitled to vote at the meeting.
RECORD DATE; OUTSTANDING SHARES
Stockholders of record at the close of business on July 10, 1996 (the "Record
Date") are entitled to notice of and to vote at the meeting. At the Record Date,
56,893,706 shares of the Company's Common Stock, $0.01 par value, were issued
and outstanding. The closing price of the Company's Common Stock on the Record
Date, as reported by Nasdaq was $13.875 per share.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company or its
transfer agent a written notice of revocation or a duly executed proxy bearing a
later date or by attending the meeting and voting in person.
VOTING AND SOLICITATION
On all matters other than the election of directors, each share has one
vote. See "ELECTION OF DIRECTORS--Required Vote."
The cost of soliciting proxies will be borne by the Company. The Company has
retained the services of Corporate Investor Communications, Inc. (the
"Solicitor") to aid in the solicitation of proxies. The Company estimates that
it will pay the Solicitor a fee not to exceed $5,500 for its services and will
reimburse the Solicitor for certain out-of-pocket expenses. In addition, the
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone, telegram, telefax or otherwise.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 1997 Annual Meeting must be received by
the Company no later than March 27, 1997 in order that they may be considered
for possible inclusion in the proxy statement and form of proxy relating to that
meeting.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the votes eligible to be cast by holders of shares of Common Stock
issued and outstanding on the Record Date. Shares that are voted "FOR",
"AGAINST" or "ABSTAIN" from a matter are treated as being present at the meeting
for purposes of establishing a quorum and are also treated as shares entitled to
vote at the Annual Meeting (the "Votes Cast") with respect to such matter.
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While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
While abstentions will be counted for purposes of determining both the
presence or absence of a quorum for the transaction of business and the total
number of Votes Cast with respect to a particular matter other than the election
of directors, broker non-votes with respect to proposals set forth in this Proxy
Statement will be counted only for purposes of determining the presence or
absence of a quorum and will not be considered Votes Cast. Accordingly, broker
non-votes will not affect the determination as to whether the requisite majority
of Votes Cast has been obtained with respect to a particular matter.
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PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A Board of six directors is to be elected at the meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for
management's six nominees named below. In the event that any management nominee
is unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. It is not expected that any nominee will
be unable or will decline to serve as a director. In the event that additional
persons are nominated for election as directors, the proxy holders intend to
vote all proxies received by them in such a manner in accordance with cumulative
voting as will ensure the election of as many of the nominees listed below as
possible. In such event, the specific nominees for whom such votes will be
cumulated will be determined by the proxy holders. The term of office of each
person elected as a director will continue until the next Annual Meeting of
Stockholders or until his successor has been elected and qualified. Each of the
nominees set forth below is presently a director of the Company.
<TABLE>
The name of and certain information regarding each nominee is set forth
below.
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- - ---------------------- ----- --------------------------------------------- ----------
<S> <C> <C> <C>
Stephen M. Berkley ...... 52 Chairman of the Board of Quantum Corporation 1987
David A. Brown ........... 51 Director of Quantum; management consultant for 1988
various high technology companies
Michael A. Brown ......... 37 President and Chief Executive Officer of 1995
Quantum Corporation
Robert J. Casale ......... 57 Group President, Brokerage Information Services 1993
Group of Automatic Data Processing, Inc.
Edward M. Esber, Jr. .... 44 President and Chief Executive Officer 1988
of Solopoint, Inc.
Steven C. Wheelwright ... 52 Professor of Management and Senior Associate Dean 1989
at the Graduate School of Business, Harvard
University
</TABLE>
Except as set forth below, each of the nominees has been engaged in his
principal occupation described above during the past five years. There is no
family relationship between any director or executive officer of the Company.
Mr. Stephen M. Berkley joined the Company in October 1981, as Vice President,
Marketing. In November 1983, he became the founding President and Chief
Executive Officer of Plus Development Corporation, previously a wholly owned
subsidiary of the Company. From May 1987 to March 1992, he served as Chairman of
the Board and Chief Executive Officer of Quantum. From April 1992 to July 1993
and since August 1995, he has served as Chairman of the Board of Quantum. Mr.
Berkley served as Chairman of the Board and Chief Executive Officer of Coactive
Computer Corporation, a computer networking company, from February 1993 to June
1993 and from June 1993 to July 1994 he served as Chairman of the Board of
Coactive Computer Corporation. Mr. Berkley has served as a consultant to high
technology firms since May 1992. Mr. Berkley is also a member of the Board of
Directors of Edify Corporation.
Mr. David A. Brown, a founder of the Company, has been with the Company
since its inception in February 1980. Initially, Mr. Brown served as Vice
President of Engineering of the Company. In 1983, he co-founded Plus Development
Corporation and became its Executive Vice President of Operations. He returned
to Quantum in September 1986 to lead the engineering organization and direct
Quantum's effort in the 3 1/2 -inch disk drive market. From May 1987 to April
1990, Mr. Brown served as President of the Company and from April 1990 to
February 1992, he served as its Vice Chairman of the Board of Directors
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and Chief Operating Officer. Mr. Brown served as Chief Executive Officer of
Visioneer Communications, a communications company, from June 1993 to December
1993. From June 1993 to November 1995 he served as Chairman of the Board and
from November 1995 to February 1996 he served as a member of the Board of
Directors of Visioneer Communications. Mr. Brown has also been a management
consultant and Board member for various high technology companies since February
1992.
Mr. Michael A. Brown was named President and Chief Executive Officer of
Quantum Corporation in September 1995. From August 1993 to September 1995 he was
President of the Company's Desktop and Portable Storage Group. He served as
Executive Vice President of the Company from February 1992 to August 1993 and as
Vice President of Marketing from June 1990 to February 1992.
Mr. Robert J. Casale has served as Group President of the Brokerage
Information Services Group of Automatic Data Processing, Inc., an information
services company, since February 1988. Mr. Casale also served as a Director of
Automatic Data Processing, Inc. From 1986 to February 1988, he was a Managing
Director with Kidder Peabody and Company, Inc. He is also a member of the Board
of Directors of Compression Laboratories and until May 1996, Tricord Systems.
Mr. Edward M. Esber, Jr. was named President and Chief Executive Officer of
Solopoint, Inc., a personal communications management products company, in
October 1995. He served as Chairman, President and Chief Executive Officer of
Creative Insights, Inc., a computer toys company from March 1994 to June 1995.
From May 1993 to May 1994, he was President and Chief Operating Officer of
Creative Labs, Inc., a multimedia company. From February 1991 to May 1993, he
was President of the Esber Group, a consulting firm.
Mr. Steven C. Wheelwright has served as a professor of management at the
Graduate School of Business, Harvard University since August 1988. Mr.
Wheelwright additionally served in the same position from August 1985 to August
1986. From August 1986 to August 1988, Mr. Wheelwright served as a professor at
Stanford University. Mr. Wheelwright is also a member of the Board of Directors
of T.J. International Corporation, Allegheny-Ludlum Steel Corporation and
Heartport, Inc.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of nine (9) meetings
during the fiscal year ended March 31, 1996. During the fiscal year ended March
31, 1996, no director attended fewer than 75% of the meetings of the Board of
Directors or the meetings of committees, if any, upon which such director
served.
The Audit Committee of the Board of Directors, which was formed in March
1983, currently consists of Mr. Esber, Chairman of the Committee, Mr.
Wheelwright and Mr. Casale. The Audit Committee, which generally meets prior to
quarterly earnings releases, recommends engagement of the Company's independent
auditors and is primarily responsible for approving the services performed by
the Company's independent auditors and for reviewing and evaluating the
Company's accounting principles and its systems of internal accounting controls.
The Audit Committee held a total of four (4) meetings during the fiscal year
ended March 31, 1996.
The Compensation Committee, which was formed in November 1988, is currently
composed of Mr. Wheelwright, Chairman of the Committee, Mr. Esber and Mr.
Casale. The Compensation Committee, which generally meets in conjunction with
Board meetings and as deemed necessary by the Board of Directors, reviews and
approves the Company's executive compensation policy and makes recommendations
concerning the Company's employee benefit policies. The Compensation Committee
held a total of thirteen (13) meetings during the fiscal year ended March 31,
1996.
The Board of Directors does not have a Nominating Committee nor any committee
performing such function.
DIRECTOR COMPENSATION
During the year ended March 31, 1996 each director who was not an employee
("Outside Director") received an annual retainer of $27,000 per year. Certain
directors were paid an additional $4,000 per year
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for chairing a committee of the Board. In addition, each Outside Director was
paid $1,250 per day for any Board meeting attended. Outside Directors serving on
Board committees receive $1,000 per meeting for meetings held on days when there
was no regularly scheduled Board meeting. Outside Directors may also receive
consulting fees for projects completed at the request of management. See
"CERTAIN TRANSACTIONS." Employee directors are not compensated for their service
on the Board of Directors or on committees of the Board.
Options may be granted to Outside Directors under the 1986 Stock Option Plan
only in accordance with an automatic, non-discretionary grant mechanism. The
1986 Stock Option Plan provides that since May 1, 1991 (the "Effective Date"),
each of the Company's Outside Directors who were directors on the Effective Date
shall automatically be granted options to purchase 7,500 shares of Common Stock
on the date of each Annual Meeting of Stockholders, which options commence
vesting on April 1 of the year which is three years from the year of the grant
of such option and vest in installments cumulatively with respect to one-twelfth
(1/12) of the shares subject thereto per month on the first day of each month
thereafter. Each Outside Director appointed or elected after the Effective Date
("Future Outside Director") shall receive a one-time option grant of 30,000
shares on the date of his or her appointment or election (the "Initial Option"),
7,500 shares of which shall vest on the first day of the month which is one (1)
year from the month in which the Initial Option was granted, and the balance of
which shall vest ratably on a monthly basis on the first day of each month over
the next succeeding 36-month period. Additionally, each Future Outside Director
shall be granted an option (the "Subsequent Option") to purchase 7,500 shares on
the date of each Annual Meeting of Stockholders which is held at least six (6)
months from the date of such Future Outside Director's appointment or election,
which Subsequent Option shall vest ratably on a monthly basis over a 12-month
period commencing on the month immediately following the month in which the
preceding options, whether the Initial Option or a Subsequent Option, becomes
fully vested. All options granted to Outside Directors under the 1986 Stock
Option Plan contain the following provisions: the term of the option is ten (10)
years; the option can be exercised only while the Outside Director remains a
director or within ninety (90) days after ceasing to be a director; and the
exercise price per share of Common Stock is 100% of the fair market value on the
date the option is granted. The provisions of the 1986 Stock Option Plan
governing options granted to Outside Directors may not be amended more than once
every six (6) months.
During fiscal 1996, each of the Company's Outside Directors, Mr. Brown, Mr.
Casale, Mr. Esber and Mr. Wheelwright received an option to purchase 7,500
shares of Common Stock at an exercise price of $24.50 per share.
REQUIRED VOTE
The six nominees for director receiving the highest number of affirmative
votes of the shares entitled to be voted for them shall be elected as directors.
Votes withheld from any director are counted for purposes of determining the
presence or absence of a quorum, but have no other legal effect under Delaware
law. Every stockholder voting for the election of directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of votes to which the
stockholder's shares are entitled, or may distribute the stockholder's votes on
the same principle among as many candidates as the stockholder thinks fit,
provided that votes cannot be cast for more than six candidates. No stockholder
shall be entitled to cumulate votes, however, unless the candidates have been
properly placed in nomination according to the Company's Bylaws and notice of
the intention to cumulate votes is given to the Company and other stockholders
at least twenty (20) and no more than sixty (60) days prior to the Annual
Meeting. The Company may exercise discretionary authority to cumulate votes and
to allocate such votes among the Company's nominees in the event that additional
persons are nominated at the Annual Meeting for election of directors.
MANAGEMENT RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES LISTED ABOVE.
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PROPOSAL TWO
APPROVAL OF THE ANNUAL INCENTIVE PLAN FOR THE
COMPANY'S CHIEF EXECUTIVE OFFICER
The Compensation Committee (the "Committee") of the Board of Directors has
adopted, subject to stockholder approval, an Annual Incentive Plan (the "Plan")
for the Chief Executive Officer ("CEO") of the Company. The payment of the
compensation (the "Bonus") will depend on the Company's return on total capital
(the "Targets") for the fiscal year ending March 31, 1997 achieving levels
established by the Committee. The Plan has the same payment scheme and purposes
as the Annual Incentive Plan for other executives except the Board has no
discretion to increase payments in the Plan. SEE "COMPENSATION COMMITEE REPORT;
COMPENSATION PLANS". Stockholder approval of the Bonus is required if
compensation paid under the Plan is to qualify for the "performance based"
exemption from the limitations on deductibility of executive compensation set
forth in Section 162(m) of the Internal Revenue Code of 1986, as amended, which
provides a $1,000,000 limitation on deductions by any publicly-held corporation
for certain compensation paid to the CEO.
The CEO is the only person eligible to participate in the Plan. The Bonus is
designed to reward the CEO to the extent the Company achieves certain targets.
If the Company's Targets are above certain specified levels, the CEO will be
eligible to receive a bonus in a predetermined amount ranging from $113,750 to a
maximum of $1,500,000. The Board does have discretion to reward less than the
minimum predetermined amount. If the Company's minimum targets are not met, no
Bonus will be paid to the CEO.
The following table summarizes the maximum Bonus that will be payable to the
CEO assuming the highest Target levels are met.
NEW PLAN BENEFITS
NAME AND POSITION DOLLAR VALUE($)
------------------ ---------------
Michael A. Brown ......................... $1,500,000
President and Chief Executive Officer
The Bonus is to be paid in cash upon approval by the Committee. The Committee
will be responsible for certifying the results achieved to determine the amount
of the Bonus.
REQUIRED VOTE
The affirmative vote of a majority of the Votes Cast will be required to
approve the adoption of the Annual Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE ANNUAL
INCENTIVE PLAN.
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PROPOSAL THREE
1996 BOARD OF DIRECTORS STOCK OPTION PLAN
GENERAL INFORMATION
The Quantum Corporation 1996 Board of Directors Stock Option Plan ("Director
Plan") was adopted by the Board of Directors in July of 1996 and will be
presented to the stockholders for their approval at the 1996 Annual Meeting. The
Director Plan is before the stockholders for approval as the current plan from
which directors are granted stock options will expire on December 10, 1996. The
total number of shares of Common Stock reserved and available for issuance under
the Director Plan is 300,000 shares.
PURPOSE
The purposes of the Director Plan are to attract and retain the best
available individuals for service as non-employee directors of the Company
("Outside Directors"), to provide additional incentive to the Outside Directors
and to encourage their continued service on the Board.
ADMINISTRATION
The Director Plan is administered by the Board of Directors, who receive no
additional compensation for such service. All questions of interpretation or
application of the Director Plan are determined by the Board, whose decisions
are final and binding upon all participants.
ELIGIBILITY
Options under the Director Plan may be granted only to Outside Directors of
the Company. As of the Record Date, there were four (4) Outside Directors of the
Company, all of whom have been nominated to serve as directors for the 1996
year. These individuals were eligible to receive grants of options as of the
effective date of the Director Plan which was July 8, 1996. The Board, in its
descretion, selects the Outside Directors to whom options may be granted, the
time or times at which such options may be granted, and the number of shares
subject to each such grant.
TERM OF OPTIONS
Each option granted under the Director Plan is evidenced by a written stock
option agreement between the Company and the optionee. Options are generally
subject to the terms and conditions listed below.
Exercise of the Option. The Board determines when options become exercisable.
An option is exercised by giving written notice of exercise to the Company by
specifying the number of whole shares of Common Stock to be purchased and by
tendering payment of the purchase price. Payment for shares purchased upon
exercise of an option may be in the form of cash, check, certain other shares of
the Company's Common Stock, a "cashless exercise" or any combination of these
methods of payment.
Exercise Price. The per share exercise price for shares to be issued pursuant
to exercise of an option under the Director Plan is 100% of the fair market
value per share of the Company's Common Stock on the date of grant of the
option. The fair market value is determined by the closing sales price on the
stock exchange with the greatest volume of trading in Common Stock on the date
of the grant of the option.
Term of Option. The term of an option may be no more than ten years from the
date of grant.
Termination of Continuous Status as Director. If an optionee ceases to serve
as a director, he or she may, but only within ninety days after the date he or
she ceases to be a director of the Company, exercise his or her option to the
extent that he or she was entitled to exercise it at the date of such
termination (but in no event later than the expiration of its ten year term). To
the extent that he or she was not entitled to exercise the option at the date of
such termination, or if he or she does not exercise such option within the time
specified, the option terminates.
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Liquidaton or Dissolution. In the event of a proposed liquidation or
dissolution of the Company, options under the Director Plan shall terminate
immediately prior to the consummation of such proposed action.
Merger or Asset Sale. In the event of a merger of the Company or the sale of
substantially all of the assets of the Company, each option may be assumed or an
equivalent option substituted by the successor corporation. If an option is
assumed or substituted for, it shall continue to first become exercisable as
provided in the Director Plan. However, if a non-employee director's status as a
driector of the Company or the successor corporation, as applicable, is
terminated other than upon a voluntary resignation by the non-employee director,
each option granted to such non-employee director shall become fully
exercisable. If the successor does not agree to assume or substitute the option,
each option shall also become fully exercisable for a period of thirty days from
the date the Board notifies the optionee of the option's full exercisability,
after which period the option shall terminate.
Capital Changes. In the event of any changes made in the Company's
capitalization which result in an exchange of Common Stock for a greater or
lesser number of shares without receipt of consideration, appropriate adjustment
shall be made in the exercise price and in the number of shares subject to
options outstanding under the Director Plan, as well as the number of shares
reserved for issuance under the Director Plan.
Nontransferability of Option. Unless otherwise provided for by the Board,
options granted pursuant to the Director Plan may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the optionee, only by the optionee.
Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Director Plan as may be
determined by the Board.
AMENDMENT AND TERMINATION OF THE DIRECTOR PLAN
The Board may at any time amend, alter, suspend or discontinue the Director
Plan, but no amendment, alteration, suspension or discontinuance shall be made
which would impair the rights of any optionee under any grant theretofore made
without such optionee's consent. In addition, to the extent necessary and
desirable to comply with any applicable law or regulation, including the
requirements of an established stock exchange or quotation system, the Company
shall obtain shareholder approval of any amendment to the Director Plan in such
a manner and to such degree as required.
TAX INFORMATION--THE DIRECTOR PLAN
Options granted pursuant to the Director Plan are "nonstatutory options" and
will not qualify for any special tax benefits to the optionee.
An optionee will not recognize any taxable income at the time the option is
granted. Upon exercise of the option, the optionee will generally recognize
ordinary income for federal tax purposes measured by the excess, if any, of the
fair market value of the shares over the exercise price. Because shares held by
directors might be subject to restrictions on resale under Section 16(b) of the
Exchange Act, the date of taxation may be deferred unless the optionee files an
election with the Internal Revenue Service pursuant to Section 83(b) of the Code
within thirty days after the date of exercise.
Upon a resale of shares acquired pursuant to, an option under the Director
Plan, any difference between the sales price and the exercise price, to the
extent not recognized as ordinary income as provided above, will be treated as
capital gain or loss. The tax rate on net capital gain (net long-term capital
gain minus net short-term capital loss) is capped at 28%. Capital losses are
allowed in full against capital gains plus $3,000 of other income.
The Company will be entitled to a tax deduction in the amount and at the time
that the optionee recognizes ordinary income with respect to shares acquired
upon exercise of an option under the Director Plan. The Company is not required
to withhold any amount for tax purposes on any such income included by the
optionee.
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The foregoing summary of the effect of federal income taxation upon the
optionee and the Company with respect to the grant of options under the Director
Plan does not purport to be complete, and reference should be made to the
applicable provisions of the Code. In addition, this summary does not discuss
the provisions of the income tax laws of any municipality, state or foreign
country in which the optionee may reside.
REQUIRED VOTE
The affirmative vote of a majority of the Votes Cast will be required to
approve the adoption of the 1996 Board of Directors Stock Option Plan.
MANAGEMENT RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 1996 BOARD OF
DIRECTORS STOCK OPTION PLAN.
PROPOSAL FOUR
INDEPENDENT AUDITORS
In July 1996, the Board of Directors of the Company adopted a resolution
whereby Ernst & Young LLP was selected as the Company's independent auditors to
audit the financial statements of the Company for the fiscal year ending March
31, 1997.
A representative of Ernst & Young LLP is expected to be available at the
Annual Meeting to make a statement if such representative desires to do so and
to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT AUDITORS FOR THE 1997 FISCAL
YEAR.
OTHER INFORMATION
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's executive officers,
directors, and persons who own more than 10% of a registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission.
Based solely on its review of the copies of such reports received by the
Company, or on written representations from certain reporting persons that no
reports were required for such persons, the Company believes that, during the
fiscal year ended March 31, 1996, all Section 16(a) filing requirements
applicable to its executive officers, directors and ten percent stockholders
were complied with.
CERTAIN TRANSACTIONS
In August of 1995, the Company entered into a consulting agreement (the
"Consulting Agreement") with David A. Brown. The Consulting Agreement provides
that Mr. Brown shall receive $5,000 per day for consulting services beginning
August 1, 1995 through August 1, 1999. Also pursuant to the Consulting
Agreement, Mr. Brown received a grant of options to purchase 40,000 shares of
Common Stock. The options were granted on September 27, 1995 at $20.875 per
share, the fair market value of the Company's Common Stock, fully vesting within
four (4) years from the grant date.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of July 10, 1996 certain information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each of the Company's directors, (iii)
all individuals serving as the Company's Chief Executive Officer during fiscal
year 1996 and each of the four other most highly compensated individuals who
served as executive officers of the Company at fiscal year end and (iv) all
directors and executive officers as a group.
APPROXIMATE
NAME AMOUNT OWNED PERCENTAGE OWNED
- - ---- --------------- ----------------
J.P. Morgan & Company, Inc ............ 8,789,257(1) 15.06%
60 Wall Street
New York, NY 10260
Franklin Templeton Group .............. 4,505,560 7.72%
777 Mariners Island Blvd
San Mateo, CA 94404
FMR Corp .............................. 3,577,520(2) 6.13%
82 Devonshire Street
Boston, MA 02109-3014
Michael A. Brown ...................... 268,046(4) *
Joseph T. Rodgers ..................... 266,523(4) *
Stephen M. Berkley .................... 254,119(4) *
Kenneth Lee ........................... 206,946(4) *
William F. Roach ...................... 70,695(4) *
William J. Miller ..................... 48,999(3) *
David A. Brown ........................ 33,645(3) *
Steven C. Wheelwright ................. 26,125(3) *
Robert J. Casale ...................... 22,500(3) *
Edward M. Esber, Jr. .................. 10,000(3) *
All directors and executive officers
as a group (15 persons)............... 1,335,613(5) 2.29%
- - ----------
* Less than 1%.
(1) Includes 230,412 shares of Common Stock subject to the Convertible
Subordinated Debenture due April 1, 2002 and the Convertible Subordinated
Debenture due March 1, 2003.
(2) Amount based upon the most recent available Form 13G filings with the
Securities and Exchange Commission as of July 10, 1996.
(3) Represents shares subject to stock options exercisable at July 10, 1996 or
within sixty (60) days thereafter.
(4) Includes 265,953 shares, 233,001 shares, 219,581 shares, 190,108 shares and
55,695 shares subject to stock options held by Mr. Brown, Mr. Rodgers, Mr.
Berkley, Mr. Lee and Mr. Roach respectively, which were exercisable at July
10, 1996 or within sixty (60) days thereafter.
(5) Includes 1,228,788 shares subject to stock options held by executive
officers and directors which were exercisable at July 10, 1996 or within
sixty (60) days thereafter.
10
<PAGE>
<TABLE>
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows, as to any person serving as Chief Executive
Officer during fiscal 1996 and each of the four other most highly compensated
executive officers whose salary plus bonus exceeded $100,000, information
concerning compensation paid for services to the Company in all capacities
during the fiscal year ended March 31, 1996, as well as the total compensation
paid to each such individual for the Company's previous two fiscal years (if
such person was the Chief Executive Officer or an executive officer, as the case
may be, during any part of such fiscal year).
<CAPTION>
ANNUAL COMPENSATION(1) LONG TERM COMPENSATION(1)
----------------------------------- -------------------------
AWARDS
-------------------------
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDERLYING OTHER
COMPENSA- STOCK OPTIONS/ COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) TION($)(2) AWARDS($)(3) SARS(#) TION(4)
- - --------------------------- ------ --------- ------------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael A. Brown ........... 1996 452,846 0 0 0 360,000 4,071
President and Chief 1995 348,703 470,421 0 0 75,000 884
Executive Officer* 1994 329,228 0 0 0 75,000 0
Kenneth Lee ................ 1996 363,385 0 0 262,350 55,000 2,496
President, Workstation 1995 324,687 426,814 0 0 50,000 1,688
and Systems Storage Group, 1994 276,389 0 0 0 50,000 0
Chief Technical Officer
William F. Roach ........... 1996 353,846 0 0 262,350 55,000 3,459
Executive Vice President, 1995 324,134 436,819 0 0 50,000 1,688
World-Wide Sales 1994 283,607 0 0 0 50,000 0
Joseph T. Rodgers .......... 1996 344,231 0 0 0 40,000 2,427
Executive Vice President, 1995 323,035 400,417 0 0 50,000 1,688
Finance, Chief Financial 1994 298,149 0 0 0 50,000 0
Officer and Secretary(5)
Stephen M. Berkley ......... 1996 297,998 231,644(7) 19,750 0 250,000 5,300
Chairman of the Board(6)* 1995 0 0 39,000 0 7,500 0
1994 73,757 0 20,000 0 0 0
William J. Miller .......... 1996 400,909 0 0 0 100,000 273,864(8)
Chairman of the Board and 1995 561,023 870,000 0 0 125,000 1,212
Chief Executive Officer* 1994 516,976 0 0 0 125,000 0
<FN>
- - ----------
* Mr. Miller resigned as Chairman of the Board effective August 22, 1995 and
as Chief Executive Officer effective September 25, 1995. Mr. Berkley
succeeded Mr. Miller as Chairman of the Board and Mr. Brown succeeded Mr.
Miller as Chief Executive Officer. Mr. Brown assumed the additional position
of President of the Company.
(1) The Company has not granted any stock appreciation rights and does not have
any Long-Term Incentive Plans as that term is defined in regulations
promulgated by the Securities and Exchange Commission (the "SEC").
(2) The value of perquisites fell below the lesser of $50,000 or 10% of reported
salary plus bonus for each executive. Therefore, amounts related to
perquisites have not been included in the Other Annual Compensation column.
The Other Annual Compensation column has been included to report Board of
Director fees paid to Mr. Berkley prior to his becoming Chairman of the
Board.
(3) As of March 31, 1996, Kenneth Lee and William F. Roach each held 15,000
shares valued at $269,850. The shares will vest in under three (3) years
according to the following schedule: 3,750 shares will vest on November 1,
1996, 3,750 shares will vest on November 1, 1997 and 7,500 shares will vest
on November 1, 1998. The aggregate market value is based on $18.00 per
share, the fair market value of the Company's common stock as of March 31,
1996. Dividends are not paid on Quantum stock.
(4) Represents amounts contributed by the Company to the defined benefit
contribution plan approved under Internal Revenue Code section 401(k) (the
"401(k) Plan") maintained by the Company for each executive officer, except
as expressly indicated otherwise.
11
<PAGE>
(5) Joseph T. Rodgers resigned as Executive Vice President, Finance, Chief
Financial Officer and Secretary effective July 2, 1996.
(6) Stephen M. Berkley became Chairman of the Board effective August 23, 1995.
Mr. Berkley did not serve as Chairman of the Board during the fiscal year
ended March 31, 1995 and accordingly was not an executive officer of the
Company during that fiscal year. He previously served as Chairman of the
Board from April 1992 to July 1993.
(7) Stephen M. Berkley's fiscal 1996 bonus is to be earned over a four year
period commencing August 23, 1995 and is contingent upon Mr. Berkley's
continued employment and/or consulting relationship with the Company. Should
Mr. Berkley terminate employment and/or the consultancy relationship prior
to the end of the four year period the unearned portion of the bonus shall
be forfeited.
(8) Includes payment of $273,433 paid pursuant to a consulting and release
agreement between Mr. Miller and the Company and a contribution by the
Company of $431 to the 401(k) Plan maintained by the Company for Mr. Miller.
</FN>
</TABLE>
STOCK OPTION GRANTS AND EXERCISES
The following tables set forth information with respect to the stock options
granted to the named executive officers under the Company's stock option plans,
the options exercised by such named executive officers during the fiscal year
ended March 31, 1996 and the options held by such named executive officers as of
March 31, 1996.
<TABLE>
The Option Grant Table sets forth hypothetical gains for the options at the
end of their respective ten (10)-year terms, as calculated in accordance with
the rules of the SEC. Each gain is based on an arbitrarily assumed annualized
rate of compound appreciation of the market price of 5% and 10%, less the
exercise price, from the date the option was granted to the end of the option
term. Actual gains, if any, on option exercises are dependent on the future
performance of the Company's Common Stock.
OPTION GRANTS IN FISCAL YEAR 1996
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
----------------------------------------------------- ------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTION EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- - ------------------- ------------- --------------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Brown ... 60,000(2) 2.02% $15.625 04/07/05 $ 589,589 $1,494,134
300,000(3) 10.12 20.875 09/27/05 3,938,452 9,980,812
Kenneth Lee ......... 40,000(2) 1.35 15.625 04/07/05 393,059 996,089
15,000(4) 0.51 17.50 11/20/05 165,084 418,357
William F. Roach .... 40,000(2) 1.35 15.625 04/07/05 393,059 996,089
15,000(4) 0.51 17.50 11/20/05 165,084 418,357
Joseph T. Rodgers .. 40,000(2) 1.35 15.625 04/07/05 393,059 996,089
Stephen M. Berkley .. 125,000(3) 4.21 20.875 09/27/05 1,641,022 4,158,671
125,000(5) 4.21 18.00 11/22/05 1,415,013 3,585,921
William J. Miller ... 100,000(2) 3.37 15.625 04/07/05 982,648 2,490,223
<FN>
- - ----------
(1) Potential realizable value is based on an assumption that the stock price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the ten (10)-year option term.
Potential realizable value is shown net of exercise price. These numbers are
calculated based on the regulations promulgated by the SEC and do not
reflect the Company's estimate of future stock price growth.
(2) Options were granted on April 7, 1995 at fair market value, fully vesting
within four (4) years from the grant date.
(3) Options were granted on September 27, 1995 at fair market value, fully
vesting within two (2) years from the grant date for Mr. Berkley and four
(4) years from the grant date for Mr. Brown.
(4) Options were granted on November 20, 1995 at fair market value, fully
vesting within four (4) years from the grant date.
(5) Options were granted on November 22, 1995 at fair market value, fully
vesting within two (2) years from the grant date.
</FN>
</TABLE>
12
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS HELD IN-THE-MONEY OPTIONS HELD
ACQUIRED ON VALUE AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------- ------------- ----------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Brown .... 40,000 $ 437,936 277,859 379,377 $1,374,640 $502,590
Kenneth Lee .......... 43,392 503,472 162,399 88,338 1,015,501 346,532
William F. Roach .... 47,839 477,164 110,520 88,439 591,064 347,353
Joseph T. Rodgers .... 0 0 179,458 74,587 1,217,209 339,657
Stephen M. Berkley ... 0 0 150,831 198,126 688,249 136,965
William J. Miller .... 432,248 2,745,328 48,999 0 191,373 0
<FN>
- - ----------
(1) Total value of vested options based on fair market value of the Company's
Common Stock of $18.00 per share as of March 31, 1996, less the exercise
price.
</FN>
</TABLE>
EMPLOYMENT TERMS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has entered into agreements (the "Agreements") with certain
officers, including the officers named in the Summary Compensation Table,
whereby in the event there is a "change of control" of the Company, which is
defined in the Agreements to include, among other things, a merger or sale of
assets of the Company or a reconstitution of the Company's Board of Directors,
the exercisability and vesting of all stock-based compensation awards granted to
the officers shall be accelerated. Under the Agreements, upon a change of
control, 50% of the unvested shares or options to purchase shares held by an
officer become exercisable and the remaining 50% of such unvested shares or
options to purchase shares become vested and exercisable upon the earlier of the
date of the first anniversary of the change of control or upon such officer's
"Involuntary Termination" after the change of control. Under the Agreements,
"Involuntary Termination" is defined to include, among other things, any
termination without "cause" by the Company of the employee without such
employee's express written consent or a significant reduction of or addition to
the employee's duties. Additionally, such officers receive twelve (12) months
severance pay and continued health and medical benefits during the severance
period. The purpose of the Agreements is to assure that the Company will have
the continued dedication of its officers by providing such individuals with
certain compensation arrangements, competitive with those of other corporations,
to provide sufficient incentive to the individuals to remain with the Company,
to enhance their financial security, as well as protect them against unwarranted
termination in the event of a change of control.
In October 1995, the Company entered into a letter agreement with Mr. Stephen
M. Berkley, its current Chairman of the Board, relating to terms of his
employment, his initial level of compensation and payment of certain
compensation in the event of his termination from the Company under certain
circumstances. The agreement provides for base compensation of $525,000 per
year, a bonus of approximately $200,000 and the grant of options to purchase
250,000 shares of the Company's Common Stock vesting over a two (2) year period
beginning August 1, 1995. One hundred twenty-five thousand (125,000) options
were granted on September 27, 1995 at $20.875 per share and one hundred
twenty-five thousand (125,000) options were granted on November 22, 1995 at
$18.00 per share. The Company ultimately paid a bonus of $231,644 to Mr.
Berkley. The letter agreement provided that in the event Mr. Berkley is
terminated by the Company without cause prior to May 22, 1996, the Company shall
continue to pay his base salary until August 22, 1996 under a consultancy
agreement, during which time his options shall continue to vest.
In September of 1995, William J. Miller resigned as Chief Executive Officer
of the Company. Mr. Miller became a consultant to the Company pursuant to a
consulting and release agreement (the "Miller Consulting and Release Agreement")
beginning November 1, 1995 through September 30, 1997. The Miller Consulting and
Release Agreement provided that the Company pay Mr. Miller the equivalent of
eleven (11) months salary in equal monthly payments commencing November 1, 1995
plus accrued vacation earned as of Mr. Miller's termination date. During the
first eleven (11) months of the consulting period, Mr. Miller shall provide, at
the Company's request, a minimum of one (1) day per month. For any
13
<PAGE>
additional consulting services provided during the first eleven (11) months and
any consulting services provided after the eleventh (11) month, the Company
shall pay Mr. Miller $5,000 per day for consulting services. The Company will
pay the reasonable cost for outplacement services for up to twelve (12) months.
Mr. Miller is entitled to convert the health coverage formerly provided to him
as an employee of the Company to individual coverage pursuant to COBRA. Also
pursuant to the terms of the Miller Consulting and Release Agreement the vesting
of six (6) months of stock options was accelerated and became fully exercisable
as of Mr. Miller's termination date.
In March of 1996, Joseph T. Rodgers resigned as Executive Vice President,
Finance and Secretary of the Company effective July 2, 1996. Mr. Rodgers became
a consultant to the Company pursuant to a consulting and release agreement (the
"Rodgers Consulting and Release Agreement") beginning July 2, 1996 through July
1, 1997. The Rodgers Consulting and Release Agreement provided that the Company
pay Mr. Rodgers the equivalent of twelve (12) months salary in equal monthly
payments commencing July 2, 1996 plus accrued vacation earned as of Mr. Rodgers'
termination date. During the term of the consulting period, Mr. Rodgers shall
provide, at the Company's request, a minimum of one (1) day per month. The
Company shall pay Mr. Rodgers $4,000 per day for any additional consulting
services provided. Upon completion of certain milestones, Mr. Rodgers shall
receive a cash payment equivalent to the value of 5,000 shares of common stock
as quoted by Nasdaq as of the close of business on the day immediately preceding
the date of payment. The Company will pay the reasonable cost for outplacement
services up to $15,000. Mr. Rodgers is entitled to convert the health coverage
formerly provided to him as an employee of the Company to individual coverage
pursuant to COBRA. Also pursuant to the terms of the Rodgers Consulting and
Release Agreement the vesting of twelve (12) months of stock options was
accelerated and became fully exercisable as of Mr. Rodgers' termination date.
COMPENSATION COMMITTEE REPORT
INTRODUCTION
The Compensation Committee of the Board of Directors (the "Committee") is
made up of Outside Directors of the Company. The Committee generally determines
base salary levels and determines targets under the Annual Incentive Plan for
executive officers of the Company at the start of the fiscal year. Each year the
Committee evaluates the Company's compensation practices and equity programs
based on comparisons with other companies in the industry, and compares the
Company's performance to a group of peer companies in making determinations with
respect to compensation plans.
COMPENSATION PHILOSOPHY
The Company's executive compensation policies are designed to attract and
retain experienced and qualified executive officers critical to the success of
the Company, and to provide incentive for such individuals to maximize the
Company's corporate performance and strategic objectives. The target levels of
the executive officers' total compensation package are intended to be
competitive at the 50th percentile in average performance years and above
average when the Company's performance is above average with executives in the
Company's industry, taking into account corporate performance and individual
achievement. With respect to Section 162(m) of the Code (which limits
deductibility of executive compensation exceeding $1 million per individual per
year unless certain conditions are met), the Company is taking steps to qualify
its Chief Executive Officer's Annual Incentive Plan for an exemption from
Section 162(m). The 1993 Long Term Incentive Plan currently qualifies for a
temporary exemption from Section 162(m), and the Company currently intends to
take steps to secure a permanent exemption. The Company will continue to
evaluate its other compensation programs in light of Section 162(m), although it
has no current plans to qualify any of its other compensation programs for
exemptions.
COMPENSATION PLANS
The principal components of executive compensation are described below:
Base Compensation. Base salaries for executive officers are set by the
Committee, in consultation with the Chief Executive Officer, after considering
factors such as the competitive environment, experience levels, position and
responsibility, corporate performance and overall contribution levels of the
14
<PAGE>
individuals. The Company obtains competitive salary information from independent
survey sources of peer companies in competition for similar management talent,
which includes both direct competitors of the Company and other companies in the
high technology industry which have similar size and performance profiles. Most
of the companies included in these surveys are also included in the Hambrecht &
Quist Technology Index (see PERFORMANCE GRAPH). This survey data is then
analyzed by independent consultants and the Company to provide the necessary
information to the Committee.
Annual Incentive Plan. The Annual Incentive Plan provides for cash bonuses to
be paid to executive officers of the Company subject to the Company meeting
certain performance targets set by the Compensation Committee at the beginning
of the fiscal year. The purposes of the Annual Incentive Plan are to (i) tie
compensation to achievement of performance measures that provide an optimum
return on total capital in the current fiscal year (ii) drive long-term
stockholder value creation and (iii) ensure that payments are targeted to
provide a competitive level of compensation, taking into account the Company's
performance against its peers in the disk drive and related industries. In
fiscal year 1996, the Company did not meet its threshold performance level for
return on total capital. However, amounts were paid out under a one-time
discretionary plan to non-executive officers.
Long-Term Incentive Compensation. Another component of the total compensation
package for the Company's executive officers is in the form of stock option
awards. The Company's 1986 Stock Option Plan and 1993 Long-Term Incentive Plan
provide for long-term incentive compensation for employees of the Company,
including executive officers. An important objective of the 1986 Stock Option
Plan and 1993 Long-Term Incentive Plan is to align the interest of executive
officers with those of stockholders by providing an equity interest in the
Company, thereby providing incentive for such executive officers to maximize
stockholder value. Option awards directly tie executive compensation to the
performance of the Company's stock. The Committee is responsible for
determining, subject to the terms of such Plan, the individuals to whom grants
should be made, the timing of grants, the exercise or purchase price per share
and the number of shares subject to each grant. Grants are determined based on
the individual's position in the Company, comparative market data, and the
number of unvested shares already held by each officer. The option program also
utilizes vesting periods to encourage retention of executive officers and reward
long-term commitment to the Company.
COMPANY PERFORMANCE AND CHIEF EXECUTIVE OFFICER COMPENSATION
The process of determining the compensation for the Company's Chief Executive
Officer and the factors taken into consideration in such determination are
generally the same as the process and factors used in determining the
compensation of all of the Company's executive officers. During 1996, the
Company increased the Chief Executive Officer's base salary based on an analysis
of salaries paid by peer companies and the Chief Executive Officer's individual
performance. In fiscal 1996, the Chief Executive Officer did achieve many of his
individual objectives, including maintaining the Company's position as the
largest independent supplier of 3 1/2 -inch disk drives. The Company did not
meet its target for return on total capital. Therefore, no payments were made to
the Chief Executive Officer from the Annual Incentive Plan.
MEMBERS OF THE COMPENSATION
COMMITTEE
Steven C. Wheelwright
Edward M. Esber, Jr.
Robert J. Casale
15
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual change (on a dividend
reinvested basis) in five-year cumulative total return between Quantum
Corporation, the S&P 500 Index and the Hambrecht & Quist Technology Index. The
graph assumes $100 invested in the Company's common stock and in each index on
March 31, 1991 through fiscal year ended March 31, 1996.
[The following description data is supplied in accordance with Rule 304(d) of
Regulation S-T]
QNTM
Cumulative Total Return
------------------------------------------------------
3/91 3/92 3/93 3/94 3/95 3/96
Quantum QNTM 100 90 78 100 91 110
S&P 500 1500 100 111 128 130 150 198
H&Q TECHNOLOGY IHQT 100 118 129 144 185 254
16
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: July 25, 1996
17
<PAGE>
APPENDIX A
QUANTUM CORPORATION
Annual Meeting of Stockholders - September 3, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated July 25, 1996, and the 1996 Annual
Report to Stockholders, and appoints Michael A. Brown and G. Edward McClammy, or
either of them, as the proxies and attorneys-in-fact, with full power to each of
substitution on behalf and in the name of the undersigned to vote and otherwise
represent all of the shares registered in the name of the undersigned at the
1996 Annual Meeting of Stockholders of the Company to be held on Tuesday,
September 3, 1996 at 3:00 p.m. (local time) at the Company's headquarters
located at 500 McCarthy Boulevard, Milpitas, California 95035, and any
adjournment thereof with the same effect as if the undersigned were present and
voting such shares, on the following matters and in the following manner:
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND DATE
THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
1. The election of the following persons as directors of the Company to
serve until the next Annual Meeting of Stockholders and until their
successors shall be duly elected and qualified:
Name of Nominees
Stephen M. Berkley Vote For Withhold Vote
David A. Brown Vote For Withhold Vote
Michael A. Brown Vote For Withhold Vote
Robert J. Casale Vote For Withhold Vote
Edward M. Esber, Jr. Vote For Withhold Vote
Steven C. Wheelwright Vote For Withhold Vote
2. To approve and ratify the adoption of the Annual Incentive Plan for
the Company's Chief Executive Officer.
FOR AGAINST ABSTAIN
3. To approve and ratify the adoption of the 1996 Board of Directors
Stock Option Plan.
FOR AGAINST ABSTAIN
4. To ratify the appointment of Ernst & Young LLP as independent
auditors for the Company for the fiscal year ending March 31, 1997.
FOR AGAINST ABSTAIN
5. To vote or otherwise represent the shares on any other business which
may properly come before the meeting or any adjournment thereof,
according to their discretion and in their discretion.
FOR AGAINST ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATION MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR EACH OF THE ABOVE PERSONS AND PROPOSALS, AND FOR OR
AGAINST SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AS THE
PROXYHOLDERS DEEM ADVISABLE.
---------------------------------
(Name typed or printed)
---------------------------------
(Signature)
---------------------------------
(Title, if appropriate)
Date:_________________, 1996
I plan to attend the meeting: Yes_____ No_____
Sign exactly as your name(s) appear on the stock certificate. A
Corporation is requested to sign its name by its President or other authorized
officer, with the office held designated. Executors, administrators, trustees,
etc., are requested to so indicate when signing. If stock is registered in two
names, both should sign.
<PAGE>
QUANTUM CORPORATION
1996 BOARD OF DIRECTORS STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1996 Board of Directors
Stock Option Plan are to attract and retain the best available personnel for
service as Outside Directors (as defined herein) of the Company, to provide
additional incentive to the Outside Directors of the Company to serve as
Directors, and to encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under applicable U. S. state corporate
laws, U.S. federal and state securities laws, and any stock exchange or
quotation system on which the Common Stock is listed or quoted.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Common Stock" means the Common Stock of the Company.
(e) "Company" means Quantum Corporation, a Delaware corporation.
(f) "Director" means a member of the Board.
(g) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" means, as of any date, the closing sales
price of the Common Stock (or the closing bid, if no sales were reported) as
quoted on the stock exchange with the greatest volume of trading in Common Stock
on the date of grant, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable.
(j) "Inside Director" means a Director who is an Employee.
(k) "Option" means a stock option granted pursuant to the Plan.
(l) "Optioned Stock" means the Common Stock subject to an Option.
<PAGE>
(m) "Optionee" means a Director who holds an Option.
(n) "Outside Director" means a Director who is not an Employee.
(o) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 1996 Board of Directors Stock Option Plan.
(q) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 300,000 Shares of Common Stock (the "Pool"). The Shares
may be authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration.
(a) Procedure. The Plan shall be administered by the Board.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, the Board shall have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Outside Directors to whom Options may be
granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
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(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Board, in its sole
discretion, shall determine;
(vi) to construe and interpret the terms of the Plan and Options
granted pursuant to the Plan;
(vii) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(viii) to modify or amend each Option (subject to Section 12(b)
of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(ix) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option that number of Shares having a Fair Market Value equal to
the amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by an Optionee to have Shares withheld for
this purpose shall be made in such form and under such conditions as the Board
may deem necessary or advisable;
(x) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option previously granted by
the Board,
(xi) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Board's decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options.
5. Eligibility. Options may be granted only to Outside Directors.
The Plan shall not confer upon any Optionee any right with respect
to continuation of service as a Director or nomination to serve as a Director,
nor shall it interfere in any way with any rights which the Director or the
Company may have to terminate the Director's relationship with the Company at
any time.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the stockholders of the
Company as described in Section 17
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of the Plan. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 12 of the Plan.
7. Term of Option. The term of each Option shall be stated in the
Option Agreement. The term of each Option shall be ten (10) years from the date
of grant or such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be one hundred percent of the
Fair Market Value per Share on the date of grant.
(b) Form of Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of payment,
shall consist of (i) cash, (ii) check, (iii) other shares which (x) in the case
of Shares acquired upon exercise of an Option, have been owned by the Optionee
for more than six (6) months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, (iv) delivery of a
properly executed exercise notice together with such other documentation as the
Company and the broker, if applicable, shall require to effect an exercise of
the Option and delivery to the Company of the sale or loan proceeds required to
pay the exercise price, or (v) any combination of the foregoing methods of
payment.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in the
Option Agreement; provided, however, that no Options shall be exercisable until
stockholder approval of the Plan in accordance with Section 17 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8 of the Plan. Until Shares are issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such Shares promptly after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the Shares are issued, except as provided in Section 11 of the Plan.
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Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to
Section 11 hereof, in the event an Optionee ceases to be a Director, the
Optionee may exercise his or her Option, but only within ninety (90) days
following the date of such termination, and only to the extent that the Optionee
was entitled to exercise it on the date of such termination (but in no event
later than the expiration of its ten (10) year term). To the extent that the
Optionee was not entitled to exercise an Option on the date of such termination,
and to the extent that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
10. Non-Transferability of Options. Unless otherwise provided for by
the Board, the Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable under the Plan shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
Shares effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Shares subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation"). If an Option is assumed or substituted for, the Option
or equivalent option shall continue to be exercisable as provided in the Option
Agreement for
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so long as the Optionee serves as a Director or a director of the Successor
Corporation. Following such assumption or substitution, if the Optionee's status
as a Director or director of the Successor Corporation, as applicable, is
terminated other than upon a voluntary resignation by the Optionee, the Option
or option shall become fully exercisable, including as to Shares for which it
would not otherwise be exercisable. Thereafter, the Option or option shall
remain exercisable in accordance with Section 9(b) above.
If the Successor Corporation does not assume an outstanding Option
or substitute for it an equivalent option, the Option shall become fully vested
and exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 11(c), an Option shall be
considered assumed if, following the merger or sale of assets, the Option
confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares). If such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
12. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Applicable Laws,
the Company shall obtain stockholder approval of any Plan amendment in such a
manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Board makes the determination granting
such Option.
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14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
Applicable Laws, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
15. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders held subsequent to the granting of an Option hereunder.
Such stockholder approval shall be obtained in the degree and manner required
under Applicable Laws.
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