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
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
Quantum Corporation
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] 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.
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[ ] 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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(2) Form, Schedule or Registration Statement No.:
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(4) Date filed:
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<PAGE>
[Quantum Logo]
QUANTUM CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 15, 1998
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 15, 1998 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 ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending March 31, 1999; and
3. 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 20, 1998
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/ Richard L. Clemmer
---------------------------------
Richard L. Clemmer
Executive Vice President, Finance
and Chief Financial Officer
Milpitas, California
August 14, 1998
<PAGE>
QUANTUM CORPORATION
----------------
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 15, 1998 at 3:00 p.m., or at any adjournment thereof (the
"Annual Meeting" or "Meeting"), 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 August 14,
1998 to all stockholders entitled to vote at the Meeting.
Record Date; Outstanding Shares
Stockholders of record at the close of business on July 20, 1998 (the
"Record Date") are entitled to notice of and to vote at the Meeting. At the
Record Date, 151,401,814 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 $19.9375 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 $6,000 for its services and
will reimburse the Solicitor for reasonable 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 1999 Annual Meeting must be
received by the Company no later than April 12, 1999 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" on 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 (the "Votes Cast") at the Annual Meeting with respect to such
matter.
1
<PAGE>
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 matter (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, with the exception of the
proposal for the election of directors, abstentions will have the same effect as
a vote against the proposal. Because directors are elected by a plurality vote,
abstentions in the election of directors have no impact once a quorum exists.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware
Supreme Court held that, while broker non-votes may be counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
broker non-votes should not be counted for purposes of determining the number of
Votes Cast with respect to the particular proposal on which the broker has
expressly not voted. Broker non-votes with respect to proposals set forth in
this Proxy Statement will therefore 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.
Section 16(a) Beneficial Ownership Reporting Compliance
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 (the "SEC"). Such
executive officers, directors and ten-percent stockholders are also required by
SEC rules to furnish the Company with copies of all forms that they file
pursuant to Section 16(a). 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 other reports were required for such persons, the
Company believes that, during the fiscal year ended March 31, 1998, all Section
16(a) filing requirements applicable to its executive officers, directors and
ten-percent stockholders were complied with.
2
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
A board of six (6) directors is to be elected at the Annual Meeting.
Unless otherwise instructed, the proxy holders will vote the proxies received by
them for management's nominees named below. Each nominee has consented to be
named a nominee in the proxy statement and to continue to serve as a director if
elected. In the event that any management nominee becomes unable or declines to
serve as a director, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. In the event
that additional persons be nominated at the time of the Annual Meeting, 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 (or, if new nominees have been designated by
the Board of Directors, in such a manner as to elect such nominees). In such
event, the specific nominees for whom such votes will be cumulated will be
determined by the proxy holders. The Company is not aware of any reason that any
nominee will be unable or will decline to serve as a director. The term of
office of each person elected as a director will continue until the next Annual
Meeting of Stockholders or until a successor has been elected and qualified.
There are no arrangements or understandings between any director or executive
officer and any other person pursuant to which he is or was to be selected as a
director or officer of the Company.
The Board of Directors' key roles include, but are not limited to,
selection and evaluation of the Chief Executive Officer and other members of
senior management, advising the Chief Executive Officer and the management team
on strategic goals and directions for the Company, approval of material
acquisitions or strategic partnerships that support the Company's goals and
providing general guidance and counsel to senior management. The criteria used
by the Company in nominating directors include: a nominee's knowledge and
familiarity with high technology companies, a nominee's prior board experience
and a nominee's personal characteristics, including objectivity, integrity and
independence of judgment. The Company believes its current board members meet
each of these criteria.
<TABLE>
The names of the nominees, all of whom are currently directors of the
Company, and certain information about them as of July 1, 1998, are set forth
below.
<CAPTION>
Director
Name of Nominee Age Since Principal Occupation Since
- --------------------------------- ----- ---------- ---------------------------------------------------
<S> <C> <C> <C>
Stephen M. Berkley .............. 54 1987 President of SMB Associates, 1992
David A. Brown .................. 53 1988 Retired management consultant to various high
technology companies
Michael A. Brown(1) ............. 39 1995 President and Chief Executive Officer of Quantum,
1995; Chairman of the Board of Quantum, 1998
Robert J. Casale*+ .............. 59 1993 Group President, Brokerage Information Services
Group of Automatic Data Processing, Inc., 1988
Edward M. Esber, Jr.*+ .......... 46 1988 Chairman of the Board of Solopoint, Inc., 1998
Steven C. Wheelwright*+ ......... 54 1989 Professor of Management and Senior Associate Dean
at the Graduate School of Business Administration,
Harvard University, 1989
<FN>
- ------------
(1) Mr. Brown was elected Chairman of the Board of Directors on May 28, 1998.
* Member of Audit Committee.
+ Member of Compensation Committee.
</FN>
</TABLE>
3
<PAGE>
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 October 1983, he became the founding President and
Chief Executive Officer of Plus Development Corporation, previously a
wholly-owned subsidiary of the Company ("Plus"), where he continued to serve as
such until July 1988. 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, Mr.
Berkley served as Chairman of the Board and Chief Executive Officer of both
Quantum and Plus. From April 1992 to August 1993 and again from August 1995 to
May 1998, Mr. Berkley 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 ("Coactive"), from February 1993 to
June 1993 and from June 1993 to July 1994 he served solely as Chairman of the
Board of Coactive. Mr. Berkley has served as a consultant to various 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 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 and Chief Operating Officer. Mr. Brown
served as Chief Executive Officer of Visioneer Communications, a communications
company, from June 1993 to December 1993. 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 and has served as Chairman of the Board of
Quantum since May 1998. From August 1993 to September 1995, Mr. Brown was
President of the Company's Desktop and Portable Storage Group. Mr. Brown 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. From February
1986 to June 1990, Mr. Brown held various marketing positions in the Company.
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 a former member of the
Board of Directors of Compression Laboratories and Tricord Systems. Mr. Casale
is currently a member of the Board of Directors of The BISYS Group, Inc.
Mr. Edward M. Esber, Jr. has served as Chairman of the Board of
Solopoint, Inc., a personal communications management products company
("Solopoint"), since March 1998. From October 1993 to March 1998, he served as a
director of Solopoint and also served as President and Chief Executive Officer
of Solopoint from October 1995 to March 1998. 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. Esber is also a member of the Board of Directors of Borealis
Corporation, Integrated Circuit Systems, Inc. and Socket Communications Inc.
Mr. Steven C. Wheelwright has served as a Professor of Management and
Senior Associate Dean at the Graduate School of Business Administration, Harvard
University since August 1988 and has served as a director of Quantum since March
1989. Mr. Wheelwright also served in the same position at Harvard 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, Franklin-Covey Co. and
Heartport, Inc.
4
<PAGE>
Board Meetings and Committees
The Board of Directors of the Company held a total of four (4) meetings
during the fiscal year ended March 31, 1998. During the fiscal year ended March
31, 1998, 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, 1998.
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 five (5) meetings during the fiscal year
ended March 31, 1998.
The Board of Directors does not have a nominating committee nor any
committee performing such function.
Director Compensation
During the year ended March 31, 1998, each director who was not an
employee ("Outside Director") received an annual retainer of $34,000 per year
and the Chairman of the Board received an annual retainer of $60,000 per year.
Certain directors were paid an additional $4,000 per year for chairing the Audit
Committee of the Board and $10,000 per year for chairing the Compensation
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 committee 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.
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 Company's 1996
Board of Directors Stock Option Plan ("Director Plan"), which was approved by
the Company's stockholders at the 1996 Annual Meeting of Stockholders. The
Board, in its discretion, selects Outside Directors to whom options may be
granted, the time or times at which such options may be granted, the number of
shares subject to each grant and the period over which such options become
exercisable. All options granted to Outside Directors under the Director Plan
contain the following provisions: the exercise price per share of Common Stock
is 100% of the fair market value of the Company's Common Stock on the date the
option is granted; the term of the option may be no more than ten years from the
date of grant; and the option may be exercised only while the Outside Director
remains a director or within ninety days after the date he or she ceases to be a
director of the Company; upon a proposed liquidation or dissolution of the
Company, the options will terminate immediately prior to such action; and in the
event of a merger or sale of substantially all of the Company's assets, each
option may be assumed or an equivalent option substituted by the successor
corporation. The Board may at any time amend, alter, suspend or discontinue the
Director Plan, subject to stockholder approval in certain circumstances.
During fiscal 1998, the Company's Outside Directors, Mr. David Brown,
Mr. Casale, Mr. Esber and Mr. Wheelwright each received an option to purchase
12,500 shares of Common Stock and Mr. Berkley received an option to purchase
17,500 shares of Common Stock at an exercise price of $26.875 per share.
5
<PAGE>
Compensation Committee Interlocks and Insider Participation
The members of the Company's Compensation Committee are Steven C.
Wheelwright, Chairman of the Committee, Edward M. Esber, Jr. and Robert J.
Casale. None of the members of the Compensation Committee of the Board of
Directors is currently or has been, at any time since the formation of the
Company, an officer or employee of the Company. During fiscal year 1998, no
executive officer of the Company (i) served as a member of the compensation
committee (or other board committee performing similar functions or, in the
absence of any such committee, the board of directors) of another entity, one of
whose executive officers served on the Company's Compensation Committee, (ii)
served as a director of another entity, one of whose executive officers served
on the Company's Compensation Committee, or (iii) served as a member of the
compensation committee (or other board committee performing similar functions
or, in the absence of any such committee, the board of directors) of another
entity, one of whose executive officers served as a director of the Company.
REQUIRED VOTE
Each 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. Alternatively, a stockholder 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. However, no stockholder shall be entitled to cumulate votes for a
candidate unless such candidate's name has 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 proxy holders may
exercise discretionary authority to cumulate votes and to allocate such votes
among management's nominees in the event that additional persons are nominated
at the Annual Meeting for election of directors.
If a quorum is present and voting, the six nominees for director
receiving the highest number of votes will be elected to the Board of 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. See "INFORMATION CONCERNING SOLICITATION AND VOTING--Quorum; Abstentions;
Broker Non-Votes."
MANAGEMENT RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES LISTED ABOVE.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
In June 1998, 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, 1999. The Board of Directors recommends that stockholders vote
for ratification of such appointment. In the event of a negative vote or
ratification, the Board of Directors will reconsider its selection. A
representative of Ernst & Young LLP is expected to be available at the Annual
Meeting with the opportunity to make a statement if such representative desires
to do so, and is expected to be available to respond to appropriate questions.
MANAGEMENT RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT
OF ERNST & YOUNG LLP AS THE INDEPENDENT AUDITORS FOR THE 1999 FISCAL YEAR.
6
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation
The following table shows, as to any person serving as Chief Executive
Officer during fiscal 1998 and each of the four other most highly compensated
executive officers whose salary plus bonus exceeded $100,000 (the "Named
Executive Officers"), information concerning compensation paid for services to
the Company in all capacities during the fiscal year ended March 31, 1998, as
well as the total compensation paid to each such individual for the Company's
previous two fiscal years.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation(1)
-------------------------------------- ----------------------------------
Other Securities All
Annual Restricted Underlying Other
Compen- Stock Options/ Compensa-
Name and Principal Position Year Salary($) Bonus($) sation($)(2) Awards($)(3) SARs(#) tion($)(4)
--------------------------- ---- --------- -------- ------------ ------------ ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael A. Brown(5) ..................... 1998 721,828 248,765 0 0 200,000 3,636
President, Chief 1997 644,540 633,813 0 0 200,000 2,466
Executive Officer and 1996 452,846 0 0 0 720,000 4,071
Chairman of the Board
Richard L. Clemmer(6) ................... 1998 465,083 112,799 0 0 40,000 4,782
Executive Vice President, 1997 245,773 202,931 0 0 315,000 1,558
Finance and Chief
Financial Officer
Kenneth Lee ............................. 1998 410,888 65,000 0 0 100,000 2,303
Executive Vice President and 1997 381,938 378,861 0 0 80,000 1,066
Chief Technology Officer 1996 363,385 0 0 262,200 110,000 2,496
Young K. Sohn ........................... 1998 342,785 125,000 0 0 120,000 1,291
President, Enterprise and 1997 282,574 270,237 144,259(7) 0 20,000 1,917
Personal Storage Group 1996 214,462 0 69,696(8) 0 80,000 2,113
Peter van Cuylenburg(9) ................. 1998 422,404 150,000 0 0 80,000 0
President, Specialty 1997 192,310 156,878 0 263,138 200,000 0
Storage Products Group
<FN>
- ------------
(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 SEC.
(2) Other annual compensation in the form of perquisite and other personal
benefits, securities or property has been omitted in those cases where the
aggregate amount of such compensation is the lesser of either $50,000 or
10% of the total annual salary and bonus reported for such executive
officer.
(3) Mr. Lee's restricted stock grant in fiscal 1996 consisted of 30,000 shares
which vest as follows: 7,500 shares vested on November 1, 1996, 7,500
shares vested on November 1, 1997 and 15,000 shares vest on November 1,
1998. Mr. van Cuylenburg's restricted stock grant in fiscal 1997 consisted
of 30,000 shares which vest as follows: 6,000 shares vested on October 1,
1997, 9,000 shares vest on October 1, 1998 and 15,000 shares vest on
October 1, 1999. As of March 31, 1998, 15,000 shares of Mr. Lee's grant and
6,000 shares of Mr. van Cuylenburg's grant had vested. The aggregate value
on March 31, 1998, determined in accordance with the rules of the
Commission, of the vested and unvested shares of restricted stock held by
each of Mr. Lee and Mr. van Cuylenburg was $639,075. The aggregate value is
based on $21.3125 per share, the fair market value of the Company's Common
Stock as of March 31, 1998. Shares of restricted stock are entitled to
receive dividends payable on Quantum Common Stock when, as and if declared
by the Board of Directors of the Company. Cash dividends have not been paid
on Quantum Common Stock.
(4) Represents amounts contributed by the Company to the defined benefit
contribution plan approved under Internal Revenue Code Section 401(k) (the
"401(k) Plan") maintained by the Company for each executive officer, except
as expressly indicated otherwise.
(5) Mr. Brown was elected Chairman of the Board on May 28, 1998.
7
<PAGE>
(6) Mr. Clemmer joined Quantum on August 29, 1996.
(7) Represents reimbursement for taxes associated with Mr. Sohn's foreign
assignment.
(8) Represents reimbursement for expenses associated with Mr. Sohn's relocation
to the United States upon the termination of his foreign assignment.
(9) Mr. van Cuylenburg joined Quantum on September 23, 1996.
</FN>
</TABLE>
Stock Option Grants and Exercises
The following table shows, as to each Named Executive Officer,
information concerning stock options granted during the fiscal year ended March
31, 1998.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term(2)
------------------------------------------------------------- ------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise
Option Employees in Price Expiration
Name Granted (#)(1) Fiscal Year ($/share) Date 5% ($) 10% ($)
- ----------------------------------- ---------------- -------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Brown .................. 200,000 3.30% 17.875 4/25/07 2,248,298 5,697,629
President, Chief Executive Officer
and Chairman of the Board
Richard L. Clemmer ................ 40,000 0.66% 17.875 4/25/07 449,660 1,139,526
Executive Vice President, Finance
and Chief Financial Officer
Kenneth Lee ....................... 100,000 1.65% 17.875 4/25/07 1,124,149 2,848,815
Executive Vice President and
Chief Technology Officer
Young K. Sohn ..................... 120,000 1.98% 17.875 4/25/07 1,348,979 3,418,578
President, Enterprise and
Personal Storage Group
Peter van Cuylenburg .............. 40,000 0.66% 17.875 4/25/07 449,660 1,139,526
President, Specialty Storage 40,000 0.66% 19.4375 5/30/07 488,966 1,239,135
Products Group
<FN>
- ------------
(1) The exercise price of each option is determined by the Compensation
Committee of the Board of Directors and in 1998 was not less than 100% of
the fair market value of the Common Stock on the date of grant. The options
expire not more than ten years from the date of grant, and may be exercised
only while the optionee provides services to the Company or within such
period of time following termination of services as is determined by the
Compensation Committee at the time of grant. The options granted to Messrs.
Brown, Lee, Clemmer, Sohn and van Cuylenburg vest as follows: 1/48 of the
shares subject to the option vest each month beginning on April 1, 1997.
(2) 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-year option term.
These numbers are calculated based on the regulations promulgated by the
SEC based on an arbitrarily assumed annualized compound rate of
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.
</FN>
</TABLE>
8
<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 ($)(2)
Name Exercise (#) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------- -------------- ----------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Brown .................. 400,112 6,299,941 595,391 531,461 6,391,148 4,743,847
President, Chief Executive Officer
and Chairman of the Board
Richard L. Clemmer ................ 12,030 140,601 115,260 227,710 1,404,050 2,654,247
Executive Vice President, Finance
and Chief Financial Officer
Kenneth Lee ....................... 151,474 3,251,806 374,994 155,006 5,204,236 1,203,889
Executive Vice President and
Chief Technology Officer
Young K. Sohn ..................... 66,828 1,366,735 49,166 136,672 378,812 868,771
President, Enterprise and
Personal Storage Group
Peter van Cuylenburg .............. -- -- 89,163 190,837 936,295 1,782,455
President, Specialty Storage
Products Group
<FN>
- ------------
(1) Total value realized is calculated based on fair market value of the
Company's Common Stock at the close of business on the date of exercise,
less the exercise price.
(2) Total value of unexercised options based on the fair market value of the
Company's Common Stock at the close of business on March 31, 1998 of
$21.3125, 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.
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 All-Inclusive
Bonus Plan ("AIB 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.
9
<PAGE>
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 level of an
executive officer's total compensation package is 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 has qualified its Chief Executive
Officer's AIB Plan and the 1993 Long-Term Incentive Plan for an exemption from
Section 162(m). 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
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.
All-Inclusive Bonus Plan. The AIB Plan provides for cash bonuses to be
paid to all employees of the Company subject to the Company meeting certain
performance targets set by the Committee at the beginning of the fiscal year.
The purposes of the AIB 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 1998, the Company's
performance for return on total capital was below the AIB Plan target level. The
approved pool available for bonuses was set at the target level determined by
the AIB Plan.
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 1993 Long-Term Incentive Plan provides for
long-term incentive compensation for employees of the Company, including
executive officers. An important objective of the 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.
10
<PAGE>
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 1998, 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 year 1998, payments made to the Chief Executive Officer
from the Chief Executive Officer's AIB Plan were based on the actual level of
Company performance.
MEMBERS OF THE COMPENSATION COMMITTEE
Steven C. Wheelwright
Edward M. Esber, Jr.
Robert J. Casale
THE FOREGOING COMPENSATION COMMITTEE REPORT SHALL NOT BE DEEMED TO BE
"SOLICITING MATERIAL" OR TO BE FILED WITH THE SEC, NOR SHALL SUCH INFORMATION BE
INCORPORATED BY REFERENCE INTO ANY PAST OR FUTURE FILING UNDER THE SECURITIES
ACT OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY
INCORPORATES IT BY REFERENCE INTO SUCH FILING.
11
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return to
stockholders of the Company's Common Stock at March 31, 1998 since March 31,
1993 to the cumulative total return over such period of (i) Standard & Poors 500
Index, and (ii) the Hambrecht & Quist Technology Index. The graph assumes the
investment of $100 on March 31, 1993 in the Company's Common Stock and each of
such indices and reflects the change in the market price of the Company's Common
Stock relative to the noted indices at March 31, 1994, 1995, 1996, 1997 and
1998. The performance shown is not necessarily indicative of future price
performance.
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
QNTM
CUMULATIVE TOTAL RETURN
3/93 3/94 3/95 3/96 3/97 3/98
---- ---- ---- ---- ---- ----
Quantum Corporation 100 128 117 141 303 334
Hambrecht & Quist Technology 100 115 149 202 235 350
S & P 500 100 101 117 155 186 275
THE INFORMATION CONTAINED IN THE STOCK PERFORMANCE GRAPH SHALL NOT BE
DEEMED TO BE "SOLICITING MATERIAL" OR TO BE FILED WITH THE SEC, NOR SHALL SUCH
INFORMATION BE INCORPORATED BY REFERENCE INTO ANY FUTURE FILING UNDER THE
SECURITIES ACT OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT THE COMPANY
SPECIFICALLY INCORPORATES IT BY REFERENCE INTO SUCH FILING.
12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth as of July 1, 1998 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) the Named Executive Officers and (iv) all directors and executive officers
as a group.
<CAPTION>
Number of Shares Approximate
Name Beneficially Owned(1) Percentage Owned(2)
-------- ----------------------- --------------------
<S> <C> <C>
FMR Corp. ............................................................ 17,536,345 (3) 11.5%
82 Devonshire Street
Boston, MA 02109-3014
Sanford C. Bernstein & Co. ........................................... 13,178,661 (3) 8.7%
767 Fifth Avenue
New York, NY 10153
Goldman, Sachs & Co. ................................................. 9,016,820 (3) 5.9%
85 Broad Street
New York, NY 10004
Michael A. Brown ..................................................... 774,160 (4) *
Stephen M. Berkley ................................................... 490,550 (5) *
Kenneth Lee .......................................................... 343,886 (6) *
Richard L. Clemmer ................................................... 172,393 (7) *
Peter van Cuylenburg ................................................. 152,452 (8) *
Young K. Sohn ........................................................ 94,809 (9) *
Robert J. Casale ..................................................... 73,750 (10) *
Steven C. Wheelwright ................................................ 41,000 (10) *
Edward M. Esber, Jr. ................................................. 45,000 (11) *
David A. Brown ....................................................... 43,750 (10) *
All directors and executive officers as a group (16 persons) ......... 2,564,765 (12) 1.7%
<FN>
- ------------
* Less than 1%.
(1) Except pursuant to applicable community property laws or as indicated in
the footnotes to this table, to the Company's knowledge, each stockholder
identified in the table possesses sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by such
stockholder.
(2) Applicable percentage ownership based on 152,318,103 shares of Common Stock
outstanding as of July 1, 1998, together with applicable options for such
stockholder. Beneficial ownership is determined in accordance with the
rules of the SEC, based on factors including voting and investment power
with respect to shares. Shares of Common Stock subject to options currently
exercisable, or exercisable within 60 days after July 1, 1998 are not
deemed outstanding for computing the percentage ownership of any other
person.
(3) Based on most recent public information available to the Company as of July
14, 1998.
(4) Includes 731,847 shares subject to stock options which were exercisable at
July 1, 1998 or within sixty (60) days thereafter.
(5) Includes 482,500 shares subject to stock options which were exercisable at
July 1, 1998 or within sixty (60) days thereafter.
(6) Includes 251,844 shares subject to stock options which were exercisable at
July 1, 1998 or within sixty (60) days thereafter.
(7) Includes 157,239 shares subject to stock options which were exercisable at
July 1, 1998 or within sixty (60) days thereafter.
(8) Includes 124,578 shares subject to stock options which were exercisable at
July 1, 1998 or within sixty (60) days thereafter.
(9) Includes 78,958 shares subject to stock options which were exercisable at
July 1, 1998 or within sixty (60) days thereafter.
13
<PAGE>
(10) Represents shares subject to stock options which were exercisable at July
1, 1998 or within sixty (60) days thereafter.
(11) Includes 5,000 shares subject to stock options which were exercisable at
July 1, 1998 or within sixty (60) days thereafter.
(12) Includes an aggregate of 2,207,606 shares subject to stock options held by
directors and executive officers which were exercisable at July 1, 1998 or
within sixty (60) days thereafter.
</FN>
</TABLE>
CERTAIN TRANSACTIONS
During fiscal 1998, the Company granted options to its executive
officers and directors. The Company intends to grant options to its executive
officers and directors in the future. See "PROPOSAL ONE--Director Compensation"
and "EXECUTIVE COMPENSATION--Stock Option Grants and Exercises."
The Company has entered into indemnification agreements with its
executive officers, directors and certain significant employees containing
provisions that are in some respects broader than the specific indemnification
provisions contained in the General Corporation Law of Delaware. These
agreements provide, among other things, for indemnification of the executive
officers, directors and certain significant employees in proceedings brought by
third parties and in stockholder derivative suits. Each agreement also provides
for advancement of expenses to the indemnified party.
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: August 14, 1998
14
