43
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant X
-----
Filed by a Party other than the Registrant
-----
Check the appropriate box:
Preliminary Proxy Statement
- - -----
X Definitive Proxy Statement
- - -----
Definitive Additional Materials
- - -----
Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
- - -----
Maxtor Corporation
--------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Maxtor Corporation
211 River Oaks Parkway
San Jose, California 95134
-------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
X $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
- - ----- 14a-6(i)(2).
$500 per each party to the controversy pursuant to Exchange Act
- - ----- Rule 14a-6(i)(3).
Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
- - ----- and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
-----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
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Set forth the amount on which the filing fee is calculated and state how it
was determined.
Check box if any part of the fee is offset as provided by Exchange
- - ----- Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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MAXTOR CORPORATION
Notice of Annual Meeting of Stockholders
to be held August 10, 1995
The Annual Meeting of Stockholders of Maxtor Corporation ("Maxtor" or the
"Company") will be held in the San Jose Room of the Renaissance Meeting
Center, located at TECHMART, 5201 Great America Parkway, Santa Clara,
California 95054, on Thursday, August 10, 1995, at 10:00 a.m., local time,
for the following purposes:
1. To elect two Class II directors to hold office for a three-year term
and until their successors have been elected and qualified.
2. To approve the 1996 Outside Directors Stock Option Plan and reserve
of 340,000 shares of the Common Stock of the Company for issuance
pursuant to the Directors Plan.
3. To approve an amendment to the Company's 1992 Employee Stock Purchase
Plan to increase the number of shares of Common Stock reserved for
issuance under the Plan from 2,900,000 to 4,400,000.
4. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors.
5. To transact such other business as may properly come before the
meeting, or any adjournment thereof.
Stockholders of record at the close of business on June 23, 1995 shall be
entitled to vote at the meeting or any adjournment thereof. For ten days
prior to the meeting, a complete list of the stockholders entitled to vote at
the meeting will be available for examination by any stockholder for any
purpose germane to the meeting during ordinary business hours at the
Reception Desk at TECHMART, 5201 Great America Parkway, Santa Clara,
California 95054.
By Order of the Board of Directors
/s/ G. H. Stevens
-----------------------
Glenn H. Stevens
Vice President, General Counsel
and Secretary
San Jose, California
July 7, 1995
MAXTOR CORPORATION
211 River Oaks Parkway
San Jose, California 95134
July 7, 1995
Dear Stockholder:
You are cordially invited to attend the 1995 Annual Meeting of
Stockholders of Maxtor Corporation ("Maxtor" or the "Company") to be held at
10:00 a.m. on Thursday, August 10, 1995, in the San Jose Room of the
Renaissance Meeting Center, located at TECHMART, 5201 Great America Parkway,
Santa Clara, California 95054.
The Annual Meeting will begin with a discussion and voting on the matters
set forth in the accompanying Notice of Annual Meeting and Proxy Statement
and on other business properly brought before the meeting, followed by a
report on the Company's financial and operating performance.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, WE URGE YOU TO SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE IN
ORDER THAT AS MANY SHARES AS POSSIBLE MAY BE REPRESENTED AT THE MEETING.
The vote of every stockholder is important and your cooperation in
promptly returning your executed Proxy will be appreciated. Each Proxy is
revocable and will not affect your right to vote in person in the event that
you decide to attend the meeting.
Sincerely,
/s/ Mong Hun Chung
-------------------
Mong Hun Chung
Chairman of the Board
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of Maxtor
Corporation, a Delaware corporation ("Maxtor" or the "Company"), for use at
the Annual Meeting of Stockholders to be held on Thursday, August 10, 1995,
at 10:00 a.m., local time, or at any adjournment thereof. The meeting will
be held in the San Jose Room of the Renaissance Meeting Center, located at
TECHMART, 5201 Great America Parkway, Santa Clara, California 95054. The
Company's principal executive offices are located at 211 River Oaks Parkway,
San Jose, California 95134. The Company's telephone number is (408) 432-
1700.
The date of this Proxy Statement is July 7, 1995, the approximate date on
which the Proxy Statement and form of proxy were first sent or given to
stockholders. The Annual Report to Stockholders for the fiscal year ended
March 25, 1995, including financial statements, is included with this Proxy
Statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
This solicitation of proxies is made on behalf of the Board of Directors
of Maxtor and the cost thereof will be borne by Maxtor. The Board of
Directors may use the services of the Company's directors, officers and
others to solicit proxies, personally or by telephone and may arrange with
brokerage houses and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of the stock held of record
by such persons and Maxtor may reimburse them for the fees and reasonable out-
of-pocket expenses incurred in doing so.
On June 23, 1995, Maxtor had outstanding 33,048,112 shares of Common Stock
and 19,480,000 shares of Class A Common Stock, all of which are entitled to
vote as a single class with respect to the proposals presented in this Proxy
Statement. Each stockholder of record at the close of business on June 23,
1995 is entitled to one vote for each share held. The Company's By-Laws
provide that a majority of all shares entitled to vote, whether present in
person or by proxy, will constitute a quorum for the transaction of business
at the meeting.
Any person giving a proxy pursuant to this solicitation may revoke it at
any time before its use by delivering to Maxtor's Corporate Secretary a
written notice of revocation or a duly executed proxy bearing a later date or
by attending the meeting and voting in person. If an executed proxy is
submitted without any instruction for the voting of such proxy, the proxy
will be voted in favor of the proposals described.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with one
class elected at each Annual Meeting of Stockholders for a three-year term.
In connection with the purchase by Hyundai Electronics Industries Co.,
Ltd. and several related members of the Hyundai Business Group ("Hyundai") of
19,480,000 shares of the Company's Class A Common Stock (the "Shares") in
February 1994, representing approximately 37% of the outstanding stock of the
Company, Hyundai is entitled to nominate the number of directors equal to its
proportionate voting interest in the Company. In Baik (I. B.) Jeon, Chong
Sup (C. S.) Park and Mong Hun (M. H.) Chung, incumbent directors, were
appointed as directors of the Company in accordance with this right. The
balance of the nominees for directors are selected by the Board of Directors,
provided that the vote in favor of such other nominees must include the vote
of at least a majority of the directors not nominated by Hyundai. Hyundai's
right to nominate directors is suspended during such times as Hyundai and its
affiliates no longer collectively hold of record either (a) at least 80% of
the Shares and/or Common Stock issuable upon conversion of the Shares, or (b)
at least 20% of the total outstanding voting stock of the Company. In
addition, Hyundai is required by the Company's Restated Certificate of
Incorporation and the terms of the Stock Purchase Agreement between Hyundai
and the Company to vote any stock held by it for the slate of directors
nominated as described above. If Hyundai fails to do so, Hyundai's shares
will not be entitled to vote for such election without the consent of a
majority of directors other than any directors nominated by Hyundai. See
"Stock Ownership of Management and Certain Beneficial Owners" and "Certain
Relationships and Related Transactions."
C. S. Park and Ryal R. Poppa, constituting Class II of Maxtor's three
classes of directors, have been nominated, in accordance with the provisions
described above, to serve a term of three years and until their successors
have been elected and qualified. Upon the resignation from the Company's
Board of Directors of J. Larry Smart on February 8, 1995, the Board reduced
the size of Class I to two directors and has reduced the total number of
authorized directors from eight to seven.
It is intended that the proxies in the form enclosed will be voted, unless
otherwise indicated, for the election of the nominees to Class II. If either
nominee should for any reason be unable or unwilling to serve, the proxies
will be voted for the election of such other person(s) for the office of
director as the Board may recommend in the place of such nominee.
If a quorum is present and voting, the two nominees for Class II director
receiving the highest number of votes will be elected as Class II directors.
Abstentions will be counted as present for purposes of determining if a
quorum is present.
Set forth below are the names and ages of the nominees and other
directors, the year in which each became a director of the Company, and a
brief description of their business experience, including principal
occupations during the last five years.
<TABLE>
<CAPTION>
Name Positions with Age Director Since Class
the Company
<S> <C> <C> <C> <C>
- - ------------------- --------------- --- ---------------- -----
Gregory M. Gallo Director 53 December 1987; I
term ends 1997.
I. B. Jeon Director 47 February 1994; I
term ends 1997.
C. S. Park Director 47 February 1994; II
term ends 1995.
Ryal R. Poppa Director 61 October 1994; II
term ends 1995.
Richard D. Balanson Director 46 October 1994; III
term ends 1996.
M. H. Chung Chairman of 46 February, 1994; III
the Board term ends 1996.
Charles Hill Director 59 March 1992; III
term ends 1996.
</TABLE>
Gregory M. Gallo is an attorney and member of Gray Cary Ware &
Freidenrich, a Professional Corporation, a Palo Alto, California law firm,
which was the successor by merger in January 1994 to Ware & Freidenrich, and
which serves as outside counsel to the Company. Mr. Gallo has been a member
of Gray Cary Ware & Freidenrich or its predecessor firm since 1977. He is
also currently a director of Network General Corporation, a network
diagnostics company, and General Magic, Inc., a software company.
I. B. Jeon has been President and Chief Executive Officer and a director
of Axil Computer, Inc., a workstation computer manufacturer, in Santa Clara,
California, since February 1995. Previously, he was Vice President of
Strategic Development of Maxtor from February 1994 until February 1995.
Prior to 1994, Mr. Jeon held various management positions with Hyundai
Business Group companies, including Vice President, Corporate Planning of
Hyundai Electronics Industries Co., Ltd., from 1991 to 1994, and Senior Vice
President of Hyundai Electronics America from 1988 to 1991.
C. S. Park was appointed President and Chief Executive Officer of Maxtor
in February 1995. From July 1993 to February 1995, Dr. Park was President
and Chief Executive Officer of Axil Computer, Inc., a workstation computer
manufacturer, in Santa Clara, California. He has been Chairman of Axil
Computer since July 1993. Previously, he taught at the graduate schools of
business and international studies, Yonsei University, Seoul, Korea, in
addition to having undertaken research projects for Ernst & Young Consulting
Company, Seoul, from April 1992 through June 1993. Dr. Park also held
various management positions with Hyundai Electronics Industries Co., Ltd.,
including from 1990 to February 1992, Senior Vice President, Semiconductor
Sales and Marketing. From 1985 to 1989, Dr. Park was President and Chief
Executive Officer of Hyundai Electronics America, Inc., of San Jose,
California.
Ryal R. Poppa was elected a director of Maxtor in October 1994. Since
1985, Mr. Poppa has been Chairman, President and Chief Executive Officer of
Storage Technology Corp., an international manufacturer of information
storage and retrieval devices for enterprise-wide computer systems and
networks, in Louisville, Colorado. Prior to 1985, Mr. Poppa was Chairman and
Chief Executive Officer of BMC Corporation, an optical and electronics
manufacturer.
Richard D. Balanson was appointed a director and Executive Vice President
and Chief Technical Officer of Maxtor in October 1994. He joined Maxtor in
August 1994 as Vice President and Chief Technical Officer. Prior to joining
Maxtor, Dr. Balanson was President and Chief Operating Officer of Applied
Magnetics Corporation from 1992 to 1994. From 1975 until 1992, he served in
several managerial positions with International Business Machines Corporation
("IBM"), where his last position included the management of IBM's mid-range
and high-end disk drive development and manufacturing groups.
M. H. Chung has been Chairman of the Board of Directors of Hyundai
Electronics Industries Co., Ltd. in Korea since January 1992. He was
President and Representative Director of Hyundai Electronics Industries Co.,
Ltd. in Korea from February 1984 to December 1991. Currently, Mr. Chung is
also Vice Chairman of Hyundai Merchant Marine Co., Ltd. and holds
directorship positions on the boards of other Hyundai Business Group
companies.
Charles Hill has been a Senior Research Fellow at the Hoover Institution
since 1989. From 1982 to 1989, he served as Chief of Staff of the U.S. State
Department and Executive Assistant to former U.S. Secretary of State George
P. Shultz. Mr. Hill at present is Diplomat-in-Residence at Yale University
and Special Consultant to the Secretary General of the United Nations.
The Board of Directors held six meetings in fiscal 1995. Each director
attended at least 75% of the meetings held during his tenure in fiscal 1995.
Committees of the Board
Charles Hill, Gregory M. Gallo and I. B. Jeon served as members of the
Compensation Committee during fiscal 1995. C. S. Park also served on the
Compensation Committee until his election as President and Chief Executive
Officer in February 1995. The Compensation Committee held 15 meetings in
fiscal 1995. The Compensation Committee is responsible for determining the
compensation of the Company's executive officers.
Gregory M. Gallo, I. B. Jeon and Ryal R. Poppa served on the Audit
Committee during fiscal 1995. Charles Hill also served as a member of the
Audit Committee until the appointment of Ryal R. Poppa as his successor on
the Committee in December 1995. The Audit Committee held five meetings in
fiscal 1995. The responsibilities of the Audit Committee include reviewing
the scope of the audit, approving audit fees and reviewing the adequacy and
effectiveness of internal accounting and financial controls.
Gregory M. Gallo, Charles Hill and Ryal R. Poppa served on the Nominating
Committee during fiscal 1995. C. S. Park also served on the Nominating
Committee until his election as President and Chief Executive Officer in
February 1995. The Nominating Committee held seven meetings in fiscal 1995.
The principal function of the Nominating Committee is to identify candidates
for election to the Board of Directors. The Committee has the primary
responsibility for evaluating and for selecting or recommending to the Board
candidates for Board membership. Except as otherwise provided in Maxtor's
Restated Certificate of Incorporation with respect to the special rights of
Hyundai to nominate a certain number of directors as set forth above, the
Committee will consider nominees recommended by the stockholders of the
Company, provided the notice requirements set forth in the Company's By-Laws
have been met.
Each director attended at least 75% of the Committee meetings for the
Committees on which he served during fiscal 1995.
Compensation of Directors
During fiscal 1995, non-employee members of the Board of Directors of the
Company received the following compensation: (i) $18,000 per year; (ii)
$1,000 per scheduled or special board meeting or special committee meeting;
(iii) $750 per scheduled committee meeting or telephonic board or committee
meeting; and (iv) nonqualified stock options pursuant to the Company's 1986
Outside Directors Stock Option Plan, and in the case of Mr. Poppa, the
Company's Individual Stock Option Plan, as described below. In addition, non-
employee members of the Board of Directors with no other medical coverage are
entitled to participate in a medical insurance plan and a deferred
compensation life insurance plan available to all members of the Board of
Directors. Effective in fiscal 1996 non-employee members of the Board of
Directors will receive the following compensation: (i) $22,000 per year;
(ii) $2000 per year for service as a committee chairperson; (iii) $1500 per
board meeting; (iv) $1000 per committee meeting; and (v) nonqualified stock
options pursuant to the Company's 1986 Plan, and subject to stockholder
approval, the 1996 Outside Directors Stock Option Plan, as described below.
1986 Outside Directors Stock Option Plan
The Company's 1986 Outside Directors Stock Option Plan (the "1986 Plan"),
adopted by the Board of Directors in December 1986 and approved by the
stockholders in September 1987, provides for the granting of nonqualified
stock options to directors of the Company who are not employees of the
Company. The following summary of the 1986 Plan is qualified in its entirety
by the specific language of such Plan, a copy of which may be obtained from
the Company by any stockholder.
The 1986 Plan is administered by the Board of Directors or a duly
appointed committee of the Board. Only directors of the Company who are not
employees of the Company or any present or future parent and/or subsidiary
corporations of the Company (the "Outside Directors") are eligible to
participate in the 1986 Plan. Upon initial election to the Board of
Directors, each new Outside Director is automatically granted an option to
purchase 15,000 shares of the Company's Common Stock. An Outside Director is
automatically granted an additional option to purchase 5,000 shares on each
anniversary of his or her initial election to the Board. Options must have
an exercise price equal to the fair market value of the shares of the Common
Stock on the date of grant. All options must be granted, if at all, not
later than December 30, 1996.
Options may be exercised by payment of the exercise price in cash, by
check, or in cash equivalent. Options are exercisable over four years, with
the option exercisable as to 3/48 of the number of shares subject to option
after three months service as a director, and as to 1/48 of such shares for
each full month of continuous service thereafter, until the option is fully
exercisable. Options expire ten years after the date of grant.
During the lifetime of the optionee, the option may be exercised only by
the optionee. An option may not be transferred or assigned, except by will
or the laws of descent and distribution. In the event of a transfer of
control of the Company, any unexercisable portion of an option shall be
immediately exercisable as of a date prior to the transfer of control. The
Board may terminate or amend the 1986 Plan at any time, but, without
stockholder approval, the Board may not amend the 1986 Plan to increase the
number of shares covered by the Plan or to expand the class of persons
eligible to receive options under the Plan.
The Company has reserved 250,000 shares under the 1986 Plan. As of June
2, 1995, five directors were eligible to participate in the 1986 Plan, and
options to purchase 155,000 shares were outstanding having a weighted average
exercise price of $ $6.34 per share. During fiscal 1995, options to purchase
a total of 40,000 shares of the Company's Common Stock were granted. Mr.
Poppa received his initial 15,000 shares as a new director and 5,000 shares
each were granted to Mr. Chung, Mr. Gallo, Mr. Hill, Mr. Jeon and Dr. Park.
Individual Stock Option Plan
The Company's Individual Stock Option Plan (the "Individual Plan") was
adopted by unanimous written consent of the Board of Directors in October
1994. The Individual Plan provided for a one-time, stand-alone grant to Ryal
R. Poppa upon his election to the Company's Board of Directors. Mr. Poppa
was granted an option to purchase 15,000 shares of the Company's Common Stock
with an exercise price of $3.375 per share. The Board determined that the
grant was in the Company's best interest and an important factor in the
Company's ability to attract and retain an Outside Director with background
and expertise essential to the success of the Company. The terms of the
Individual Plan, a copy of which may be obtained from the Company by any
stockholder, are substantially those of the Company's 1986 Plan.
STOCK OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of June 2, 1995,
with respect to the beneficial ownership of Common Stock and Class A Common
Stock of Maxtor by (i) all persons known to Maxtor to be the beneficial
owners of five percent or more of the outstanding shares of the Common Stock
or Class A Common Stock of Maxtor, (ii) each of Maxtor's directors and
nominees, (iii) each of the executive officers named in the Summary
Compensation Table and (iv) all executive officers and directors of Maxtor as
a group.
<TABLE>
<CAPTION>
Number of Shares Percent of
Beneficially Owned Stock
Outstanding
-------------------------------- -----------------
Name or Identity of Class A Common Class A
Beneficial Owner <F1> Common Common <F2> Common
<S> <C> <C> <C> <C>
- - ---------------------- --------------- --------------- ------- --------
Hyundai Electronics 19,480,000 <F3> 19,480,000 <F3> 37.3% 100.00%
Industries Co.,Ltd.
and several related
members of the
Hyundai Business
Group (Hyundai)
66, Jeokseon-dong
Chongro-ku, Seoul,
Korea
State of Wisconsin 3,050,000 - 5.8% -
Investment Board
P.O. Box 7842
Madison, Wisconsin
53707 <F4>
M. H. Chung <F5> 5,832 - * -
Gregory M. Gallo <F6> 50,367 - * -
Charles Hill <F7> 17,697 - * -
I. B. Jeon <F8> 8,332 - * -
C. S. Park <F9> 505,832 - * -
Ryal R. Poppa <F10> 5,624 - * -
Richard D. Balanson
<F11> 300,000 - * -
Katherine C. Young
<F12> 120,000 - * -
Walter D. Amaral <F13> - -
William M. Hake <F14> 101,540 - * -
J. Larry Smart <F15> 32,765 - * -
Laurence R. Hootnick
<F16> 125,000 - * -
All executive officers
and directors as a
group (15 persons)
<F17> 1,396,111 - 2.7% -
* Less than one percent (1%)
- - ----------------------------------
<FN>
<F1> The persons named in the table have sole voting and investment power
with respect to all shares of Common Stock and Class A Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes to this table.
<F2> Calculation based on the total number of shares of Common Stock
outstanding and Class A Common Stock outstanding which are convertible into
shares of Common Stock.
<F3> Represents 19,480,000 shares of Class A Common Stock convertible into
19,480,000 shares of Common Stock. Hyundai Electronics Industries Co., Ltd.
owns 5,844,000 shares of Class A Common Stock, representing 11.2% of the
Common Stock; Hyundai Heavy Industries Co., Ltd. owns 4,870,000 shares of
Class A Common Stock, representing 9.3% of the Common Stock; Hyundai
Corporation owns 4,870,000 shares of Class A Common Stock, representing 9.3%
of the Common Stock; and Hyundai Merchant Marine Co., Ltd. owns 3,896,000
shares of Class A Common Stock, representing 7.5% of the Common Stock. See
"Certain Relationships and Related Transactions."
<F4> Based on information contained in Schedule 13-G filed with the
Securities and Exchange Commission on February 13, 1995.
<F5> Includes 5,832 shares subject to an option granted under the Company's
1986 Plan (as defined below) which is exercisable within 60 days of June 2,
1995.
<F6> Includes 40,413 shares subject to options granted under the Company's
1986 Plan which are exercisable within 60 days of June 2, 1995.
<F7> Includes 17,497 shares subject to options granted under the Company's
1986 Plan which are exercisable within 60 days of June 2, 1995.
<F8> Includes 5,832 shares subject to options granted under the Company's
1986 Plan which are exercisable within 60 days of June 2, 1995.
<F9> Includes 5,832 shares subject to options granted under the Company's
1986 Plan which are exercisable within 60 days of June 2, 1995 (these options
were granted prior to Dr. Park's becoming Chief Executive Officer and
President of the Company). Also includes 500,000 shares subject to options
granted under the Company's 1995 Stock Option Plan which are exercisable
within 60 days of June 2, 1995; as of June 2, 1995, 483,751 of those shares
are unvested and are subject to a right of repurchase in favor of the
Company.
<F10> Includes 2,812 shares subject to options granted under the Company's
1986 Plan which are exercisable within 60 days of June 2, 1995; also includes
2,812 shares subject to options granted under the Individual Plan which are
exercisable within 60 days of June 2, 1995.
<F11> Includes 300,000 shares subject to options which are exercisable
within 60 days of June 2, 1995; 243,752 of those shares are unvested and are
subject to right of repurchase in favor of the Company.
<F12> Includes 120,000 shares subject to options which are exercisable
within 60 days of June 2, 1995; 95,834 of those shares are unvested and are
subject to right of repurchase in favor of the Company.
<F13> Mr. Amaral's employment with the Company terminated on April 28, 1995;
his options expired on May 29, 1995.
<F14> Includes 101,540 shares subject to options which are exercisable
within 60 days of June 2, 1995; 50,149 of those shares are unvested and are
subject to a right of repurchase in favor of the Company.
<F15> Mr. Smart's employment with the Company terminated on February 16,
1995; his options expired unexercised on May 17, 1995. See "Severance and
Change of Control Arrangements."
<F16> Includes 125,000 shares subject to options which are exercisable
within 60 days of June 2, 1995. In connection with the termination of Mr.
Hootnick's position as an executive officer of the Company effective August
18, 1994 and termination of his employment with the Company effective
September 30, 1995, all options granted to Mr. Hootnick will continue to be
governed by the terms and conditions of the applicable Maxtor stock option
plans and stock options agreements between Maxtor and Mr. Hootnick until
September 30, 1995. See "Severance and Change of Control Arrangements."
<F17> 1,396,111 shares are subject to options which are exercisable within
60 days of June 2, 1995; 1,048,564 of those shares are unvested and are
subject to a right of repurchase in favor of the Company. Includes shares
subject to options described in footnotes 5, 6, 7, 8, 9, 10, 11, 12 and 14.
</FN>
</TABLE>
In February 1994, Hyundai Electronics Industries Co., Ltd. ("HEI"),
Hyundai Heavy Industries Co., Ltd. ("HHI"), Hyundai Corporation ("HC") and
Hyundai Merchant Marine Co., Ltd. ("HMM") (collectively, "Hyundai") invested
$149,996,000 in the Company in return for 19,480,000 shares of Class A Common
Stock at a per share price of $7.70. Such shares represented approximately
40% of the then outstanding stock of the Company. See "Election of
Directors" and "Certain Relationships and Related Transactions."
Based on information provided in a statement filed on Schedule 13D under
the Securities Exchange Act of 1934, as amended, HEI, HHI, HC and HMM have
informally agreed among themselves to act together with respect to the
acquisition, holding, voting and disposing of equity securities of the
Company. Such agreement has not been reduced to written form, and is
terminable as to any party at any time at the election of such party.
Pursuant to such informal agreement, HHI, HC and HMM have each granted a
revocable power of attorney with respect to the voting of shares of Class A
Common Stock held by it to Joo Yong Kim, the President and a Representative
Director of HEI.
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth compensation paid to the three persons who
served as the Company's Chief Executive Officer during fiscal 1995, and the
four other most highly compensated executive officers of Maxtor as of March
25, 1995 whose total salary and bonus exceeded $100,000 for the fiscal year
ending March 25, 1995.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------------------------- -------------
Name and Fis- Other All Other
Principal cal Salary Bonus Annual Options Compensation
Position Year $ $ Compensa- (Shares #) ($) <F20>
tion ($)
<S> <C> <C> <C> <C> <C> <C>
- - ---------- ---- ----------- ------------ ----------- ------------- -------------
C. S. Park 1995 73,289<F7> - - 505,000 <F15> -
<F1> 1994 - - - - -
President 1993 - - - - -
and Chief
Executive
Officer
J. Larry
Smart <F2>1995 313,269 143,750 <F8> 51,827<F14> 200,000 <F16> 358,168 <F21>
President 1994 - - - 300,000 <F17> -
and Chief 1993 - - - - -
Executive
Officer
Laurence R.
Hootnick 1995 448,888 - - - 1,949 <F22>
<F3> 1994 520,000 - - 35,000 -
President 1993 520,000 227,573 <F9> - - -
and Chief
Executive
Officer
Richard D.
Balanson 1995 202,795 176,292 <F10> - 300,000 50
<F4> 1994 - - - - -
Executive 1993 - - - - -
Vice
President
and Chief
Technical
Officer
Katherine
C. Young 1995 147,830 205,566 <F11> - 120,000 65
<F5> 1994 - - - - -
Sr. Vice 1993 - - - - -
President,
Worldwide
Operations
Walter D.
Amaral 1995 240,380 - - - 3,447 <F23>
<F6> 1994 192,300 - - 110,000 <F18> 260
Vice Pre- 1993 146,352 74,837 <F12> - 87,500 <F19> 195
sident,
Finance
and Chief
Financial
Officer
William M.
Hake 1995 210,674 - - - 260
Vice Pre- 1994 192,500 - - 36,883 7,952 <F24>
sident, 1993 158,827 68,927 <F13> - 30,617 260
Worldwide
Sales and
Product
Management
<FN>
<F1> Dr. Park was appointed President and Chief Executive Officer in February
1995; previously, Dr. Park was a director, elected to the Company's Board of
Directors in February 1994.
<F2> Mr. Smart joined the Company in March 1994 and became Chief Executive
Officer and President on August 1994. He resigned from his positions as
President and Chief Executive Officer of the Company in February 1995. See
"Severance and Change of Control Arrangements."
<F3> Mr. Hootnick resigned from his positions as President and Chief Executive
Officer of the Company in August 1994. See "Severance and Change of Control
Arrangements."
<F4> Dr. Balanson joined the Company in August 1994.
<F5> Ms. Young joined the Company in July 1994.
<F6> Mr. Amaral's employment with the Company terminated in April 1995.
<F7> Includes $31,750 which represents payment for director fees for Dr.
Park's service as an outside director prior to his election as President and
Chief Executive Officer in February 1995.
<F8> Represents bonus in the amount of $143,750 paid in accordance with the
Company's offer letter to Mr. Smart.
<F9> Includes bonus in the amount of $187,914 and cash profit sharing in the
amount of $39,659.
<F10> Represents bonus in the amount of $176,292 paid in accordance with the
Company's offer letter to Dr. Balanson.
<F11> Represents bonus in the amount of $205,566 paid in accordance with the
Company's offer letter to Ms. Young.
<F12> Includes bonus in the amount of $65,012 and cash profit sharing in the
amount of $9,825.
<F13> Includes bonus in the amount of $60,804 and cash profit sharing in the
amount of $8,123.
<F14> Represents reimbursement for relocation expenses incurred by Mr. Smart in
the amount of $51,827.
<F15> Includes option for 5,000 shares granted under the 1986 Plan and option
for 500,000 shares granted upon Dr. Park's appointment as Chief Executive
Officer in fiscal 1995.
<F16> These options expired May 17, 1995.
<F17> These options expired May 17, 1995.
<F18> Includes options for 87,500 shares which were repriced on May 10, 1993,
replacing options granted in fiscal 1994.
<F19> Represents options for 87,500 shares which were repriced on May 10, 1993.
See footnote (18) above.
<F20> The amounts shown in this column, unless otherwise indicated, represent
the Company's annual contributions to the Maxtor Savings Retirement Plan, a
401(k) plan. All U.S. employees are eligible to participate in this Plan.
<F21> Includes payment for accumulated unused vacation and sick leave under the
Company's paid time-off program in the amount of $24,615, and severance pay in
the amount of $333,333. See "Severance and Change of Control Arrangements."
<F22> Includes payment for accumulated unused vacation and sick leave under the
Company's paid time-off program in the amount of $1,949.
<F23> Includes payment for accumulated unused vacation and sick leave under the
Company's paid time-off program in the amount of $3,187.
<F24> Includes payment for accumulated unused vacation and sick leave under the
Company's paid time-off program in the amount of $7,692.
</FN>
</TABLE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to stock options
granted in fiscal 1995 to each of the executive officers named in the Summary
Compensation Table:
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
------------------------------------------ Value at Assumed
% of Annual Rates of
Total Stock Price
Options Appreciation for
Granted Option Term
Number of to Em- <F2>
Options ployees Exercise Expiration -----------------------
Name Granted in Price Date 5% 10%
<F1> Fiscal Per
Year Share
<S> <C> <C> <C> <C> <C> <C>
- - ----------- ------------ ------- -------- ------------ ----------- -----------
C. S. Park 5,000 <F3> .20% $5.0625 02/07/05 $ 15,919 $ 40,342
500,000 19.50% $4.6875 02/16/05 $1,473,972 $3,735,334
J. Larry
Smart 200,000 7.80% $5.1250 05/17/95 <F4> $ 38,238 $ 76,024
Laurence R.
Hootnick - - - - - -
Richard D.
Balanson 300,000 11.70% $4.8750 08/25/04 $ 919,758 $2,330,848
Katherine C.
Young 100,000 3.90% $4.8125 07/22/04 $ 302,656 $ 766,989
20,000 .78% $5.3750 01/30/05 $ 67,606 $ 171,327
Walter D.
Amaral - - - - - -
William M.
Hake - - - - - -
- - ---------------------------
<FN>
<F1> Unless otherwise indicated, all options were granted under the
Company's Fiscal 1988 and 1995 Stock Option Plans ("Stock Option Plans").
Options are immediately exercisable and vest monthly over a four-year period
as determined by the Board of Directors in its sole discretion. Unvested
options are subject to repurchase by the Company. The Board retains
discretion to modify the terms, including the price of outstanding options.
See also "Severance and Change of Control Arrangements."
<F2> Potential realizable value is based on an assumption that the market
price of the stock appreciates at the stated rate, compounded annually, from
the date of grant to the expiration date. These values are calculated on
requirements promulgated by the Securities and Exchange Commission and do not
reflect the Company's estimate of future stock price appreciation. Actual
gains, if any, are dependent on the future market price of the Company's
Common Stock.
<F3> Option was granted under the Company's 1986 Plan to Dr. Park as an
outside director of the Company prior to his appointment as President and
Chief Executive Officer in February 1995. The option vests monthly over a
four-year period and is exercisable only with respect to vested shares. The
Board retains discretion to modify the terms, including the price of the
outstanding option. Dr. Park is not eligible to receive additional grants
under the 1986 Plan while he serves as an officer or employee of the Company.
<F4> In connection with the termination of Mr. Smart's position as an
executive officer of the Company effective February 16, 1995, Mr. Smart was
provided an extension of the period within which he would be entitled to
exercise shares vested as of his termination date; such period was extended
until May 17, 1995. See "Severance and Change of Control Arrangements."
</FN>
</TABLE>
AGGREGATED FISCAL YEAR-END OPTION/SAR VALUES <F1>
The following table sets forth information regarding year-end stock option
values for each of the executive officers named in the Summary Compensation
Table for fiscal 1995:
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at Fiscal Year End at Fiscal Year End
<F2> <F3>
--------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
- - -------------------- ------------ ------------- ----------- -------------
C. S. Park 504,062 <F4> 15,938 <F5> 0 -
J. Larry Smart 87,498 <F6> - 0 -
Laurence R. Hootnick 735,000 <F7> - $ 228,125 -
Richard D. Balanson 300,000 <F8> - 0 -
Katherine C. Young 120,000 <F9> - 0 -
Walter D. Amaral 110,000 <F10> - 0 -
William M. Hake 101,540 <F11> - $ 8,900 -
- - ----------------------------
<FN>
<F1> There were no options exercised during the fiscal year ended March 25,
1995 by executive officers named in the Summary Compensation Table.
<F2> Options granted to executive officers under the Company's stock option
plans are generally immediately exercisable. Shares purchased on exercise of
initial grants are subject to vesting over a four-year period. Shares
purchased on exercise of evergreen grants are subject to monthly vesting over
twelve months commencing three or four years from the date of grant.
<F3> These amounts represent the difference between the exercise price of
the stock options and the average of the high and low market price of the
Company's Common Stock on March 24, 1995 (the last day of trading for the
fiscal year ended March 25, 1995) for all options exercisable by each named
executive officer whether vested or unvested. The average of the high and
low market price as of March 24, 1995 was $4.3125.
<F4> As of March 25, 1995, 500,000 of those shares were unvested and
subject to a right of repurchase in favor of the Company; 500,000 of those
shares have an exercise price of $4.6875, and 4,062 of those shares have an
exercise price of $6.0625, both of which are higher than the average of the
high and low market price of the Company's Common Stock as of March 24, 1995.
<F5> This amount represents shares granted to Dr. Park under the Company's
1986 Plan; shares granted thereunder are exercisable with respect to vested
shares only.
<F6> Mr. Smart's employment with the Company terminated on February 16,
1995, and 412,502 unvested stock option shares were canceled as of that date.
His vested stock options expired unexercised on May 17, 1995. 62,498 of
those shares had an exercise price of $7.5625 and 25,000 of those shares had
an exercise price of $5.125, both of which were higher than the average of
the high and low market price of the Company's Common Stock as of March 24,
1995.
<F7> As of March 25, 1995, 5,834 of those shares were unvested and subject
to a right of repurchase in favor of the Company; 35,000 of those shares have
an exercise price of $6.6250 which is higher than the average of the high and
low market price of the Company's Common Stock as of March 24, 1995. In
connection with the termination of Mr. Hootnick's position as an executive
officer of the Company effective August 18, 1994, and termination of
employment with the Company effective September 30, 1995, all options granted
to Mr. Hootnick will continue to be governed by the terms and conditions of
the applicable Maxtor stock option plans and stock option agreements between
Maxtor and Mr. Hootnick until September 30, 1995. See "Severance and Change
of Control Arrangements."
<F8> As of March 25, 1995, 256,252 of those shares were unvested and
subject to a right of repurchase in favor of the Company; 300,000 of those
shares have an exercise price of $4.875, which is higher than the average of
the high and low market price of the Company's Common Stock as of March 24,
1995.
<F9> As of March 25, 1995, 104,584 of those shares were unvested and
subject to a right of repurchase in favor of the Company; 100,000 of those
shares have an exercise price of $4.8125, and 20,000 of those shares have an
exercise price of $5.3750, both of which are higher than the average of the
high and low market price of the Company's Common Stock as of March 24, 1995.
<F10> As of March 25, 1995, 51,667 of those shares were unvested and subject
to a right of repurchase in favor of the Company; 110,000 of those shares had
an exercise price of $6.625, which was higher than the average of the high
and low market price of the Company's Common Stock as of March 24, 1995. Mr.
Amaral's employment with the Company terminated in April 1995 and the stock
options have expired unexercised.
<F11> As of March 25, 1995, 55,539 of those shares were unvested and subject
to a right of repurchase in favor of the Company; 12,500 of those shares have
an exercise price of $14.625, 18,117 of those shares have an exercise price
of $9.25, 36,883 of those shares have an exercise price of $6.625, 3,667 of
those shares have an exercise price of $5.75, and 3,501 of those shares have
an exercise price of $4.875, all of which are higher than the average of the
high and low market price of the Company's Common Stock as of March 24, 1995.
</FN>
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Hyundai Transactions
On February 3, 1994, Hyundai Electronics Industries Co., Ltd. ("HEI"),
Hyundai Heavy Industries Co., Ltd. ("HHI"), Hyundai Corporation ("HC") and
Hyundai Merchant Marine Co., Ltd. ("HMM") (collectively, "Hyundai") invested
$149,996,000 in the Company in return for 19,480,000 shares of Class A Common
Stock (the "Shares") at a per share price of $7.70. Such shares represented
approximately 40% of the then outstanding stock of the Company. The source
and amount of funds used to pay for the Shares were as follows: HEI and HMM
borrowed $44,998,800 and $29,999,200, respectively, under a term loan
facility with The Nippon Credit Bank Limited, Los Angeles Agency ("Nippon"),
and HHI and HC each borrowed $37,499,000 under separate loan agreements with
American Express Bank Ltd. ("American Express"). The Nippon term loan
facility bears interest, payable semi-annually, at an annual rate equal to
the sum of 0.95% and either the rate quoted on the Telerate Page 3750 or, if
no rate appears on such page, a rate per annum based on the LIBOR rate for
the applicable interest period as more particularly set forth in the loan
documents. Funds borrowed under the Nippon term loan facility are due three
years from the date advanced, which date may be extended for two one-year
periods at the option of HEI and HMM, and thereafter upon 90 days' prior
notice under certain conditions. The American Express loan agreements bear
interest, payable every three or six months at the option of HHI or HC, as
applicable, at a rate equal to the sum of 0.8% and the LIBOR rate for the
applicable interest period as more particularly set forth in the loan
documents. Funds borrowed under the American Express loan agreements are
payable on January 28, 1999. In order to effect the investment, the Company
entered into a Stock Purchase Agreement with Hyundai and amended its
Certificate of Incorporation to create the Class A Common Stock and establish
special voting rights associated with such stock. The investment was
approved by the stockholders of the Company on December 20, 1993. Under the
Company's Restated Certificate of Incorporation, Hyundai has a right to
approve certain transactions or make certain decisions with respect to a core
line of products, capital expenditures, new high-volume manufacturing
facilities, joint ventures, material exclusive licenses, changes in senior
management compensation arrangements, stock ranking senior to the common
stock or issuances of securities constituting 20% or more of the Company's
stock. Pursuant to the Stock Purchase Agreement, such approval shall not be
unreasonably withheld by Hyundai. In addition, Hyundai has such approval
right over any sale of substantially all of the assets, merger or acquisition
of the Company for a period of five years, and thereafter, a right of
approval if any corporate sale is not offered first to Hyundai under a right
of first refusal. These rights remain in effect as long as Hyundai and its
subsidiaries retain either substantially all the Shares (so long as the
Shares constitute at least 20% of the total outstanding voting stock of the
Company) or at least 30% of the total outstanding voting stock of the
Company. Hyundai is also entitled to nominate the number of directors equal
to its proportionate voting interest in the Company. See "Election of
Directors." In addition, the Board of Directors of the Company must elect as
the Chairman of the Board the director designated by Hyundai, as long as
Hyundai maintains certain levels of stockholdings in the Company. M. H.
Chung was elected Chairman of the Board of the Company in connection with
this provision. Each share of Class A Common Stock is convertible, at the
option of the holder, into one share of Common Stock. Shares transferred to
any person other than an entity controlled by Hyundai convert automatically
into shares of Common Stock. The Stock Purchase Agreement imposes certain
restrictions on Hyundai's right to acquire additional voting securities
without Board approval for a period of seven years. However, Hyundai may
acquire additional shares until its total holdings equal 45% of the total
outstanding stock of the Company without Board approval. Hyundai may also
make a tender or exchange offer for all of the outstanding stock of the
Company provided that the purchase price has been approved by a majority of
the disinterested members of the Company's Board of Directors following good
faith negotiations with disinterested members of the Company's Board of
Directors. Such tender must be for cash or U. S. traded securities. In
addition, Hyundai may make unlimited open market purchases if a third party
acquires more than 20% or makes a tender or exchange offer for more than 40%
of the Company's total outstanding stock and the Board of Directors waives
the application of the Company's Rights Plan to such third party or if the
Board of Directors fails to renew the Rights Plan upon its expiration. For a
period of seven years, or if earlier, the date Hyundai acquires 51% or more
of the Company, Hyundai will not engage in any proxy solicitation. Hyundai
has the right to maintain its proportionate ownership of the Company under
certain circumstances by purchasing shares of the Company's capital stock or
Stock Rights (as defined in the Stock Purchase Agreement). The foregoing
description is only a summary of the terms of the Stock Purchase Agreement
and the Company's Restated Certificate of Incorporation, copies of which may
be obtained from the Company upon request.
In February 1995, the Board of Directors established the Special Committee
for Maxtor/Hyundai Transactions ("Special Committee"). The Special
Committee, comprised of independent outside directors of the Company who are
not otherwise affiliated with either the Company or Hyundai, is responsible
for the review and approval of all significant proposed transactions between
the Company and any Hyundai company or affiliate thereof.
In May 1995, the Company entered into a manufacturing and purchase
agreement with HEI which was reviewed and approved by the Special Committee.
Under the terms of the agreement, HEI will manufacture Maxtor-designed hard
disk drives for the Company. The two companies plan to begin volume
production at a Korean manufacturing site during summer 1995. The additional
manufacturing capacity provided by HEI is intended to supplement current
production capacity at the Company's manufacturing plant in Singapore without
any capital expenditure on Maxtor's part. The two companies intend to
participate in an ongoing exchange of technology to enable HEI to assume a
leadership role in disk drive manufacturing and to enable Maxtor to obtain
high-quality, low-cost manufacturing capacity. As of June 2, 1995, HEI had
received no compensation under the terms of the Agreement.
Other Relationships and Related Transactions
On September 4, 1992, Mr. James M. McCoy, former Chairman of the Board,
delivered to the Company a promissory note in the principal amount of
$166,272.75 in connection with the exercise of a stock option granted in 1985
under the Company's 1985 Stock Option Plan. According to its terms, the note
provided for the forgiveness of the outstanding principal balance plus
accrued interest at the rate of 25% per year on the anniversary date of the
note, provided that Mr. McCoy was an employee of Maxtor on that date. In
addition, the promissory note would be forgiven in full upon termination of
Mr. McCoy's employment following a transfer of control of the Company if
either (i) Mr. McCoy was terminated by Maxtor without cause, or (ii) Mr.
McCoy left the Company for "good cause" as defined in the note. The note was
secured by a pledge of shares of the Company's Common Stock owned by Mr.
McCoy. The interest rate on the note was 5.98% per annum and the maximum
aggregate amount of principal owed by Mr. McCoy under the note during the
year ended March 25, 1995 was $83,136.37. The note was paid in full in the
amount of $83,749.30 (including accrued interest in the amount of $612.93)
upon Mr. McCoy's resignation from the Board and termination of employment
with the Company on October 31, 1994.
In December 1993, the Company entered into termination agreements with all
of its executive officers, except Mr. Hootnick, and certain key non-executive
officers. In addition, the Company entered into individual resignation
agreements with certain executive officers in connection with the termination
of their employment with the Company since the beginning of fiscal 1994. See
"Severance and Change of Control Arrangements" and "Report of the Board of
Directors on Termination Agreements."
Gregory M. Gallo, a director of the Company, is a member of Gray Cary Ware
& Freidenrich, a Professional Corporation, of Palo Alto, California, which
serves as primary outside counsel to the Company.
Since December 1986, Maxtor has entered into indemnification agreements
with its officers and directors, the form of which was approved by the
stockholders in October of 1986 (the "Agreements"). It is the Company's
policy to enter into such Agreements with all officers and directors.
Pursuant to the Agreements, Maxtor has agreed to indemnify its officers and
directors to the maximum extent permitted under Delaware law. For directors
and certain officers, the Agreements, as amended, also provide that the
Company must procure a letter of credit in an amount not less than $300,000
for each director and in an amount not less than $175,000 for each officer
and keep such letters of credit in effect during the term of the Agreements.
Such letters of credit have been obtained by Maxtor. On June 7, 1994, the
Board authorized the discontinuance of the Company's obligation to provide
letters of credit to future directors and officers and authorized the Company
to request all present holders of letters of credit to return them to the
Company for cancellation. The Company does not maintain letters of credit
for any current officers or directors.
SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS
In the event of a "Transfer of Control" (as defined in the Company's
Fiscal 1988 and 1995 Stock Option Plans, under which options to executive
officers are granted), the successor corporation shall assume all outstanding
options or substitute new options therefor, unless the Board of Directors
determines in its discretion to accelerate the vesting of such options.
On February 7, 1995, Maxtor entered into a Confidential Resignation
Agreement General Release of Claims with J. Larry Smart (the "Smart
Agreement"). Pursuant to the Smart Agreement, Mr. Smart resigned from his
positions as President and Chief Executive Officer, and as a director, of
Maxtor and as an officer of any of its subsidiaries effective February 8,
1995, and from his employment with Maxtor effective February 16, 1995. In
exchange for his release of all claims against Maxtor, Maxtor agreed to
provide Mr. Smart with the following benefits: (i) payment of $333,333.00;
(ii) reimbursement of health insurance premiums for a ten-month period after
February 16, 1995 if Mr. Smart elects to continue to use Maxtor's health
insurance programs; (iii) extension until May 17, 1995 of the period within
which Mr. Smart would be entitled to exercise shares vested pursuant to
outstanding options granted to Mr. Smart during his employment with Maxtor;
and (iv) payout of amounts accrued under the Company's 401(k) Plan, the
MaxPurchase 423 Plan and vacation allowance (less applicable withholding).
On September 7, 1994, Maxtor entered into a Resignation Agreement and
General Release of Claims with Skip Kilsdonk (the "Kilsdonk Agreement").
Pursuant to the Kilsdonk Agreement, Mr. Kilsdonk resigned from his employment
with Maxtor effective August 26, 1994, and in exchange for his release of all
claims against Maxtor, Maxtor agreed to provide Mr. Kilsdonk with the
following benefits: (i) a payment of $100,000, less applicable withholding,
for loss of wages, and $35,000 for alleged pain, suffering, anxiety,
emotional and personal injury allegedly suffered and incurred; (ii)
reimbursement of health insurance premiums for a nine-month period after
August 26, 1994 if Mr. Kilsdonk elects to continue to use Maxtor's health
insurance program; (iii) immediate vesting of all of his outstanding stock
options exercisable for a period of six months after August 26, 1994; and
(iv) payout of amounts accrued under the Company's 401(k) Plan, the
MaxPurchase 423 Plan and vacation allowance (less applicable withholding).
The above benefits are in lieu of all payments due and payable under the
Termination Agreement.
On June 28, 1994, Maxtor entered into a Confidential Resignation Agreement
and General Release of Claims with Mark Chandler (the "Chandler Agreement").
Pursuant to the Chandler Agreement, Mr. Chandler resigned from his position
as General Counsel, Secretary and Vice President, Corporate Development of
Maxtor and as an officer of any of its subsidiaries effective June 28, 1994,
and from his employment with Maxtor effective July 20, 1994. In exchange for
his release of all claims against Maxtor, Maxtor agreed to provide Mr.
Chandler with the following benefits: (i) a payment of $8,587.68, less
applicable withholding, constituting the difference between nine months' pay
($112,500) and the balance outstanding ($103,912.32, including $100,000
principal and $3,912.32 accrued interest), under the Chandler Note; (ii)
reimbursement of health insurance premiums for a nine-month period after July
20, 1994 if Mr. Chandler elects to continue to use Maxtor's health insurance
program; (iii) immediate vesting of all of his outstanding stock options
exercisable for a period of six months after July 20, 1994; and (iv) payout
of amounts accrued under the Company's 401(k) Plan, the MaxPurchase 423 Plan
and vacation allowance (less applicable withholding). The above benefits are
in lieu of all payments due and payable under the Termination Agreement.
On June 14, 1994, Maxtor entered into a Confidential Resignation Agreement
and General Release of Claims with Laurence R. Hootnick (the "Hootnick
Agreement"). Pursuant to the Hootnick Agreement, Mr. Hootnick resigns from
his positions as President and Chief Executive Officer and a director of the
Company, and as an officer and director of any subsidiary of the Company,
effective as of the conclusion of the Company's Annual Meeting of
Stockholders on August 18, 1994. Under the terms of the Hootnick Agreement,
Mr. Hootnick will continue to be employed by Maxtor until September 30, 1995
(the "Employment Period"). Mr. Hootnick will perform special projects or
work in connection with the transition of his positions at the request of the
Company up to a maximum of 20 hours per month after August 18, 1994 until
September 30, 1995. In exchange for Mr. Hootnick's continued service as
described above and his release of any claims against Maxtor, Maxtor agreed
to provide Mr. Hootnick with the following benefits: (i) salary payments at
his current salary rate ($43,333.33 per month), less applicable withholdings,
through December 31, 1994; (ii) from January 1, 1995 through September 30,
1995, salary payments equal to 4/9ths of his current salary rate ($19,259.26
per month), less applicable withholdings; (iii) during the Employment Period,
the Company will continue to provide Mr. Hootnick with the same standard
employee benefits that he has been receiving (except he will not accrue any
vacation); and (iv) payout of any accrued vacation, less applicable
withholdings, prior to the Employment Period upon expiration of the
Employment Period. In addition, all options granted to Mr. Hootnick will
continue to be governed by the terms and conditions of the applicable Maxtor
stock option plans and stock option agreements between Maxtor and Mr.
Hootnick. Under the terms of the Hootnick Agreement, Mr. Hootnick agrees
that during the Employment Period he will not engage in, or plans to become
engaged in, any activity which is competitive with any of the Company's
activities or planned activities that are specific to the disk drive industry
(excluding ownership by Mr. Hootnick of one percent or less of the stock of
any publicly traded corporation). If Mr. Hootnick breaches the obligation
described in the immediately preceding sentence, the Company shall have no
further obligation or liability to Mr. Hootnick under the Hootnick Agreement.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee consists entirely of independent, outside
directors and is responsible for formulating and administering corporate
policy with respect to executive compensation. The goals of the Committee
are to align executive compensation with business objectives and performance,
and to enable the Company to attract, retain, and reward executive officers
who contribute to the long-term success of the Company. To achieve these
goals, the Committee believes that a substantial portion of the annual
compensation of each executive officer should be contingent upon the
performance of the Company, as well as the individual performance of each
executive officer.
The Company's executive compensation consists of four components: salary,
contingent bonus, profit sharing and stock options.
Base Salary
The salaries for executive officers generally are based on a review of
salaries for comparable positions among comparable companies, and are
generally adjusted annually to take into account cost of living increases,
individual performance and long-term contributions to the Company, and
adjustments deemed necessary to continue to attract and retain highly
qualified executive officers.
Contingent Bonus
The Company's Fiscal 1995 Management Incentive Plan ("MIP") is the
variable portion of management's and key employees' total compensation
package. The MIP is designed so that participants share in the successes of
the Company. The MIP rewards participants when the Company's strategic and
financial objectives are attained. If, however, Company business targets are
not met, the portion of the bonus associated with such goals or targets is
not paid. The MIP is the key element for tying compensation of the Company's
management and key employees to not only individual performance but also to
the Company's financial and strategic performance.
Under the MIP, annual bonus compensation at targeted levels of performance
represents approximately 50% of the base salary of executive officers.
Bonuses are determined quarterly according to a split basis of assessment by
the Committee in which 30% of annual target incentive is tied to the
accomplishment of Corporate, profit-before-tax objectives. The other 70% of
annual target incentive is tied to objectives which are specific to the
accomplishment of Corporate or functional objectives, and in support of other
functional area objectives; however, this 70% was not paid in fiscal 1995
because the Company was not profitable. These objectives are predetermined
and vary depending on the responsibility of each of the Company's four
functional groups: Corporate (including the Chief Executive Officer, Legal
Department, Quality, Finance, Human Resources and Information Services),
Marketing and Product Management, Operations, and Engineering. The major
overall objectives for fiscal 1995 included the following: (1) increasing
corporate revenue and profitability, (2) introducing new products to the
market on schedule, (3) launching the Company's VIP Program to establish
direct contact with resellers of the Company's products, (4) improving
manufacturing ramps and productivity, (5) enhancing the Company's Total
Customer Satisfaction Program, and (6) refining strategic planning processes.
No bonuses were paid in fiscal 1995 under the MIP.
During fiscal 1995, the Compensation Committee approved bonus payments to
certain executive officers hired during the year. The bonus payments were
guaranteed in order to enable the Company to attract and retain such
executive officers.
The Compensation Committee has reviewed the requirements for qualifying
compensation for deductibility under Section 162(m) of the Internal Revenue
Code of 1986, as amended. That section generally limits to $1 million the
non-exempt annual compensation that may be deducted by the Company for any of
its five highest-paid executive officers. It is not anticipated that non-
exempt compensation to any such individual will exceed $1 million in fiscal
1996. Accordingly, the Compensation Committee has determined that none of
the Company's compensation programs need to be revised to comply with Section
162(m) at this time.
Profit Sharing Plan
The Company has a quarterly profit sharing plan under which seven percent
of its quarterly operating profits before taxes is distributed to all
employees (who meet certain employment criteria) and one percent is allocated
to all employees' (including executive officers) 401(k) accounts on a prorata
basis, whether or not the employee is participating in the Company 401(k)
plan. The profit sharing plan formula is reviewed annually by the Board of
Directors. The Company believes that all employees share the responsibility
of achieving profits. Profits are awarded to employees in proportion to
their base salary. In fiscal 1995, there were no distributions under the
plan because the Company was not profitable.
Stock Option Program
The Committee believes that employee equity ownership is highly
motivating, provides a major incentive to employees to build stockholder
value, and serves to align the interests of employees with stockholders.
Options are based upon the relative position and responsibilities of each
executive officer, historical and expected contributions of each officer to
the Company, and previous option grants to such executive officers. Options
are recommended with a goal to provide competitive equity compensation for
executive officers compared to executive officers of similar rank in
companies of the Company's industry, geographic location and size.
Generally, option grants vest over three or four years (one year for
evergreen options) as determined by the Board of Directors in its sole
discretion, and although the options are immediately exercisable, shares are
subject to repurchase by the Company until vesting restrictions have lapsed.
All options are granted at the current market price on the date of grant.
Option grants for fiscal 1995 are set forth in the table entitled "Option
Grants in Last Fiscal Year" in the section entitled "EXECUTIVE COMPENSATION
AND OTHER MATTERS."
Other
In addition to the compensation paid to executive officers as described
above, executive officers and all other employees of the Company receive
matching contributions by the Company under the Company's pre-tax savings
plan (a 401(k) plan), up to $260 annually. Executive officers and all other
employees are eligible to participate in the Company's 1992 Employee Stock
Purchase Plan (which is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended).
Under the 1992 Employee Stock Purchase Plan, the purchase price is 85% of the
market price of the stock at either the beginning or the end of each plan
period, whichever is lower.
President/CEO Compensation
C. S. Park has served as President and Chief Executive Officer of the
Company since February 1995. Dr. Park's salary and other compensation was
determined by the Committee based primarily on the compensation received by
Mr. J. Larry Smart, Dr. Park's predecessor. Dr. Park's salary, therefore,
may not reflect a salary that would be otherwise required to competitively
compensate him and may not be indicative of future compensation. In fiscal
1995, Dr. Park received salary as President and Chief Executive Officer of
$41,549 based on a total annual base salary of $400,000. Mr. Smart's
eligibility for bonus and profit sharing was established in accordance with
the criteria described above. No bonus or profit sharing was paid to Dr.
Park in fiscal 1995 because the Company was not profitable. Options to
purchase 500,000 shares of the Company's Common Stock were granted to Dr.
Park upon his election as President and Chief Executive Officer during fiscal
1995.
THE COMPENSATION COMMITTEE
Gregory M. Gallo
Charles Hill
I. B. Jeon
STOCK PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder return
to Maxtor's stockholders during the fiscal five-year period ended March 25,
1995 with the CRSP Total Return Index for the NASDAQ Stock Market (U.S.
companies only) and the Hambrecht & Quist Technology - Hardware Sector Index
(*):
The Stock Performance Graph which appears in this section is a line graph
which presents dollars on the vertical axis in increments of $50 from $0 to
$250, and Maxtor's fiscal year end dates on the horizontal axis for the five
fiscal year period from March 1990 to March 1995. The vertical and
horizontal axes intersect at $0 and March 1990. The returns are measured
from a fixed point, the measurement point, which is $100 on the vertical axis
and March 1990 on the horizontal axis. From the measurement point, the
cumulative total stockholder return to Maxtor's stockholders for each of the
five subsequent periods through March 1995 is plotted on the graph according
to the table which immediately follows this graph. Similarly from the
measurement point, the CRSP Total Return Index for the Hambrecht & Quist
Technology - Hardware Sector Index and the CRSP Total Return Index for the
NASDAQ Stock Market (U.S. companies only) for those same five periods are
also plotted on the graph, and similarly are plotted according to the table
which immediately follows this graph.
Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95
------ ------ ------ ------ ------ ------
Maxtor $100 $44 $100 $65 $63 $38
NASDAQ - $100 $114 $146 $167 $181 $201
U.S. Index
H&Q Technology $100 $113 $100 $82 $91 $110
Hardware Sector
Index
- - ----------------
(*) The Stock Performance Graph assumes $100 was invested on March 31, 1990
at the closing sales price of the Company's Common Stock and in each index
and that all dividends were reinvested. No cash dividends have been declared
on the Company's Common Stock. Stockholder returns over the indicated period
should not be considered indicative of future stockholder returns.
Changes to Benefit Plans
The Company has proposed the approval of the Directors Plan (defined
below). If the Directors Plan is approved by the Company's stockholders,
Messrs. Chung, Gallo, Hill and Jeon will each receive an initial option grant
of 15,000 shares on the date of the 1995 Annual Meeting of Stockholders (the
"Effective Date"). In addition, Messrs. Chung, Gallo, Hill, Jeon and Poppa
will thereafter receive on each anniversary date of his appointment or
election to the Board of Directors following the Effective Date an automatic
grant of an option to purchase 10,000 shares. The following table sets forth
the options that will be granted under the Directors Plan to the current
directors who are not executive officers as a group during the fiscal year
ending March 30, 1996 if Directors Plan is approved as proposed. Employee
directors are not eligible to participate in the Directors Plan.
The Company has also proposed an amendment to increase the number of
shares available for issuance under the Company's Purchase Plan (defined
below). The following table sets forth purchases of shares under the
Purchase Plan during the fiscal year ended March 25, 1995 by (1) the
Company's President and Chief Executive Officer and the four other most
highly compensated executive officers of the Company as of March 25, 1995
whose total salary and bonus for the year ended March 25, 1995 exceeded
$100,000; (2) all current executive officers as a group; and (3) all
employees, including all officers who are not executive officers, as a group.
Non-employee directors are not eligible to participate in the Purchase Plan.
Purchases of stock under the Purchase Plan are made at the discretion of
participants. Accordingly, future purchases under the Purchase Plan are not
determinable.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
Maxtor Corporation 1996 Maxtor Corporation 1992
Outside Directors Stock Employee Stock Purchase
Option Plan <F1> Plan <F2>
------------------------ -------------------------
Name and Exercise Number Purchase Number
Principal Price Per of Price of
Principal Position Share <F3> Shares Per Share Shares
<S> <C> <C> <C> <C>
- - ----------------------- ----------- ----------- ----------- ------------
C. S. Park - - - 0
President and Chief
Executive Officer
Richard D. Balanson - - - 0
Exec. Vice President
and Chief Technical
Officer
Katherine C. Young - - - 0
Sr. Vice President,
Worldwide Operations
Walter D. Amaral - - $4.0375 2,571
Sr. Vice President and
Chief Financial Officer
William M. Hake - - $4.0375 235
Vice President,
Worldwide Sales and
Product Management
All executive officers - - $4.0375 2,806
as a group (10 persons)
All Outside Directors - 90,000 <F4> - -
as a group (5 persons)
All Non-Executive - - $4.0375 324,894
Officer employees as $3.8250 352,240
a group
<FN>
<F1> Only non-employee directors of the Company are eligible to participate
in the Directors Plan.
<F2> Only employees of the Company are eligible to participate in the
Purchase Plan.
<F3> Exercise prices per share are unknown, as they are based upon fair
market value at the date of grant.
<F4> Represents initial options for 60,000 shares which will be granted to
four directors on the date of the 1995 Annual Meeting of Stockholders, and
automatic grants of 10,000 shares each for three directors during fiscal 1996
on the anniversary of their appointment or election to the Board of
Directors; anniversary grants for two other outside directors will occur in
fiscal 1997 as a result of the timing of such anniversaries in the fiscal
year.
</FN>
</TABLE>
APPROVAL OF THE COMPANY'S
1996 OUTSIDE DIRECTORS STOCK OPTION PLAN
General
The Company's 1996 Outside Directors Stock Option Plan (the "Directors
Plan") was adopted by the Board of Directors of the Company (the "Board") on
June 14, 1995 and will become effective upon approval by the stockholders of
the Company (the "Effective Date"). If approved, the Directors Plan will
replace the Maxtor Corporation 1986 Outside Directors Stock Option Plan
(previously referred to as the "1986 Plan").
The Directors Plan provides for initial and annual grants of nonstatutory
stock options to persons who, at the time of grant, are nonemployee directors
of the Company ("Outside Directors"). Nonstatutory stock options are options
not treated as incentive stock options within the meaning of Section 422(b)
of the Internal Revenue Code of 1986, as amended (the "Code"). As of June
14, 1995, five members of the Board of Directors qualified as Outside
Directors eligible to participate in the Directors Plan.
The Directors Plan continues until the earlier of (1) its termination by
the Board or (2) the date on which all of the shares of Stock available for
issuance under the Directors Plan have been issued and any restrictions on
such shares under the terms of the Directors Plan and each written agreement
between the Company and an Optionee setting forth the terms, conditions and
restrictions of the Option (an "Option Agreement") have lapsed.
The Board of Directors believes that adoption of the Directors Plan with
an adequate reserve of shares of Stock for issuance thereunder is an
important factor in attracting and retaining highly qualified Outside
Directors essential to the success of the Company and aligning their long-
term interests with those of the stockholders.
Description of the Plan
The following summary of the Directors Plan is qualified in its entirety
by the specific language of the Directors Plan, a copy of which is available
to any stockholder upon request.
Administration. The Directors Plan is administered by the Board of
Directors and/or by a duly appointed committee of the Board. However, the
Board or the committee has no discretion to select the Outside Directors of
the Company who are granted options under the Directors Plan, to set the
exercise price of such options, to determine the number of shares for which
or the time at which particular options are granted, or to establish the
duration of such options. The Board or committee is authorized to interpret
the Directors Plan and options granted under the plan, and all such
determinations of the Board or committee will be final and binding on all
persons having an interest in the Directors Plan or any option.
Shares Subject to Plan. Up to 340,000 shares of the authorized but
unissued shares or treasury shares of the Company's Common Stock ("Stock")
may be issued under the Directors Plan. If an outstanding Option expires,
terminates or is canceled or shares of Stock acquired, subject to repurchase,
upon the exercise of an Option are repurchased by the Company, the shares of
Stock allocable to the unexercised portion of such Option, or such
repurchased shares of Stock, will again be available for issuance under the
Directors Plan. In the event of any stock dividend, stock split, reverse
stock split, recapitalization, combination, reclassification or similar
change in the capital structure of the Company, appropriate adjustments will
be made in the number and class of shares subject to the Directors Plan, to
the "Initial Option" and "Anniversary Option" (discussed below), and to any
outstanding Options, and in the exercise price of any outstanding Options.
Automatic Grant of Option. Subject to execution by an Outside Director of
the appropriate Option Agreement, Options are granted automatically and
without further action of the Board, as follows: Each person first elected
or appointed as an Outside Director on or after the Effective Date is granted
an Initial Option on the date of such initial election or appointment to
purchase 30,000 shares of Stock. Each Outside Director on the Effective Date
who was not granted an option upon his or her initial election or appointment
to the Board other than an initial option for 15,000 shares of Stock granted
under the 1986 Plan is granted on the Effective Date an Initial Option to
purchase 15,000 shares of Stock. Each Outside Director is granted an
Anniversary Option on each anniversary of the date of his or her initial
election or appointment to the Board or on December 30, 1986, whichever is
later, to purchase 10,000 shares of Stock. Provided that an optionee has
remained in continuous service as a director of the Company, an Option
granted to the optionee will become exercisable as to 3/48 of the shares
subject to the Option three months after the date of grant and as to 1/48 of
such shares monthly thereafter. The exercise price per share of Stock
subject to an Option is the fair market value of such share of Stock on the
Option grant date. "Fair market value" means the average of the high and low
prices of the Stock as reported on the National Association of Securities
Dealers Automated Quotation System. The closing sale price on June 2, 1995
of the Company's Common Stock, as reported on the NASDAQ National Market, was
$5.625.
An Outside Director may elect not to receive an Option by delivering
written notice of such election to the Board no later than the day before
such Option would otherwise be granted. The Outside Director will receive no
payment or other consideration in lieu of such declined Option. An Outside
Director who has declined an Option may revoke such election prospectively by
delivering written notice of revocation to the Board no later than the day
before such Option would be granted.
Terms and Conditions. Options granted under the Directors Plan may be
exercised by payment of the exercise price by any combination of (1) cash,
check, or cash equivalent, (2) tender to the Company of whole shares of Stock
owned by the Optionee having a fair market value not less than the aggregate
exercise price, or (3) the assignment in a form acceptable to the Company of
the proceeds of a sale of some or all of the shares of Stock being acquired
upon the exercise of an Option pursuant to a program or procedure approved by
the Company.
Subject to early termination following an optionee's termination of
service as a director of the Company or upon a Transfer of Control (as
defined below), Options expire 10 years after the date of grant ("Option
Expiration Date"). During the lifetime of the optionee, an Option is
exercisable only by the optionee or the optionee's guardian or legal
representative. No Option is assignable or transferable by the optionee,
except by will or by the laws of descent and distribution. After the
optionee's death, the Option generally is exercisable by the optionee's legal
representative or by any person empowered to do so under the deceased
optionee's will or under the then applicable laws of descent and
distribution.
If the optionee's service as a Director of the Company is terminated for
any reason other than the optionee's death or disability, the optionee may
exercise his or her Options (to the extent exercisable) within 90 days (or
such longer period of time as determined by the Board), but in any event, not
later than the Option Expiration Date. If the optionee's service is
terminated due to death or disability, the optionee or the optionee's
guardian or legal representative may exercise his or her Options (to the
extent exercisable) within twelve months (or such longer period of time as
determined by the Board), but in any event, not later than the Option
Expiration Date. However, if a sale, within this time period of shares
acquired upon the exercise of the Option would subject the optionee to suit
under Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Option will remain exercisable until the earliest to
occur of (1) the 90th day after the date on which a sale of such shares by
the Optionee would no longer be subject to such suit or (2) the Option
Expiration Date.
Transfer of Control. A "Transfer of Control" will be deemed to occur upon
any of the following events in which the stockholders of the Company before
such event do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company, its successor or the
corporation to which the assets of the Company were transferred: (1) the
direct or indirect sale or exchange by the stockholders of the Company of all
or substantially all of the stock of the Company, (2) a merger in which the
Company is a party, or (3) the sale, exchange or transfer of all or
substantially all of the Company's assets. In the event of a Transfer of
Control, any unexercisable or unvested portion of outstanding Options will be
immediately exercisable and vested 10 days before the Transfer of Control.
In addition, the Board may arrange with the acquiring corporation to either
assume the outstanding Options or substitute substantially equivalent options
for the acquiring corporation's stock for such outstanding Options. Any
Options which are not assumed, substituted for or exercised as of the date of
the Transfer of Control will terminate as of such date.
Termination or Amendment. The Board may terminate or amend the Directors
Plan at any time. However, without the approval of the Company's stockholders
there generally may be (1) no increase in the total number of shares of Stock
that may be issued under the Directors Plan and (2) no expansion in the class
of persons eligible to receive Options. Furthermore, to the extent required
by Rule 16b-3 promulgated under the Exchange Act, Plan provisions addressing
eligibility to participate in the Directors Plan and the amount, price and
timing of Options generally may not be amended more than once every six
months. In any event, no termination or amendment of the Directors Plan, in
general, may adversely affect any then outstanding Option, or any unexercised
portion thereof, without the consent of the Optionee.
Summary of United States Federal Income Tax Consequences
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law with respect to
participation in the Directors Plan and does not attempt to describe all
possible federal or other tax consequences of such participation. The tax
consequences of options are complex and subject to change, and a taxpayer's
particular situation may be such that some variation of the described rules
is applicable. Optionees should consult their own tax advisors prior to the
exercise of any option and prior to the disposition of any Shares.
Nonstatutory stock options granted under the Directors Plan have no
special tax status. An optionee generally recognizes no taxable income as
the result of the grant of such an option. Upon exercise of the Option, the
optionee normally recognizes ordinary income equal to the excess (if any) of
the fair market value of the Stock on the determination date (defined below)
over the purchase price of the Stock. Upon the sale of acquired Stock any
gain or loss, based on the difference between the sale price and the fair
market value on the determination date, will be taxed as capital gain or
loss. A capital gain or loss will be long-term if the Optionee's holding
period is more than 12 months from the determination date.
No tax deduction is available to the Company with respect to the grant of
a nonstatutory stock option or the sale of the acquired Stock. The Company
should be entitled to a deduction equal to the amount of ordinary income
recognized by the Optionee as a result of the exercise of a nonstatutory
stock option or the vesting of the Stock.
Generally, the "determination date" is the later of (1) the date on which
the Option is exercised, (2) the date on which the Stock vests, or (3) the
date which is six months after the Option grant date. If the determination
date is after the exercise date, the Optionee may elect, pursuant to Section
83(b) of the Code, to have the exercise date be the determination date by
filing an election with the Internal Revenue Service not later than 30 days
after the date the Option is exercised.
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the votes present or represented by
proxy and entitled to vote at the Annual Meeting of Stockholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of
the Company is present and voting, either in person or by proxy, is required
for approval of this proposal. Abstentions and broker non-votes will each be
counted as present for purposes of determining the presence of a quorum.
Abstentions will have the same effect as a negative vote on this proposal.
Broker non-votes will have no effect on the outcome of this vote.
The Board of Directors believes that the proposed 1996 Outside Director
Stock Option Plan, and the reservation of 340,000 shares of the Common Stock
of the Company for issuance thereunder, is in the best interests of the
Company and the stockholders for the reasons stated above. THEREFORE, THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE 1996 OUTSIDE DIRECTORS STOCK OPTION PLAN AND TO RESERVE 340,000
SHARES OF THE COMMON STOCK OF THE COMPANY FOR ISSUANCE PURSUANT TO THE
DIRECTORS PLAN.
APPROVAL OF AMENDMENT TO THE 1992 EMPLOYEE STOCK PURCHASE PLAN
General
The Company's 1992 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors of the Company in December 1991 and
approved by the stockholders in August 1992. In August 1993 the Company's
stockholders approved an amendment to the Purchase Plan to increase from
1,700,000 to 2,900,000 the number of shares of Common Stock reserved for
issuance under the Purchase Plan. The Purchase Plan is intended to qualify
as an "employee stock purchase plan" under section 423 of the Code. On June
14, 1995, the Board of Directors adopted an amendment to the Purchase Plan,
subject to stockholder approval, to increase the number of shares of Common
Stock reserved for issuance under the Purchase Plan by 1,500,000 shares to a
total of 4,400,000 shares. The Board of Directors believes that the
availability of an opportunity to purchase shares under the Purchase Plan
through payroll deduction at a discount is important to attracting and
retaining qualified employees essential to the success of the Company and its
subsidiaries, and that stock ownership is important to providing such persons
with incentive to perform in the best interests of the Company.
As of June 2, 1995, 676,645 shares remain available for issuance under the
Purchase Plan. It is anticipated that at the end of the current Offering
Period ending July 28, 1995, almost all of the shares currently reserved
under the Purchase Plan will have been purchased. The closing sale price on
June 2, 1995 of the Company's Common Stock, as reported on the NASDAQ
National Market, was $5.625.
Description of the Purchase Plan
The following summary of the Purchase Plan is qualified in its entirety by
the specific language of the plan, a copy of which may be obtained from the
Company by any stockholder.
The Purchase Plan is implemented by sequential offering periods which are
approximately six months long (the "Offering Period"). An Offering Period
generally begins on the day following the last Sunday of January and ends on
the last Sunday of July of the same year. An Offering Period also begins on
the day following the last Sunday of July and ends on the last Sunday of
January of the following year. At the beginning of each Offering Period,
eligible employees may elect to participate in the Purchase Plan by
authorizing payroll deductions of up to 10% of their compensation. An
employee may withdraw from participation at any time during the Offering
Period. The purchase price at which shares of Common Stock may be acquired
in any offering under the Purchase Plan is set by the Board of Directors.
Unless otherwise provided by the Board of Directors prior to the commencement
of an Offering Period, the purchase price for an Offering Period is, and
cannot in any event, be less than 85% of the lower of the fair market value
of the shares of Common Stock at the beginning or end of the Offering Period.
Currently, a maximum of 2,900,000 shares of Common Stock may be issued under
the Purchase Plan, subject to appropriate adjustment in the event of a stock
split, stock dividend, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company, or in the event of a
merger, sale of assets or other reorganization of the Company. In the event
that any right to purchase stock outstanding under the Purchase Plan (a "Plan
Option") for any reason expires or is terminated, the shares of Common Stock
allocable to the unexercised portion of such Plan Option may again be
subjected to a Plan Option. The Purchase Plan is administered by the Board
of Directors or a duly appointed committee of the Board of Directors.
Any employee of the Company and any present or future parent and/or
subsidiary corporations of the Company, as the Board of Directors shall from
time to time designate, is eligible to participate in the Purchase Plan and
any offering under the Purchase Plan except the following:
(a) employees who are not employed by the Company prior to the
commencement of an Offering Period;
(b) employees who are customarily employed by the Company for less than
20 hours a week;
(c) employees who are customarily employed by the Company for not more
than five months in any calendar year; and
(d) employees who own or hold options to purchase, or who, as a result
of participation in the Purchase Plan, would own or hold options to purchase,
stock of the Company possessing 5% or more of the total combined voting power
or value of all classes of stock of the Company within the meaning of Section
423(b)(3) of the Code.
An eligible employee becomes a participant effective on the first day of
an Offering Period (the "Offering Date") after satisfying the eligibility
requirements by delivering to the Company's payroll office prior to such
Offering Date a subscription agreement authorizing payroll deductions. A
participant participates automatically in each successive Offering Period
until such time as such participant withdraws from the Purchase Plan or
terminates employment with the Company.
Subject to certain limitations, on the last day of the Offering Period,
each participant as of that date automatically purchases the number of whole
shares of Common Stock that can be acquired based on the funds credited to
the participant's account, at the purchase price established by the Board for
the Offering Period. A participant may not purchase in any single Offering
Period more than the number of whole shares of Common Stock determined by
dividing 40% of the participant's compensation (as defined in the Purchase
Plan) during the three months immediately preceding the Offering Date by 85%
of the fair market value of a share of Common Stock on the Offering Date.
Furthermore, no participant may purchase shares of Common Stock having a fair
market value exceeding $25,000 in any calendar year (measured by the fair
market value of a share of Common Stock on the Offering Date of the Offering
Period in which the shares are purchased). Any cash balance which is less
than the purchase price of one share remaining in participant's account for
such completed offering is carried over to the next Offering Period. No
shares will be purchased in any Offering Period on behalf of any participant
whose participation in the Purchase Plan terminates during such Offering
Period.
Termination of a participant's employment for any reason, including
retirement or death or the failure of a participant to remain an eligible
employee, will immediately terminate such participant's participation in the
Purchase Plan. In such event, the payroll deductions credited to the
participant's account from the beginning of the applicable Offering Period
through the date of such termination will be returned to the participant (or
the participant's legal representative) and all rights of the participant
under the Purchase Plan terminate.
The Purchase Plan will continue until terminated by the Board of
Directors, until all of the shares of Common Stock reserved for issuance
under the Purchase Plan have been issued, or until December 12, 2001,
whichever occurs first. The Board of Directors may at any time amend or
terminate the Purchase Plan, except that (i) such amendment or termination
may not adversely affect any rights previously granted under the Purchase
Plan, and (ii) such amendment may not increase the number of shares
authorized for issuance under the Purchase Plan or change the designation of
corporations whose employees may participate in the Purchase Plan without the
approval of the Company's stockholders.
Summary of United States Federal Income Tax Consequences
The following summary is intended only as a general guide to the United
States federal income tax consequences under current law with respect to
participation in the Purchase Plan and does not attempt to describe all
possible federal or other tax consequences of such participation.
Furthermore, tax consequences are subject to change and a taxpayer's
particular situation may be such that some variation of the described rules
is applicable.
There are no tax consequences to an eligible employee of becoming a
participant in the Purchase Plan or purchasing shares of Common Stock under
the Plan. If a participant disposes of shares acquired under the Purchase
Plan within the later of two years from the date the underlying option was
granted (which is the Offering Date) or within one year from the date the
underlying option was exercised (which is the last day of the Offering
Period), this transaction is referred to as a "disqualifying disposition" and
the participant will realize ordinary income in the year of such disposition
equal to the amount by which the fair market value of the shares on the date
the option was exercised exceeded the purchase price. In such instances, the
amount of such ordinary income will be added to the participant's basis in
the shares, and any additional gain or resulting loss recognized on the
disposition of the shares after such basis adjustment will be a capital gain
or loss. A capital gain or loss will be long-term if the participant holds
the shares of Common Stock for more than 12 months.
If the participant disposes of shares acquired under the Purchase Plan at
least two years after the date the underlying option was granted and at least
one year after the date the underlying option was exercised, the participant
will realize ordinary income in the year of such disposition equal to the
lesser of (i) the excess of the fair market value of the shares on the date
of disposition over the purchase price or (ii) 15% of the fair market value
of the shares on the date the option was granted. The amount of such
ordinary income will be added to the participant's basis in the shares, and
any additional gain recognized on the disposition of the shares after such
basis adjustment will be a long-term capital gain. If the fair market value
of the shares on the date of disposition is less than the purchase price,
there will be no ordinary income and any loss recognized will be a long-term
capital loss.
If the participant still owns the shares acquired under the Plan at the
time of death, the lesser of (i) the excess of the fair market value of the
shares on the date of death over the purchase price or (ii) 15% of the fair
market value of the shares on the date the option was granted will constitute
ordinary income in the year of death.
The Company should be entitled to a deduction in the year of a
disqualifying disposition equal to the amount of ordinary income recognized
by the participant as a result of the disposition, except to the extent such
deduction is limited by applicable provisions of the Code or the regulations
thereunder. In all other cases, no deduction is allowed the Company.
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the votes present or represented by
proxy and entitled to vote at the Annual Meeting of Stockholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of
the Company is present and voting, is required for approval of this proposal.
Abstentions and broker nonvotes will each be counted present for purposes of
determining the presence of a quorum. Abstentions will have the same effect
as a negative vote. Broker nonvotes, on the other hand, will have no effect
on the outcome of the vote.
The Board of Directors believes that the availability of an opportunity to
purchase shares under the Purchase Plan at a discount from market price is
important to attracting and retaining qualified officers and employees
essential to the success of the Company, and that stock ownership is
important to providing such persons with incentive to perform in the best
interest of the Company. THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE AMENDMENT TO THE 1992
PURCHASE PLAN.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of Maxtor has selected Ernst & Young LLP as the
independent auditors of Maxtor for fiscal 1995. Ernst & Young LLP has acted
in such capacity since its appointment in January 1983. A representative of
Ernst & Young LLP will be present at the Annual Meeting, will be given the
opportunity to make a statement if he or she so desires and will be available
to respond to appropriate questions. In the event ratification by the
stockholders of the appointment of Ernst & Young LLP as the independent
auditors for Maxtor is not obtained from a majority of the stockholders in
attendance or represented by Proxy at the Annual Meeting, the Board of
Directors will reconsider such appointment. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders of the Company (i) must be received by Maxtor at its
offices at 211 River Oaks Parkway, San Jose, California 95134 not later than
March 9, 1996; and (ii) must satisfy the conditions established by the
Securities and Exchange Commission for stockholder proposals to be included
in Maxtor's Proxy Statement for that meeting and the other requirements
contained in the Company's By-Laws.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which the Board of
Directors intends to present or knows that others will present at the meeting
is as set forth herein. If any other matter or matters are properly brought
before the meeting, or any adjournment thereof, it is the intention of the
persons named in the accompanying form of Proxy to vote the Proxy on such
matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ G. H. Stevens
----------------------------------
Glenn H. Stevens
Vice President, General Counsel
and Secretary
July 7, 1995
MAXTOR CORPORATION
1996 OUTSIDE DIRECTORS STOCK OPTION PLAN
1. Establishment, Purpose and Term of Plan.
1.1 Establishment. The Maxtor Corporation 1996 Outside Directors
Stock Option Plan (the "Plan") is hereby established effective on the date
the Plan is approved by the stockholders of the Company (the "Effective
Date"). The Plan replaces the Maxtor Corporation 1986 Outside Directors
Stock Option Plan (the "1986 Plan").
1.2 Purpose. The purpose of the Plan is to advance the interests of
the Company and its stockholders by providing an incentive to attract and
retain highly qualified persons to serve as Outside Directors of the Company
and by creating additional incentive for Outside Directors to promote the
growth and profitability of the Company.
1.3 Term of Plan. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the
shares of Stock available for issuance under the Plan have been issued and
any restrictions on such shares under the terms of the Plan and the
agreements evidencing Options granted under the Plan have lapsed.
2. Definitions and Construction.
2.1 Definitions. Whenever used herein, the following terms shall
have their respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company. If one
or more Committees have been appointed by the Board to administer the Plan,
"Board" also means such Committee(s).
(b) "Code" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.
(c) "Committee" means a committee of the Board duly appointed to
administer the Plan and having such powers as shall be specified by the
Board. Unless the powers of the Committee have been specifically limited,
the Committee shall have all of the powers of the Board granted herein,
including, without limitation, the power to amend or terminate the Plan at
any time, subject to the terms of the Plan and any applicable limitations
imposed by law.
(d) "Company" means Maxtor Corporation, a Delaware corporation,
or any successor corporation thereto.
(e) "Director" means a member of the Board.
(f) "Employee" means any person treated as an employee (including
an officer or a Director who is also treated as an employee) in the records
of a Company; provided, however, that neither service as a Director nor
payment of a director's fee shall be sufficient to constitute employment for
this purpose.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" means, the average of the high and low
prices of the Stock as reported on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") System, the NASDAQ National Market
System or such other national or regional securities exchange or market
system constituting the primary market for the Stock. If the relevant date
does not fall on a day on which the Stock is trading on NASDAQ, the NASDAQ
National Market System or other national or regional securities exchange or
market system, the date on which the Fair Market Value shall be established
shall be the last day on which the Stock was so traded prior to the relevant
date.
(i) "Option" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions
of the Plan.
(j) "Optionee" means a person who has been granted one or more
Options.
(k) "Option Agreement" means a written agreement between the
Company and an Optionee setting forth the terms, conditions and restrictions
of the Option granted to the Optionee.
(l) "Outside Director" means a Director of the Company who is not
an Employee.
(m) "Rule 16b-3" means Rule 16b-3 as promulgated under the
Exchange Act, as amended from time to time, or any successor rule or
regulation.
(n) "Service" means the Optionee's service with the Company in
the capacity of a Director.
(o) "Stock" means the common stock, par value $0.01, of the
Company, as adjusted from time to time in accordance with Section 4.2.
2.2 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural, and the plural shall include the
singular. Use of the term "or" is intended to include the conjunctive as
well as the disjunctive.
3. Administration.
3.1 Administration by the Board. The Plan shall be administered by
the Board, including any duly appointed Committee of the Board. All
questions of interpretation of the Plan or of any Option shall be determined
by the Board, and such determinations shall be final and binding upon all
persons having an interest in the Plan or such Option. Any officer of the
Company shall have the authority to act on behalf of the Company with
respect to any matter, right, obligation, determination or election which is
the responsibility of or which is allocated to the Company herein, provided
the officer has apparent authority with respect to such matter, right,
obligation, determination or election.
3.2 Limitations on Authority of the Board. Notwithstanding any
other provision herein to the contrary, the Board shall have no authority,
discretion, or power to select the Outside Directors who will receive
Options, to set the exercise price of the Options, to determine the number
of shares of Stock to be subject to an Option or the time at which an Option
shall be granted, to establish the duration of an Option, or to alter any
other terms or conditions specified in the Plan, except in the sense of
administering the Plan subject to the provisions of the Plan.
4. Shares Subject to Plan.
4.1 Maximum Number of Shares Issuable. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock
that may be issued under the Plan shall be three hundred forty thousand
(340,000) and shall consist of authorized but unissued shares or treasury
shares of Stock or a combination thereof. In the event that any outstanding
Option for any reason expires or is terminated or canceled or shares of
Stock acquired, subject to repurchase, upon the exercise of an Option are
repurchased by the Company, the shares of Stock allocable to the unexercised
portion of such Option, or such repurchased shares of Stock, shall again be
available for issuance under the Plan.
4.2 Adjustments for Changes in Capital Structure. In the event of
any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of
the Company, appropriate adjustments shall be made in the number and class
of shares subject to the Plan, to the "Initial Option" and "Anniversary
Option" (as defined in Section 6.1), and to any outstanding Options, and in
the exercise price of any outstanding Options. If a majority of the shares
which are of the same class as the shares that are subject to outstanding
Options are exchanged for, converted into, or otherwise become (whether or
not pursuant to a Transfer of Control as defined in Section 8.1) shares of
another corporation (the "New Shares"), the Board may unilaterally amend the
outstanding Options to provide that such Options are exercisable for New
Shares. In the event of any such amendment, the number of shares subject
to, and the exercise price of, the outstanding Options shall be adjusted in
a fair and equitable manner as determined by the Board, in its sole
discretion. Notwithstanding the foregoing, any fractional share resulting
from an adjustment pursuant to this Section 4.2 shall be rounded down to the
nearest whole number, and in no event may the exercise price of any Option
be decreased to an amount less than the par value, if any, of the stock
subject to the Option.
5. Eligibility and Type of Options.
5.1 Persons Eligible for Options. An Option shall be granted only
to a person who, at the time of grant, is an Outside Director (an "Eligible
Outside Director").
5.2 Options Authorized. Options shall be nonstatutory stock
options; that is, options which are not treated as incentive stock options
within the meaning of Section 422(b) of the Code.
6. Terms and Conditions of Options. Options shall be evidenced by
Option Agreements specifying the number of shares of Stock covered thereby,
in such form as the Board shall from time to time establish. Option
Agreements may incorporate all or any of the terms of the Plan by reference
and shall comply with and be subject to the following terms and conditions:
6.1 Automatic Grant of Options. Subject to execution by an Eligible
Outside Director of the appropriate Option Agreement, Options shall be
granted automatically and without further action of the Board, as follows:
(a) Initial Option.
(i) Each person who is first elected or appointed as an Outside
Director on or after the Effective Date shall be granted an Option on the
date of such initial election or appointment to purchase thirty thousand
(30,000) shares of Stock, subject to the exercisability provisions of this
Section 6.
(ii) Each person who is an Eligible Outside Director on the
Effective Date and who was not granted an option upon his or her initial
election or appointment to the Board other than an initial option for
fifteen thousand (15,000) shares of Stock granted under the 1986 Plan shall
be granted on the Effective Date an Option to purchase fifteen thousand
(15,000) shares of Stock, subject to the exercisability provisions of this
Section 6.
(b) Anniversary Option. Each Eligible Outside Director shall be
granted an Option on each anniversary of the date of his or her initial
election or appointment to the Board or as of December 30, 1986, whichever
is later, to purchase ten thousand (10,000) shares of Stock, subject to the
exercisability provisions of this Section 6.
(c) Right to Decline Option. Notwithstanding the foregoing, any
person may elect not to receive an Option by delivering written notice of
such election to the Board no later than the day prior to the date such
Option would otherwise be granted. A person so declining an Option shall
receive no payment or other consideration in lieu of such declined Option.
A person who has declined an Option may revoke such election prospectively
by delivering written notice of such revocation to the Board no later than
the day prior to the date such Option would be granted pursuant to Section
6.1(a) or (b), as the case may be.
6.2 Exercise Price. The exercise price per share of Stock subject
to an Option shall be the Fair Market Value of a share of Stock on the date
the Option is granted.
6.3 Exercise Period. Each Option shall terminate and cease to be
exercisable on the date ten (10) years after the date of grant of the Option
unless earlier terminated pursuant to the terms of the Plan or the Option
Agreement.
6.4 Right to Exercise Options.
(a) Vesting Schedule. Except as otherwise provided in the Plan
or in the Option Agreement and provided that the Optionee's Service is
continuous from the date of grant of the Option ("Option Grant Date") to the
respective date set forth below, an Option granted pursuant to the Plan
shall be exercisable prior to the termination thereof cumulatively as to the
number of shares as follows:
(i) 0/48th of the shares prior to the Initial Vesting Date.
(ii) 3/48th of the shares on and after the Initial Vesting Date.
(iii) 1/48th of the shares for each full month for forty-five (45)
months after the Initial Vesting Date.
(b) Initial Vesting Date. The "Initial Vesting Date" is the date
which is three (3) months after the Option Grant Date.
6.5 Payment of Exercise Price.
(a) Forms of Payment Authorized. Except as otherwise provided
below, payment of the aggregate exercise price for the number of shares of
Stock being purchased pursuant to any Option shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of whole shares of
Stock owned by the Optionee having a Fair Market Value not less than the
aggregate exercise price, (iii) by the assignment in a form acceptable to
the Company of the proceeds of a sale of some or all of the shares being
acquired upon the exercise of an Option pursuant to a program or procedure
approved by the Company (including, without limitation, through an exercise
complying with the provisions of Regulation T as promulgated from time to
time by the Board of Governors of the Federal Reserve System) (a "Same-Day
Sale"), or (iv) by any combination thereof.
(b) Tender of Stock. Notwithstanding the foregoing, an Option
may not be exercised by tender to the Company of shares of Stock to the
extent such tender of Stock would constitute a violation of the provisions
of any law, regulation or agreement restricting the redemption of the
Company's stock. Unless otherwise provided by the Board, an Option may not
be exercised by tender to the Company of shares of Stock unless such shares
either have been owned by the Optionee for more than six (6) months or were
not acquired, directly or indirectly, from the Company.
(c) Same-Day Sale. The Company reserves, at any and all times,
the right, in the Company's sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise
of Options by means of a Same-Day Sale.
6.6 Tax Withholding. In its sole discretion, the Company shall have
the right to require the Optionee to make adequate provision for any
federal, state, local and foreign tax withholding obligations of the Company
arising in connection with the Option. The Company shall have no obligation
to deliver shares of Stock until the Company's tax withholding obligations
have been satisfied.
7. Standard Form of Option Agreement.
7.1 Initial Option for a Newly Elected or Appointed Director.
Unless otherwise provided for by the Board at the time an Initial Option for
a newly elected or appointed Outside Director is granted, each such Option
shall comply with and be subject to the terms and conditions set forth in
the applicable form of Nonstatutory Stock Option Agreement for Outside
Directors adopted by the Board concurrently with its adoption of the Plan
and as amended from time to time.
7.2 Initial Option for an Existing Director. Unless otherwise
provided for by the Board at the time an Initial Option for an existing
Outside Director is granted, each such Option shall comply with and be
subject to the terms and conditions set forth in the applicable form of
Nonstatutory Stock Option Agreement for Outside Directors adopted by the
Board concurrently with its adoption of the Plan and as amended from time to
time.
7.3 Anniversary Option. Unless otherwise provided for by the Board
at the time an Anniversary Option is granted, each Anniversary Option shall
comply with and be subject to the terms and conditions set forth in the
applicable form of Nonstatutory Stock Option Agreement for Outside Directors
adopted by the Board concurrently with its adoption of the Plan and as
amended from time to time.
7.4 Authority to Vary Terms. Subject to the limitations set forth
in Section 3.2, the Board shall have the authority from time to time to vary
the terms of any of the standard forms of Option Agreement described in this
Section 7 either in connection with the grant or amendment of an individual
Option or in connection with the authorization of a new standard form or
forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Option Agreement shall be in
accordance with the terms of the Plan. Such authority shall include, but
not by way of limitation, the authority to grant Options which are
immediately exercisable subject to the Company's right to repurchase any
unvested shares of Stock acquired by the Optionee upon the exercise of an
Option in the event such Optionee's Service as a Director is terminated for
any reason. In no event, however, shall the Board be permitted to vary the
terms of any standard form of Option Agreement if such change would cause
the Plan to cease to qualify as a formula plan pursuant to Rule 16b-3 at any
such time as any class of equity security of the Company is registered
pursuant to Section 12 of the Exchange Act.
8. Transfer of Control.
8.1 Definition. A "Transfer of Control" shall be deemed to have
occurred in the event that any of the following occurs with respect to the
Company:
(a) the direct or indirect sale or exchange by the stockholders
of the Company of all or substantially all of the stock of the Company where
the stockholders of the Company before such sale or exchange do not retain,
directly or indirectly, at least a majority of the beneficial interest in
the voting stock of the Company;
(b) a merger in which the stockholders of the Company before such
merger do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company; or
(c) the sale, exchange, or transfer of all or substantially all
of the Company's assets (other than a sale, exchange, or transfer to one or
more corporations where the stockholders of the Company before such sale,
exchange or transfer retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the corporation(s) to which
the assets were transferred).
8.2 Effect of Transfer of Control on Options. In the event of a
Transfer of Control, any unexercisable or unvested portion of the
outstanding Options shall be immediately exercisable and vested in full as
of the date ten (10) days prior to the date of the Transfer of Control, and
the Company shall provide each Optionee holding an outstanding Option with
at least ten (10) days advance written notice of the pending Transfer of
Control prior to the consummation thereof. In addition, the Board, in its
sole discretion, may arrange with the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be
(the "Acquiring Corporation"), for the Acquiring Corporation to either
assume the Company's rights and obligations under outstanding Options or
substitute substantially equivalent options for the Acquiring Corporation's
stock for outstanding Options. The exercise or vesting of any Option that
was permissible solely by reason of this Section 8.2 shall be conditioned
upon the consummation of the Transfer of Control. Any Options which are
neither assumed or substituted for by the Acquiring Corporation in
connection with the Transfer of Control nor exercised as of the date of the
Transfer of Control shall terminate and cease to be outstanding effective as
of the date of the Transfer of Control. If the corporation the stock of
which is subject to the outstanding Options immediately prior to a Transfer
of Control described in Section 8.1(a) is the surviving or continuing
corporation, the outstanding Options shall be deemed to have been assumed by
the Acquiring Corporation for purposes of this Section 8.2.
9. Nontransferability of Options. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or the Optionee's
guardian or legal representative. No Option shall be assignable or
transferable by the Optionee, except by will or by the laws of descent and
distribution.
10. Termination or Amendment of Plan. The Board may terminate or amend
the Plan at any time. However, subject to changes in the law or other legal
requirements that would permit otherwise, without the approval of the
Company's stockholders there shall be (a) no increase in the total number of
shares of Stock that may be issued under the Plan (except by operation of
the provisions of Section 4.2) and (b) no expansion in the class of persons
eligible to receive Options. Furthermore, to the extent required by Rule
16b-3, provisions of the Plan addressing eligibility to participate in the
Plan and the amount, price and timing of Options shall not be amended more
than once every six (6) months, other than to comport with changes in the
Code, the Employee Retirement Income Security Act, or the rules thereunder.
In any event, no termination or amendment of the Plan may adversely affect
any then outstanding Option, or any unexercised portion thereof, without the
consent of the Optionee, unless such termination or amendment is necessary
to comply with any applicable law or government regulation.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Maxtor Corporation 1996 Outside Directors Stock Option
Plan was duly adopted by the Board on June 14, 1995.
/s/ Glenn H. Stevens
------------------------
Secretary
