<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MICROPOLIS CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
Micropolis Corporation
21211 Nordhoff Street
Chatsworth, CA 91311
(818) 709-3300
Stuart P. Mabon
Chairman of the Board
and President
Dear Stockholder:
It is my pleasure to invite you to attend your Company's Annual
Meeting of Stockholders on April 26, 1995. The meeting will be held
at the Company's headquarters in Chatsworth, California and will
begin at 10:00 a.m. In the following pages you will find information
about the meeting and a Proxy Statement.
During the business session, I will review Micropolis' past year
and discuss its prospects for the future. Our Stockholders will also
have the opportunity to discuss their Company with the directors and
officers of Micropolis.
If you cannot be with us in person, please be sure to vote your
shares by proxy. Just mark, sign and date the enclosed proxy card
and return it in the postage-paid envelope. Your prompt return of
the card will help your Company avoid additional solicitation costs.
In person or by proxy, your vote is important.
I hope you can join us at the Annual Meeting.
Sincerely,
/s/ Stuart P. Mabon
Stuart P. Mabon
March 27, 1995
<PAGE>
MICROPOLIS CORPORATION
21211 NORDHOFF STREET
CHATSWORTH, CALIFORNIA 91311
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 26, 1995
To Our Stockholders:
The Annual Meeting of the Stockholders of Micropolis Corporation, a Delaware
corporation (the "Company"), will be held at Micropolis Corporation, 21329
Nordhoff Street, Chatsworth, California, on Wednesday, April 26, 1995 at 10:00
a.m., local time, for the following purposes:
1. To elect five directors to serve during the ensuing year and until their
successors are elected and have qualified;
2. To consider and vote upon an amendment to the Stock Option Plan for
Directors of Micropolis Corporation to increase the number of options
automatically granted under this plan; and
3. To transact such other business as may properly come before the meeting
and any adjournments thereof.
The Board of Directors intends to present for election as directors the
nominees named in the accompanying proxy statement, whose names are
incorporated herein by reference.
In accordance with the By-Laws of the Company, the Board of Directors has
fixed the close of business on Tuesday, March 7, 1995 as the record date for
the determination of stockholders entitled to vote at the Annual Meeting and to
receive notice thereof.
All stockholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
Ericson M. Dunstan
Secretary
Chatsworth, California
March 27, 1995
In order to ensure your representation at the Annual Meeting, if you
cannot be present, you are requested to sign and date the enclosed proxy
as promptly as possible and return it in the enclosed envelope (to which
no postage need be affixed if mailed in the United States). If you attend
the Annual Meeting and wish to vote in person, your proxy will not be
used.
<PAGE>
MICROPOLIS CORPORATION
21211 NORDHOFF STREET
CHATSWORTH, CALIFORNIA 91311
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders by the Board of
Directors of Micropolis Corporation, a Delaware corporation (the "Company"),
for solicitation of proxies for use at the Annual Meeting of Stockholders to be
held at Micropolis Corporation, 21329 Nordhoff Street, Chatsworth, California,
on Wednesday, April 26, 1995 at 10:00 a.m., local time, and at any and all
adjournments thereof. A stockholder giving a proxy pursuant to the present
solicitation may revoke it at any time before it is exercised by giving a
subsequent proxy or by delivering to the Secretary of the Company a written
notice of revocation prior to the voting of the proxy at the Annual Meeting. No
proxy will be used if the stockholder is personally present at the Annual
Meeting and informs the Secretary in writing that he or she wishes to vote his
or her shares in person. Expenses incident to the preparation and mailing of
the notice of meeting, proxy statement and form of proxy are to be paid by the
Company. It is anticipated that the mailing to stockholders of this Proxy
Statement and the enclosed proxy will commence on or about March 27, 1995.
Following the initial mailing of the proxy statement and proxies, the Company
and its agents may also solicit proxies by mail, telephone, facsimile or in
person; employees of the Company who assist in such activities will not receive
additional compensation in connection therewith.
The purpose of the meeting and the matters to be acted upon are set forth in
the foregoing attached Notice of Annual Meeting. As of the date of this Proxy
Statement, the Board of Directors knows of no other business which will be
presented for consideration at the Annual Meeting. However, if any such other
business shall properly come before the Annual Meeting, votes will be cast
pursuant to said proxies in respect of any such other business in accordance
with the judgment of the persons acting under said proxies.
VOTING SHARES AND VOTING RIGHTS
Stockholders of record at the close of business on March 7, 1995, are
entitled to notice of, and to vote at, the Annual Meeting of Stockholders.
There were 15,326,630 shares of Common Stock of the Company outstanding on that
date. Each share of the Common Stock is entitled to one vote. In voting for the
election of directors, each share has one vote for each position filled. There
is no cumulative voting, which means a simple majority of the shares voting may
elect all of the directors to be elected.
Under the Company's By-Laws and Delaware law, shares represented by proxies
that reflect abstentions or "broker non-votes" (i.e., shares held by a broker
or nominee which are represented at the meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular proposal or
proposals) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. However, under the Company's
By-Laws and Delaware law, proxies that reflect abstentions as to a particular
proposal will be treated as voted for purposes of determining the approval of
that proposal and will have the same effect as a vote against that proposal,
while proxies that reflect broker non-votes will be treated as unvoted for
purposes of determining approval and will not be counted as votes for or
against that proposal.
The beneficial ownership of the Company's Common Stock by certain beneficial
owners and by each of the Company's directors, each of its five most highly-
compensated officers and all executive officers and directors as a group is set
forth below under "Security Ownership of Certain Beneficial Owners" and
"Security Ownership of Management."
1
<PAGE>
ELECTION OF DIRECTORS
The By-Laws of the Company presently provide for five directors. All five
directors are to be elected at the 1995 Annual Meeting and will hold office
until the 1996 Annual Meeting or until their successors are elected and have
qualified. It is intended that the persons named in the enclosed proxy will,
unless such authority is withheld, vote for the election of the five nominees
proposed by the Board of Directors. In the event that any of them should become
unavailable prior to the Annual Meeting, the proxy will be voted for a
substitute nominee or nominees designated by the Board of Directors, or the
number of directors may be reduced accordingly. The following table sets forth
the names and ages of the nominees for election to the Board of Directors, the
principal occupation or employment of each of such nominees during the past
five years and at present, the name and principal business of the corporation
or other organization, if any, in which such occupation or employment is or was
carried on, directorships of other public companies held by such nominees, the
present position of such nominees with the Company, and the period during which
such nominees have served as directors of the Company. All of the nominees
named below have consented to being named herein and to serve if elected.
<TABLE>
<CAPTION>
PRESENT POSITION
PRINCIPAL OCCUPATION WITH THE COMPANY
DURING PAST 5 YEARS; AND PERIOD SERVED
NAME AND AGE OTHER DIRECTORSHIPS AS DIRECTOR
------------ -------------------- -----------------
<S> <C> <C>
Stuart P. Mabon, 57............. President and Chairman President and
of the Board of the Chairman of the
Company Board; Director
since 1976
Ericson M. Dunstan, 62.......... Senior Vice President Senior Vice
--Corporate Engineering President--
since October 1985 and Corporate Engineer-
Secretary of the Company ing and Secretary;
since 1976 Director since 1976
Chriss W. Street, 45............ Principal of Chriss No present or prior
Street and Company; a positions with the
business involved in company
stock brokerage, venture
capital, and
restructuring, since
January 1991. Chairman
and CEO of Comprehensive
Care, a publicly traded
firm which develops,
markets and manages
programs for treatment
of chemical dependency
and psychiatric
disorders, since
November 1993. Secretary
and Treasurer of
Hacienda Village
Modernization
Corporation; a nonprofit
organization to give
vocational training and
assistance to the under-
privileged minority
residents of a housing
project, since June
1993.
J. Larry Smart, 47.............. President and Chief No present or prior
Executive Officer of positions with the
Maxtor Corporation, a company
company that
manufactures Winchester
disk drives and other
mass-storage products,
from March 1994 to
February 1995; Chairman
of the Board of
Southwall Technologies
Inc., a thin film
technology company,
since March 1994;
President and Chief
Executive Officer of
Southwall Technologies
Inc. from June 1991 to
March 1994; and Senior
Vice President at SCI
Systems, a contract
manufacturer, from
November 1987 to June
1991.
S. Kenneth Kannappan, 35........ Vice President--Sales of No present or prior
Plantronics, Inc. since positions with the
February 1995. Senior company.
Vice President, Kidder,
Peabody & Co.
Incorporated, an
investment banking firm,
from 1985 to December
1994.
</TABLE>
2
<PAGE>
Mr. Street was appointed to the Board of Directors on March 27, 1995 and will
serve in that capacity until the completion of the election of Directors at the
1995 Annual Meeting.
During the 1994 fiscal year the Board of Directors of the Company held seven
meetings. Each director attended 100% of the total number of meetings of the
Board and of committees of the Board on which he served held during the year,
except Mr. Smith who was not present at one Board meeting.
The Board of Directors of the Company has the following standing committees:
the Audit Committee and the Compensation Committee. Mr. Theodore J. Smith and,
through March 1, 1995, Mr. J. Burgess Jamieson comprised the members of both
committees. The functions of the Audit Committee are to aid the directors in
fulfilling their responsibilities for financial reporting to the stockholders,
to oversee the financial controls exercised by management, and to provide
channels of communication between the Board of Directors, management and the
Company's independent auditors. The functions of the Compensation Committee are
to review and approve executive officer base salary and incentive compensation,
stock plans, and other compensation matters and to administer the Company's
stock option plan for executive officers and key employees. The Audit Committee
and the Compensation Committee met two and five times, respectively, during
1994. The Company has no nominating committee.
Each director who is not an officer of the Company was paid a retainer fee of
$3,000 per quarter, an attendance fee of $2,000 per Board meeting attended, and
a daily attendance fee of $1,000 for all committee meetings attended.
In October 1987, the Board of Directors adopted the Stock Option Plan for
Directors of Micropolis Corporation (the "Directors Plan") which was approved
by the stockholders of the Company in April 1988. As of January 31, 1995, there
were options outstanding to purchase an aggregate of 140,000 shares of Common
Stock. At the close of business on the date of each annual meeting of the
stockholders of the Company, each Director of the Company, who is not an
employee of the Company or of any affiliate of the Company and who is reelected
or continuing as a Director, is presently automatically granted an option to
purchase 5,000 shares of the Company's Common Stock and, subject to stockholder
approval of the proposed amendment to the Directors Plan described below, would
be granted an option to purchase 10,000 shares of the Company's Common Stock.
In addition, when a person is initially elected to the Board, at an annual
meeting of stockholders or at any other time, each such new Director who is not
an employee of the Company or of any affiliate of the Company is presently
automatically granted an option to purchase 20,000 shares of the Company's
Common Stock at the close of business on the date of his or her election to the
Board and, subject to stockholder approval of the proposed amendment to the
Directors Plan described below, would be granted an option to purchase 30,000
shares of the Company's Common Stock. Further stockholder action is not
required with respect to such automatic option grants in the future. Options
under the Directors Plan have an exercise price equal to the fair market value
of the shares covered by the option on the date of grant, have a term of five
years and become exercisable in three equal annual installments commencing one
year after the date of grant. At the close of business on April 26, 1995,
options to purchase 30,000 shares of the Company's Common Stock will
automatically be granted to each of Mr. Street, Mr. Smart and Mr. Kannappan (if
elected) at the market price of the Company's Common Stock on April 26, 1995
(subject to stockholder approval).
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of December 31, 1994,
with respect to those known by the Company, based solely on a review of filings
on Schedules 13D or 13G, to be beneficial owners of more than five percent (5%)
of the outstanding shares of the Company's Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
<S> <C> <C>
Ryback Management Corporation(1) 2,090,342 13.7%
7711 Carondelet Avenue
Box 16900
St. Louis, Missouri 63105
State of Wisconsin Investment Board 1,466,000 9.6%
P.O. Box 7842
Madison, Wisconsin 53707
First Pacific Advisors 1,137,480 7.5%
11400 West Olympic Boulevard
Suite 1200
Los Angeles, California 90064
Richard C. Perry 910,000 5.9%
2635 Century Parkway, N.E.
Suite 1000
Atlanta, Georgia 30345
</TABLE>
--------
(1) Shares held in a fiduciary capacity by Ryback Management Corporation and/or
Lindner Fund, Inc. as of December 31, 1994. Amount beneficially owned:
1,427,300 shares held by Linder Fund, Inc., and 663,042 shares managed by
Ryback Management Corporation.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding ownership of the
Company's Common Stock as of January 31, 1995 by nominees for Directors, by
each of the named Executive Officers and by all Executive Officers and
Directors as a group:
<TABLE>
<CAPTION>
PERCENT
AMOUNT AND NATURE OF OF
NAME BENEFICIAL OWNERSHIP(1)(2)(3) CLASS
---- ----------------------------- -------
<S> <C> <C>
DIRECTORS
Stuart P. Mabon..................... 340,667 2.2%
Ericson M. Dunstan.................. 65,250 *
Chriss W. Street.................... 26,500 *
J. Larry Smart...................... -- --
S. Kenneth Kannappan................ -- --
EXECUTIVE OFFICERS
Taroon C. Kamdar.................... 46,500 *
Nigel C. Macleod.................... 13,000
Joel A. Appelbaum................... 12,000 *
Dale J. Bartos...................... 42,093 *
All Executive Officers and Directors
as a Group (14 persons, including
those named)....................... 590,064 3.8%
</TABLE>
--------
* Less than 1%.
(1) Information with respect to beneficial ownership is based on information
furnished to the Company by each person included in this table. Except as
indicated in the notes to the table, each stockholder included in the table
has sole voting and dispositive power with respect to the shares shown to
be beneficially owned by the stockholder.
(2) All of the stockholders included in this table reside in California.
California has community property laws under which the spouse of a
stockholder in whose name securities are registered may be entitled to
share in the management of their community property which may include the
right to vote or dispose of the shares.
(3) Includes installments of options to purchase 70,667, 6,000, 46,500, 13,000,
12,000, 20,800 and 222,301 shares of Common Stock held by Mr. Mabon, Dr.
Dunstan, Mr. Kamdar, Mr. Macleod, Mr. Appelbaum, Mr. Bartos and all
executive officers and directors as a group, respectively, that were
exercisable on, or within 60 days after, January 31, 1995.
5
<PAGE>
EXECUTIVE COMPENSATION
CASH AND OTHER COMPENSATION
The following table and accompanying notes show, for the Chief Executive
Officer and the other four most highly-compensated executive officers of the
Company for 1994, the compensation paid by the Company and its subsidiaries to
such persons for services in all capacities during 1994 and the preceding two
fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- ------------
OTHER OPTIONS
NAME AND ANNUAL GRANTED ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) (SHARES) COMPENSATION(3)
------------------ ---- --------- ------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Stuart P. Mabon, 1994 $292,136 $ -- $ -- 20,000 $11,798
President and 1993 296,871 22,860 -- 50,000 3,933
Chairman of the Board 1992 273,321 127,940 -- -- 13,711
Taroon C. Kamdar, 1994 200,044 25,000 2,060 25,000 48,075
President, 1993 203,410 91,170 2,612 -- --
Asia Pacific Division 1992 175,032 219,406 6,318 10,000 4,364
Nigel C. Macleod, 1994 162,925 89,333 -- 5,000 --
Vice President-- 1993 157,993 32,000 -- -- --
Engineering(4) 1992 53,658 -- -- 30,000 --
Joel A. Appelbaum, 1994 165,421 50,000 -- 60,000 --
Executive
Vice President--Sales
and Marketing(5)
Dale J. Bartos, Senior 1994 185,484 15,000 -- 15,000 --
Vice President-- 1993 189,051 9,525 -- -- --
Finance and Chief 1992 179,072 71,644 -- 7,000 4,364
Financial Officer(6)
</TABLE>
--------
(1) Includes amounts contributed by each person named through salary reduction
under the Micropolis Corporation Employee Savings and Retirement Plan (the
"Section 401(k) Plan"). The 1993 salary year included 53 weeks.
(2) Amounts represent reimbursement during the fiscal year for the payment of
taxes.
(3) Amounts for Mr. Mabon include payoff of accrued vacation of $11,798, $3,933
and $9,347 in 1994, 1993 and 1992, respectively. Amounts for Mr. Kamdar
include cash payment of $48,075 relating to his overseas assignment.
Amounts in 1992 include the Company's contributions of $4,364 to the
Section 401(k) Plan on behalf of Mr. Mabon, Mr. Kamdar and Mr. Bartos.
(4) Bonus amounts for Mr. Macleod in 1993 and 1994 are in accordance with his
employment contract with the Company dated August 10, 1992.
(5) Mr. Appelbaum resigned from the Company on March 2, 1995.
(6) Mr. Bartos resigned from the Company on March 17, 1995.
The Company has a severance pay agreement with Mr. Kamdar and had a severance
pay agreement with Mr. Appelbaum which provide for payments to such persons in
the event their employment is terminated by the Company for reasons other than
cause. At December 30, 1994, the aggregate commitments pursuant to the
agreements were approximately $100,000 and $200,000 for Mr. Kamdar and Mr.
Appelbaum, respectively. The commitment to Mr. Kamdar is for six months base
salary and performance bonus. The commitment for Mr. Appelbaum during his first
year of employment was for one year base salary. After his first year of
employment, the commitment to Mr. Appelbaum was for six months base salary.
6
<PAGE>
STOCK OPTIONS
In October 1987, the Board of Directors adopted the Stock Option Plan for
Executive and Key Employees of Micropolis Corporation (the "Option Plan"). The
Option Plan was approved by stockholders in April 1988. The Option Plan is
administered by the Compensation Committee of the Board of Directors of the
Company. Under the Option Plan, full-time employees of the Company and of any
subsidiary of the Company are eligible to receive grants of non-qualified stock
options and incentive stock options (as defined in Section 422 of the Internal
Revenue Code (the "Code")).
The following table sets forth information regarding stock options granted in
1994 to each of the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS PRESENT VALUE(2)
--------------------------------------------------------------- ----------------
% OF TOTAL
OPTIONS
OPTIONS GRANTED GRANTED TO EXERCISE EXPIRATION
NAME (SHARES)(1) EMPLOYEES PRICE DATE 5% 10%
---- --------------- ---------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Stuart P.
Mabon.......... 20,000 4.2% $5.625 2/16/99 $31,082 $ 68,682
Taroon C.
Kamdar......... 25,000 5.2% $5.625 2/16/99 $38,852 $ 85,853
Nigel C.
Macleod........ 5,000 1.0% $5.625 2/16/99 $ 7,770 $ 17,171
Joel A.
Appelbaum...... 60,000 12.6% $5.625 2/16/99 $93,245 $206,047
Dale J. Bartos.. 15,000 3.1% $5.625 2/16/99 $23,311 $ 51,512
</TABLE>
--------
(1) The per share exercise price of all options granted is the fair market
value of the Company's Common Stock on the date of grant. Options have a
term of five years and become exercisable in three to five equal
installments, each of which accrues at the end of each year after the grant
date except for the fifth installment, which accrues 60 days before the
expiration date.
(2) The potential realizable value is calculated from the exercise price per
share, assuming the market price of the Company's Common Stock appreciates
in value at the stated percentage rate from the date of grant to the
expiration date. Actual gains, if any, are dependent on the future market
price of the Common Stock.
The following table sets forth information regarding stock option exercises
and year-end stock option values for each of the named executive officers for
1994.
OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AT DECEMBER 30, 1994
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED 'IN-THE-MONEY'
STOCK OPTIONS STOCK OPTIONS(1)
------------------------- -------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stuart P. Mabon......... -- -- 66,667 53,333 $79,201 $143,359
Taroon C. Kamdar........ -- -- 41,500 43,500 $41,615 $ 98,741
Nigel C. Macleod........ -- -- 12,000 23,000 $ 5,256 $ 24,449
Joel A. Appelbaum....... -- -- -- 60,000 -- $198,780
Dale J. Bartos(2)....... 18,000 $95,634 17,800 24,200 $14,171 $ 56,100
</TABLE>
--------
(1) Market value of underlying Common Stock on date of exercise or fiscal year-
end, minus the option exercise price. The share price as of December 30,
1994 was $8.938.
(2) The shares acquired on exercise by Mr. Bartos were still being held by him
as of March 22, 1995.
On February 25, 1993, as an inducement to his employment, the Company loaned
Mr. Macleod the $180,000 to facilitate his relocation to Southern California.
As of December 30, 1994, $120,000 was
7
<PAGE>
outstanding on the loan. The loan is free of interest so long as Mr. Macleod
is employed by the Company; if and when he is not employed by the Company,
interest will accrue at 9% per annum. The loan is secured by Mr. Macleod's
home in Southern California.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee") has
furnished the following report on executive compensation. Mr. Jamieson was a
member of the Committee through March 1, 1995. In this capacity, he was
involved in decision-making responsibilities for the 1994 fiscal year. Mr.
Jamieson left the Board of Directors prior to the completion of the Report of
the Compensation Committee.
OVERALL POLICY
The Committee consists entirely of independent, outside directors and is
responsible for formulating and implementing corporate policy with respect to
executive compensation. Each year the Committee reassesses the Company's
executive compensation program. The Committee's annual review process involves
determining the base salaries of the Chief Executive Officer ("CEO") and the
other executive officers, reviewing and approving performance bonus plans and
bonus criteria and reviewing the Company's stock option plan and analyzing
grants thereunder.
In determining the executive compensation package for 1994, the Committee
sought to retain the Company's talented and entrepreneurial management by
setting base salaries at competitive levels and to motivate executive officers
to perform to the full extent of their abilities by creating significant
incentive compensation opportunities intended to correlate executive
compensation with the Company's achievement of certain performance goals.
The Company's executive compensation program is comprised of base salary,
three types of performance bonuses, stock options and a stock purchase plan.
The policies underlying each component of the compensation program are
described more fully below. Although the components of executive officer
compensation are determined separately, the Committee considers the entire
compensation (earned or potentially earned) of each executive officer in
setting each component.
The Company has evaluated current compensation levels and concluded it is
unlikely that Section 162(m) of the Code would lead to the loss of
deductibility of compensation in future periods.
BASE SALARY
The Committee determines the base salary of the CEO based on competitive
compensation data, overall Company financial and operating performance and the
Committee's assessment of the CEO's past performance and its expectation as to
his future contributions in leading the Company. The Committee has adopted a
similar policy with respect to the other executive officers of the Company.
Utilizing salary survey data supplied by outside industry associations and
independent survey organizations, the Committee fixes base salaries that are
within a range of salaries for positions of similar responsibilities at
selected other companies. In addition, the Committee considers factors such as
overall Company performance and the individual's past performance and future
potential in establishing the base salaries of the other executive officers,
as well as the recommendations of the CEO. The base salaries for the CEO and
the other executive officers have been held constant since July 1, 1992.
BONUS PLANS
The Committee believes that the CEO and other executive officers' incentive
compensation should be influenced by Company financial and operating
performance and develops and approves incentive compensation plans which are
based upon the achievement of performance goals such as earnings per share
(EPS), sales, gross margins and the market capitalization value of the
Company's Common Stock. Incentive
8
<PAGE>
compensation plans are also based on the achievement by executive officers and
other key employees of individual performance goals, which are typically
related to the performance of his or her business group or the area of the
Company's business in which he or she is involved.
Under the Company's Key Person Bonus Plan (the "KPB"), the Committee, in
consultation with the CEO, fixes a targeted dollar amount of incentive
compensation for the CEO and each other executive officer based upon industry
compensation surveys, past performance and estimated future performance. For
1994, the target incentive compensation of the CEO was based principally upon
the achievement of a specific EPS target for 1994, which was fixed in December
1993, and also upon overall Company performance in such areas as asset
management, accounts receivable, cash flow and inventory turns. For the other
executive officers, 50% of the target incentive compensation was based on the
achievement of the targeted EPS for 1994. The remaining 50% of the other
executive officer incentive compensation under the KPB Plan was linked to
specific individual performance objectives. Each individual has several
performance objectives. These performance objectives related to such matters as
cost of material reduction, inventory management, product quality, accounts
receivable, customer service, timeliness of product delivery and new product
introduction. In the event that an executive officer did not achieve a specific
individual performance objective, a proportionate amount of EPS incentive
compensation was lost by that participant. The CEO consults with the Committee
as to whether or not each executive officer has achieved his or her individual
performance objective or objectives. The Company did not achieve its EPS target
in 1994. The CEO did not receive a bonus under the KPB Plan for 1994.
STOCK OPTION PLAN
Stock options under the Company's Option Plan (approved by stockholders in
April 1988) are periodically granted by the Compensation Committee to executive
officers and other key employees of the Company to further the growth,
development and financial success of the Company. In determining the grants of
stock options the Committee reviews with the Chief Executive Officer his
recommendations for individual awards, and takes into account the respective
scope of responsibility and the anticipated performance requirements and
contributions to the Company of each proposed optionee. Stock option awards are
also based, among other things, on a review of compensation data from selected
other companies as well as the Committee's perception of past and expected
future contributions to the Company. All options are granted at the current
market price. Since the value of an option bears a direct relationship to the
Company's stock price it is an effective incentive for Company management to
create value for stockholders. The Committee views stock options, therefore, as
an important component of its long-term, performance based compensation
philosophy.
STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (the "Stock Purchase Plan") was
adopted by the Board of Directors and approved by stockholders in April 1984.
The Stock Purchase Plan is administered by the Board and qualifies as an
"employee stock purchase plan" under Section 423 of the Code. All employees and
executive officers, including the CEO, are eligible to participate in the Stock
Purchase Plan.
The Stock Purchase Plan is intended to provide Company executives and
employees with a favorable means of acquiring Common Stock of the Company
through payroll deductions and to provide an incentive for continued
employment. In general, the purchase price is 85% of the market price of the
stock at either the beginning or the end (whichever is lower) of each plan
period.
COMPENSATION COMMITTEE
Theodore J. Smith
9
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SHAREHOLDER RETURN PERFORMANCE
The following graph compares the Company's cumulative stockholder return on
its Common Stock (no dividends have been paid thereon) with the return on the
common stocks included in The Nasdaq Stock Market (US) and the Nasdaq Computer
Manufacturers indexes. The stocks in these groups are weighted by market
capitalization and returns thereon include the reinvestment of dividends. The
presentation assumes $100 invested on December 29, 1989, the last trading day
prior to the end of the Company's 1989 fiscal year.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
AMONG MICROPOLIS CORP., NASDAQ STOCK MARKET U.S. INDEX AND
NASDAQ COMPUTER MANUFACTURERS INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period MICROPOLIS NASDAQ STOCK NASDAQ COMPUTER
(Fiscal Year Covered) CORP. MARKET INDEX MANUFACTURERS INDEX
--------------------- ---------- ------------ -------------------
<S> <C> <C> <C>
Measurement Pt-12/29/89 $100 $100 $100
FYE 12/30/90 $250 $ 85 $107
FYE 12/30/91 $246 $136 $149
FYE 12/30/92 $232 $157 $200
FYE 12/30/93 $200 $181 $190
FYE 12/30/94 $255 $177 $209
</TABLE>
10
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities
("Insiders"), to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common
Stock of the Company. Insiders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on its review of the copies of such
reports furnished to the Company and written representations from certain
Insiders that no other reports were required, during the fiscal year ended
December 30, 1994 all Section 16(a) filing requirements applicable to Insiders
were complied with.
PROPOSED AMENDMENT TO THE STOCK OPTION PLAN FOR
DIRECTORS OF MICROPOLIS CORPORATION
The stockholders of the Company will be asked to approve an amendment to the
Directors Plan. The Directors Plan was adopted by the Board of Directors in
October 1987, approved by the stockholders in April 1988 and amended in April
1994. The proposed amendment will increase the number of future options
automatically granted under the Directors Plan, upon the terms and conditions
set forth in the Directors Plan. In March 1995, the Board of Directors adopted,
subject to approval by the stockholders at the April 26, 1995 Annual Meeting,
the proposed amendment.
The principal features of the Directors Plan are summarized below. Copies of
the Directors Plan will be available at the Annual Meeting and can also be
obtained by making written request of the Company's Secretary.
PARTICIPATION IN THE DIRECTORS PLAN
It is proposed that the Directors Plan be amended so that each Director of
the Company, who is not an employee of the Company or of any affiliate of the
Company and who is reelected or continuing as a Director, automatically shall
be granted an option to purchase 10,000 shares of the Company's Common Stock at
the close of business on the date of each annual meeting of the stockholders of
the Company, subject to approval of this amendment by the stockholders at the
April 26, 1995 Annual Meeting. In addition, subject to such stockholder
approval, it is further proposed that when a person is initially elected to the
Board, at an annual meeting of stockholders or at any other time, each such new
Director who is not an employee of the Company or of any affiliate of the
Company automatically shall be granted an option to purchase 30,000 shares of
the Company's Common Stock at the close of business on the date of his or her
election to the Board. If these amendments are approved by the stockholders,
further stockholder action would not be required with respect to such automatic
option grants in the future.
OPTIONS OUTSTANDING UNDER THE DIRECTORS PLAN
At January 31, 1995, there were options outstanding to purchase an aggregate
of 140,000 shares of Common Stock and there were 115,000 shares available for
future issuance under the Directors Plan. The market value of the shares of
Common Stock represented by options outstanding under the Directors Plan was
$1,338,750 as of January 31, 1995.
Pursuant to the Directors Plan as presently in effect, each Director of the
Company, who is not an employee of the Company or of any affiliate of the
Company and who is reelected or continuing as a Director, automatically shall
be granted an option to purchase 5,000 shares of the Company's Common Stock at
the close of business on the date of each annual meeting of the stockholders of
the Company. In addition, when a
11
<PAGE>
person is initially elected to the Board, at an annual meeting of stockholders
or at any other time, each such new Director who is not an employee of the
Company or of any affiliate of the Company automatically shall be granted an
option to purchase 20,000 shares of the Company's Common Stock at the close of
business on the date of his or her election to the Board. Further stockholder
action is not required with respect to such automatic option grants in the
future.
Generally, options which are exercisable upon a termination of a director's
directorship with the Company expire three months following such termination.
Options may, however, be exercised within one year by the executors or
administrators of the director's estate or his successors by will or the laws
of descent and distribution in the event the director's directorship is
terminated by reason of his death or if the director dies within the three-
month period following termination of his directorship.
The exercise prices of options automatically granted would be equal to 100%
of the fair market value of the Company's Common Stock on the date of grant. To
exercise an option, the directors must deliver to the Company a written notice
of exercise and full payment in cash of the exercise price for the shares as to
which the option is being exercised.
FEDERAL INCOME TAX CONSEQUENCES
The Federal income tax discussion set forth below is intended for general
information only. State and local income tax consequences are not discussed,
and may vary from locality to locality.
For Federal income tax purposes, the recipient of non-qualified stock options
granted under the Directors Plan will not realize income upon the grant of the
option, nor will the Company then be entitled to any deduction. Generally, upon
exercise of non-qualified stock options the optionee will realize ordinary
income, and, subject to Section 162(m) of the Code, the Company will be
entitled to a deduction, in an amount equal to the difference between the
option exercise price and the fair market value of the stock at the date of
exercise of non-qualified stock options in order to be entitled to the tax
deduction. An optionee's basis for the stock for purposes of determining his
gain or loss on his subsequent disposition of the shares generally will be the
fair market value of the stock on the date of exercise of the non-qualified
stock option.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of a majority of the shares present or represented and
entitled to vote on this amendment at the Annual Meeting of Stockholders is
required to approve the adoption of this amendment. The Board of Directors has
adopted the amendment and recommends a vote FOR approval of the amendment to
the Directors Plan which increases the number of future options automatically
granted under the Directors Plan, upon the terms and conditions set forth in
the Directors Plan.
12
<PAGE>
GENERAL
INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young to serve as the Company's
independent accountants for the 1995 fiscal year. One or more representatives
of Ernst & Young will be present at the Annual Meeting to respond to
appropriate questions and will be given an opportunity to make a statement if
they so desire.
STOCKHOLDER PROPOSALS
Stockholder proposals for presentation at the annual meeting to be held in
1996 must be received at the Company's principal executive offices on or before
November 22, 1995.
ANNUAL REPORT
The Company's Annual Report to Stockholders containing audited financial
statements for the year ended December 30, 1994 is being mailed to all
stockholders of record with these proxy materials.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN THE ACCOMPANYING
PROXY CARDS IN THE ENCLOSED ENVELOPE.
ERICSON M. DUNSTAN
Secretary
DATED: March 27, 1995
13
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MICROPOLIS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, APRIL 26, 1995
The undersigned, a stockholder of Micropolis Corporation, a Delaware
corporation, hereby appoints Stuart P. Mabon and Barbara V. Scherer and each of
them, each having full power of substitution to vote the shares of stock of
Micropolis Corporation which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of said Corporation to
be held at Micropolis Corporation, 21329 Nordhoff Street, Chatsworth,
California, on Wednesday, April 26, 1995, at 10:00 A.M. and at any adjournment
thereof.
1. Election of Directors:
FOR [_] Authority to vote WITHHOLD [_] Authority to vote for all
for the election of all nominees listed below.
nominees listed below.
(Except as marked to the contrary below)
Stuart P. Mabon, Ericson M. Dunstan, Chriss W. Street,
J. Larry Smart, S. Kenneth Kannappan
(Instruction: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below.)
-----------------------------------------------------------------------------
2. Proposed amendment to the Stock Option Plan for Directors of Micropolis
Corporation.
FOR [_] AGAINST [_] ABSTAIN [_]
(continued and to be signed on other side)
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. MANAGEMENT RECOMMENDS A
VOTE FOR THE ELECTION OF THE ABOVE DIRECTORS AND FOR APPROVAL OF THE ABOVE
PROPOSAL AND IF NOT OTHERWISE SPECIFIED THIS PROXY WILL BE VOTED
ACCORDINGLY.
-------------- ----------------
Proxy Number Number of Shares
Dated: ----------------------, 1995
-----------------------------------
-----------------------------------
(Signature(s) of Stockholder(s))
(NOTE--Please sign exactly as your
name or names appear on the label.
If more than one name appears, all
persons so designated should sign.
When signing in a representative
capacity, please give your full
title.)
[_] I plan to attend the meeting.
Please return promptly in the enclosed envelope, which requires
no postage if mailed in the U.S.A.
DO NOT FOLD, STAPLE OR MUTILATE
