<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
STRATUS COMPUTER, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
STRATUS COMPUTER, INC.
------------------------------------------------------------------------
(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:
(4) Date Filed:
Notes:
<PAGE>
STRATUS COMPUTER, INC.
55 FAIRBANKS BOULEVARD
MARLBOROUGH, MASSACHUSETTS 01752
March 24, 1995
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Stratus Computer, Inc., which will be held on Tuesday, April 25, 1995, at 2:00
PM, at the offices of the Company, 55 Fairbanks Boulevard, Marlborough,
Massachusetts.
The following Notice of Annual Meeting of Stockholders and Proxy Statement
describes the items to be considered by the stockholders and contains certain
information about Stratus' directors and executive officers.
Please sign and return the enclosed proxy card as soon as possible in the
envelope provided so that your shares can be voted at the meeting in accordance
with your instructions. Even if you plan to attend the meeting, we urge you to
sign and promptly return the enclosed proxy. You can revoke it at any time
prior to the meeting, or vote your shares personally if you attend the meeting.
We look forward to seeing you.
Sincerely,
WILLIAM E. FOSTER
Chairman of the Board
Chief Executive Officer
<PAGE>
STRATUS COMPUTER, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 25, 1995
The Annual Meeting of Stockholders of Stratus Computer, Inc. (the "Company")
will be held at the offices of the Company, 55 Fairbanks Boulevard,
Marlborough, Massachusetts, on Tuesday, April 25, 1995, at 2:00 PM, for the
following purposes:
1. To elect two Class II directors for a three year term.
2. To approve amendments to the 1983 Stock Option Plan and the Non-
Qualified Common Stock Option Plan increasing the combined aggregate
number of shares of common stock authorized to be issued under both
plans from 8,780,200 to 9,380,200, an increase of 600,000 shares.
3. To approve an amendment to the Employee Stock Purchase Plan
increasing the number of shares that may be issued thereunder from
2,700,000 to 3,100,000, an increase of 400,000 shares.
4. To ratify the selection by the Board of Directors 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 of the meeting.
Stockholders of record at the close of business on March 1, 1995 will be
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting.
In addition to the foregoing, stockholders are hereby notified that the
Board of Directors has adopted certain Amendments to the By-laws of the
Company. In connection with Mr. Haroian's election to the office of President
and Chief Operating Officer in November 1993, the By-laws, which had previously
provided that the President would be chief executive officer, were amended to
provide that, if so designated by the Board, the Chairman of the Board would be
chief executive officer and the President would have such duties as the Board
prescribes. In January 1995, in connection with Mrs. Obourn's election to the
Board, the By-laws were amended to provide that, subject to Massachusetts law
and the Articles of Incorporation of the Company, the maximum number of
directors shall be eight (in lieu of seven, as previously provided). These By-
law amendments adopted by the Board do not require any action by stockholders
nor is any such action proposed to be taken at the meeting. The amendments, in
accordance with Massachusetts law and the Articles of Incorporation and By-laws
of the Company, are subject to further amendment or repeal by either the
stockholders or the directors.
By order of the Board of Directors
FREDERICK S. PRIFTY
Clerk
Marlborough, Massachusetts
March 24, 1995
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
<PAGE>
STRATUS COMPUTER, INC.
55 FAIRBANKS BOULEVARD
MARLBOROUGH, MASSACHUSETTS 01752
(508) 460-2000
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Stratus Computer, Inc. (the "Company").
The proxies will be used at the Annual Meeting of Stockholders to be held on
April 25, 1995 and at any adjournment of that meeting. Each proxy will be voted
in accordance with the instructions specified, and, if no instruction is
specified, the proxy will be voted in favor of the proposals set forth in the
Notice of Meeting. Any proxy may be revoked by a stockholder at any time before
it is exercised by a written revocation, a subsequently dated proxy or an oral
request at the meeting.
The Board of Directors has fixed March 1, 1995 as the record date for the
determination of stockholders entitled to vote at the meeting. On that date
there were outstanding and entitled to vote 23,824,890 shares of common stock
of the Company. Each share is entitled to one vote.
A plurality of the shares voting is required for the election of directors.
Approval of each of the other matters which is before the meeting will require
the affirmative vote of the holders of a majority of the shares voting thereon.
No votes may be taken at the meeting, other than a vote to adjourn, unless a
quorum has been constituted consisting of the representation of a majority of
the outstanding shares as of the record date. Votes will be tabulated by the
Company's transfer agent subject to the supervision of persons designated by
the Board of Directors as inspectors.
All shares represented at the meeting, by holders present either in person
or by proxy, will be deemed to be represented for purposes of constituting a
quorum. Shares which are represented at a meeting but as to which the holder
abstains from voting or has no voting authority in respect of a particular
matter (such as in the case of a broker non-vote) will not be deemed to be
voted on such matter and will not be the equivalent of negative votes on such
matter.
The Company's Annual Report to Stockholders for the year ended January 1,
1995 is being mailed to stockholders together with this Proxy Statement. The
date of mailing of this Proxy Statement is expected to be on or about March 24,
1995.
<PAGE>
The following table sets forth, to the knowledge of the Company, the only
beneficial owners of more than 5% of the Company's outstanding common stock as
of February 22, 1995. This information is based on the most recent statements
on Schedule 13G filed with the Securities and Exchange Commission or on other
information available to the Company.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
NAME AND ADDRESS OWNED PERCENT
- ---------------- ------------ -------
<S> <C> <C>
Neuberger & Berman (1)..................................... 2,075,698 8.69
605 Third Avenue
New York, New York 10158-3698
FMR Corp. (2).............................................. 1,657,500 6.94
82 Devonshire Street
Boston, Massachusetts 02109-3614
</TABLE>
- -----------------------------
(1) Neuberger & Berman has sole voting power with respect to 750,880 shares,
shared voting power with respect to 963,500 shares, and shared investment
power with respect to all 2,075,698 shares.
(2) FMR has sole voting power with respect to 62,400 shares and sole investment
power with respect to all 1,657,500 shares.
ELECTION OF DIRECTORS
(ITEM 1 OF NOTICE)
There are currently three Class I directors, two Class II directors and
three Class III directors. On January 31, 1995, the Board of Directors voted
(i) to expand the number of Class I directors from two to three and (ii) to
elect Candy M. Obourn to the Board of Directors as a Class I director. The
present terms of the Class I and Class III directors extend until the 1997 and
1996 Annual Meetings of Stockholders, respectively. The present terms of the
Class II directors expire at the 1995 Annual Meeting, and the Board has fixed
at two the number of Class II directors to be elected at the meeting.
The proxy will be voted to elect as Class II directors the two nominees
(Messrs. Ferri and Hendrie), unless authority to vote for the election of
directors is withheld by marking the proxy to that effect or the proxy is
marked with the names of directors as to whom authority to vote is withheld.
Each of the nominees is presently a director of the Company and has consented
to serve if re-elected.
Each Class II director will be elected to hold office until the third annual
meeting of stockholders following the 1995 Annual Meeting (1998) and until a
successor is elected and qualified. If a nominee becomes unavailable, the proxy
may be voted for the election of a substitute, unless authority has been
withheld as to that nominee.
2
<PAGE>
Set forth below are the names of each nominee and the positions and offices
held by him, his age at February 22, 1995, the year in which he became a
director of the Company, his principal occupation and business experience for
at least the last five years, and the names of other publicly-held companies
for which he serves as a director. Following that is the same information
regarding the other directors of the Company.
CLASS II DIRECTORS--NOMINEES FOR ELECTION AT THE ANNUAL MEETING TO BE HELD
APRIL 25, 1995
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION, DIRECTOR
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE AGE
- ------------------------------------- -------- ---
<S> <C> <C>
Paul J. Ferri........................................................ 1981 56
He has been, since 1978, a general partner of Hellman, Ferri
Investment Associates, since 1982, a general partner of Matrix
Partners, L.P., since 1985, a general partner of Matrix Partners
II, L.P., and since 1990, a general partner of Matrix Partners
III, L.P., all of which are venture capital investment
partnerships. Mr. Ferri is a director of BancTec, Inc., a
manufacturer of check-processing equipment, Xyplex Corporation, a
manufacturer of data communications equipment, and Atria Software,
Inc., a developer of software management tools.
Gardner C. Hendrie................................................... 1985 62
He has been, since May 1985, a private investor and independent
consultant, and since 1987, a general partner of Sigma Partners,
a venture capital investment partnership. Mr. Hendrie was a
founder of the Company and, from 1980 through 1985, served the
Company as an executive officer in various senior engineering
management positions. Mr. Hendrie is a director of Atria
Software, Inc., a developer of software management tools.
CLASS III DIRECTORS--TERMS EXTENDING UNTIL 1996
Alexander V. d'Arbeloff.............................................. 1980 67
He has been, since 1971, President and Chief Executive Officer of
Teradyne, Inc., a producer of automatic test equipment for the
electronics industry. Mr. d'Arbeloff is a director of Teradyne,
Inc. and BTU Corporation, a manufacturer of thermal processing
equipment.
Robert M. Morrill.................................................... 1983 57
He was, from July 1983 through December 1990, a general partner of
H & Q Investment Partners, a venture capital investment
partnership. Since January 1991, Mr. Morrill has been a private
investor. Mr. Morrill is a director of VMARK Software, Inc., a
supplier of database and application development software.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION DIRECTOR
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE AGE
- ------------------------------------- -------- ---
<S> <C> <C>
Gary E. Haroian...................................................... 1993 43
Mr. Haroian joined the Company in 1983 as Corporate Controller and
has since served in the following senior management positions:
1985-1988, Vice President, Finance and Administration and
Treasurer; 1988-1990, Senior Vice President, Finance and
Administration, Treasurer, and Chief Financial and Accounting
Officer; 1990-1991, Vice President and General Manager, Corporate
Division; 1991-1992, Senior Vice President and General Manager,
Corporate Division; 1992-November 1993, Executive Vice President
and General Manager, Corporate Operations; and since November
1993, President and Chief Operating Officer.
CLASS I DIRECTORS--TERMS EXTENDING UNTIL 1997
Arthur Carr.......................................................... 1990 63
He was, from 1982 to 1986, Executive Vice President and General
Manager of the Information Systems Group of Motorola, Inc., from
1986 to 1989, President of Stellar Computer, Inc., a manufacturer
of graphics super computers, from 1989 to 1991, President of Carr
& Associates Management Consultants, and from 1991 through
November 1993, Chairman, President and Chief Executive Officer of
Bytex Corporation, a manufacturer of data communications
equipment. Since November 1993, Mr. Carr has been a private
investor. Mr. Carr is a director of Bay Networks, Inc., a
manufacturer of computer network systems.
William E. Foster.................................................... 1980 50
Mr. Foster is a founder of the Company and he has been, since
1980, Chairman and Chief Executive Officer of the Company. From
1980 until November 1993, Mr. Foster also served as President of
the Company. Mr. Foster is a director of Avid Technology, Inc., a
developer of audio/video editing software.
Candy Obourn......................................................... 1995 44
Mrs. Obourn has served in the following management positions for
Eastman Kodak Company: 1989-1990, General Manager, Data Processing
Products, Business Imaging Systems; 1990-1991, Assistant to
Chairman of the Board; 1990-1993, Vice President & Director of
Information Systems & Business Processes; 1993-present, Vice
President & General Manager of Business Imaging Systems.
</TABLE>
4
<PAGE>
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth information as of February 22, 1995 as to
shares of common stock of the Company beneficially owned by each of the
directors and the named executive officers of the Company and the directors and
all executive officers as a group. Except as otherwise indicated, each person
has sole investment and voting power with respect to the shares owned.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK
--------------------
NUMBER OF PERCENT OF
SHARES(1) OWNERSHIP
--------- ----------
<S> <C> <C>
Alexander V. d'Arbeloff................................... 103,588 .43%
Arthur Carr (2)........................................... 21,000 .09%
Paul J. Ferri............................................. 104,312 .44%
William E. Foster (3)..................................... 332,281 1.39%
Gary E. Haroian........................................... 182,238 .76%
Gardner Hendrie........................................... 24,000 .10%
Robert M. Morrill (4)..................................... 25,185 .11%
Candy M. Obourn........................................... 0 .00%
Robert E. Donahue......................................... 53,320 .22%
Paul R. Jones............................................. 47,800 .20%
David M. Weishaar......................................... 42,000 .18%
Richard L. Tarulli........................................ 55,250 .23%
All directors and executive officers as a group (15 per-
sons).................................................... 1,138,001 4.77%
</TABLE>
- -----------------------------
(1) Includes 661,885 shares which may be acquired within sixty days after
February 22, 1995 by exercise of stock options by the directors and
executive officers as follows: Mr. d'Arbeloff, 29,000; Mr. Carr, 20,000;
Mr. Ferri, 28,000; Mr. Foster, 167,500; Mr. Haroian, 179,830; Mr. Hendrie,
24,000; Mr. Morrill, 15,185; Mr. Donahue, 53,320; Mr. Jones, 47,800; Mr.
Weishaar, 42,000; Mr. Tarulli, 55,250; and all directors and executive
officers as a group, 752,140. Of those shares, 267,260 would be fully
vested as to all directors and all executive officers as a group within
that sixty day period, and the holders would have investment and voting
powers; the remaining shares would be subject to vesting, and the holders
would have voting but not investment powers until the shares vested.
(2) Excludes 400 shares held by Mr. Carr's wife, beneficial ownership of which
he disclaims.
(3) Excludes 62,000 shares held by Mr. Foster's wife, beneficial ownership of
which he disclaims.
(4) Includes 10,000 shares held by Morrill Associates Limited Partners, of
which Mr. Morrill and members of his family are partners.
5
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 1994, the Board of Directors of the Company held five meetings. Each
incumbent director attended at least 75% of the aggregate number of the
meetings of the Board and the meetings of the committees of the Board on which
he served.
The Board of Directors has an Audit Committee which held two meetings during
1994. The current members of the Audit Committee are Messrs. Ferri and Morrill.
The principal functions of the Committee are to review matters relating to the
examination of the Company by its independent auditors and its accounting
control procedures.
The Board of Directors has a Compensation and Stock Option Committee which
held 2 meetings during 1994. The current members of this Committee are Messrs.
d'Arbeloff, Carr, Ferri, Hendrie and Morrill, comprising all of the non-
employee directors, except Mrs. Obourn who is expected to be elected to the
committee after the annual meeting. The principal functions of the Committee
are to fix the compensation of senior management and to administer the grant of
options under the Company's stock option plans.
The Board of Directors does not have a nominating or similar committee.
6
<PAGE>
EXECUTIVE COMPENSATION
I. SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid by the Company for
services rendered to the Company and its subsidiaries in all capacities during
the fiscal years ended January 1, 1995, January 2, 1994, and January 3, 1993 to
the chief executive officer, the four most highly paid persons other than the
CEO who were serving as executive officers on January 1, 1995, and one other
person who served as an executive officer during part of fiscal 1994.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
SHARES
ANNUAL COMPENSATION UNDER
NAME AND PRINCIPAL POSITION ---------------------------- OPTION ALL OTHER
(AT JANUARY 1, 1995) YEAR SALARY ($)(1) BONUS ($) AWARDS (#) COMPENSATION ($)(1)
- --------------------------- ---- ------------- --------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
William E. Foster....... 1994 415,012 422,293 50,000 4,500
Chairman & Chief 1993 450,000 29,100 60,000 7,075
Executive Officer 1992 475,008 6,600 0 8,728
Gary E. Haroian......... 1994 350,012 356,151 80,000 4,500
President & Chief 1993 315,000 19,123 62,000 7,075
Operating Officer 1992 315,000 5,715 0 8,728
Robert E. Donahue....... 1994 235,000 160,174 20,000 4,500
Vice President Finance & 1993 225,000 7,483 24,000 6,836
Chief Financial Officer 1992 195,000 2,855 0 6,400
Paul R. Jones........... 1994 230,000 132,458 18,000 4,500
Vice President & Chief 1993 230,000 8,314 27,000 6,986
Operating Officer 1992 220,000 2,855 0 7,060
ISIS Distributed
Systems, Inc.(2)
David M. Weishaar(3).... 1994 220,000 145,525 20,000 4,500
Vice President Worldwide 1993 95,898 70,000 25,000 2,933
Operations & 1992 -- -- -- --
Chief Quality Officer
Richard L. Tarulli(4)... 1994 299,994 180,805 18,000 284,500
1993 300,000 41,547 45,000 7,075
1992 285,000 6,120 0 8,728
</TABLE>
- -----------------------------
(1) Salary includes amounts deferred by the named executive officer and All
Other Compensation consists exclusively (except for Mr. Tarulli in 1994) of
the Company's contribution under the Company's capital accumulation plan
established pursuant to Section 401 (k) of the Internal Revenue Code. Under
the capital accumulation plan, each participant may defer up to fifteen
percent of his annual salary up to an annual maximum amount prescribed by
IRS regulations. The Company matches such deferrals (up to an IRS maximum
amount of $4,500 in 1994) to the extent of achievement by the Company of
certain profit goals.
(2) Isis Distributed Systems, Inc. is a wholly owned subsidiary of the Company.
(3) Mr. Weishaar began his employment with the Company in 1993.
(4) Mr. Tarulli served as Senior Vice President, World Wide Sales and Service
until his resignation in December 1994 and thereafter was not an executive
officer. Upon his resignation, the Company entered into an agreement with
Mr. Tarulli pursuant to which he will continue as an employee through
December 31, 1995, subject to his earlier voluntary termination. The amount
set forth for him in 1994 for all other Compensation consists of $4,500
contributed by the Company under the capital accumulation plan and
$280,000, which is the amount accrued by the Company in 1994 for the
maximum salary payable to him in 1995 under the agreement.
7
<PAGE>
II. OPTION GRANTS TABLE
The following table sets forth information with respect to stock options
granted by the Company to the named executive officers in the fiscal year ended
January 1, 1995.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
--------------------------------------------- -----------------------
% OF TOTAL
OPTIONS
OPTIONS GRANTED TO EXERCISE
GRANTED(1) EMPLOYEES IN PRICE EXPIRATION
NAME (#/SHARES) FISCAL YEAR ($/SHARES) DATE 5%($)(2) 10%(2)
- ---- ---------- ------------ ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
William E. Foster....... 50,000 4.0% 27.25 3/2/04 857,000 2,171,500
Gary E. Haroian......... 80,000 6.5% 27.25 3/2/04 1,371,200 3,474,400
Robert E. Donahue....... 20,000 1.6% 27.25 3/2/04 342,800 868,600
Paul R. Jones........... 18,000 1.5% 27.25 3/2/04 308,520 781,740
David M. Weishaar....... 20,000 1.6% 27.25 3/2/04 342,800 868,600
Richard L. Tarulli...... 18,000 1.5% 27.25 3/2/04 308,520 781,740
</TABLE>
- -----------------------------
(1) All options granted are exercisable in full, but shares purchased may not
be disposed of and are subject to repurchase by the Company at the exercise
price until they vest. Shares vest at the rate of 5% per quarter over a
five year period from the date of grant, subject to acceleration upon
certain change-of-control events. Such events include a tender offer for or
acquisition of 30% or more of the stock of the Company by any person or
group, a sale or merger pursuant to which the stock of the Company is
converted into cash or other property, and a majority of the Board ceasing
to consist of the current members or successors nominated by the current
members. Shares vest in full upon such an event.
(2) As required by the rules of the Securities and Exchange Commission,
potential values are stated based on the prescribed assumption that the
common stock will appreciate in value from the date of grant to the end of
the option term at rates (compounded annually) of 5% and 10%, respectively,
and therefore do not reflect past results and are not intended to forecast
possible future appreciation, if any, in the price of the common stock.
8
<PAGE>
III. OPTION EXERCISES AND FISCAL YEAR END OPTION VALUE TABLE
The following table sets forth, for the named executive officers, the number
of shares for which stock options were exercised in the fiscal year ended
January 1, 1995, the realized value or spread (the difference between the
exercise price and market value on date of exercise), and the number and
unrealized spread of the unexercised options held by each at fiscal year end.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED VALUE FY-END FY-END
NAME ON EXERCISE (#) REALIZED ($) (# SHARES)(1) ($)(1)
- ---- --------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
William E. Foster....... 0 0 167,500 2,505,625
Gary E. Haroian (2)..... 0 0 179,830 2,290,233
Robert E. Donahue (2)... 0 0 53,320 657,820
Paul R. Jones (2)....... 14,200 275,619 47,800 588,938
David M. Weishaar (2)... 3,000 78,375 42,000 671,000
Richard L. Tarulli...... 27,250 445,493 55,250 739,100
</TABLE>
- -----------------------------
(1) All shares shown are exercisable in full, but are subject to the vesting
provisions described under the Option Grants Table. The following number of
shares held by the named executive officers were fully vested as of fiscal
year-end: Mr. Foster, 65,750 shares, Mr. Haroian, 64,177 shares, Mr.
Donahue, 18,410 shares, Mr. Jones 8,750, Mr. Weishaar 7,500, and Mr.
Tarulli, 4,550 shares.
(2) Does not include 939 shares purchased by Mr. Haroian, 935 shares purchased
by Mr. Donahue, 935 shares purchased by Mr. Jones, and 653 shares purchased
by Mr. Weishaar during 1994 under the Company's Employee Stock Purchase
Plan.
DIRECTORS COMPENSATION
Each director of the Company who is not an employee is paid $17,000 per year
and $1,000 for each meeting of the Board attended. In addition members of the
Audit Committee, Compensation and Stock Option Committee and any other special
committees formed from time to time are paid $1,000 for each meeting of such
committee attended. Directors of the Company who are not employees have also
been granted stock options annually in connection with the performance of their
duties. In 1994, each non- employee director was granted an option for the
purchase of 6,000 shares at an exercise price equal to the fair market value at
the time of grant. Options granted to non-employee directors are exercisable in
full, but the underlying shares vest over a five year period from the date of
grant, subject to acceleration upon certain change-of-control events.
9
<PAGE>
The following report on executive compensation and the Performance Graph on
page 12 shall not be incorporated by reference into any filings by the Company
with the Securities and Exchange Commission.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
This report, prepared by the Compensation and Stock Option Committee,
addresses the Company's executive compensation policies and the basis on which
fiscal 1994 executive officer compensation determinations were made. The
Committee (aided by compensation professionals employed by the Company) designs
and approves all components of executive compensation.
To ensure executive compensation is designed and administered in an
objective manner, the Committee's members are all non-employee directors. The
duty of the Committee is to set the base salary and variable compensation for
all executive officers, as well as the design of all other elements of the
executive compensation program.
Policy: The Company's overall policy for compensating its executive officers
continues to be to establish aggregate compensation levels which (i) provide
appropriate incentives for individual and Company performance (ii) are
sufficiently competitive within the computer/high-technology industry to retain
and, when necessary, attract executive officers who are capable of leading the
Company to achieve its business objectives, (iii) reward outstanding
performance and (iv) tie the interests of the Company's executives to the
interests of the Company's stockholders.
The principal components of the executive compensation programs are base
salary, variable bonus, and stock options, as described below. In addition,
executives are eligible to participate, on a non-discriminatory basis, in
various benefit programs provided to all full-time employees, including the
capital accumulation and employee stock purchase plans and the group medical,
disability and life insurance programs. In reaching its decisions with regard
to actual compensation levels, the Committee takes into consideration all
elements of the program rather than any one element in isolation.
Competitive market data is obtained by using market standard surveys. This
competitive market data compares the Company's compensation programs to those
of a group of computer/high-technology companies consisting of substantially
the same companies as the industry index shown on the performance graph below.
The Company's overall compensation is generally targeted at the mid-range of
the comparison group.
Base Salary and Variable Bonus: The 1994 executive compensation program was
designed to continue the process, begun in 1991, of more directly tying the
executive officers' compensation to the performance of the Company. Consistent
with the foregoing, Mr. Foster's base salary for 1994 was reduced by
approximately 8% compared to 1993, while his targeted bonus was increased by
34% compared to 1993, resulting in an overall targeted annual compensation
increase of approximately 4% over 1993. The Committee determined that the
overall targeted compensation was approximately at the mid-range of
compensation for chief executive officers of comparable companies. Mr. Foster's
potential bonus for 1994 was based upon attainment by the Company of an
earnings per share goal established for bonus purposes. His actual bonus of
$422,293 resulted from the extent by which the Company exceeded the earnings
per share goal.
Approximately 60% of the aggregate targeted annual compensation for the
other four executive officers for 1994 consisted of base salaries, and the
remainder consisted of potential bonuses based upon the
10
<PAGE>
attainment of certain individuals goals in combination with the Company meeting
or exceeding its earnings per share goal established for bonus purposes. The
overall targeted annual compensation for each of the executive officers was
determined by the Committee to be approximately at the mid-range of
compensation for similar positions in comparable companies.
Stock Options: The Committee believes that stock ownership by executive
officers is important in aligning management and stockholder interests in the
long-term enhancement of stockholder value. Since the early years of the
Company, stock options have been granted to executive officers and other key
employees annually. The options granted to executive officers have had exercise
prices equal to the fair market value of the stock on the date of grant and
have vested over five years. Prior to 1992, stock option awards were made in
the latter part of each year. In 1992, the Committee changed the timing of
option awards to coincide with performance appraisals and compensation actions,
which are made in the early part of each year. Accordingly no options were
granted in 1992, and the 1993 and 1994 option awards were made in the first
quarters of those years.
The number of shares for which options were granted to executive officers in
1994 was determined by the Committee based upon several factors, including the
executive's position, his past and future expected performance, the competitive
survey data as described above, and the number of shares under options
previously granted.
Compensation Not Qualifying for Tax Deductibility: Section 162(m) of the
Internal Revenue Code, adopted in 1993, provides in general that compensation
to certain individual executive officers during any year in excess of $1
million is not deductible by a public company. The Committee believes that,
given the general range of salaries and bonuses for executive officers of the
Company, the $1 million threshold of Section 162(m) will not be reached by any
executive officer of the Company in the foreseeable future. Accordingly, the
Committee has not established a policy regarding compensation not qualifying
for federal tax deductibility because that threshold is not currently within
reasonable range of any executive officer.
Compensation and Stock Option Committee
Alexander V. d'Arbeloff
Arthur Carr
Paul J. Ferri
Gardner C. Hendrie
Robert A. Morrill
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<PAGE>
STOCK PERFORMANCE GRAPH
The following Performance Graph assumes an investment of $100 on December
31, 1989 and compares annual percentage changes thereafter in the market price
of the Company's common stock with a broad market index (S&P 500) and an
industry index (S&P Computer Systems). The Company paid no dividends during the
periods shown; the performance of the indexes is shown on a total return
(dividend reinvestment) basis. The graph lines merely connect year-end dates
and do not reflect fluctuations between those dates.
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG S&P 500, STRATUS AND S&P COMPUTER SYSTEMS
<CAPTION>
S&P
Measurement period COMPUTER
(Fiscal Year Covered) S&P 500 STRATUS SYSTEMS
- --------------------- -------- -------- --------
<S> <C> <C> <C>
12/31/89 $ 100 $ 100 $ 100
12/31/90 $ 96.90 $ 100.54 $ 112.06
12/31/91 $ 126.42 $ 216.30 $ 99.58
12/31/92 $ 136.05 $ 147.28 $ 73.10
12/31/93 $ 149.76 $ 136.41 $ 75.87
12/31/94 $ 151.74 $ 165.22 $ 97.98
</TABLE>
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<PAGE>
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation & Stock Option Committee during 1994 were
Messrs. d'Arbeloff, Carr, Ferri, Hendrie and Morrill. Mr. Hendrie was a founder
of the Company and was employed by the Company in various executive positions
until 1985. See "Election of Directors". None of the members of the Committee
had any interlocking or insider relationships during 1994 with the Company or
its executive officers.
SECTION 16(A) REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, officers and persons who own more than ten percent of its common
stock to file reports with the Securities and Exchange Commission disclosing
their ownership of stock in the Company and changes in such ownership. Copies
of such reports are also required to be furnished to the Company. Based solely
on a review of the copies of such reports received by it, the Company believes,
during and in respect of fiscal year ended January 1, 1995, all such filing
requirements were complied with, except that John F. Young, an executive
officer of the Company, did not file a report within the prescribed time period
in respect of the sale of 446 shares on December 7, 1994. A report was
subsequently filed by Mr. Young in respect of the sale.
APPROVAL OF AMENDMENTS TO STOCK OPTION PLANS
(ITEM 2 OF NOTICE)
On January 31, 1995 the Board of Directors of the Company adopted amendments
to both the Employee Stock Option Plan ("1983 Plan") and the Non-Qualified
Stock Option Plan ("NQSO Plan") (see plan descriptions below) to increase the
total number of shares authorized to be issued under both plans so that, as
amended, the maximum aggregate number of shares available under both plans is
9,380,200, an increase of 600,000 shares. As of February 22, 1995, of the
9,380,200 shares authorized under the plans only 1,556,025 remain available for
grant, therefore the purpose of the increase in the combined shares is to
permit the continuing grant of stock options, which the Board of Directors
believes is necessary to continue to attract and retain key employees as well
as provide an incentive to them to exert their best efforts for the Company.
Approval of the stockholders is sought in order to meet the stockholder
approval requirements of i) the respective plans, ii) Section 422 of the
Internal Revenue Code, which requires stockholder approval of any increase in
the number of shares which may be issued under an Incentive Stock Option Plan,
and iii) Rule 16(b)-3 under the Securities Exchange Act of 1934, which, in the
case of certain option plans which have been approved by stockholders, prevents
the grant of options to directors, officers, and certain other affiliates from
being deemed "purchases" for purposes of the profit recapture provisions of
Section 16(b) of that Act. The executive officers and certain directors of the
Company who may receive such options will benefit from such approval. The Board
of Directors recommends stockholder approval of the amendment.
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<PAGE>
1983 STOCK OPTION PLAN
The 1983 Plan currently provides for the grant, to key employees of the
Company, of either (i) "incentive stock options" ("ISOs") within the meaning of
the Internal Revenue Code or (ii) "nonstatutory stock options" ("NSOs") for the
purchase of common stock of the Company. The exercise price for ISOs granted
under the 1983 Plan must be at least equal to the fair market value of the
underlying shares of common stock at the time of grant, and the exercise price
for NSOs granted under the 1983 Plan must be at least equal to 50% of the fair
market value of the underlying shares of common stock at the time of grant. The
1983 Plan is administered by the Compensation and Stock Option Committee of the
Board of Directors, which determines the option price, exercise period and
other terms and conditions of options at the time of each grant. All options
granted to date under the 1983 Plan become exercisable in full not later than
one year from the date of grant, expire ten years from the date of grant to the
extent not exercised, are non-transferable by the optionee, and are exercisable
only during the employment of the optionee by the Company and, in certain
cases, for a limited period thereafter. Shares of common stock purchased
pursuant to the options vest over a five year period from the date of grant,
subject to acceleration upon certain change-of-control events. Any shares not
vested upon termination of employment are subject to the Company's right of
repurchase at the original purchase price. It is expected that options granted
in the future under the 1983 Plan will have terms and conditions substantially
the same as those described above. Approximately 700 employees of the Company
are eligible to receive options under the 1983 Plan.
NON-QUALIFIED STOCK OPTION PLAN
The Non-Qualified Common Stock Option Plan (the "NQSO Plan") provides for
the grant, to key employees and directors of the Company, of NSOs for the
purchase of common stock of the Company. The NQSO Plan is administered by the
Compensation and Stock Option Committee, which determines the option price,
exercise period and other terms and conditions of options at the time of each
grant. To date, the terms and conditions of options granted under the NQSO Plan
have been substantially the same as those described above for options under the
1983 Plan.
Currently, the only material differences between the 1983 Plan, as it
provides for NSOs, and the NQSO Plan is that the NQSO Plan permits (i) the
grant of NSOs to directors who are not employees of the Company, and (ii) the
grant of NSOs (other than to directors) having exercise prices less than 50% of
the fair market value of the underlying shares at the time of grant. Under both
plans, the grant of options to directors, whether or not employees, are subject
to certain limitations.
FEDERAL INCOME TAX INFORMATION
For federal tax purposes, no taxable income is recognized by the optionee
upon grant of any option. No taxable income is recognized by the optionee upon
exercise of an ISO so long as the shares acquired are held for at least two
years from the date of grant and one year from the date of exercise and,
correspondingly, there is no compensation deductible by the Company. Upon sale
of the shares by the optionee after such holding periods, any gain or loss over
the exercise price is long-term capital gain or loss. In the case of NSOs,
ordinary compensation income is recognized by the optionee upon exercise in the
amount of any excess of the then fair value over the exercise price, and the
Company is entitled to a corresponding deduction. In the event an optionee
disposes of shares purchased under an ISO before the holding periods referred
to above are met, the disposition is treated similarly to the exercise of an
NSO. The foregoing general summary is not intended to be exhaustive, does not
address certain special federal tax provisions, and does not address state,
municipal or foreign tax laws.
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<PAGE>
OPTION GRANTS AND OUTSTANDING OPTION TOTALS
During the fiscal year ended January 1, 1995, NSOs for the purchase of
1,206,400 shares of common stock were issued under the 1983 Plan, of which
approximately 40,000 were issued to employees of subsidiaries in connection
with certain acquisitions. The exercise prices of all such options were equal
to the fair market value of the underlying shares at the time of grant. During
fiscal year ended January 1, 1995, NSOs for the purchase of 30,000 shares of
common stock were issued under the NQSO Plan. The exercise prices for these
shares were equal to the fair market value of the underlying shares at the time
of grant. During the fiscal year ended January 1, 1995, no ISOs were granted
under the 1983 Plan. The following table sets forth the number of shares for
which NSOs were granted during the fiscal year ended January 1, 1995 to the
named executive officers, the current executive officers as a group, the non-
employee directors, and the non-executive officer employees. For additional
information as to options granted to the named executive officers, see the
Options Grants Table above.
<TABLE>
<CAPTION>
1983 PLAN NQSO PLAN
--------- ---------
<S> <C> <C>
William E. Foster........................................... 50,000
Gary E. Haroian............................................. 80,000
Robert E. Donahue........................................... 20,000
Paul R. Jones............................................... 18,000
David M. Weishaar........................................... 20,000
Richard L. Tarulli.......................................... 18,000
Current executive officers as a group....................... 285,000
Non-employee directors as a group........................... 30,000
Non-executive officer employees............................. 921,400
</TABLE>
At January 1, 1995, options outstanding under both the 1983 Plan and the
NQSO Plan were for the purchase of an aggregate of 3,145,515 shares of common
stock. 1,556,025 shares remain available for grant under the plans.
APPROVAL OF AMENDMENTS TO EMPLOYEE STOCK PURCHASE PLAN
(ITEM 3 OF NOTICE)
On January 31, 1995, the Board of Directors adopted an Amendment to the
Employee Stock Purchase Plan ("ESPP") increasing the number of shares available
for purchase by 400,000 to 3,100,000 shares. On January 31, 1995, the Board of
Directors adopted an Amendment to the Employee Stock Purchase Plan ("ESPP")
increasing the number of shares available for purchase by 400,000 to 3,100,000
shares. As of February 22, 1995, of the 2,700,000 shares authorized under the
ESPP, only 285,347 shares remained available for issuance under further
offerings. The Board of Directors recommends approval of the amendment because
it believes that the availability of an employee stock purchase plan is an
important factor in the Company's ability to attract and retain employees and
provide an incentive to them to exert their best efforts for the Company.
Approval of the stockholders is sought to meet the stockholder approval
requirements of the ESPP and Rule 16(b)-3 of the Securities and exchange Act of
1934.
15
<PAGE>
The ESPP is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Internal Revenue Code. As such, no income is
taxable to a participant until shares which have been purchased are sold, and
the federal tax treatment upon sale depends upon whether the shares have been
held for two years following the beginning of the applicable offering period
and one year from the date of purchase. If shares are held for those periods,
there is no compensation deduction for the initial Company. The purpose of the
ESPP is to provide employees of the Company (of which there are approximately
2,800) an opportunity to participate in the growth and development of the
Company through the purchase of common stock. The plan is implemented by one or
more offerings from time to time and for such offering period(s) as determined
by the Board of Directors or the Compensation and Stock Option Committee of the
Board. Each offering period shall be no longer than twenty-seven months. The
price at which common stock is purchased under the plan is the lower of 85% of
its fair market value at the commencement of an offering period or 85% of its
fair market value on the last day of the offering period. The maximum value of
common stock an employee may purchase during an offering period is 10% of the
employee's annual rate of compensation at the time the option is granted. The
following table sets forth the number of shares purchased under the ESPP during
the fiscal year ended January 1, 1995 by the named executive officers, the
current executive officers as a group, and the non-executive officer employees.
<TABLE>
<CAPTION>
NO. OF SHARES
-------------
<S> <C>
William E. Foster................................................. 0
Gary E. Haroian................................................... 939
Robert E. Donahue................................................. 935
Paul R. Jones..................................................... 935
David M Weishaar.................................................. 653
Richard L. Tarulli................................................ 0
Current executive officers as a group............................. 6,239
Non-executive officer employees................................... 323,033
</TABLE>
RATIFICATION OF APPOINTMENT OF AUDITORS
(ITEM 4 OF NOTICE)
Subject to approval by the stockholders, the Board of Directors has selected
the firm of Ernst & Young LLP as independent auditors of the Company for the
fiscal year ending December 31, 1995.
Although there is no legal requirement that this matter be submitted to a
vote of the stockholders, the Board of Directors believes that the selection of
independent auditors is of sufficient importance to seek stockholder
ratification. In the event the selection of Ernst & Young LLP is not ratified
by the affirmative vote of a majority of the shares represented and voting at
the meeting, the Board will reconsider its selection.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting of Stockholders. They will have an opportunity to make a
statement if they desire to do so and will also be available to respond to
appropriate questions from stockholders.
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<PAGE>
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise to act, in accordance with their judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone and personal interviews.
Proposals of stockholders intended to be presented at the 1996 Annual
Meeting of Stockholders must be received by the Company at its principal
executive offices not later than November 22, 1995 for inclusion in the proxy
statement for that meeting. Other requirements for inclusion are set forth in
Rule 14a-8 under the Securities Exchange Act of 1934 as amended.
By order of the Board of Directors
FREDERICK S. PRIFTY
Clerk
March 24, 1995
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING, AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
17
