<PAGE> 1
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
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
STRATUS COMPUTER, INC.
(Name of Registrant as Specified In Its Charter)
STRATUS COMPUTER, INC.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 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:
- --------------------------------------------------------------------------------
<PAGE> 2
STRATUS COMPUTER, INC.
55 FAIRBANKS BOULEVARD
MARLBOROUGH, MASSACHUSETTS 01752
March 18, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Stratus Computer, Inc., which will be held on Tuesday, April 23, 1996, 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,
GARY E. HAROIAN
President, Chief Executive Officer
WILLIAM E. FOSTER
Chairman
<PAGE> 3
STRATUS COMPUTER, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 23, 1996
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 23, 1996, at 2:00 PM, for the
following purposes:
1. To elect three Class III directors for a three year term.
2. To ratify the selection by the Board of Directors of Ernst & Young
LLP as the Company's independent auditors.
3. 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, 1996 will be
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting.
By order of the Board of Directors
PAUL L. CRISWELL, Assistant Clerk
Marlborough, Massachusetts
March 18, 1996
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> 4
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
23, 1996 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, 1996 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 23,361,447 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 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 March 1, 1996. 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
NAME AND ADDRESS BENEFICIALLY OWNED PERCENT
---------------- ------------------ -------
<S> <C> <C>
Pioneering Management Corporation................................... 2,077,000 8.89
60 State Street
Boston, MA 02109
Gardner Lewis Asset Management...................................... 1,506,200 6.45
285 Wilmington
West Chester Pike
Chadds Ford, PA 19317
</TABLE>
The Company's Annual Report to Stockholders for the year ended December 31,
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 18,
1996.
<PAGE> 5
ELECTION OF DIRECTORS
(ITEM 1 OF NOTICE)
There are currently three Class I directors, two Class II directors and
three Class III directors. The present terms of the Class I and Class II
directors extend until the 1997 and 1998 Annual Meetings of Stockholders,
respectively. The present terms of the Class III directors expire at the 1996
Annual Meeting, and the Board has fixed at three the number of Class III
directors to be elected at the meeting.
The proxy will be voted to elect as Class III directors the three nominees
(Messrs. d'Arbeloff, Haroian and Morrill), 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 III director will be elected to hold office until the third
annual meeting of stockholders following the 1996 Annual Meeting (The 1999
Annual Meeting) 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.
Set forth below are the names of each nominee and the positions and offices
held by him, his age at March 1, 1996, 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 III DIRECTORS -- NOMINEES FOR ELECTION AT THE ANNUAL MEETING TO BE HELD
APRIL 23, 1996
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION DIRECTOR
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE AGE
------------------------------------- -------- ---
<S> <C> <C>
Alexander V. d'Arbeloff.................................................... 1980 68
He was, from 1971 to 1977, President and, from 1977 to 1996, President,
Chairman and Chief Executive Officer and has been, since January 1996,
Chairman 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., PRI Automation, Inc. a semiconductor
equipment manufacturer and BTU Corporation, a manufacturer of thermal
processing equipment.
Robert M. Morrill.......................................................... 1983 58
He was, from July 1983 through December 1990, a general partner of H and
Q Investment Partners, a venture capital investment partnership. Since
January 1991, Mr. Morrill has been a private investor. Mr. Morrill is a
director and, since February, 1996, has been President and Chief
Executive Officer on an interim basis of VMARK Software, Inc., a supplier
of database and application development software.
Gary E. Haroian............................................................ 1993 44
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 Operations; 1991-1992, Senior Vice President and
General Manager, Corporate Operations; 1992-1993, Executive Vice
President and General Manager, Corporate Operations; 1993-January 1996,
President and Chief Operating Officer and, since January, 1996 President
and Chief Executive Officer.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION DIRECTOR
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE AGE
------------------------------------- -------- ---
<S> <C> <C>
CLASS I DIRECTORS -- TERMS EXTENDING UNTIL 1997
Arthur Carr................................................................ 1990 64
He was, from 1982 to 1986, Executive Vice President of Motorola, Inc. and
General Manager of its Information Systems Group; from 1986 to 1989,
President of Stellar Computer, Inc., a manufacturer of graphics super
computers; from 1989 to 1991, President of Carr and 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, and Peritus Software Services,
Inc., a provider of software engineering services.
William E. Foster.......................................................... 1980 51
Mr. Foster is a founder of the Company and he was, from 1980 to January
1996, Chairman and Chief Executive Officer of the Company. From 1980
until November 1993, Mr. Foster also served as President of the Company.
Since January 1996 he has been Chairman of the Company. Mr. Foster is
director of Avid Technology, Inc., a developer of audio/video editing
software and VideoServer, Inc., a manufacturer of video conference and
networking equipment.
Candy Obourn............................................................... 1995 45
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 and Director of Information Systems and
Business Processes; 1993-1995, Vice President and General Manager of
Business Imaging Systems; and 1995-present President, Business Imaging
Systems.
</TABLE>
CLASS II DIRECTORS -- TERMS EXTENDING TO 1998
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION, DIRECTOR
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE AGE
------------------------------------- -------- ---
<S> <C> <C>
Paul J. Ferri.............................................................. 1981 57
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., since 1990, a
general partner of Matrix Partners III, L.P., and, since 1995, a general
partner of Matrix Partners IV, L.P., all of which are venture capital
investment partnerships. Mr. Ferri is a director of BancTec, Inc., a
manufacturer of check-processing equipment, VideoServer, Inc. a
manufacturer of video conference and networking equipment, Cascade
Communications, Inc. a manufacturer of data communications equipment,
Atria Software, Inc., a developer of software management tools, Applix
Inc., a developer of real time software products and TechForce, Corp., a
provider of integrated network support solutions.
Gardner C. Hendrie......................................................... 1985 63
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.
</TABLE>
3
<PAGE> 7
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
<TABLE>
The following table sets forth information as of February 1, 1996 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.
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK
---------------------------
PERCENT
NUMBER OF OF
SHARES(1) OWNERSHIP
--------- ---------
<S> <C> <C>
Alexander V. d'Arbeloff........................................... 109,588 .47
Arthur Carr(2).................................................... 19,500 .08
Paul J. Ferri..................................................... 40,312 .17
William E. Foster(3).............................................. 362,281 1.55
Gary E. Haroian................................................... 212,907 .91
Gardner Hendrie................................................... 18,500 .08
Robert M. Morrill(4).............................................. 31,185 .13
Candy M. Obourn................................................... 6,000 .03
Robert E. Donahue................................................. 78,358 .34
Paul R. Jones..................................................... 57,394 .25
J. Donald Oldham.................................................. 64,210 .27
All directors and executive officers as a group (16 persons)...... 1,194,054 5.11
<FN>
- ---------------
(1) Includes 740,345 shares which may be acquired within sixty days after
February 1, 1996 by exercise of stock options by the directors and named
executive officers as follows: Mr. d'Arbeloff, 35,000; Mr. Carr, 18,500; Mr.
Ferri, 34,000; Mr. Foster 197,500; Mr. Haroian, 209,830; Mr. Hendrie,
18,500; Mr. Morrill, 21,185; Mrs. Obourn, 6,000; Mr. Donahue, 78,320; Mr.
Jones, 57,300; Mr. Oldham 64,210; all directors and executive officers as a
group 933,745. Of those shares, 447,765 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.
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 1995, the Board of Directors of the Company held nine 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 or she
served.
The Board of Directors has an Audit Committee which held two meetings
during 1995. 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 one meeting during 1995. The current members of this Committee are Messrs.
d'Arbeloff, Carr, Ferri, Hendrie, Morrill and Mrs. Obourn, comprising all of the
non-employee directors. 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.
4
<PAGE> 8
EXECUTIVE COMPENSATION
<TABLE>
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 December 31, 1995, January 1, 1995 and January 2, 1994,
to the chief executive officer and the four most highly paid persons other than
the CEO who were serving as executive officers on December 31, 1995.
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION -------------
NAME AND -------------------- SHARES UNDER ALL OTHER
PRINCIPAL POSITION SALARY(1) BONUS OPTION AWARDS COMPENSATION(1)
(AT DECEMBER 31, 1995) YEAR ($) ($) (#) ($)
---------------------- ---- --------- ------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
William E. Foster.................... 1995 415,012 0 30,000 0
Chairman and 1994 415,012 422,293 50,000 4,500
Chief Executive Officer 1993 450,000 29,100 60,000 4,500
Gary E. Haroian...................... 1995 350,012 0 30,000 0
President and 1994 350,012 356,151 80,000 4,500
Chief Operating Officer 1993 315,000 19,123 62,000 4,500
Robert E. Donahue.................... 1995 240,000 0 25,000 0
Vice President Finance and 1994 235,000 160,174 20,000 4,500
Chief Financial Officer 1993 225,000 7,483 24,000 4,500
Paul R. Jones........................ 1995 230,000 0 15,000 0
Vice President and 1994 230,000 132,458 18,000 4,500
Chief Operating Officer 1993 230,000 8,314 27,000 4,500
ISIS Distributed Systems, Inc.(2)
J. Donald Oldham..................... 1995 220,000 0 25,000 0
Vice President 1994 190,000 84,073 15,000 4,500
Worldwide Sales 1993 160,000 79,902 11,500 4,500
<FN>
- ---------------
(1) Salary includes amounts deferred by the named executive officer and All
Other Compensation consists exclusively 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 ($9,240 in 1995). The
Company matches such deferrals to the extent of achievement by the Company
of certain profit goals. The Company made no matching contribution with
respect to 1995.
(2) Isis Distributed Systems was, during 1995, a wholly-owned subsidiary and is
now a division of the Company.
</TABLE>
5
<PAGE> 9
<TABLE>
II. OPTION GRANTS TABLE
The following table sets forth information with respect to stock options
granted by the Company to the named executive officers in the fiscal year ended
December 31, 1995.
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------- VALUE AT ASSUMED
% OF ANNUAL RATES
TOTAL OF STOCK
OPTIONS PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM
GRANTED(1) EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME (# SHARES) FISCAL YEAR ($/SHARE) DATE 5%(2) 10%(2)
---- ---------- ------------ --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
William E. Foster......... 30,000 2.52 26.38 3/1/05 $497,400 $1,260,900
Gary E. Haroian........... 30,000 2.52 26.38 3/1/05 $497,400 $1,260,900
Robert E. Donahue......... 25,000 2.1 26.38 3/1/05 $414,500 $1,050,750
J. Donald Oldham.......... 25,000 2.1 26.38 3/1/05 $414,500 $1,050,750
Paul R. Jones............. 15,000 1.26 26.38 3/1/05 $248,700 $ 630,450
<FN>
- ---------------
(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.
</TABLE>
<TABLE>
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
December 31, 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.
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY
ACQUIRED VALUE FY-END OPTIONS AT FY-END
NAME ON EXERCISE REALIZED (# SHARES)(1) (1)
---- ----------- -------- ------------- --------------------
<S> <C> <C> <C> <C>
William E. Foster........................ 0 0 197,500 $2,187,812
Gary E. Haroian(2)....................... 0 0 209,830 $1,930,806
Robert E. Donahue(2)..................... 0 0 78,320 $ 684,115
Paul R. Jones(2)......................... 5,500 $82,188 57,300 $ 439,612
J. Donahld Oldham(2)..................... 1,500 $14,438 64,210 $ 635,781
<FN>
- ---------------
(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, 109,500 shares; Mr. Haroian, 102,230 shares; Mr.
Donahue, 32,370 shares; Mr. Jones, 19,500 shares; Mr. Oldham, 27,085 shares.
(2) Does not include 669 shares purchased by Mr. Haroian, 674 shares purchased
by Mr. Donahue, 683 shares purchased by Mr. Jones, and 695 shares purchased
by Mr. Oldham during 1995 under the Company's Employee Stock Purchase Plan.
</TABLE>
6
<PAGE> 10
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 1995, 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. The
Stratus Non-Qualified Common Stock Option Plan currently provides that,
beginning in 1996, each non-employee director shall receive option awards of
6,000 shares upon first joining the Board and 3,000 shares each year thereafter.
The following report on executive compensation and the Performance Graph on
page 9 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 1995 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 stock 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 1995 executive compensation program
was designed to continue the process, begun in 1991, of more directly tying the
executive officers' compensation to the performance of
7
<PAGE> 11
the Company. Consistent with the foregoing, Mr. Foster's base salary for 1995
remained the same as it was in 1994, as did his targeted bonus, resulting in no
change in his overall targeted compensation over 1994. 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 1995 was based upon attainment by the Company of certain
goals for revenue and earnings per share. His lack of bonus payment for 1995
resulted from the extent by which the Company fell short of its earnings per
share goal established for bonus purposes.
Approximately 60% of the aggregate targeted annual compensation for the
other four executive officers for 1995 consisted of base salaries, and the
remainder consisted of potential bonuses based upon the 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. For options granted in 1996 and thereafter, the
Committee has determined to reduce the vesting period to four years, based on
competitive market data.
The number of shares for which options were granted to executive officers
in 1995 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
Candy M. Obourn
8
<PAGE> 12
<TABLE>
STOCK PERFORMANCE GRAPH
The following Perfomance Graph assumes an investment of $100 on December
31, 1990 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 System). The Company paid no dividends during the
periods shown; the performance of the indexes is shown on a total return
(devidend reinvestment) basis. The graph lines merely connect year-end dates and
do not reflect fluctuations between those dates.
CLOSE OF BUSINESS AT CALENDAR YEAR END
<CAPTION>
- ------------------------------------------------------------------------------------
90 91 92 93 94 95
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stratus 100 215.14 146.49 135.68 164.32 149.73
- ------------------------------------------------------------------------------------
S&P Comp Sys 100 88.87 65.24 67.71 87.44 116.37
- ------------------------------------------------------------------------------------
S&P 500 100 130.47 140.41 154.56 156.60 215.45
- ------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 13
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation and Stock Option Committee during 1995 were
Messrs. d'Arbeloff, Carr, Ferri, Hendrie, Morrill and Mrs. Obourn. 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 1995 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 December 31, 1995, all such filing
requirements were complied with, except that J. Donald Oldham, an executive
officer of the Company, did not file a report within the prescribed time period
in respect of the sale of 1,629 shares on December 5, 1995, and John F. Young,
also an executive officer of the Company, did not file a report within the
prescribed time period in respect of the sale of 317 shares on December 6, 1995.
Reports were subsequently filed by Mr. Oldham and Mr. Young in respect of the
sales.
RATIFICATION OF APPOINTMENT OF AUDITORS
(ITEM 2 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 29, 1996.
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.
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 1997 Annual
Meeting of Stockholders must be received by the Company at its principal
executive offices not later than November 19, 1996, for inclusion in
10
<PAGE> 14
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
PAUL L. CRISWELL, Assistant Clerk
March 18, 1996
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.
11
<PAGE> 15
PROXY STRATUS COMPUTER, INC. PROXY
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING APRIL 23, 1996
The undersigned stockholder of Stratus Computer, Inc. hereby appoints
Alexander V. d'Arbeloff, Gary E. Haroian and Robert M. Morrill, or any one or
more of them, attorneys and proxies for the undersigned with power of
substitution in each to act for and to vote, as designated below, with the
same force and effect as the undersigned, all shares of Stratus Computer, Inc.
common stock standing in the name of the undersigned at the Annual Meeting of
Stockholders of Stratus Computer, Inc. to be held at the Company's offices, 55
Fairbanks Boulevard, Marlborough, Massachusetts on April 23, 1996, at 2:00 PM
and any adjournments thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL GRANT AUTHORITY TO VOTE FOR ALL NOMINEES FOR CLASS III DIRECTORS AND WILL
BE VOTED "FOR" THE OTHER PROPOSAL. THE PROXY WILL BE VOTED IN ACCORDANCE WITH
THE HOLDER'S BEST JUDGMENT AS TO ANY OTHER MATTERS.
To elect three Class III Directors for a three-year term.
NOMINEES: ALEXANDER V. D'ARBELOFF, GARY E. HAROIAN AND ROBERT M. MORRILL
SEE REVERSE SIDE. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS, JUST SIGN ON THE REVERSE SIDE. YOU NEED NOT MARK ANY
BOXES.
/ SEE REVERSE SIDE /
/ X / PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SAID MEETING AND
THE RELATED PROXY STATEMENT.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
- -------------------------------------------------------------------------------
FOR
NOMINEES WITHHELD
1. Election of / / / /
Directors (see
reverse side).
FOR AGAINST ABSTAIN
2. Ratify Ernst & Young LLP as / / / / / /
independent auditors
/ /_____________________________________
For all nominees except as noted above.
- -------------------------------------------------------------------------------
MARK HERE / /
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
Signature: _________________________________________ Date ____________________
Signature: _________________________________________ Date ____________________
