<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)
[ ]
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which 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 17, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Stratus Computer, Inc., which will be held on Wednesday, April 23, 1997, 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
WILLIAM E. FOSTER
Chairman of the Board
Chief Executive Officer
<PAGE> 3
STRATUS COMPUTER, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 23, 1997
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 Wednesday, April 23, 1997, at 2:00 PM, for the
following purposes:
1. To elect two Class I directors for a three (3) year term.
2. To approve amendments to the 1983 Stock Option Plan and the
Non-Qualified Common Stock Option Plan increasing the maximum
combined aggregate number of shares of Common Stock authorized to be
issued under both plans from 9,380,200 to 10,880,200.
3. To approve amendments to the 1983 Stock Option Plan and the
Non-Qualified Common Stock Option Plan increasing the maximum
aggregate annual limitation on shares for which options may be
granted to a participant under both plans from 100,000 to 500,000.
4. To approve an amendment to the Non-Qualified Common Stock Option
Plan increasing the number of shares for which options are to be
granted to outside Directors from 6,000 to 8,000 upon new
appointment and from 3,000 to 4,000 annually thereafter.
5. To approve an amendment to the Employee Stock Purchase Plan
increasing the aggregate number of shares that may be issued
thereunder from 3,100,000 to 4,100,000.
6. To ratify the selection by the Board of Directors of Ernst & Young
LLP as the Company's independent auditors.
7. 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 February 28, 1997 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
EILEEN CASAL, Assistant Clerk
Marlborough, Massachusetts
March 17, 1997
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, 1997 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 February 28, 1997 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 23,993,346 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 February 28, 1997. 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>
Morgan Stanley Group, Inc. ("MS Group")(1).......................... 1,980,171 8.25%
1585 Broadway
New York, NY 10036
Pioneering Management Corporation(2)................................ 1,929,900 8.04%
60 State Street
Boston, MA 02109
Lazard Freres & Co. LLC(3).......................................... 1,664,000 6.94%
30 Rockefeller Plaza
New York, NY 10020
Merrill Lynch & Co., Inc. ("ML&Co")(4).............................. 1,571,800 6.55%
World Financial Center, North Tower
New York, NY 10281
</TABLE>
- ---------------
(1) Consists of shares held by investors whose accounts are managed by Miller
Anderson & Sherred LLP and other subsidiaries of MS Group. MS Group has
shared voting power as to 1,885,171 and shared investment power as to all
such shares.
<PAGE> 5
(2) Consists of shares held by investors whose accounts are managed by
Pioneering Management Corporation ("PMC"). PMC has sole voting power as to
all and shared investment power as to 1,749,900 such shares.
(3) Consists of shares held by investors whose accounts are managed by Lazard
Freres & Co. LLC ("LFC"). LFC has sole voting power as to 1,547,300 and sole
investment power as to all such shares.
(4) Consists of shares held by (i) registered investment companies and other
investors whose investment advisors have as general partner Princeton
Services, Inc., a subsidiary of Merrill Lynch Group, Inc., which is a
subsidiary of ML & Co., and (ii) unit investment trusts sponsored by Merrill
Lynch, Pierce, Fenner and Smith, Incorporated, which is a subsidiary of ML &
Co. ML & Co. has shared voting and investment powers as to all such shares.
The Company's Annual Report to Stockholders for the year ended December 29,
1996 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 17,
1997.
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 II and Class III
directors extend until the 1998 and 1999 Annual Meetings of Stockholders,
respectively. The present terms of the Class I directors expire at the 1997
Annual Meeting, and the Board has fixed at two the number of Class I directors
to be elected at the meeting.
The proxy will be voted to elect as Class I directors the two nominees (Mr.
Foster and Mrs. Obourn), 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 I director will be elected to hold office until the third annual
meeting of stockholders following the 1997 Annual Meeting (2000) 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/her, his/her age at February 28, 1997, the year in which he/she
became a director of the Company, his/her principal occupation and business
experience for at least the last five years, and the names of other
publicly-held companies for which he/she serves as a director. Following that is
the same information regarding the other directors of the Company whose term of
office will continue after the meeting.
2
<PAGE> 6
CLASS I DIRECTORS -- NOMINEES FOR ELECTION AT THE ANNUAL MEETING TO BE HELD
APRIL 23, 1997
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION DIRECTOR
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE AGE
------------------------------------- -------- ---
<S> <C> <C>
William E. Foster.......................................................... 1980 52
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.
From January 1996 he has been Chairman and from August 1996 he has also
been President and Chief Executive Officer 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 M. Obourn............................................................ 1995 46
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 the Chairman of the
Board; 1990-1993, Vice President and Director of formation 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 58
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,
Applix Inc., a developer of real-time software products, and TechForce,
Corp., a provider of integrated network support solutions.
Gardner C. Hendrie......................................................... 1985 64
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 Geotel Communications Corporation, a manufacturer of
enterprise level call processing software.
</TABLE>
CLASS III DIRECTORS -- TERMS EXTENDING TO 1999
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION DIRECTOR
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE AGE
------------------------------------- -------- ---
<S> <C> <C>
Alexander V. d'Arbeloff.................................................... 1980 69
He has been, from 1971 to 1977, President and Chief Executive Officer,
from 1977 to 1996, President, Chairman and Chief Executive Officer, and
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, BTU Corporation, a
manufacturer of thermal processing equipment, and Geotel Communications
Corporation, a manufacturer of enterprise level call processing software.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION DIRECTOR
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE AGE
------------------------------------- -------- ---
<S> <C> <C>
Robert M. Morrill.......................................................... 1983 59
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 of VMARK Software, Inc., a supplier of database and
application development software.
Paul J. Severino........................................................... 1997 50
In 1981, he co-founded and, until 1985, served as President, Chief
Executive Officer and Director of Interlan, Inc., a manufacturer of
ethernet connectivity products. In 1986 he co-founded and, until October
1994, served as President, Chief Executive Officer and Director of
Wellfleet Communications, Inc., a manufacturer of fault resilient
inter-networking systems and services. From 1994 until November 1996, he
served as Chairman of BayNetworks, Inc., which resulted from the merger
of Wellfleet Communications, Inc., and Synoptics Communications, Inc. Mr.
Severino is a Director of BayNetworks, Inc., Media 100, Inc., a
manufacturer of nonlinear digital video editing products, and the
Chairman and a Director of the Massachusetts Technology Development
Corporation.
</TABLE>
4
<PAGE> 8
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth information as of February 14, 1997 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.................................................. 62,909 .26%
Arthur Carr(2)........................................................... 22,500 .09%
Paul J. Ferri............................................................ 43,312 .18%
William E. Foster(3)..................................................... 422,281 1.76%
Gary E. Haroian.......................................................... 109,962 .46%
Gardner C. Hendrie....................................................... 21,500 .09%
Robert M. Morrill(4)..................................................... 34,185 .14%
Candy M. Obourn.......................................................... 9,000 .04%
Paul J. Severino(5)...................................................... 8,000 .03%
Robert E. Donahue........................................................ 149,131 .62%
Stephen C. Kiely......................................................... 130,000 .54%
J. Donald Oldham......................................................... 128,995 .54%
David M. Weishaar........................................................ 123,156 .51%
All directors & executive officers as a group (16 persons)............... 1,341,903 5.60%
</TABLE>
- ---------------
(1) Includes 1,051,365 shares which may be acquired within sixty days after
February 14, 1997 by exercise of stock options by the directors and named
executive officers as follows: Mr. d'Arbeloff, 38,000 ; Mr. Carr, 21,500 ;
Mr. Ferri, 37,000; Mr. Foster 257,500; Mr. Haroian, 106,150; Mr. Hendrie,
21,500 ; Mr. Morrill, 24,185; Mrs. Obourn, 9,000; Mr. Severino, 8,000; Mr.
Donahue, 148,320; Mr. Kiely 130,000; Mr. Oldham 128,210; Mr. Weishaar,
123,156; all directors and executive officers as a group 1,127,265. Of those
shares, 389,238 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) Includes 2,000 shares held by Mr. Severino, which are subject to stockholder
approval of the amendment referred to in Item 4 of the Notice of the Annual
Meeting on April 23, 1997.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 1996, the Board of Directors of the Company held seven (7) 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 1996. 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.
5
<PAGE> 9
The Board of Directors has a Compensation and Stock Option Committee which
held two meetings during 1996. The current members of this Committee are Messrs.
d'Arbeloff, Carr, Ferri, Morrill and Mrs. Obourn, all of whom are nonemployee
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.
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 December 29, 1996, December 31, 1995 and January 1, 1995,
to the chief executive officer and the four most highly paid persons other than
the CEO who were serving as executive officers on December 29, 1996 and one
person who served as Chief Executive Officer during part of fiscal 1996 (the
"named executive officers").
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION --------------
NAME AND ------------------ SHARES UNDER ALL OTHER
PRINCIPAL POSITION SALARY(1) BONUS OPTION AWARDS COMPENSATION(1)
(AT DECEMBER 29, 1996) YEAR ($) ($) (#)(2) ($)
---------------------- ---- --------- ------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
William E. Foster.................... 1996 353,666 106,000 120,000 4,500
Chairman, President 1995 415,012 0 30,000 0
and Chief Executive Officer 1994 415,012 422,293 50,000 4,500
Robert E. Donahue.................... 1996 270,009 216,330(3) 115,000 4,500
Vice President Finance, Chief 1995 240,000 0 25,000 0
Financial Officer and Treasurer 1994 235,000 160,174 20,000 4,500
J. Donald Oldham..................... 1996 240,000 125,680 100,000 4,500
Vice President 1995 220,000 0 25,000 0
Worldwide Sales 1994 190,000 84,073 15,000 4,500
Stephen C. Kiely(4).................. 1996 246,176 115,380 130,000 4,500
Vice President 1995 220,004 0 40,000 0
Platform Products 1994 71,077 78,795 0 2,132
David M. Weishaar.................... 1996 230,000 106,040 95,000 4,500
Vice President 1995 220,000 0 15,000 0
World wide Operations and 1994 220,000 145,525 20,000 4,500
Chief Quality Officer
Gary E. Haroian(5)................... 1996 400,010 0 190,000 721,430
1995 350,012 0 30,000 0
1994 350,012 356,151 80,000 4,500
</TABLE>
- ---------------
(1) Salary includes amounts deferred by the named executive officer and, except
with respect to Mr. Haroian (see note 5 below), 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 (15%) of his annual salary up to an annual
maximum amount prescribed by IRS regulations ($9,500 in 1996). The Company
matches a portion of such deferrals to the extent of achievement by the
Company of certain profit goals.
6
<PAGE> 10
(2) All options granted in 1994 and 1995 and certain options granted in 1996
were exchanged under a share for share option exchange program completed in
July, 1996 (the "Option Exchange Program"). See "Option Repricing" below.
(3) $95,000 of this bonus amount is related to Mr. Donahue's performance as
Chief Executive Officer of S2 Systems, Inc., a wholly owned software
subsidiary of the Company.
(4) Mr. Kiely began his employment with Stratus in September 1994.
(5) Mr. Haroian served as President and Chief Executive Officer until his
resignation in August 1996 and thereafter was not an executive officer.
Upon his resignation, the Company entered into an agreement with Mr.
Haroian pursuant to which he will continue as an employee through September
6, 1998, subject to his earlier voluntary termination. The amount set forth
for him in 1996 for All Other Compensation consists of $4,500 contributed
by the Company under the Capital Accumulation Plan, $676,930 which is the
amount accrued by the Company at fiscal year end 1996 for the remaining
salary and $40,000 of benefits paid on his behalf under the agreement.
Pursuant to the agreement, 75,000 of the shares under option awards are
vested and the options for the remainder have been canceled under the
Option Exchange Program or have otherwise expired without vesting.
II. OPTION GRANTS TABLE
The following table sets forth information with respect to stock options
granted by the Company to the named executive officers in the fiscal year ended
December 29, 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM
GRANTED(1) EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME (# SHARES) FISCAL YEAR ($/SHARE) DATE 5%(5) 10%(5)
---- ---------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William E. Foster........... 20,000(2) .54 25.50 02/02/06 $ 320,736 $ 812,809
100,000(3) 2.71 17.125 07/25/06 $1,076,974 $2,729,211
Robert E. Donahue........... 25,000(2) .68 25.50 02/02/06 $ 400,920 $1,016,011
70,000(3) 1.90 17.125 07/25/06 $ 753,882 $1,910,448
20,000 .54 24.00 10/22/06 $ 301,867 $ 764,963
J. Donald Oldham............ 20,000(2) .54 25.50 02/02/06 $ 320,736 $ 812,809
60,000(3) 1.62 17.125 07/25/06 $ 646,200 $1,637,525
20,000 .54 24.00 10/22/06 $ 301,867 $ 764,963
Stephen C. Kiely............ 30,000(2) .81 25.50 02/02/06 $ 481,104 $1,219,213
70,000(3) 1.90 17.125 07/25/06 $ 753,882 $1,910,448
30,000 .81 24.00 10/22/06 $ 452,801 $1,147,445
David M. Weishaar........... 20,000(2) .54 25.50 02/02/06 $ 320,736 $ 812,809
55,000(3) 1.49 17.125 07/25/06 $ 592,336 $1,501,067
20,000 .54 24.00 10/22/06 $ 301,867 $ 764,964
Gary E. Haroian............. 40,000(2) 1.08 25.50 02/02/06 $ 641,473 $1,625,617
150,000(3)(4) 4.06 17.125 07/25/06 $1,615,462 $4,093,818
</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 6.25% per quarter over a
four (4) 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
7
<PAGE> 11
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) Canceled in July 1996 under the Option Exchange Program. See "Option
Repricing" below. The issuance upon exchange of options for a corresponding
number of shares is reflected in the Option Grant numbers identified by
footnote (3) in the Table above.
(3) Issued pursuant to the Option Exchange Program. See "Option Repricing"
below. These numbers include shares under options issued in exchange for
options granted in 1994 and 1995 as well as those granted earlier in 1996,
which were subsequently canceled and are identified by footnote (2) in the
Table above.
(4) Options for 75,000 of these shares have expired without vesting. See note
(5) to Summary Compensation Table above.
(5) 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.
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 29, 1996, 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>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY
ACQUIRED VALUE FY-END OPTIONS AT
NAME ON EXERCISE(1) REALIZED (# SHARES)(2) FY-END(2)
---- -------------- -------- ------------- ------------
<S> <C> <C> <C> <C>
William E. Foster............................. 0 0 217,500 $1,705,313
Robert E. Donahue............................. 0 0 123,320 $ 843,180
J. Donald Oldham.............................. 6,000 $ 22,500 98,210 $ 711,914
Stephen C. Kiely.............................. 0 0 100,000 $ 743,750
David M. Weishaar............................. 0 0 97,000 $ 780,750
Gary E. Haroian............................... 68,680 $624,480 106,150(3) $ 465,831
</TABLE>
- ---------------
(1) Does not include 773 shares purchased by Mr. Donahue, 785 shares purchased
by Mr. Oldham; 229 shares purchased by Mr. Kiely; 471 shares purchased by
Mr. Weishaar and 735 shares purchased by Mr. Haroian during 1996 under the
Company's Employee Stock Purchase Plan.
(2) With the exception of Mr. Haroian, whose options shown are fully vested, all
shares shown are exercisable in full, but are subject to the vesting
provisions described in note (1) to the Option Grants Table above. The
following number of shares held by the named executive officers were fully
vested as of fiscal year-end: Mr. Foster, 105,750 shares; Mr. Donahue,
30,795 shares; Mr. Oldham, 18,385 shares; Mr. Kiely 4,375 shares; and Mr.
Weishaar 16,687 shares.
(3) Excludes 75,000 shares under options which have expired without vesting. See
note (5) to Summary Compensation Table above.
8
<PAGE> 12
IV. OPTION REPRICING AND TEN-YEAR OPTION REPRICING TABLE
As discussed in the report on executive compensation below, in 1996 the
Company gave holders of stock options, including executive officers, the
opportunity to exchange certain of those options for new options with a lower
exercise price and with a new four year vesting schedule beginning on the grant
date of the new option. The following table sets forth certain information
concerning the exchange of stock options during the last ten fiscal years by the
named executive officers, the other persons who are currently executive officers
of the Company, and any other persons who exchanged stock options while serving
as executive officers of the Company.
9
<PAGE> 13
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF MARKET PRICE OF NEW TERM REMAINING AT
OPTIONS REPRICED STOCK AT TIME EXERCISE PRICE AT EXERCISE DATE OF REPRICING
NAME DATE (# SHARES) OF REPRICING TIME OF REPRICING PRICE (1)
---- -------- ---------------- --------------- ----------------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
William E. Foster......... 10/12/90 85,000 15.25 19.75 -- 21.50 15.25 6Y 0M
Chairman, President 09/08/93 30,000 23.25 40.00 23.25 8Y 2M
& CEO 07/25/96 100,000 17.125 25.50 -- 27.25 17.125 9Y 6M
Robert A. Donahue......... 12/07/87 5,600 18.00 19.75 -- 20.25 18.00 8Y 6M
Vice-President, CFO 10/12/90 3,400 15.25 20.00 15.25 5Y 2M
& Treasurer 09/08/93 9,000 23.25 40.00 23.25 8Y 2M
07/25/96 70,000 17.125 25.50 -- 27.25 17.125 9Y 6M
J. Donald Oldham.......... 10/12/90 5,150 15.25 20.00 -- 21.25 15.25 3Y 5M
Vice-President 09/08/93 15,000 23.25 40.00 23.25 8Y 2M
Worldwide Sales 07/25/96 60,000 17.125 25.50 -- 27.25 17.125 9Y 6M
Stephen C. Kiely.......... 07/25/96 100,000 17.125 25.50 -- 26.375 17.125 9Y 6M
Vice President
Platform Products
David M. Weishaar......... 07/25/96 55,000 17.125 25.50 -- 27.25 17.125 9Y 6M
Vice President Worldwide
Operations and Chief
Quality Officer
John F. Young(2).......... 12/07/87 2,300 18.00 21.50 18.00 7Y 11M
10/12/90 7,000 15.25 20.00 -- 21.25 15.25 9Y 2M
09/08/93 4,500 23.25 40.00 23.25 8Y 3M
07/25/96 27,000 17.125 25.50 -- 27.25 17.125 9Y 6M
David P. Gamache(2)....... 12/07/87 3,700 18.00 21.50 18.00 8Y 10M
10/12/90 6,450 15.25 18.00 -- 21.50 15.25 9Y 2M
09/08/93 5,000 23.25 40.00 23.25 8Y 3M
07/25/96 18,500 17.125 25.50 -- 27.25 17.125 9Y 6M
Eileen Casal(2)........... 10/12/90 465 15.25 20.00 -- 21.25 15.25 9Y 2M
09/08/93 3,000 23.25 40.00 23.25 8Y 3M
07/25/96 14,100 17.125 25.50 -- 27.25 17.125 9Y 6M
Gary E. Haroian........... 12/07/87 6,400 18.00 19.75 -- 21.50 18.00 6Y 0M
10/12/90 9,350 15.25 20.00 15.25 5Y 2M
09/08/93 22,000 23.25 40.00 23.25 8Y 2M
07/25/96 150,000 17.125 25.50 -- 27.25 17.125 9Y 6M
Richard L. Tarulli(3)..... 10/12/90 11,000 15.25 20.00 -- 22.25 15.25 8Y 1M
09/08/93 15,000 23.25 40.00 23.25 8Y 3M
Robert A.
Freiburghouse(3)........ 12/07/87 18,000 18.00 19.75 -- 21.50 18.00 8Y 11M
10/12/90 31,100 15.25 18.00 -- 21.25 15.25 8Y 1M
09/08/93 18,000 23.25 40.00 23.25 8Y 3M
Paul R. Tucker(3)......... 12/07/87 4,000 18.00 28.25 18.00 9Y 1M
10/12/90 20,000 15.25 20.00 -- 21.25 15.25 8Y 1M
09/08/93 15,000 23.25 40.00 23.25 8Y 3M
John H. Curtis(3)......... 12/07/87 13,500 18.00 19.25 -- 21.50 18.00 8Y 11M
William H. Thompson(3).... 12/07/87 2,000 18.00 28.25 18.00 9Y 1M
James E.D. Austin(3)...... 12/07/87 12,800 18.00 19.75 -- 21.50 18.00 8Y 1M
10/12/90 36,000 15.25 18.00 -- 21.50 15.25 8Y 11M
</TABLE>
- ---------------
(1) All exchanged options begin a new five (5) year vesting schedule beginning
on the grant date of the new, repriced option except options exchanged in
1996 which begin a new four (4) year vesting schedule commencing on the
grant date of the new repriced option. If the repriced options were in
exchange for more than one original option, the length of term remaining
refers to the most recently granted original option.
(2) Currently an executive officer of the Company.
(3) Formerly an executive officer of the Company.
10
<PAGE> 14
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 1996, each non-employee director was granted an option for the
purchase of 3,000 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 four (4) 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 each
nonemployee director shall receive option awards of 8,000 shares upon first
joining the Board and 4,000 shares each year thereafter, subject to stockholder
approval of Item 4 of the Notice of the Annual Meeting.
The following report on executive compensation and the Performance Graph on
page 14 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 1996 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 1996 executive compensation program
was designed to continue the process, begun in 1991, of more directly tying the
executive officers' compensation to the performance of
11
<PAGE> 15
the Company. During the first half of 1996, Mr. Foster's compensation as
Chairman consisted entirely of a base salary that was 27.7% lower than his 1995
base salary. Upon his reappointment as President and Chief Executive Officer in
the second half of 1996 and consistent with the Company's executive compensation
program, Mr. Foster's base salary was adjusted prospectively to equal the prior
Chief Executive Officer's base salary (representing a 3.6% reduction from Mr.
Foster's 1995 base salary) and he was provided a targeted bonus. 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 1996 was based upon attainment by the Company of
certain goals for revenue and earnings per share.
Approximately 67% of the aggregate targeted annual compensation for the
other four executive officers for 1996 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
designated financial performance goals 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 exercise
prices equal to the fair market value of the stock on the date of grant and vest
over either a five (5) or four (4) year period.
The number of shares for which options were granted to executive officers
in 1996 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.
OPTION EXCHANGE PROGRAM. The Committee decided in July 1996 that the
exercise price of certain stock options previously granted was at such a high
level, when compared to existing market value, that the incentives and retention
power associated with such options had been substantially negated. The Company
believes that its Option Exchange Program was an effective way to ensure
stability in key management positions without adversely impacting the earnings
or the cash position of the Company. Under the repricing program, vesting
schedules were re-set over a new four (4) year period. Accordingly, the
Committee authorized the Company to offer to all employees, including executive
officers, and to all Directors, who held outstanding unexercised options granted
between January 1, 1994 to July 25, 1996, the opportunity to exchange such
options on a one for one basis for new options. The new options issued pursuant
to such exchange had an exercise price of $17.125, which was the fair market
value of the common stock on the effective date of the exchange. Optionees who
elected to make the exchange received the lower exercise price and a new ten
(10) year option, but lost the accumulated vesting on the exchanged and canceled
options; a new four (4) year vesting schedule began on the new options at a rate
of 6.25% per quarter from the date of the grant.
12
<PAGE> 16
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
Robert A. Morrill
Candy M. Obourn
13
<PAGE> 17
STOCK PERFORMANCE GRAPH
The following Performance Graph assumes an investment of $100 on December
31, 1991 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
(dividend reinvestment) basis. The graph lines merely connect year-end dates and
do not reflect fluctuations between those dates.
[Stratus Computer Graph]
14
<PAGE> 18
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation and Stock Option Committee during 1996 were
Messrs. d'Arbeloff, Carr, Ferri, and Morrill and Mrs. Obourn. See "Election of
Directors". None of the members of the Committee had any interlocking or insider
relationships during 1996 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 that
during and in respect of the fiscal year ended December 29, 1996 all such filing
requirements were complied with.
APPROVAL OF AMENDMENTS TO STOCK OPTION PLANS
(ITEMS 2-4 OF NOTICE)
On January 13, 1997 the Board of Directors of the Company adopted
amendments to both the 1983 Incentive Stock Option Plan ("1983 Plan") and the
Non-Qualified Common Stock Option Plan ("NQSO Plan") (see plan descriptions
below) to (i) increase the maximum combined aggregate number of shares
authorized to be issued under both plans so that, as amended, the maximum
aggregate number of shares available under both plans combined is 10,880,200, an
increase of 1,500,000 shares; (ii) increase the maximum aggregate limit of
shares for which options may be granted to any person in any fiscal year from
100,000 to 500,000 shares per plan; and (iii) increase the number of shares for
which options are to be granted to outside directors from 6,000 to 8,000 upon
new appointment and from 3,000 to 4,000 annually thereafter. As of February 24,
1997, of the 9,380,200 shares authorized under the plans, only 942,687 remain
available for grant; and the purpose of the increase in the combined number of
shares was 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. The purpose of the increase in the limitation on the number of shares
for which options may be granted annually is to attract and retain key
executives including a new Chief Executive Officer (the search for whom the
Company announced on January 22, 1997) and enable taxable compensation to
executives in respect of such options to be exempt from the limitation on
deductibility imposed by Section 162(m) of the Internal Revenue Code (the
"Code"). Section 162(m) 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 for federal tax purposes. However, compensation
pursuant to plans meeting certain qualifications is not included in determining
the deductibility limitation, and the Company believes that the Company's plans
will continue to meet such qualifications. The purpose of the increase in the
number of shares to be granted to outside directors is to be able to continue to
attract and retain key non-employee members of the Board of Directors in today's
competitive environment.
Approval of the amendments by the stockholders is sought in order to meet
the stockholder approval requirements of i) the respective plans, (ii) Section
422 of the Code, which requires stockholder approval of any increase in the
number of shares which may be issued under an ISO Plan, iii) Rule 16(b)-3 of the
Securities Exchange Act of 1934, which, in the case of certain option plans that
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 and,
(iv) Section
15
<PAGE> 19
162(m) of the Code, which among other qualifications requires stockholder
approval of certain provisions of an option plan to exempt the spread (the
difference between the exercise price and the market value at the time of
exercise) of NSOs from the limitation on deductibility under that section. 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 these amendments.
1983 Stock Option Plan
The 1983 Plan currently provides for the grant, to key employees of the
Company, of either "incentive stock options" ("ISOs") within the meaning of the
Internal Revenue Code or "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 (if granted prior to January 1, 1996) or
over a four year period (if granted from January 1, 1996) 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 764 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 (other than to directors) having exercise prices less than 50% of the
fair market value of the underlying shares at the time of grant, and (ii) the
grant of NSOs to directors who are not employees of the Company.
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 market value over the exercise price, and
the Company is entitled to a corresponding deduction. In the event
16
<PAGE> 20
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.
Option Grants and Outstanding Option Totals
During the fiscal year ended December 29, 1996, NSOs for the purchase of
3,692,521 shares of common stock were issued under the 1983 Plan, of which
approximately 2,398,178 were issued pursuant to the share for share exchange
program described above. The exercise prices of substantially all such options
were equal to the fair market value of the underlying shares at the time of
grant. During the fiscal year ended December 29, 1996, NSOs for the purchase of
87,000 shares of common stock were issued under the NQSO Plan, of which
approximately 69,000 were issued pursuant to the share for share exchange
program described above. The exercise price for these shares was equal to the
fair market value of the underlying shares at the time of grant. During the
fiscal year ended December 29, 1996, 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 December 29, 1996 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............................................ 120,000
Robert E. Donahue............................................ 115,000
J. Donald Oldham............................................. 100,000
Stephen C. Kiely............................................. 130,000
David M. Weishaar............................................ 95,000
Gary E. Haroian.............................................. 190,000
Current executive officers as a group........................ 837,000
Non-employee directors as a group............................ 87,000
Non-executive officer employees.............................. 2,855,521
</TABLE>
At December 29, 1996, options outstanding under both the 1983 Plan and the
NQSO Plan were for the purchase of an aggregate of 3,656,398 shares of common
stock, and, of the 9,380,200 authorized shares, 930,927 shares remained
available for grant under the Plan.
APPROVAL OF AMENDMENTS TO EMPLOYEE STOCK PURCHASE PLAN
(ITEM 5 OF NOTICE)
On January 13, 1997, the Board of Directors adopted an Amendment to the
Employee Stock Purchase Plan ("ESPP") increasing the number of shares available
for purchase by 1,000,000 to 4,100,000 shares. As of February 24, 1997, of the
3,100,000 shares authorized under the ESPP, only 172,938 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.
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
17
<PAGE> 21
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 Company. The
purpose of the ESPP is to provide employees of the Company (of which there are
approximately 2,450) 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 December 29, 1996 by the named
executive officers, the current executive officers as a group, and all other
employees.
<TABLE>
<CAPTION>
NO. OF SHARES
-------------
<S> <C>
William E. Foster............................................. 0
Robert E. Donahue............................................. 773
J. Donald Oldham.............................................. 785
Stephen C. Kiely.............................................. 229
David M. Weishaar............................................. 471
Gary E. Haroian............................................... 735
Current executive officers as a group......................... 4,258
All other employees........................................... 259,770
</TABLE>
RATIFICATION OF APPOINTMENT OF AUDITORS
(ITEM 6 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 28, 1997.
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 at 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. Brokers, custodians and fiduciaries will be requested to
forward proxy
18
<PAGE> 22
soliciting materials to the owners of stock held in their names, and the Company
will reimburse them for their out-of-pocket expenses in this connection. The
Company has retained Corporate Investor Communications, Inc. to aid in the
solicitation of proxies, which company will receive a fee and reimbursement of
expenses estimated not to exceed an aggregate of $15,000, all of which will be
borne by the Company.
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal
executive offices not later than November 16, 1997, 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
EILEEN CASAL, Assistant Clerk
March 17, 1997
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.
19
<PAGE> 23
STRATUS COMPUTER, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
P FOR ANNUAL MEETING APRIL 23, 1997
R The undersigned stockholder of Stratus Computer, Inc. hereby appoints
Alexander V. d'Arbeloff, Robert M. Morrill, Paul J. Ferri, Gardner C.
O Hendrie, William E. Foster and Paul J. Severino, or any one or more of
them, attorneys and proxies for the undersigned with power of substitution
X 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
Y 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, 1997 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 I DIRECTORS AND
WILL BE VOTED "FOR" THE OTHER PROPOSALS. THE PROXY WILL BE VOTED IN
ACCORDANCE WITH THE HOLDER'S BEST JUDGMENT AS TO ANY OTHER MATTERS.
To elect two Class I Directors for the ensuing year.
NOMINEES: William E. Foster and Candy Obourn
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
-------------
<PAGE> 24
Please mark
[X] 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, 2, 3, 4, 5 and 6.
- -------------------------------------------------------------------------------
FOR
NOMINEES WITHHELD
1. Election of Class I Directors
(see reverse side). [ ] [ ]
[ ]
- -----------------------------------------
For all nominees except as noted above
2. Approve amendments to 1983 Stock Option FOR AGAINST ABSTAIN
Plan and the Non-Qualified Common Stock
Option Plan increasing the maximum [ ] [ ] [ ]
combined aggregate number of shares of
common stock authorized to be issued
under both plans from 9,380,200 to
10,880,200.
3. Approve amendments to the 1983 Stock FOR AGAINST ABSTAIN
Option Plan and the Non-Qualified
Common Stock Option Plan increasing the [ ] [ ] [ ]
maximum aggregate annual limitation on
shares for which options may be granted
to a participant under both plans from
100,000 to 500,000.
4. Approve an amendment to the Non-Qualified FOR AGAINST ABSTAIN
Common Stock Option Plan increasing the
number of shares for which options are [ ] [ ] [ ]
to be granted to outside directors from
6,000 to 8,000 upon new appointment and
from 3,000 to 4,000 annually thereafter.
5. Approve an amendment to the Employee Stock FOR AGAINST ABSTAIN
Purchase Plan increasing the aggregate
number of shares that may be issued [ ] [ ] [ ]
thereunder from 3,100,000 to 4,100,000.
6. Ratify Ernst & Young LLP as independent FOR AGAINST ABSTAIN
auditors.
[ ] [ ] [ ]
- -------------------------------------------------------------------------------
MARK HERE FOR
ADDRESS CHANGE AND [ ]
NOTE AT LEFT
<TABLE>
<S> <C>
Signature: Date
Please sign exactly as name appears hereon. ---------------------------------- -----------------
Joint owners should each sign. When signing
as attorney, executor, administrator, Signature: Date
trustee or guardian, please give full title ---------------------------------- -----------------
as such.
</TABLE>
