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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
MYLEX CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
April 16, 1999
Dear Fellow Stockholder:
The Board of Directors of Mylex Corporation is pleased to invite you to
attend the Company's 1999 Annual Meeting of Stockholders to be held on Monday,
May 17, 1999, at 2:00 p.m., at the Sheraton Palo Alto, located at 625 El Camino
Real, Palo Alto, California 94301.
At the meeting, we will vote to elect six directors and vote on the
proposals described in the accompanying Notice and Proxy Statement. We will also
report to you on the operations of the Company. You will have the opportunity to
ask questions about the business that may be of general interest to
stockholders.
I urge you to vote your Proxy as soon as possible. Your vote is very
important regardless of the number of shares you own. Please mark, sign and date
each Proxy card you receive and return it, at your earliest convenience, in the
postage-paid envelope provided, even if you currently plan to attend the Annual
Meeting. Returning your Proxy card will not prevent you from voting in person,
but will assure that your vote is counted if you are unable to attend. I
encourage you to vote "FOR" each of the Board's nominees for director and "FOR"
the proposals discussed in the accompanying Notice and Proxy Statement.
Sincerely,
/s/ Al Montross
Al Montross
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
[LOGO]
MYLEX CORPORATION
----------------
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
---------------------
APRIL 16, 1999
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders of Mylex
Corporation, a Delaware corporation (the "Company"), will be held on Monday, May
17, 1999, at 2:00 p.m., at the Sheraton Palo Alto, located at 625 El Camino
Real, Palo Alto, California 94301, for the following purposes:
1. To elect six (6) Directors of the Company to serve for the following
year or until their successors are duly elected and qualified or until
their earlier resignation or removal.
2. To approve adoption of the Company's 1998 Stock Option and Incentive
Plan and the reservation of 2,000,000 shares of the Company's Common
Stock for issuance thereunder.
3. To approve adoption of the Company's 1998 Employee Stock Purchase Plan
and the reservation of 500,000 shares of the Company's Common Stock for
issuance thereunder.
4. To ratify the appointment of KPMG Peat Marwick LLP as independent public
accountants of the Company for the fiscal year ending December 25, 1999.
5. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close of
business on April 7, 1999 are entitled to notice of and to vote at the Annual
Meeting. A list of stockholders eligible to vote at the Annual Meeting will be
available for inspection at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the envelope
enclosed for that purpose. Any stockholder attending the meeting may vote in
person even if he or she previously returned a Proxy.
Sincerely,
/s/ Al Montross
Al Montross
PRESIDENT AND CHIEF EXECUTIVE OFFICER
YOUR VOTE IS IMPORTANT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
MARK, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT IN
THE ENCLOSED ENVELOPE.
<PAGE>
[LOGO]
MYLEX CORPORATION
----------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 1999
GENERAL
The enclosed Proxy is solicited on behalf of Mylex Corporation (the
"Company") for the Annual Meeting of Stockholders to be held on May 17, 1999, at
2:00 p.m., at the Sheraton Palo Alto, located at 625 El Camino Real, Palo Alto,
California 94301, or any adjournment or adjournments thereof, for the purposes
set forth herein and in the accompanying Notice of Annual Meeting of
Stockholders. The Company's telephone number is (510) 796-6100.
This Proxy Statement and the enclosed Proxy are first being mailed on or
about April 16, 1999 to all stockholders entitled to notice of and vote at the
Annual Meeting.
RECORD DATE AND SHARES OUTSTANDING
Only stockholders of record at the close of business on April 7, 1999 (the
"Record Date") are entitled to receive notice of and to vote at the Annual
Meeting. The issued and outstanding voting securities of the Company at March
27, 1999, consisted of 20,689,208 shares of Common Stock, par value $0.01.
REVOCABILITY OF PROXIES
The enclosed Proxy is revocable at any time before its use by delivering to
the Secretary of the Company a written notice of revocation or a duly executed
Proxy bearing a later date. If a person who has executed and returned a Proxy is
present at the meeting and wishes to vote in person, he or she may elect to do
so and thereby suspend the power of the Proxyholders with respect to his or her
Proxy.
VOTING AND SOLICITATION
Each outstanding share of the Company's Common Stock is entitled to one vote
on all matters submitted to a vote at a meeting of stockholders.
The cost of soliciting proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may also be solicited by certain of
the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone, telegraph, facsimile, or otherwise. If
not otherwise specified, all proxies received pursuant to this solicitation will
be voted FOR each of Management's nominees for director and FOR the proposals
identified in the foregoing Notice and described herein.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The Company's Bylaws provide that the presence in person or by Proxy of
stockholders holding a majority of the shares of stock issued and outstanding
and entitled to vote shall constitute a quorum at an annual meeting of
stockholders.
<PAGE>
For determining whether a proposal has received a majority vote, abstentions
will be included in the vote totals, with the result that an abstention will
have the same effect as a negative vote. In instances where brokers are
prohibited from exercising discretionary authority for beneficial holders who
have not returned a Proxy (so called "broker non-votes"), those shares will not
be included in the vote totals and, therefore, will have no effect on the
outcome of the vote. However, broker non-votes shares that abstain and shares
for which the authority to vote is withheld on certain matters will be treated
as present for quorum purposes on all matters.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals by stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2000 Annual Meeting must be received by
the Company no later than on December 17, 1999, in order that they may be
considered for inclusion in the Proxy Statement and form of Proxy relating to
that meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
A board of six directors is to be elected at the Annual Meeting. Until
otherwise instructed, the Proxyholders will vote all of the Proxies received by
them for each of the Company's six nominees named below. Each of the nominees is
currently a director of the Company. In the event that any such nominee is
unable or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee who shall be designated by the current
Board of Directors to fill the vacancy. In the event that additional persons are
nominated for election as directors, the Proxyholders intend to vote all proxies
received by them in such a manner as will ensure the election of as many of the
nominees listed below as possible. In such event, the specific nominees to be
voted for will be determined by the Proxyholders. It is not expected that any
nominee will be unavailable. The term of office of each person elected as a
director will continue until the next Annual Meeting of Stockholders and until
his successor has been elected and qualified.
NOMINEES
The names of the nominees of management and certain information about them
are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- ------------------------------ --- ----------------------------------------------------------------- -----------
<S> <C> <C> <C>
Mr. Ismael Dudhia............. 64 Independent Consultant 1991
Dr. M. Yaqub Mirza............ 52 Chief Executive Officer and President of Mar-Jac Investments, 1988
Inc.
Dr. Inder M. Singh............ 53 Chief Executive Officer and Chairman of Lynx Real-Time System, 1986
Inc.
Mr. Al Montross............... 62 Chief Executive Officer and President of the Company 1994
Mr. Stephen McKenzie.......... 69 Independent Consultant 1995
Mr. Walter Wilson............. 55 Senior Vice President Supply Chain Integration and Information 1997
Technology of Solectron Corporation
</TABLE>
Except as set forth below, each of the nominees has been engaged in the
principal occupation described above during the past five years.
ISMAEL DUDHIA
Mr. Dudhia was elected as a Director of the Company in July 1991 and became
Chairman in December 1993. Mr. Dudhia has been an independent consultant since
late 1991. From 1983 until 1991, Mr. Dudhia was Chairman of the Board and active
in the management of Coolidge Bank and Trust
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Company of Boston, Massachusetts, which Mr. Dudhia owned from 1986 until 1991.
In 1961, Mr. Dudhia obtained a degree of Barrister-at-Law from Lincoln's Inn,
one of the four historical legal education institutions in England.
M. YAQUB MIRZA
Dr. Mirza has served as a Director of the Company since December 1988. He
was Secretary of the Company from 1989 through May, 1998. He is currently
President and Chief Executive Officer of Mar-Jac Investments, Inc., an
investment and management consulting firm that is a stockholder of the Company.
He currently serves as a Trustee and Treasurer on the Board of Trustees of Amana
Mutual Funds Trust, a mutual fund. He is also Chairman of the Board of Jugos
Concetrados, S.A., which is traded on the Santiago, Chile, Stock Exchange. Dr.
Mirza also serves as an officer of Safa Trust. Dr. Mirza holds a Doctorate in
Physics from the University of Texas.
INDER M. SINGH
Dr. Singh has served as a Director of the Company since December 1986. Since
March 1988, Dr. Singh has been the Chief Executive Officer and Chairman of Lynx
Real-Time System, Inc., a software company. From 1985 to 1988, he was the owner
and operator of Simran Associates, a computer consulting firm. From 1982 to
1985, he served as Chief Executive Officer and President of Excelan, Inc. Before
forming Excelan, Inc., Dr. Singh held executive level positions with Zilog
Incorporated and Amdahl Corporation. Dr. Singh holds a Doctorate in Computer
Science from Yale University.
AL MONTROSS
Mr. Montross was appointed President and Chief Executive Officer of the
Company in April 1994 and became a Director in May 1994. In September 1993, Mr.
Montross joined the Company as Executive Vice President and in December 1993 was
appointed Acting President and Chief Operating Officer. From August 1992 to
September 1993, he held the position of Senior Vice President at Distributed
Processing Technology of Maitland, Florida, a computer peripherals manufacturer.
From 1989 to 1992, Mr. Montross held the position of President and Chief
Operating Officer at Inacomp Computer Centers, Inc., of Troy Michigan, a
computer equipment and network reseller. He currently serves as a director of
American Speedy Printing Centers, Inc. Mr. Montross holds a Bachelor's degree in
Economics from Siena College in New York.
STEPHEN MCKENZIE
Mr. McKenzie was appointed as a Director in January 1995. Mr. McKenzie was
Chief Executive Officer of Resource Management, a receivables financing company,
from 1991 to September, 1998. From 1989 to 1991, he was Senior Vice President of
Sales and Marketing and co-founder of Reply Corporation, a manufacturer of
microchannel personal computers. From 1987 to 1989, Mr. McKenzie was President
of Acer America, Inc., a computer clone manufacturer. He currently serves as a
member of the Board of Directors of Microspeed Corporation, a manufacturer of
personal computer input devices. Mr. McKenzie holds a Bachelor's degree in
Political Science from the University of Nebraska.
3
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WALTER WILSON
Mr. Wilson is currently Senior Vice President, Supply Chain Integration and
Information Technology of Solectron Corporation. Mr. Wilson joined Solectron in
1989 as the Vice President of Project Management and was soon promoted to Senior
Vice President of the corporation. During his nine years at Solectron, Wilson
has held numerous positions, including President of Solectron California,
President of Solectron North America and President of Solectron Americas. Prior
to joining Solectron, Mr. Wilson spent 24 years at IBM Corporation, where he
held various domestic and international management positions in manufacturing,
technology and product development and corporate operations. In addition to his
executive responsibilities at Solectron, he currently serves as a director of
Asyst Technologies. Mr. Wilson holds Bachelor of Science degrees in Electrical
Engineering and Applied Mathematics from California State Polytechnic
University, and a Master of Business Administration degree from Santa Clara
University.
VOTE REQUIRED AND BOARD OF DIRECTOR'S RECOMMENDATION
The six nominees for director receiving the highest number of affirmative
votes of the shares entitled to be voted for them shall be elected as directors.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES LISTED
ABOVE.
PROPOSAL TWO
APPROVAL OF THE COMPANY'S 1998 STOCK OPTION AND INCENTIVE PLAN
GENERAL
On July 1, 1998, the Board adopted, subject to stockholder approval, the
Mylex Corporation 1998 Stock Option and Incentive Plan (the "1998 Plan"). The
following description of the 1998 Plan is qualified in its entirety by reference
to the full text of the plan, a copy of which is included as Appendix A to this
Proxy Statement.
SUMMARY OF 1998 PLAN
PURPOSE. The purpose of the 1998 Plan is to enable the Company to attract,
retain and motivate its employees, consultants and non-employee directors and to
align the interests of all such persons with the interests of the Company's
stockholders by providing for or increasing the proprietary interests of such
persons in the Company.
ADMINISTRATION. The 1998 Plan will be administered by a committee of the
Board (the "Independent Committee") consisting of two or more directors, each of
whom is an "outside director" as defined in Section 162(m) of the Internal
Revenue Code of 1986 (the "Code"). Subject to the provisions of the 1998 Plan,
the Independent Committee has full and final authority to select the
participants to whom the Company will grant awards, to grant such awards and to
determine the terms and conditions, and the number of shares to be issued
pursuant to, such awards.
ELIGIBILITY. Every employee, director or consultant of the Company or any
of its subsidiaries is eligible to be considered for the grant of awards under
the 1998 Plan. The maximum number of shares of Common Stock that may be issued
pursuant to awards granted under the 1998 Plan is 2,000,000, subject to certain
adjustments. The aggregate number of shares of Common Stock subject to awards
granted to any non-employee director in any calendar year may not exceed 20,000,
other than Non-Employee Director Options discussed below.
AWARDS. The 1998 Plan authorizes the Independent Committee to enter into
any type of arrangement with a participant, consistent with the 1998 Plan,
involving the issuance of (1) Common Stock or (2) a
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derivative security, as Rule 16a-1 promulgated under the Securities Exchange Act
of 1934, as amended (the "1934 Act") defines that term, or any other right or
interest with an exercise or conversion privilege at a price related to the fair
market value of the Common Stock or with a value dervived from the value of the
Common Stock. The exercise or conversion price of any award intended to qualify
as "performance based compensation" for purposes of Section 162(m) of the Code
will not be less than the fair market value of the Common Stock on the date of
grant.
Awards are not restricted to any specified form or structure and may include
arrangements such as sales or bonuses of stock, restricted stock, stock options,
reload stock options, stock purchase warrants, other rights to acquire stock,
securities convertible into or redeemable for stock, stock appreciation rights,
phantom stock, dividend equivalents, performance units or performance shares. An
award may consist of one such arrangement or two or more such arrangements in
tandem or in the alternative. To date, the only awards granted under the 1998
Plan have been stock options.
An award granted under the 1998 Plan is likely to include provisions
conditioning or accelerating the receipt of benefits, either automatically or in
the discretion of the Independent Committee, upon the occurrence of specified
events, such as a change of control of the Company, an acquisition of a
specified percentage of the voting power of the Company, or a dissolution,
liquidation, merger, reclassification, sale of substantially all the property
and assets of the Company or other similar significant corporate transaction.
Any stock option granted to an employee under the 1998 Plan may be an incentive
stock option or a non-qualified stock option. See "FEDERAL TAX TREATMENT,
INCENTIVE STOCK OPTIONS" and "FEDERAL TAX TREATMENT, NONQUALIFIED OPTIONS,"
below.
An award under the 1998 Plan may permit the recipient to pay part or all of
the purchase price for the shares of Common Stock or other property issuable
pursuant to the award, and part or all of the recipient's tax withholding
obligations with respect to the issuance, by delivering cash, by delivering
previously owned shares of capital stock of the Company or other property deemed
acceptable by the Independent Committee, by reducing the amount of shares or
other property otherwise issuable pursuant to the award or by delivering a
promissory note with terms and conditions determined by the Independent
Committee. If an option granted under the 1998 Plan permits the recipient to pay
for shares with previously owned shares, the recipient could exercise the option
in successive transactions, starting with a relatively small number of shares
and, by a series of exercises using shares acquired by each such transaction to
pay the purchase price of the shares acquired in the following transaction, to
acquire a larger number of shares with no more investment than the shares
received upon the first such exercise.
NON-EMPLOYEE DIRECTOR OPTIONS. The 1998 Plan provides for the automatic
grant of stock options to non-employee directors ("Non-Employee Director
Options"). The Company will grant each new non-employee director, automatically
upon his or her first election or appointment to the Board or upon full vesting
of all his or her options to purchase Common Stock under the 1998 Plan or any
other stock option plan of the Company, an option to purchase 30,000 shares of
Common Stock. Each year, the Company also will grant each non-employee director,
automatically on the first business day after the anniversary of the date of
grant of the first option automatically granted, an option to purchase an
additional 12,000 shares of Common Stock. The exercise price for each
Non-Employee Director Option is the fair market value on the date of grant of
the shares of Common Stock subject to the option.
One-sixteenth of the shares of Common Stock subject to each Non-Employee
Director Option will become exercisable, cumulatively, on each of the quarterly
anniversaries of the date of grant. A Non-Employee Director Option will become
fully exercisable on the date upon which the optionee ceases to be a
non-employee director as a result of his or her death or total disability. In
addition, all outstanding Non-
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Employee Director Options may be exercised in full on the first of the following
events to occur after July 1, 2000:
(1) Immediately prior to the consummation of a reorganization, merger or
consolidation of the Company as a result of which the outstanding
securities of the class then subject to the 1998 Plan are exchanged for
or converted into cash, property or securities not issued by the
Company;
(2) The dissolution or liquidation of the Company;
(3) The sale of all or substantially all the property and assets of the
Company; or
(4) The date of dissemination to the stockholders of the Company of a proxy
statement or an information statement disclosing a change of control of
the Company.
Each Non-Employee Director Option granted under the 1998 Plan will expire on
the first to occur of the following:
(1) the first anniversary of the date upon which the optionee ceases to be a
non-employee director as a result of death or total disability;
(2) the ninetieth day after the date on which the optionee ceases to be a
non-employee director for any reason other than death or total
disability; or
(3) the tenth anniversary of the date of grant of such option.
PLAN DURATION. The 1998 Plan became effective upon its adoption by the
Board on July 1, 1998, but no shares of Common Stock may be issued or sold until
the Company's stockholders approve the 1998 Plan. No awards may be made under
the 1998 Plan after June 30, 2008. Although the Company may issue shares of
Common Stock after that date pursuant to awards made before that date, the
Company may not issue any such shares under the 1998 Plan after June 30, 2018.
AMENDMENTS AND TERMINATION. The Board may amend or terminate the 1998 Plan
at any time and in any manner, subject to the following:
(1) the Board may not amend or terminate the 1998 Plan to deprive the
recipient of any award of the award or any of his or her rights
respecting the award without his or her consent;
(2) the Board may not amend the principal terms and conditions relating to
Non-Employee Director Options more than every six months, other than to
comply with changes in the Code, the Employee Retirement Income Security
Act or the rules and regulations promulgated under either law, all as
amended from time to time; and
(3) the Board may not amend the 1998 Plan to increase the maximum number
shares of Common Stock that may be issued pursuant to all awards,
including incentive stock options, granted under the 1998 Plan, or
awards of any type granted under the 1998 Plan during any calendar year
to any one participant, change the class of persons eligible to receive
awards under the 1998 Plan, materially increase the benefits accruing to
participants subject to Section 16 of the 1934 Act in a manner not
specifically contemplated by the 1998 Plan or affect the 1998 Plan's
compliance with Rule 16b-3 under the 1934 Act or applicable provisions
of the Code, as amended from time to time, without the approval of the
Company's stockholders to the extent required to comply with Rule 16b-3,
Sections 422 and 162(m) of the Code and other applicable code provisions
and related regulations.
FEDERAL INCOME TAX TREATMENT
The following is a brief description of the federal income tax treatment
that will generally apply to awards made under the 1998 Plan, based on federal
income tax laws in effect on the date of this Proxy Statement. The exact federal
income tax treatment of awards will depend on the specific nature of the
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award. Such an award may, depending on its conditions, be taxable as an option,
as restricted or unrestricted stock, as a cash payment, or otherwise.
INCENTIVE OPTIONS. Under the 1998 Plan, employees may be granted options
that are intended to qualify as incentive stock options under the provisions of
Section 422 of the Code ("Incentive Options"). Non-Employee Director Options do
not qualify as Incentive Options. Generally, the optionee is not taxed, and the
Company is not entitled to a deduction, on the grant or the exercise of an
Incentive Option. The optionee generally recognizes capital gain or capital loss
on the sale of the shares acquired upon the exercise of an Incentive Option
equal to the difference between the sales price and the exercise price of such
Incentive Option, and the Company is not entitled to a deduction. However, if
the optionee sells the shares acquired upon the exercise of an Incentive Option
at any time within one year after the exercise, or within two years after the
grant, of the Incentive Option, then the optionee will recognize compensation
(ordinary income) in an amount equal to the excess of the sale price of those
shares over the exercise price. In such a case, the Company will generally be
entitled to a tax deduction in an amount equal to the amount of ordinary income
recognized by the optionee.
An optionee may be taxed on the exercise of an Incentive Option under the
alternative minimum tax. The amount by which the fair market value of the stock
received upon exercise of an Incentive Option exceeds the exercise price will be
included as a positive adjustment in the calculation of an optionee's
alternative minimum taxable income ("AMTI") in the year of exercise. The
alternative minimum tax rate is 26% on total AMTI (reduced by the applicable
statutory exemption, if any) of $175,000 or less in any year and 28% on AMTI in
excess of $175,000.
NONQUALIFIED OPTIONS. The grant of an option or other similar right to
acquire stock that does not qualify for treatment as an Incentive Option (a
"Nonqualified Option") is generally not a taxable event for the optionee. Upon
exercise of the option, the optionee will generally recognize compensation
(i.e., ordinary income) in an amount equal to the excess of the fair market
value of the stock on the date of the exercise over the exercise price, and the
Company will be entitled to a tax deduction equal to such amount. See "SPECIAL
RULES FOR AWARDS GRANTED TO INSIDERS, INCLUDING NON-EMPLOYEE DIRECTORS," below.
RESTRICTED SHARES. Awards under the 1998 Plan also may include stock sales,
stock bonuses or other grants of stock involving shares that are subject to
restrictions that constitute a substantial risk of forfeiture within the meaning
of Section 83 of the Code ("Restricted Shares"). The recipient generally will
not be taxed on the receipt of Restricted Shares until the restrictions expire
or are removed. When the restrictions expire or are removed, the recipient will
recognize ordinary income (and the Company will be entitled to a deduction) in
an amount equal to the excess of the fair market value of the shares at that
time over the purchase price, if any. However, if the recipient makes an
election under Section 83(b) of the Code within 30 days after receiving
Restricted Shares ("83(b) Election"), he or she will recognize compensation
income (and the Company will be entitled to a deduction), instead, at the time
of receipt of the restricted shares and equal, instead, to the excess of the
fair market value of the shares on the date of receipt over the purchase price.
A recipient who makes an Section 83(b) election generally recognizes capital
gain on any gain realized upon a subsequent disposition of the shares in an
amount in excess of fair market value of the Restricted Shares on the date of
receipt, but is not permitted to recognize a loss if the shares are subsequently
forfeited.
SPECIAL RULES FOR AWARDS GRANTED TO INSIDERS, INCLUDING NON-EMPLOYEE
DIRECTORS. If an optionee is a director, officer or stockholder subject to
Section 16 of the 1934 Act (an "Insider") and exercises a Nonqualified Option
within six months of the date of grant, the shares received will be considered
Restricted Shares until the earlier of (1) six months after the date of grant or
(2) the date of disposition of the shares (the "16(b) Date"). Unless the Insider
has made an 83(b) Election, he or she will recognize ordinary income on the
16(b) Date equal to the excess of the fair market value of the shares on that
date over the exercise price.
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MISCELLANEOUS TAX ISSUES. Awards may be granted under the 1998 Plan that do
not fall clearly into the categories described above. The federal income tax
treatment of these awards will depend upon the specific terms of such awards.
The Company may be required to make arrangements for payment of applicable
withholding taxes with respect to any ordinary income recognized by a
participant in connection with awards made under the 1998 Plan.
With certain exceptions, an individual may not deduct investment-related
interest to the extent such interest exceeds the individual's net investment
income for the year. Investment interest generally includes interest paid on
indebtedness incurred to purchase shares of Common Stock. Interest disallowed
under this rule may be carried forward to and deducted in later years, subject
to the same limitations.
Special rules will apply in cases where a recipient of an award pays the
exercise or purchase price of the award or applicable withholding tax
obligations under the 1998 Plan by delivering previously owned shares of Common
Stock or by reducing the amount of shares otherwise issuable pursuant to the
award. The surrender or withholding of such shares will in certain circumstances
result in the recognition of income with respect to such shares.
The terms of the agreements pursuant to which specific awards are made to
employees under the 1998 Plan are likely to provide for accelerated vesting or
payment of an award in connection with a change in ownership or control of the
Company. In that event, and depending upon the individual circumstances of the
recipient, certain amounts with respect to such awards may constitute "excess
parachute payments" under the golden parachute provisions of the Code. Those
provisions will subject a recipient to 20% excise tax on, and deny the Company
any deductions respecting, any such excess parachute payments.
In certain instances, the Company may be denied a deduction for compensation
(including compensation attributable to awards made under the 1998 Plan) to
certain officers of the Company to the extent their compensation exceeds $1
million in a given year.
The foregoing brief summary of the effect of federal income taxation upon
the participants and the Company with respect to the award and exercise of
options and other equity-based incentive arrangements under the 1998 Plan and
the disposition of shares so acquired does not purport to be complete. Reference
should be made to the applicable provisions of the Code and the related
regulations for detailed information concerning the tax effects of each such
transaction. In addition, this summary does not discuss the provisions of the
income tax laws of any municipality, state or foreign country in which a
participant may reside or the Company is located.
PARTICIPATION IN THE 1998 PLAN BY EXECUTIVE OFFICERS, OTHER EMPLOYEES AND
NON-EMPLOYEE DIRECTORS
Although all employees, consultants and non-employee directors, a total of
approximately 300 persons, are eligible to receive options or other equity-based
incentive arrangements under the 1998 Plan, such grants will be made only with
the approval of the Independent Committee. Because all grants under the 1998
Plan are discretionary, future grants to eligible participants are not
determinable. As described above, the grant of certain options to non-employee
directors is non-discretionary and will be made automatically as provided in the
1998 Plan.
8
<PAGE>
Certain executive officers and employees of the Company have been granted
stock options under the 1998 Plan, subject to stockholder approval of the 1998
Plan. The following table sets forth the options granted under the 1998 Plan as
of April 16, 1999.
NEW PLAN BENEFITS
1998 STOCK OPTION AND INCENTIVE PLAN
<TABLE>
<CAPTION>
DOLLAR NUMBER
NAME AND POSITION VALUE ($) OF UNITS
- ------------------------------------------------------------------------ ------------- ---------
<S> <C> <C>
Al Montross........................................................... (1) 400,000(2)
President and Chief Executive Officer
Colleen Gray.......................................................... (1) 36,000(2)
Vice President and Chief Financial Officer
KK Rao................................................................ (1) 27,000(2)
Vice President and Chief Technology Officer
Balbir Singh.......................................................... (1) 24,000(2)
Vice President Operations
Ronald G. von Trapp................................................... (1) 24,000(2)
Vice President Worldwide Sales and Marketing
Joseph A. Schmidt..................................................... (1) 9,000(2)
-- ---------
Vice President Human Resources
Executive Group....................................................... (1) 520,000(2)
Non-Executive Director Group.......................................... -- --
Non-Executive Employee Group.......................................... (1) 472,250(2)
</TABLE>
- ------------------------
(1) The value of the Common Stock, as of January 27, 1999, is $11.00 per share.
(2) Stock options granted on January 27, 1999, with an exercise price of $11.00
and an expiration on January 27, 2009. Each option, other than the option
granted to Mr. Montross, is exercisable cumulatively at a rate of 25% of the
shares subject to the option on the first anniversary of the grant date of
the option and 6.25% of such shares on each of the 12 immediately succeeding
consecutive quarterly anniversaries. The option granted to Mr. Montross is
exercisable cumulatively at a rate of 25% of the shares subject to the
option on each of the first four anniversaries of the grant date.
VOTE REQUIRED
The affirmative vote of a majority of the votes present or represented by
Proxy and entitled to vote at the Annual Meeting, at which a quorum representing
a majority of all outstanding shares of Common Stock is present and voting, is
required for approval of this proposal.
THE BOARD OF DIRECTORS RECOMMEND A VOTE "FOR" APPROVAL OF THE 1998 STOCK OPTION
AND INCENTIVE PLAN.
PROPOSAL THREE
APPROVAL OF THE COMPANY'S 1998 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
On November 20, 1998, the Board adopted, subject to stockholder approval,
the Mylex Corporation 1998 Employee Stock Option Purchase Plan (the "Purchase
Plan"). The following description is qualified in its entirety by reference to
the full text of the Purchase Plan, a copy of which is included as Appendix B to
this Proxy Statement. The Purchase Plan, and the right of the participants to
make purchases under the Purchase Plan, are intended to qualify under the
provisions of Section 423 of the Internal Revenue Code
9
<PAGE>
of 1986, as amended (the "Code"). A total of 500,000 shares of Common Stock are
reserved for issuance under the Purchase Plan. No shares of the Common Stock
have yet been sold pursuant to the Purchase Plan. There are approximately 300
employees eligible to participate in the Purchase Plan.
SUMMARY OF PURCHASE PLAN
PURPOSE. The purpose of the Purchase Plan is to maintain competitive equity
compensation programs and to provide present and future employees of the Company
and its majority-owned subsidiaries an incentive in the performance of their
services by giving them an opportunity to acquire a proprietary interest (or
increase an existing proprietary interest) in the Company through the purchase
of Common Stock and to profit from increases in the value of the Common Stock,
thereby more closely aligning the interests of the employees and the
stockholders.
ADMINISTRATION. The Purchase Plan is administered by the Board or a
Committee (the "Committee") appointed by the Board, consisting of not less than
two members of the Board who are not officers or employees of the Company or of
any of its subsidiaries. The Committee has the authority to interpret the
Purchase Plan, to prescribe, amend and rescind rules and regulations relating to
the Purchase Plan and to make all determinations necessary or advisable for the
administration of the Purchase Plan, all of which actions and determinations are
final, conclusive and binding on all participants.
ELIGIBILITY. Subject to certain limitations imposed by Section 423(b) of
the Code (or successor provisions), any person employed by the Company (or any
of its majority-owned subsidiaries) for at least 20 hours per week and more than
five months in a calendar year is eligible to participate in the Purchase Plan,
as long as the employee is so employed on the first day of an offering period
(as described below). Eligible employees become participants in the Purchase
Plan by delivering to the Company an enrollment agreement authorizing payroll
deductions before the first day of an offering period, unless the Committee sets
another time for delivering the enrollment agreement for all eligible employees.
OFFERING DATES. The Purchase Plan is implemented by a series of offering
periods of approximately six months in duration, each of which commences on the
first day on which national stock exchanges and the Nasdaq system are open for
trading (a "Trading Day") after each June 1 and December 1. However, the first
offering period under the Purchase Plan commenced on December 16, 1998. Each
option period ends with an exercise date that is the last Trading Day before
each November 30 and May 31. The Committee may alter the duration of the
offering periods without stockholder approval.
PURCHASE PRICE. The exercise price of each of the shares in each offering
period shall be the lower of (a) 85% of the fair market value of a share of the
Common Stock on the first day of each offering period, or (b) 85% of the fair
market value of a share of the Common Stock on the applicable exercise date. The
fair market value of the Common Stock on a given date is the last sale price of
the Common Stock on the Nasdaq national market system on that date.
PAYMENT OF PURCHASE PRICE, PAYROLL DEDUCTIONS. The purchase price of the
shares is accumulated by payroll deductions during an offering period. The
deductions may be any whole percentage amount between 1% and 10% of the
participant's eligible compensation on each payroll date during the offering
period. For purposes of the Purchase Plan, eligible compensation includes each
participant's full salary and wages, including commissions, bonuses and overtime
pay (at the election of the participant), any pension or other profit sharing
plan, any fringe benefits and certain forms of extraordinary pay. A participant
may discontinue his or her participation in the Purchase Plan at any time during
an offering period. In addition, a participant may, no more than once in any
offering period, reduce or increase the rate of his or her payroll deductions. A
participant also may suspend and recommence his or her payroll deductions in any
offering period. Payroll deductions commence on the first payday following the
first day of each offering period and continue at the same rate until the last
payday in the offering period, unless the participant terminates participation
in the Purchase Plan, reduces or increases the rate of the payroll deductions or
suspends payroll deductions.
10
<PAGE>
GRANT OF OPTIONS. On the first day of each offering period, each eligible
employee is granted an option to purchase, on the exercise date for the offering
period, a number of shares of Common Stock determined by dividing such
employee's payroll deductions accumulated during the offering period by the
exercise price, up to a maximum of 1,250 shares of Common Stock for any one
employee during any offering period. Notwithstanding any provision of the
Purchase Plan to the contrary, no employee shall be granted an option under the
Plan if, immediately after the grant, such employee would own 5% or more of the
total combined voting power or value of all classes of stock of the Company or
any of its subsidiaries (including stock which may be purchased under the
Purchase Plan or any other options). Nor may any employee be granted an option
that would permit the employee to purchase Common Stock under the Purchase Plan
or any other stock purchase plan of the Company or any of its subsidiaries in
any calendar year having a fair market value that exceeds $25,000, determined
based on the fair market value of the shares at the time the option is granted.
EXERCISE OF OPTIONS. Unless a participant withdraws from the Purchase Plan,
the participant's option for the purchase of shares of Common Stock will be
exercised automatically, on the exercise date of each offering period, to
purchase the maximum number of full shares of Common Stock (subject to the
limitations described above) that may be purchased at the applicable exercise
price with the accumulated payroll deductions in the participant's account.
WITHDRAWAL AND TERMINATION. A participant may withdraw all payroll
deductions credited to his or her account under the Purchase Plan and terminate
his or her participation in the Purchase Plan, in whole but not in part, by
giving written notice to the Company. Such a withdrawal may be elected at any
time before the end of the applicable offering period. An employee's failure to
remain in continuous employ of the Company or its majority-owned subsidiaries
for at least 20 hours per week during an offering period also constitutes a
withdrawal.
CAPITAL CHANGES. If any change in the Company's capitalization, such as a
reorganization, restructuring, recapitalization, reclassification, stock split,
reverse stock split or stock dividend, results in an increase or decrease in the
number of outstanding shares of Common Stock or a change of Common Stock into,
or an exchange of Common Stock for, a different number or kind of shares, the
Committee may authorize appropriate adjustments to be made to the shares subject
to purchase under the Purchase Plan and to the purchase price per share. The
sale, merger, dissolution or liquidation of the Company or a sale of all or
substantially all of the Company's assets will terminate the then current
offering periods effective immediately before the date on which such proposed
action is to be consummated, unless the Committee otherwise determines. Upon any
such termination, unless the Committee otherwise determines, all options to
purchase shares will be exercised automatically on such date (which shall be
deemed to constitute an exercise date), to purchase the maximum number of full
shares that may be purchased at the applicable exercise price with each
participant's accumulated payroll deductions.
NONTRANSFERABILITY. Options to purchase Common Stock granted under the
Purchase Plan are not transferable by a participant other than by will or the
laws of descent and distribution and are exercisable during a participant's
lifetime only by the participant.
AMENDMENT AND TERMINATION OF THE PURCHASE PLAN. The Board may at any time
amend or terminate the Purchase Plan, except that it may make no amendment that
would cause the Purchase Plan to fail to meet the requirements for employee
stock purchase plans in Section 423 of the Code. Among other amendments, the
Board may alter the purchase price for or shorten any offering period, including
any offering period under way at the time of any such change, or allocate less
than all the shares of Common Stock purchased during an offering period among
participants in the offering, or make any other modifications or amendments that
the Board may deem necessary or desirable to reduce or eliminate any unfavorable
financial accounting consequence that otherwise may result from the ongoing
operation of the Purchase Plan. The Board need not obtain stockholder approval
of any such amendment except to the
11
<PAGE>
extent necessary to comply with Section 423 of the Code or any other applicable
law, regulation or stock exchange rule.
TAX INFORMATION
The Purchase Plan, and the right of the participants to make purchases under
the Purchase Plan, are intended to qualify under the provisions of Section 423
of the Code. Under these provisions, no income will be taxable to a participant
at the time of the grant of the option or purchase of shares. Upon any
disposition of shares, the participant will be subject to tax, and the rate will
depend upon the participant's holding period. If the shares have been held by
the participant for more than two years after the date of option grant and more
than one year after the date of exercise of the option, gain on disposition will
be treated as compensation, or ordinary income, to the extent of the excess of
the fair market value of the shares on the grant date over the purchase price
for the shares, determined as of the grant date, and any further gain will
generally be taxed as long-term capital gain. If the shares are disposed of
before the expiration of either of these two holding periods, any gain will be
treated as compensation income and any loss will generally be taxed as long-term
or short-term capital loss, depending on the holding period from the date of
exercise. If a participant dies before disposing of the shares, any gain that
would have been realized on a sale immediately before death will have to be
recognized as compensation income to the extent of the excess of the fair market
value of the shares on the grant date over the purchase price of the shares on
that date. The Company is not entitled to a deduction for amounts taxed as
ordinary income or capital gain to a participant, except to the extent of
ordinary income reported by participants upon disposition of shares within two
years from the date of grant or within one year from the date of exercise.
The foregoing brief summary of the effect of federal income taxation upon
the participants and the Company with respect to the grant and exercise of
options under the Purchase Plan and the disposition of shares so acquired does
not purport to be complete, and reference should be made to the applicable
provisions of the Code and the related regulations for detailed information
concerning the tax effects of each such transaction. In addition, this summary
does not discuss the provisions of the income tax laws of any municipality,
state, or foreign country in which a participant may reside or the Company is
located.
PARTICIPATION IN PURCHASE PLAN BY EXECUTIVE OFFICERS AND OTHER EMPLOYEES
Participation in the Purchase Plan is voluntary and depends on each eligible
employee's election to participate and his or her determination as to the level
of participation through payroll deductions. Accordingly, future purchases by
executive officers and other employees under the Purchase Plan are not
determinable. To date, no purchases have been made under the Purchase Plan.
VOTE REQUIRED AND BOARD OF DIRECTOR'S RECOMMENDATION
The affirmative vote of a majority of the votes present or represented by
Proxy and entitled to vote at the Annual Meeting, at which a quorum representing
a majority of all outstanding shares of Common Stock is present and voting, is
required for approval of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1998 EMPLOYEE
STOCK PURCHASE PLAN
12
<PAGE>
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Management has selected KPMG Peat Marwick LLP, independent public
accountants, to audit the books, records and accounts of the Company for the
current fiscal year ending December 25, 1999. KPMG Peat Marwick LLP has audited
the Company's financial statements since its 1987 fiscal year.
The affirmative vote of the holders of a majority of the Company's Common
Stock represented and voting at the Annual Meeting will be required to ratify
the Board's selection of KPMG Peat Marwick. In the event of a negative vote on
such ratification, the Board of Directors will reconsider its selection.
A representative of KPMG Peat Marwick is expected to be available at the
Annual Meeting to make a statement, if such representative desires to do so, and
to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT AUDITORS FOR THE 1999
FISCAL YEAR.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company (the "Board") held a total of seven
meetings during 1998. During 1998, no director attended fewer than seventy-five
percent (75%) of the meetings of the Board and committees thereof, if any, upon
which such director served. In 1998, the Board had an Audit Committee, a
Compensation Committee and Stock Option Plan Committee, which also acts as the
Committee under its employee stock purchase plans. The Board recently formed a
Nominating Committee, which is expected to select Management's nominees for
Director beginning with respect to the Company's Annual Meeting of Stockholders
in 2000.
During 1998, the Audit Committee, which met one time, consisted of Messrs.
McKenzie, Mirza, Singh and Wilson. The Audit Committee approves the engagement
of and the services to be performed by the Company's independent auditors and
reviews the Company's accounting principles and its system of internal
accounting controls. The Audit Committee's functions include (i) recommending to
the Board the selection of the independent accountants, (ii) reviewing with the
independent accountants the scope of their examination, (iii) receiving the
reports of the independent accountants and meeting with representatives of such
accountants for the purpose of reviewing and considering questions relating to
their examination and such reports, (iv) reviewing, either directly or through
the independent accountants, the Company's system of internal accounting
controls and the Company's accounting principles, policies and practices, and
financial reporting.
The Stock Option Plan Committee, which met once, and otherwise acted by
written consent, in 1998, consisted of Messrs. Dudhia, Mirza and Wilson. The
charter of the Stock Option Plan Committee is to review and approve grants of
stock options to employees, including officers, of the Company and to administer
the Company's employee stock purchase plans. The Compensation Committee,
consisting of Messrs. Dudhia, Singh and McKenzie, met one time in 1998. The
Compensation Committee's role is as described in the Compensation Committee
Report in this Proxy Statement.
COMPENSATION OF DIRECTORS
Each of the Company's directors who do not also serve as employees ("Outside
Directors") is remunerated for each Board meeting he attends. In 1998, the
Outside Directors were paid a fee of $2,000 for each meeting, other than
telephonic meetings, and a $1,000 fee for each telephonic meeting. The Company
also reimburses all directors for their reasonable out-of-pocket expenses
incurred in connection with their attendance at Board or Committee meetings. In
addition, Outside Directors are entitled to participate in the Company's stock
option plans. See a description of the 1993 Stock Option Plan on Page 16, and a
description of the 1998 Stock Option and Incentive Plan on Page 4.
13
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of Common Stock as
of the Record Date, (i) by each executive officer, (ii) by each director, (iii)
by all directors and executive officers as a group and (iv) by all persons known
to the Company to be the beneficial owners of more than five percent of the
Company's Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME AND ADDRESS (1) OWNERSHIP (2) OF CLASS (3)
- ---------------------------------------------------------- ------------------ -------------
<S> <C> <C>
OFFICERS AND DIRECTORS
Mr. Al Montross........................................... 664,946(4) 3.23%
Mrs. Colleen Gray......................................... 66,914(5) 0.33%
Mr. KK Rao................................................ 62,188(6) 0.31%
Mr. Balbir Singh.......................................... 33,110(7) 0.17%
Mr. Ron von Trapp......................................... 28,836(8) 0.14%
Mr. Joseph A. Schmidt..................................... 24,767(9) 0.12%
Mr. Alonzo Wilson......................................... 20,938(10) 0.10%
Mr. Ismael Dudhia......................................... 100,222(11) 0.50%
Dr. Inder Singh........................................... 379,422(12) 1.89%
Dr. M. Yaqub Mirza........................................ 790,481(13) 3.95%
Mr. Stephen McKenzie...................................... 63,125(14) 0.31%
Mr. Walter W. Wilson...................................... 43,924(15) 0.22%
All directors and executive officers as a group (12
persons)................................................ 2,278,873(16) 11.3%
CERTAIN 5% BENEFICAL OWNERS
The Crabbe Huson Group Inc................................ 3,158,400(17) 15.8%
Becker Capital Management, Inc............................ 1,668,876(18) 8.3%
Thomson Horstmann & Bryant Inc............................ 1,287,700(19) 6.4%
</TABLE>
- ------------------------
(1) All addresses, other than for 5% Beneficial Owners, are at the Company,
34551 Ardenwood Boulevard, Fremont California 94555.
(2) Includes shares subject to options becoming exercisable on or prior to May
27, 1999.
(3) Percent of class is based on 20,021,308 shares of Common Stock outstanding
as of March 27, 1999, together with options beneficially owned only by such
stockholder.
(4) Includes 82,837 shares owned and options for 582,109 shares.
(5) Includes 8,243 shares owned and options for 58,671 shares.
(6) Options for 62,188 shares.
(7) Includes 1,596 shares owned and options for 31,514 shares.
(8) Includes 3,836 shares owned and options for 25,000 shares.
(9) Includes 2,642 shares owned and options for 22,125 shares.
(10) Options for 20,938 shares exercisable by April 13, 1999. Mr. Wilson is no
longer an employee of the Company.
14
<PAGE>
(11) Includes 90,000 shares owned and options for 10,222 shares.
(12) Includes 369,200 shares owned and options for 10,222 shares.
(13) Includes 780,259 shares held in the following titles: Dr. Mirza, 115,000;
Mirza Revocable Trust, 60,000; SAFA Trust, 195,259; Humana Charitable
Trust, 320,000; and York International Trust, 90,000. Also includes
options for 10,222 shares. Dr. Mirza is an officer of SAFA Trust. Dr.
Mirza is President of Amana, Ltd., Trustee of Humana Charitable Trust. Dr.
Mirza is also Vice President and Trustee of York International Trust.
Therefore, Dr. Mirza may be deemed to beneficially own the shares held by
these stockholders. However, Dr. Mirza disclaims beneficial ownership of
all such shares.
(14) Options for 63,125 shares.
(15) Options for 43,924 shares.
(16) Includes options for an aggregate of 940,260 shares.
(17) Based upon information provided by Crabbe Huson Group as of March 27,
1999. The stockholder's ownership position may have changed since that
date. The stockholder's address is Crabbe Huson Company, 121 South West
Morrison, Suite 1400, Portland, OR 97204.
(18) Based upon information provided by Becker Capital Management as of March
27, 1999. The stockholder's ownership position may have changed since that
date. The stockholder's address is Becker Capital Management, 1211 South
West Fifth Avenue, Suite 2185, Portland, OR 97204.
(19) Based upon information provided by Thomson Horstmann & Bryant, Inc. as of
March 27, 1999. The stockholder's ownership position may have changed
since that date. The stockholder's address is Thomson Horstmann & Bryant,
Inc., Park 80 West, Plaza Two, Saddle Brook, NJ 07663.
15
<PAGE>
EXECUTIVE OFFICER COMPENSATION
The Summary Compensation Table sets forth information with respect to
compensation earned for services rendered to the Company during each of the last
three fiscal years for the Chief Executive Officer and the Company's four other
most highly compensated executive officers whose cash compensation exceeded
$100,000 in 1998.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- -------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (3) ($) (4) (#) ($)
- ----------------------------------------- --------- --------- --------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Al Montross.......................... 1998 250,000 200,000 88,385 781,170 --
President and Chief Executive Officer 1997 250,000 -- 16,826 716,170 --
1996 250,000 856,232 19,683 630,000 --
Mrs. Colleen Gray........................ 1998 221,108 67,725 3,611 117,003 --
Vice President Finance and 1997 201,923 -- 4,654 82,003 --
Chief Financial Officer 1996 171,269 107,609 2,722 65,000 --
Mr. KK Rao............................... 1998 195,014 63,826 4,636 154,000 --
Vice President and Chief Technology 1997 187,264 -- 4,501 109,000 --
Officer 1996 162,192 53,103 4,243 60,000 --
Mr. Ronald G. von Trapp.................. 1998 225,664 -- 118,747 133,000 --
Vice President--Worldwide Sales & 1997 42,310 10,000 22,856 100,000 --
Marketing 1996(1) -- -- -- -- --
Mr. Alonzo Wilson........................ 1998(2) 161,564 75,500 14,134 165,481 109,250(2)
Vice President and Chief Operating 1997 207,461 -- 11,446 125,481 --
Officer 1996 161,635 93,159 3,624 100,481 --
</TABLE>
- ------------------------------
(1) Mr. Von Trapp joined the Company in October 1997.
(2) Mr. Wilson resigned as an officer of the Company in July 1998. The amount of
all Other Compensation represents a severance payment.
(3) Except as described in this footnote, the bonus payments were made pursuant
to the Company's Executive Bonus Plan described below. Mr. Montross' bonuses
were paid pursuant to his employment agreement with the Company (see
"Employment Agreement" below). A portion of the bonus paid to Ms. Gray in
1996 ($45,000) was discretionary and approved by the Board in recognition of
her performance in that year.
(4) Other Annual Compensation consists of certain insurance premiums paid by the
Company, the Company's contributions to the accounts of the officers under
the Company's 401(k) Plan, and, in the case of Mr. Montross and Mr. von
Trapp, car allowances. In the case of Mr. von Trapp, it also includes
commissions in the amount of $21,154 in 1997 and $105,980 in 1998.
EXECUTIVE BONUS PLAN
All executive officers other than the President and Chief Executive Officer
are eligible to receive a quarterly cash bonus under the Company's Executive
Bonus Plan. The amount of the cash bonus payable to each executive officer is a
percentage of the officer's salary and is typically determined based 50% on the
Company's financial performance, and 50% on the officer's personal performance,
during the applicable quarter.
STOCK OPTION AND STOCK PURCHASE PLANS
1993 STOCK OPTION PLAN. The Company's 1993 Stock Option Plan (the "Option
Plan") is administered by the Board or a committee thereof (collectively, the
"Administrator"). The Administrator has the power, except with respect to
certain options to directors, to determine eligibility to receive an option, the
terms of each option granted, including the exercise price, the number of shares
subject to the option, and the
16
<PAGE>
vesting schedule and the term of the option. Generally, options become
exercisable or "vest," and may be exercised, over a three to four year period.
The Option Plan covers 4,825,000 shares of the Company's Common Stock. As of
the Record Date, options with respect to 3,793,894 shares of Common Stock were
outstanding, and 270,688 shares of Common Stock were reserved for issuance,
under the Option Plan.
The Option Plan provides that options may be granted to employees, including
officers, and consultants of the Company or any of its majority-owned
subsidiaries, as well as members of the Board who are not officers or employees
of the Company ("Outside Directors"). Incentive stock options may be granted
only to employees. As of the Record Date, there were approximately 300 employees
and six Outside Directors eligible to be granted options under the Option Plan.
The Option Plan provides that a nonstatutory option to purchase 50,000
shares of the Common Stock (the "First Option") shall be automatically granted
(the "Automatic Grant Program") to Outside Directors who are elected or
appointed to the Board subsequent to May 9, 1993. An additional option (the
"Second Option") to purchase 50,000 shares of the Common Stock will be
automatically granted to Outside Directors who remain on the Board three years
following the grant of the First Option. A Third Option (the "Third Option") to
purchase 50,000 shares of Common Stock will be automatically granted to Outside
Directors who remain on the Board eight years following the grant of the First
Option. The exercise price of options granted under the Automatic Grant Program
is the fair market value of the Common Stock on the date of the automatic grant.
The First Option, Second Option and Third Option become exercisable cumulatively
with respect to 1/36, 1/60 and 1/48, respectively, of the underlying shares on
the first day of each month following the date of grant of such option.
The terms of options granted under the Option Plan (other than options
granted to Outside Directors pursuant to the Automatic Grant Program (the
"Outside Director Options")) are determined by the Administrator. Each option is
subject to the following additional terms:
(a) EXERCISE OF OPTION. Each option is exercised by giving written notice
of the number of shares of Common Stock to be purchased, and tendering payment
of the purchase price, to the Company. Payment for shares issued upon exercise
of an option may be made by cash, check, promissory note, other shares of the
Common Stock or any combination of such methods of payment, or such other
consideration and method of payment as is permitted under Delaware law.
(b) EXERCISE PRICE. The per share exercise price of options under the
Option Plan (other than Outside Director Options) is determined by the
Administrator and, in the case of incentive stock options, may not be less than
100% of the fair market value on the date of grant. The Administrator may grant
nonstatutory stock options at less than fair market value, but to date has not
done so. So long as the Common Stock is listed on any established stock exchange
or a national market system, including the Nasdaq Stock Market, the fair market
value of a share of Common Stock shall be the closing sale price for such stock
as quoted on such system or exchange on the date of grant of the option.
(c) TERMINATION OF STATUS. If the optionee's employment or consulting
relationship with the Company or status as an Outside Director is terminated for
any reason (other than death or disability), options may be exercised within six
(6) months after such termination as to all or part of the shares that were
vested at the date of such termination.
(d) DEATH OR DISABILITY OF OPTIONEE. Options may be exercised within no
more than twelve (12) months following termination of the employment or
consulting relationship or status as an Outside Director if such termination
occurs due to death or permanent and total disability.
(e) TERM. Options granted under the Option Plan may have a term of up to
ten years. No option may be exercised by any person after the expiration of its
term.
17
<PAGE>
In the event a change, such as a stock split or stock dividend payable in
Common Stock, is made in the Company's capitalization that results in an
exchange of Common Stock for a greater or lesser number of shares without
receipt of consideration by the Company, appropriate adjustment shall be made
(i) in the option price and number of shares subject to outstanding options, and
(ii) in the number of shares of Common Stock that remain reserved for issuance
under the Option Plan but are not subject to outstanding options. Such
adjustments shall be made by the Board, whose determination shall be final and
conclusive, subject to any required action by the stockholders of the Company.
In the event of the proposed dissolution or liquidation of the Company,
options outstanding under the Option Plan will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by the
Board. The Board may, in the exercise of its discretion, declare that any
outstanding option (except an Outside Director Option) shall terminate as of a
date fixed by the Board and give each optionee the right to exercise his or her
option as to all or any part of the optioned stock, including shares as to which
the option would not otherwise be exercisable. In the event of a proposed sale
of all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, outstanding options will be assumed or
an equivalent option shall be substituted by such successor corporation (or a
parent or subsidiary of such successor corporation), unless such successor
corporation does not agree to assume the options or to substitute an equivalent
option, in which case the optionee shall have the right to exercise all
outstanding options as to all of the optioned stock, including shares as to
which the option would not otherwise be exercisable.
Except with respect to the Automatic Grant Program, the Board may amend or
terminate the Option Plan from time to time in such respects as the Board may
deem advisable; provided that the Company shall obtain stockholder approval of
such amendment to the extent necessary and desirable to comply with Rule 16b-3
promulgated under the 1934 Act, Section 422 of the Code, or any other applicable
law, rule or regulation. The Automatic Grant Program may not be amended more
than once every six months. Any amendment or termination of the Option Plan
shall not affect options already granted and such options shall remain in full
force and effect as if the Option Plan had not been amended or terminated,
unless mutually agreed otherwise between the optionee and the Board. The Option
Plan shall terminate in 2003. Any options outstanding under the Option Plan at
the time of its termination shall remain outstanding until they expire by their
respective terms.
EMPLOYEE STOCK PURCHASE PLAN. In 1996, the stockholders of the Company
approved the Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan"),
which is intended to qualify under the provisions of Section 421 and 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). The Purchase Plan gives
employees of the Company an opportunity to acquire shares of Common Stock at a
discount from fair market value by means of payroll deductions. The Purchase
Plan, which is administered by the Stock Option Plan Committee of the Board (the
"Independent Committee"), covers an aggregate of 300,000 shares of Common Stock
and terminates in December 2006. As of November 30, 1998, all 300,000 shares of
Common Stock were either sold under the Purchase Plan or reserved for issuance.
As of that date, there were approximately 300 employees eligible to participate
in the Purchase Plan.
The Purchase Plan is implemented by a series of 24-month (formerly 12-month)
offering periods, with a new offering period commencing on each June 1 and
December 1. The last day of each of the four six-month exercise periods during
each offering period is an exercise date under the Purchase Plan. The purchase
price for the shares is accumulated by voluntary employee payroll deductions of
between 1% and 10% of an employee's eligible compensation during each offering
period. The purchase price per share at which shares are sold under the Purchase
Plan is equal to 85% of the fair market value of the Common Stock on the first
day of each offering period or last day of the applicable exercise period,
whichever price is lower. In the event that the purchase price per share at the
beginning of any offering period is less than the purchase price per share at
the beginning of any prior offering period which has not then ended, the
Independent Committee in its discretion may terminate the participation of all
participants in the prior offering period and enroll them in the new offering
period at the same payroll deduction rate.
18
<PAGE>
No employee will be permitted to purchase, pursuant to the Purchase Plan and
any other similar purchase plans of the Company, more than $25,000 worth of
stock in any calendar year. In addition, no employee who owns 5% or more of the
voting power or value of all classes of stock of the Company will be permitted
to purchase shares under the Purchase Plan. Any participant may withdraw from
the Purchase Plan at any time prior to the end of the applicable offering
period.
Options under the Purchase Plan may not be transferred by a participant
other than by will or under the laws of descent and distribution, and may be
exercised during a participant's lifetime only by the participant. In the event
of a sale, merger, dissolution of liquidation of the Company or a sale of all or
substantially all of the Company's assets, any then current offering periods and
exercise periods will terminate immediately prior to the date on which such
proposed action is to be consummated, unless otherwise determined by the
Independent Committee. Upon any such termination, unless otherwise determined by
the Independent Committee, all options to purchase shares will be exercised
automatically, on such date, to purchase the maximum number of full shares that
may be purchased at the applicable exercise price with each participant's
accumulated payroll deductions. Although the Board may at any time amend or
terminate the Purchase Plan, no amendment may be made that would cause the
Purchase Plan to fail to meet the requirements for employee stock purchase plans
in Section 423 of the Code.
401(K) PLAN
In 1994, the Company adopted its 401(k) Profit Sharing Plan (the "401(k)
Plan"), pursuant to Section 401(k) of the Code. Each employee may participate in
the 401(k) Plan beginning the first day of the calendar quarter after he or she
has been employed by the Company. Pursuant to the 401(k) Plan, each eligible
participant may contribute up to 20% of his or her eligible compensation to the
maximum amount permitted under the Code. The Company makes an additional
matching contribution each year equal to 50% of each participant's contributions
for the year (up to 6% of such participant's eligible compensation for the year)
up to a maximum of $2,250 per employee. The Company also may contribute such
additional discretionary amount as it may determine. Matching amounts
contributed by the Company for the benefit of its executive officers are
included in the Summary Compensation Table set forth above.
19
<PAGE>
OPTIONS GRANTED IN THE LAST FISCAL YEAR
The following table discloses, for each executive named in the Summary
Compensation Table (the "Named Executives"), options granted during the last
fiscal year and the gain or "spread" that would be realized if the options were
exercised on the expiration date, assuming that the Company's stock had
appreciated at the level indicated, compounded annually over the life of the
options.
<TABLE>
<CAPTION>
ANNUAL RATES OF
SECURITIES STOCK PRICE
UNDERLYING APPRECIATION FOR
OPTIONS OPTIONS GRANTED EXERCISE OPTION TERMS (2)
GRANTED (#) TO EMPLOYEES IN PRICE EXPIRATION --------------------
NAME (1) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- -------------------------------------------- ----------- ----------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Al Montross................................. 65,000 3.6% 8.50 1/14/08 347,464 880,543
Colleen Gray................................ 35,000 2.0% 8.50 1/14/08 187,096 474,138
KK Rao...................................... 35,000 1.9% 8.50 1/14/08 187,096 474,138
10,000 0.5% 5.81 10/30/08 36,555 92,636
Ronald G. von Trapp......................... 15,000 0.8% 8.50 1/14/08 80,184 203,202
18,000 1.0% 5.81 10/30/08 65,798 166,745
Alonzo Wilson (3)........................... 40,000 2.2% 8.50 1/14/08 213,824 541,872
</TABLE>
- ------------------------------
(1) Only includes new grants, not repriced options.
(2) Potential realizable value at end of 10 year term less exercise price.
(3) Mr. Wilson resigned as an officer of the Company in July 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
This table discloses the aggregate dollar value realized upon exercise of
stock options in the last fiscal year by each Named Executive, as well as the
total number of unexercised options and the aggregate dollar value of
unexercised options held at the end of the last fiscal year.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT 1998 1998 FISCAL YEAR-END ($)
FISCAL YEAR-END (#) (1)
SHARES ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------- ----------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Al Montross....................... -- -- 513,045 268,125 2,473,351 396,687
Colleen Gray...................... -- -- 12,500 104,503 87,454 653,196
KK Rao............................ -- -- 20,000 134,000 148,760 837,567
Ronald G. von Trapp............... -- -- -- 133,000 -- 831,317
Alonzo Wilson (2)................. -- -- 86,329 79,152 440,280 262,155
</TABLE>
- --------------------------
(1) Value of options based on fair market value of Common Stock of $12.0630 as
of December 24, 1998.
(2) Mr. Wilson resigned as an officer of the Company in July 1998.
20
<PAGE>
TEN-YEAR OPTION REPRICING TABLE
On October 23, 1998, the Board of Directors authorized an offer to all
employees of the Company holding stock options with an exercise price in excess
of the closing sale price of the Company's Common Stock on the Nasdaq Stock
Market on October 30, 1998, to amend the respective exercise prices of their
options to such closing price on the condition that six months be adding to the
vesting schedule of unvested options and any previously vested options would
become unvested until April 30, 1999. The following table sets forth, for each
of the Named Executives, a summary of the repricing of such options held by such
persons. The President and Chief Executive Officer was not offered the
repricing.
<TABLE>
<CAPTION>
EXERCISE
NUMBER OF PRICE AT
SECURITIES MARKET PRICE TIME OF LENGTH OF ORIGINAL
UNDERLYING OF STOCK AT REPRICING OPTION TERM
OPTIONS TIME OF OR NEW REMAINING AT DATE
REPRICED OR REPRICING OR AMENDMENT EXERCISE OF REPRICING OR
NAME AND POSITION DATE AMENDED (#) AMENDMENT ($) ($) PRICE ($) AMENDMENT
- --------------------------------- ---------------- ------------- ------------- ----------- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Al Montross (1).............. October 30, 1998 -- -- -- -- --
President and Chief Executive
Officer
Ms. Colleen M. Gray.............. October 30, 1998 7,500 $ 5.8125 $ 6.6250 $ 5.8125 5 Years 89 Days
Vice President Finance and 13,003 $ 10.5000 6 Years 85 Days
Chief Financial Officer 24,000 $ 12.8750 7 Years 80 Days
25,000 $ 10.5000 8 Years 90 Days
35,000 $ 8.5000 9 Years 76 Days
-------------
104,503
Mr. KK Rao....................... October 30, 1998 20,000 $ 5.8125 $ 10.5000 $ 5.8125 6 Years 85 Days
Vice President and Chief 20,000 $ 12.8750 7 Years 80 Days
Technology Officer 15,000 $ 10.5000 8 Years 90 Days
34,000 $ 8.8125 8 Years 260 Days
35,000 $ 8.5000 9 Years 76 Days
-------------
124,000
Mr. Ronald G. von Trapp.......... October 30, 1998 100,000 $ 5.8125 $ 9.7500 $ 5.8125 8 Years 358 Days
Vice President--World Wide 15,000 $ 8.5000 9 Years 76 Days
Sales and Marketing
-------------
115,000
Mr. Balbir Singh................. October 30, 1998 12,000 $ 5.8125 $ 12.8750 $ 5.8125 7 Years 268 Days
Vice President--Operations 35,000 $ 10.5000 8 Years 90 Days
40,000 $ 8.5000 9 Years 76 Days
-------------
87,000
Mr. Al Wilson (1)................ October 30, 1998 -- -- -- -- --
Vice President and Chief
Operations Officer
</TABLE>
- ------------------------------
(1) The offer to reprice stock options was not made to the Company's Chief
Executive Officer or Mr. Wilson, who resigned as an officer of the Company
in July 1998.
21
<PAGE>
EMPLOYMENT AGREEMENTS
The Company and Mr. Montross, the Company's President, entered into an
employment agreement, in January, 1995 that expired at the end of 1998. The
agreement provided for an annual salary of $250,000, a bonus paid upon the
Company's performance against operating income and net sales objectives, and a
discretionary bonus based on Mr. Montross' performance. The agreement also
provided that Mr. Montross be granted options to purchase shares of Common Stock
as follows: 130,000 shares in January 1995; 130,000 shares in January 1996; and
110,000 shares in January 1997, with each vesting cumulatively at the rate of
25% of the shares subject to the option on each of the first four anniversaries
of the grant date. The vesting of each of the options will accelerate upon a
change in control of the Company. Pursuant to the agreement, Mr. Montross was
paid a discretionary bonus of $200,000 in 1996 and of $75,000 in the first
quarter of 1998 related to the Company's then recent successes with newly
released products.
The Company and Mr. Montross entered into a new employment agreement in
January 1999. The new agreement has a term of four years, through 2002. The
agreement provides for an annual salary of $333,000, a bonus based upon the
Company's performance against operating income and net sales objectives, and a
discretionary bonus based on Mr. Montross' performance. The agreement also
provides that Mr. Montross be granted an option to purchase 400,000 shares of
Common Stock in January 1999, with vesting cumulatively at a rate of 25% on each
anniversary of the grant date and acceleration of vesting upon a change of
control of the Company. Pursuant to the agreement, Mr. Montross was paid a
discretionary bonus of $125,000 in January 1999, in recognition of his
contributions to the Company during 1998.
SEVERANCE AGREEMENTS
The Company has entered into an agreement with each of its executive
officers, other than its President, providing for the following if the officer's
employment with the Company is terminated by the Company in connection with, or
within two years after, the occurrence of a change in control of the Company:
(a) payment for the officer of a pro-rata bonus with respect to the year in
which the termination occurs; (b) payment to the officer of severance pay equal
to between one and two times (based on years of service to the Company as an
officer) the aggregate of the officer's annual salary and the higher of (i) the
officer's last annual bonus, and (ii) the average of the officer's annual bonus
for the then last three years; (c) acceleration of vesting of all outstanding
options held by the officer, and (d) continuation of the officer's insurance
benefits, at the Company's expense, for two years after the termination of
employment.
The agreement also provides for the following if the officer is terminated
for other than cause and other than within two years after any change in control
of the Company: (a) payment to the officer of a pro-rata bonus with respect to
the year in which the termination occurs; (b) payment to the officer of
severance pay equal to between two and six months salary (based on years of
service to the Company as an officer); and (c) continuation of the officer's
insurance benefits, at the Company's expense, for the period of such severance
pay. The Board determined that is was in the best interest of the Company to
enter into a severance agreement with each of its executive officers (other than
the President) because the agreement provides an inducement for each executive
officer to remain in the employ of the Company, particularly in the event of a
threat or occurrence of a change in control of the Company.
22
<PAGE>
EXECUTIVE OFFICERS
The following provides information about the Company's executive officers
that do not also serve as directors:
COLLEEN M. GRAY
Ms. Gray, age 45, joined the Company in April 1992 as Controller. She was
appointed Chief Financial Officer in December 1993 and Vice President Finance in
December 1994. In May 1998, Ms. Gray was appointed Secretary of the Corporation.
From 1989 until 1991, she served as Controller of Voicemail International, Inc.,
a voice messaging equipment manufacturer. From 1987 through 1989, she was
Assistant Controller for Alcatel Business Systems, Inc. From 1978 to 1987, Ms.
Gray held a series of financial management positions with ITT Courier Terminal
Systems. She received a Bachelor of Science degree in Accounting from Arizona
State University.
KRISHNAKUMAR RAO SURUGUCCHI ("KK RAO")
Mr. Surugucchi, age 43, joined the Company in February 1992, as Director of
Hardware Engineering. He became Vice President of Engineering in July 1994. He
subsequently became Chief Technology Officer and a Vice President in October
1996. Prior to joining the Company, Mr. Surugucchi was Director of Engineering
for the Company's subsidiary, Mylex India, from 1991 to 1992. Prior to these
positions, Mr. Surugucchi was Deputy General Manager for PSI India from 1979 to
1991. Mr. Surgucchi received his undergraduate degree and Masters degree in
Electrical Engineering from the Indian Institute of Technology, Bombay, India.
RON VON TRAPP
Mr. von Trapp, age 51, joined the Company in October 1997 as Vice President
of World-Wide Sales. In July 1998, he was named Vice President of World-Wide
Sales & Marketing. Prior to joining the Company, Mr. von Trapp served as Vice
President of Americas Sales for Maxtor Corporation, a disk drive manufacturer,
from February 1996 to October 1997. He also served as World-Wide Director of
Distribution Sales for Quantum Corporation, a manufacturer of hard disk drives,
from 1988 to 1996. Mr. von Trapp has over twenty-five years of management
experience in computer sales, and has held senior management positions at NBI,
Exxon Office Systems and IBM.
BALBIR SINGH
Mr. Singh, age 50, joined the Company in May 1996, as Senior Director of
Product Engineering. He was promoted to Vice President, Operations in December
1996. Prior to joining the Company, Mr. Singh served as Vice
President--Operations for Buslogic, Inc., a manufacturer of host bus adapters,
from June 1995 through April 1996. He also served as the Senior Manager of
Product Engineering for Buslogic from September 1994 through May 1995. The
Company acquired Buslogic in February 1996. Mr. Singh also served as Director of
Quality and Operations for AT&T-EO, a company in the communications industry,
from 1993 to 1994. Prior to that position, he served as Director of Quality and
Test Engineering for Comptronix, from 1990 to 1993. Prior to these positions,
Mr. Singh held a variety of engineering and management positions with several
technology companies. Mr. Singh received an undergraduate degree in Engineering
from Coventry Technical College in England.
JOSEPH A. SCHMIDT
Mr. Schmidt, age 55, joined the Company in March 1995 as Vice President,
Human Resources. He served as Vice President, Human Resources and Corporate
Officer to Power Up Software Corp., a utility software developer, from 1991 to
1993 and as Director of Corporate Human Resources Planning for Diasonics, Inc.,
a medical equipment manufacturer, from 1986 through 1990. Mr. Schmidt holds a
Bachelors degree from the University of Waterloo, and a Masters degree in Human
Resources and Manpower Development from the New School for Social Research.
23
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Montross, the Company's President, is employed pursuant to an employment
agreement, dated January 1, 1999, with the Company. See "Executive Officer
Compensation--Employment Agreements".
In 1996, the Company made loans to certain directors, as listed below,
related to their exercise of options. The loans are evidenced by interest
bearing, full recourse promissory notes with terms described below.
<TABLE>
<CAPTION>
NAME AMOUNT ISSUE DATE MATURITY DATE RATE
- ----------------------------------------------------- ---------- ----------------- ----------------- ---------
<S> <C> <C> <C> <C>
Dr. Inder Singh...................................... $ 116,250 July 26, 1996 July 26, 1999 6.50%
Mr. Richard Love..................................... $ 193,750 July 29, 1996 July 29, 1999 6.50%
Mr. Ismael Dudhia.................................... $ 154,938 Sept. 9, 1996 Sept. 9, 1999 6.50%
</TABLE>
In 1997, the Company made loans to certain officers, as listed below,
related to their exercise of options. The loans are evidenced by interest
bearing, full recourse promissory notes with terms described below.
<TABLE>
<CAPTION>
NAME AMOUNT ISSUE DATE MATURITY DATE RATE
- ----------------------------------------------------- ---------- ----------------- ----------------- ---------
<S> <C> <C> <C> <C>
Mr. Al Montross...................................... $ 199,974 March 3, 1997 March 3, 2000 6.50%
Ms. Colleen Gray..................................... $ 54,907 March 3, 1997 March 3, 2000 6.50%
</TABLE>
In 1998, the Company made loans to certain directors, as listed below,
related to their exercise of options. The loans are evidenced by interest
bearing, full recourse promissory notes with terms described below. Although no
payments on a note are required to be made before its maturity, Dr. Mirza has
made payments aggregating $16,718 on his note.
<TABLE>
<CAPTION>
NAME AMOUNT ISSUE DATE MATURITY DATE RATE
- ----------------------------------------------------- ---------- ----------------- ----------------- ---------
<S> <C> <C> <C> <C>
Dr. M.Yaqub Mirza.................................... $ 81,375 March 26, 1998 March 26, 2000 6.50%
Dr. Inder Singh...................................... $ 64,798 March 26, 1998 March 26, 2000 6.50%
Mr. Ismael Dudhia.................................... $ 38,812 July 23, 1998 July 23, 2000 6.50%
</TABLE>
24
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the "Committee") of the Board of Directors
establishes the general compensation policies of the Company as well as the
compensation plans and specific compensation levels for executive officers. The
Committee is currently composed of three non-employee directors.
The Committee believes that the compensation of the executive officers,
including that of the Chief Executive Officer, (collectively, the "Executive
Officers") should be influenced by the Company's performance. The Committee
establishes the salaries of all the Executive Officers by considering (1) the
salaries of executive officers in similar positions of comparably-sized
companies, (2) the Company's financial performance, and (3) the achievement of
certain objectives related to the particular Executive Officer's area of
responsibility. Key target performance objectives used in determining executive
compensation include the attainment of certain levels of revenue and operating
income. Base salaries for Executive Officers other than the Chief Executive
Officer are set by the Committee, in consultation with the Chief Executive
Officer.
The Company has adopted an Executive Bonus Plan. The purposes of the
Executive Bonus Plan are to tie compensation to achievement of performance
measures that influence the creation of stockholder value and to ensure payments
are targeted to provide a competitive level of compensation, taking into account
the Company's performance against its revenue and operating income objectives,
which are set annually by the Committee.
The Company's stock option plans provide for long-term incentive
compensation for employees of the Company, including Executive Officers. An
important objective of the plans is to provide additional incentives to
employees to work to maximize stockholder value. The option program utilizes
vesting periods to encourage retention of employees and Executive Officers and
reward long-term commitment to employment with the Company. The Committee, in
consultation with the Chief Executive Officer, is primarily responsible for
establishing the terms of new equity-based incentive plans, including stock
option plans. The Stock Option Plan Committee of the Board, in consultation with
the Chief Executive Officer, is responsible for determining, subject to the
terms of the option plans, the individuals to whom grants should be made, the
timing of grants, the exercise price per share, the number of shares subject to
each grant, and the vesting under each grant.
The terms of the President and Chief Executive Officer's compensation
arrangements, which are set forth in an employment agreement with the Company
for a four year term, commencing January 1, 1999, provides for (1) a base salary
of $333,000, which will be reviewed annually by the Board, (2) a cash bonus
payable on the achievement of certain objectives based on the Company's
operating income and net sales, and (3) a grant of an option to purchase 400,000
shares of the Company's Common Stock, vesting at a stated percentage per year.
The factors taken into consideration in determining this compensation were
generally the same factors used in determining the compensation of each of the
Company's other executive officers.
Mr. Ismael Dudhia
Dr. Inder Singh
Mr. Stephen McKenzie
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Dudhia, Dr. Singh, and Mr. McKenzie comprise the Compensation Committee
for the Board.
25
<PAGE>
PERFORMANCE GRAPH FOR MYLEX CORPORATION
FIVE YEAR CUMULATIVE TOTAL RETURN
MYLEX CORPORATION, NASDAQ STOCK MARKET AND NASDAQ COMPUTER
MANUFACTURER STOCK (#357)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FISCAL YEAR END MYLEX NASDAQ MARKET (USA) NASDAQ COMPUTER MANUFACTURER
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 168.88 97.75 109.85
1995 288.68 138.26 172.95
1996 188.68 170.03 231.88
1997 131.14 200.68 266.78
1998 182.08 289.89 612.25
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR END
----------------------------------------------------------------
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Mylex.................................................. 100.00 168.88 288.68 188.68 131.14 182.08
NASDAQ Market (USA).................................... 100.00 97.75 138.26 170.03 200.68 289.89
NASDAQ Computer Manufacturer........................... 100.00 109.85 172.95 231.88 266.78 612.25
</TABLE>
- ------------------------
Note: Assumes $100 invested, on December 31, 1993, in the Company, NASDAQ Market
(USA) and NASDAQ Computer Manufacturer Stock Index. Assumes reinvestment of
dividends on a daily basis.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act 1934 requires the Company's
officers and directors, and persons who own more than ten percent of registered
class or the Company's equity securities, to file certain reports of ownership
with the Securities and Exchange Commission (the "SEC"). Such officers,
directors and stockholders are also required by SEC rules to furnish the Company
with copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company is not aware
that any such person failed to file any Section 16(a) form on a timely basis.
26
<PAGE>
OTHER MATTERS
Management does not intend to bring before the Annual Meeting any matters
other than those described in this Proxy Statement, and has no present knowledge
that any other matters will or may be brought before the Annual Meeting by
others. However, if any other matters properly come before the meeting, it is
the intention of the persons named in the enclosed form of Proxy to vote the
proxies in accordance with their judgment.
ON BEHALF OF THE BOARD OF DIRECTORS
/s/ Al Montross
Al Montross
PRESIDENT AND CHIEF EXECUTIVE OFFICER
27
<PAGE>
APPENDIX A
MYLEX CORPORATION
1998 STOCK OPTION AND INCENTIVE PLAN
Section 1. PURPOSE OF PLAN
The purpose of this 1998 Stock Option and Incentive Plan ("Plan") of Mylex
Corporation, a Delaware corporation (the "Company"), is to enable the Company to
attract, retain and motivate its employees and consultants and its non-employee
directors, and further align their interests with those of the stockholders of
the Company, by providing for or increasing the proprietary interests of such
persons in the Company.
Section 2. PERSONS ELIGIBLE UNDER PLAN
Any person who is an employee, director or consultant of the Company or any
of its subsidiaries (a "Participant") shall be eligible to be considered for the
grant of Awards (as hereinafter defined) hereunder. Any director of the Company
who is not an employee of the Company or any of its subsidiaries (a
"Non-employee Director") shall automatically receive Non-employee Director
Options (as hereinafter defined) pursuant to Section 4 hereof.
Section 3. AWARDS
(a) The Committee (as hereinafter defined), on behalf of the Company, is
authorized under this Plan to enter into any type of arrangement with a
Participant that is not inconsistent with the provisions of this Plan and that,
by its terms, involves or might involve the issuance of (i) shares of common
stock of the Company ("Common Shares"), or (ii) a right or interest with an
exercise or conversion privilege at a price related to the Common Shares or with
a value derived from the value of the Common Shares, which right or interest
may, but need not, constitute a Derivative Security (as such term is defined in
Rule 16a-1 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as such rule may be amended from time to time). The
entering into of any such arrangement is referred to herein as the "grant" of an
"Award."
(b) Awards are not restricted to any specified form or structure and may
include, without limitation, sales or bonuses of stock, restricted stock, stock
options, reload stock options, stock purchase warrants, other rights to acquire
stock, securities convertible into or redeemable for stock, stock appreciation
rights, limited stock appreciation rights, phantom stock, dividend equivalents,
performance units or performance shares, and an Award may consist of one such
security or benefits or two or more of them in tandem or in the alternative. The
terms upon which an Award is granted shall be evidenced by a written agreement
executed by the Company and the Participant to whom such Award is granted.
(c) Awards may be issued, and Common Shares may be issued pursuant to an
Award, for any lawful consideration as determined by the Committee, including,
without limitation, services rendered by the recipient of such Award.
(d) Subject to the provisions of this Plan, the Committee, in its sole and
absolute discretion, shall determine all of the terms and conditions of each
Award granted under this Plan, which terms and conditions may include, among
other things:
(i) provisions permitting the Committee to allow the recipient of such
Award, including any recipient who is a director or officer of the Company,
to pay the purchase price of the Common Shares or other property issuable
pursuant to such Award, or such recipient's tax withholding obligation with
respect to such issuance, in whole or in part, by any one or more of the
following:
(A) the delivery of cash;
(B) the delivery of other property deemed acceptable by the
Committee;
(C) the delivery of previously owned shares of capital stock of the
Company valued at Fair Market Value, as defined below, including
"pyramiding";
<PAGE>
(D) a reduction in the amount of Common Shares or other property
otherwise issuable pursuant to such Award; or
(E) the delivery of a promissory note, the terms and conditions of
which shall be determined by the Committee;
(ii) provisions conditioning or accelerating the receipt of benefits
pursuant to such Award, either automatically or in the discretion of the
Committee, upon the occurrence of specified events, including, without
limitation, a change of control of the Company, an acquisition of a
specified percentage of the voting power of the Company, the dissolution or
liquidation of the Company, a sale of substantially all of the property and
assets of the Company or an event of the type described in Section 8 hereof;
(iii) provisions specifying the exercise or settlement price for any
option, stock appreciation right or similar Award, or specifying the method
by which such price is determined, provided that the exercise or settlement
price of any option, stock appreciation right or similar Award that is
intended to qualify as "performance based compensation" for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), shall be not less than the Fair Market Value (as hereinafter
defined) of the underlying Common Shares on the date such Award is granted;
(iv) provisions relating to the exercisability and/or vesting of Awards,
lapse and non-lapse restrictions upon the Common Shares obtained or
obtainable under Awards or under the Plan and the termination, expiration
and/or forfeiture of Awards; or
(v) provisions required in order for such Award to qualify as an
incentive stock option under Section 422 of the Code (an "Incentive Stock
Option").
(e) For purposes of this Plan, the "Fair Market Value" of a Common Share or
other security on any date (the "Determination Date") shall be equal to the
closing price per Common Share or unit of such other security on the business
day immediately preceding the Determination Date, as reported in The Wall Street
Journal, Western Edition, or, if no closing price was so reported for such
immediately preceding business day, the closing price for the next preceding
business day for which a closing price was so reported, or, if no closing price
was so reported for any of the 30 business days immediately preceding the
Determination Date, the average of the high bid and low asked prices per Common
Share or unit of such other security on the business day immediately preceding
the Determination Date on a national securities exchange or on the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"),
or, if the Common Shares are not traded on a national securities exchange or
quoted on NASDAQ or such other system then in use on such immediately preceding
business day, the average of the closing bid and asked prices on such day as
furnished by a professional market maker making a market in the Common Shares or
such other security selected by the Board.
(f) Notwithstanding Section 3(d), in the event any Award is made while this
Plan is subject to Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3"),
as in effect from time to time:
(i) and Common Shares are issued or issuable under such Award for any
type of consideration other then as a bonus without the payment of any
consideration, the amount of such consideration shall be equal to the
greater of (i) the amount (such as par value) required to be received by the
Company in order to assure compliance with applicable state law, or (ii) an
amount equal to or greater than 50% of the Fair Market Value of such shares
on the date of grant of such Award; and
(ii) except as otherwise provided by the Committee in the applicable
Award agreement and subject to such rules as the Committee may adopt from
time to time, any Award granted under this Plan shall by its terms be
nontransferable by the holder thereof, other than by will or the laws of
descent and distribution, and is exercisable during the Participant's
lifetime only by the Participant or by the Participant's guardian or legal
representative; provided that, with respect to any transferable
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Award created by the Committee, the exercise of the Award and related sale
of the underlying securities must be covered by an effective registration
statement of the Company on a Form S-8, or any successor form, under the
Securities Act of 1933, as amended (a "Registered Security").
(g) All Common Shares issued or issuable under Awards shall be subject to
the terms and restrictions contained in the Certificate of Incorporation of the
Company.
Section 4. NON-EMPLOYEE DIRECTOR OPTIONS
(a) Each Non-employee Director (i) upon first being elected as a director of
the Company or appointed by the Board of Directors of the Company (the "Board")
to fill a vacancy on the Board, or (ii) upon all of his or her options to
purchase Common Shares, automatically granted under this Plan or any other stock
option plan of the Company, having all fully vested (other than as a result of
acceleration of vesting) after the effective date of this Plan, shall
automatically be granted an option (a "Non-employee Director Option") to
purchase 30,000 Common Shares as of the date on which he or she is so elected or
appointed or his or her such options have fully vested, as the case may be.
(b) Each year, on the first business day following the anniversary of the
date of grant of the initial option, pursuant to Section 4(a) above, to a
Non-employee Director, such Non-employee Director shall automatically be granted
a Non-employee Director Option to purchase an additional 12,000 Common Shares.
(c) If, on any date upon which Non-employee Director Options are to be
automatically granted pursuant to this Section 4, the number of Common Shares
remaining available for options under this Plan is insufficient for the grant to
each Non-employee Director of a Non-employee Director Option to purchase the
entire number of Common Shares specified in this Section 4, then a Non-employee
Director Option to purchase a proportionate amount of such available number of
Common Shares (rounded to the nearest whole share) shall be granted to each
Non-employee Director on such date.
(d) One sixteenth (rounded to the nearest whole share) of the Common Shares
subject to each Non-employee Director Option granted under this Plan shall
become exercisable, cumulatively, on each of the quarterly anniversaries of the
date of grant of such Non-employee Director Option; provided, however, that such
Non-employee Director Option shall become fully exercisable on the date upon
which the optionee thereunder shall cease to be a Non-employee Director as a
result of death or total disability (as defined in Section 22(e)(3) of the
Code).
(e) Each Non-employee Director Option granted under this Plan shall expire
upon the first to occur of the following
(i) The first anniversary of the date upon which the optionee shall
cease to be a Non-employee Director as a result of his or her death or total
disability (as defined in Section 22(e)(3) of the Code);
(ii) The 90th day after the date upon which the optionee shall cease to
be a Non-employee Director for any reason other than his or her death or
total disability (as defined in Section 22(e)(3) of the Code); or
(iii) The tenth anniversary of the date of grant of such Non-employee
Director Option.
(f) Each Non-employee Director Option shall have an exercise price equal to
the aggregate Fair Market Value, on the date of grant of such option, of the
Common Shares subject thereto.
(g) Payment of the exercise price of any Non-employee Director Option
granted under this Plan shall be made in full in cash concurrently with the
exercise of such Non-employee Director Option; provided, however, that, in the
discretion of the Board, the payment of such exercise price may instead be made,
in whole or in part;
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(i) with Common Shares delivered concurrently with such exercise (such
shares to be valued on the basis of the Fair Market Value of such shares on
the date of such exercise), provided that the Company is not then prohibited
from purchasing or acquiring Common Shares;
(ii) by the delivery, concurrently with such exercise and in accordance
with Section 220.3(e)(4) of Regulation T promulgated under the Exchange Act,
of a properly executed exercise notice for such Non-employee Director Option
and irrevocable instructions to a broker promptly to deliver to the Company
a specified dollar amount of the proceeds of a sale of, or a loan secured
by, the Common Shares issuable upon exercise of such Non-employee Director
Option, and/or
(iii) by delivery of a promissory note, the terms and conditions of which
shall be determined by the Board.
(h) All outstanding Non-employee Director Options theretofore granted under
this Plan shall become fully exercisable upon the first to occur of the
following (if it occurs at least two years after the date this Plan is approved
by the Board):
(i) immediately prior to the consummation of a reorganization, merger or
consolidation of the Company as a result of which the outstanding securities
of the class then subject to this Plan are exchanged for or converted into
cash, property and/or securities not issued by the Company:
(ii) the dissolution or liquidation of the Company;
(iii) the sale of all or substantially all of the property and assets of
the Company; or
(iv) the date of dissemination to the stockholders of the Company of a
proxy statement or an information statement disclosing a change of control
of the Company.
(i) Each Non-employee Director Option, except to the extent such option and
the underlying Common Shares is a Registered Security, shall be nontransferable
by the optionee other than by will or the laws of descent and distribution, and
shall be exercisable during the optionee's lifetime only by the optionee or the
optionee's guardian or legal representative.
(j) Non-employee Director Options are not intended to qualify as Incentive
Stock Options.
(k) The provisions of this Section 4, designating persons eligible to
receive Non-employee Director Options and specifying the amount, exercise price
and timing of grants to Non-employee Directors, shall not be amended more than
once every six months, other than to comport with changes in the Code or the
Employment Retirement Income Security Act of 1974, as amended ("ERISA"), or the
rules thereunder, all as further amended from time to time.
Section 5. STOCK SUBJECT TO PLAN
(a) Subject to adjustment as provided in Section 8(b) hereof, the aggregate
number of Common Shares issued and issuable pursuant to all Awards (including
all Incentive Stock Options) granted under this Plan shall not exceed 2,000,000
at any time. Such maximum number does not include the number of Common Shares
subject to the unexercised portion of any Award granted under this Plan that
expires or is terminated.
(b) The aggregate number of Common Shares subject to Awards granted during
any calendar year to any one Participant (including the number of shares
involved in any Award that has a value derived from the value of Common Shares,
or that expires, is canceled or is repriced) shall not exceed 200,000; provided,
however, that the limitation set forth in this Section 5(b) shall not apply if
such provision is not required in order for Awards to qualify as "performance
based compensation" under Section 162(m) of the Code. Further, such aggregate
number of shares shall be subject to adjustment under Section 8 only to the
extent permitted by Section 162(m) of the Code.
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(c) The aggregate number of Common Shares subject to Awards granted during
any calendar year to any Non-employee Director, other than a Non-Employee
Director Option, shall not exceed 20,000.
(d) Subject to adjustment as provided in Section 8(a) hereof, the aggregate
number of Common Shares issued and issuable pursuant to all Incentive Stock
Options granted under this Plan shall not exceed 1,500,000. Such maximum number
does not include the number of Common Shares subject to the unexercised portion
of any Incentive Stock Option Award granted under this Plan that expires or is
terminated.
(e) For purposes of Section 5(a) hereof, the aggregate number of Common
Shares issued and issuable pursuant to Awards granted under this Plan shall at
any time be deemed to be equal to the sum of the following:
(i) the number of Common Shares that were issued prior to such time
pursuant to Awards granted under this Plan, other than Common Shares that
were subsequently reacquired by the Company pursuant to the terms and
conditions of such Awards and with respect to which the holder thereof
received no benefits of ownership such as dividends; plus
(ii) the number of Common Shares that were otherwise issuable prior to
such time pursuant to Awards granted under this Plan, but that were withheld
by the Company as payment of the purchase price of the Common Shares issued
pursuant to such Awards or as payment of the recipient's tax withholding
obligation with respect to such issuance: plus
(iii) the maximum number of Common Shares that are or may be issuable at
or after such time pursuant to Awards granted under this Plan prior to such
time.
Section 6. DURATION OF PLAN
No Awards shall be made under this Plan after June 30, 2008. Although Common
Shares may be issued after such date pursuant to Awards made prior to such date,
no Common Shares shall be issued under this Plan after June 30, 2018.
Section 7. ADMINISTRATION OF PLAN
(a) This Plan shall be administered by a committee of the Board (the
"Committee"), consisting of two or more directors, each of whom is an "outside
director" (as such term is defined under Section 162(m) of the Code, as amended
from time to time).
(b) Subject to the provisions of this Plan, the Committee shall be
authorized and empowered to do all things necessary or desirable in connection
with the administration of this Plan, including, without limitation, the
following:
(i) adopt, amend and rescind rules and regulations relating to this
Plan;
(ii) determine the persons to whom Awards shall be granted hereunder;
(iii) grant Awards to Participants and determine the terms and conditions
thereof, including the number of Common Shares issuable pursuant thereto;
(iv) determine the terms and conditions of the Non-employee Director
Options that are automatically granted hereunder, other than the terms and
conditions specified in Section 4 hereof;
(v) determine whether, and the extent to which, adjustments are required
pursuant to Section 8 hereof;
(vi) grant or amend Awards that provide for acceleration of vesting upon
a reorganization, merger, sale of all or substantially all of the Company's
assets or a change in control of the Company, whether or not such
acceleration is in the discretion of the Committee or the Board; and
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(vii) interpret and construe this Plan and the terms and conditions of
any Award granted hereunder.
(c) All decisions, determinations, and interpretations of the Committee
shall be final and conclusive upon any Participant to whom an Award has been
granted and to any other person holding an Award.
(d) The Committee may, in the terms of an Award or otherwise, temporarily
suspend the issuance of Common Shares or Derivative Securities under an Award if
the Committee determines that securities law considerations so warrant.
Section 8. ADJUSTMENTS
(a) If the outstanding securities of the class then subject to this Plan are
increased, decreased or exchanged for or converted into a different number or
kind of shares or securities as a result of a reorganization, merger,
consolidation, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, spin-off or the like, then, unless the terms of such
transaction shall provide otherwise, the Committee shall make appropriate and
proportionate adjustments in (i) the number and type of shares or other
securities that may be acquired pursuant to Awards, and the exercise purchase
price thereof, theretofore granted under this Plan, and (ii) the maximum number
and type of shares or other securities that may be issued pursuant to Awards
thereafter granted under this Plan.
(b) If the outstanding securities of the class then subject to this Plan are
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of shares or securities, or if cash, property or shares
or securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than a
regular cash dividend) or other distribution, stock split, reverse stock split,
spin-off or the like, or if all or substantially all of the property and assets
of the Company are sold, then, unless the terms of such transaction shall
provide otherwise, the Committee shall make appropriate and proportionate
adjustments in (i) the number and type of shares or other securities or cash or
other property that may be acquired pursuant to Awards, other than Incentive
Stock Options, theretofore granted under this Plan and the exercise or
settlement price of such Awards, (ii) the maximum number and type of shares or
other securities that may be issued pursuant to such Awards thereafter granted
under this Plan, (iii) the aggregate number of Common Shares subject to Awards
granted during any calendar year to any one Participant, and (iv) the limitation
on the number of, and the number of, Common Shares subject to Awards specified
in Section 4 and in Section 5(c), respectively.
Section 9. AMENDMENT AND TERMINATION OF PLAN
The Board may amend or terminate this Plan at any time and in any manner;
provided, however, that no such amendment or termination shall deprive the
recipient, without the consent of such recipient, of any Award theretofore
granted under this Plan, or of any of his or her rights thereunder or with
respect thereto; provided. further, that if an amendment to the Plan would (a)
increase the maximum number of Common Shares that may be issued pursuant to (i)
all Awards granted under this Plan, (ii) all Incentive Stock Options granted
under this Plan, or (iii) Awards of any type granted under this Plan during any
calendar year to any one Participant or Non-employee Director, (b) change the
class of persons eligible to receive Awards under the Plan, (c) otherwise
materially increase the benefits hereunder accruing to Participants who are
subject to Section 16 of the Exchange Act in a manner not specifically
contemplated herein, or (d) affect the Plan's compliance with Rule 16b-3 or
applicable provisions of the Code, as amended from time to time, the amendment
shall be approved by the Company's stockholders to the extent required to comply
with Rule 16b-3, Sections 422 and 162(m) of the Code, and other applicable
provisions of or rules under the Code, as amended from time to time.
Notwithstanding the foregoing, the provisions of this Plan designating persons
eligible to receive Non-employee Director Options and specifying the amount,
exercise price and timing of Awards to Non-employee Directors shall not be
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amended more than once every six months, other than to comply with changes in
the Code or ERISA, or the rules thereunder, as amended from time to time.
Section 10. EFFECTIVE DATE OF PLAN
This Plan shall be effective as of July 1, 1998, the date upon which it was
approved by the Board; provided, however, that no Common Shares may be issued
under this Plan until it has been approved, directly or indirectly, by the
affirmative votes of the holders of a majority of the Common Shares of the
Company present, or represented, and entitled to vote at a meeting of such
stockholders duly held in accordance with the laws of the State of Delaware.
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APPENDIX B
MYLEX CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
The Mylex Corporation 1998 Employee Stock Purchase Plan (the "Plan") shall
be established and operated in accordance with the following terms and
conditions.
1. DEFINITIONS:
As used in the Plan the following terms shall have the meanings set forth
below:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as amended.
(c) "COMMITTEE" means the committee appointed by the Board to administer
the Plan, as described in Section 4 below.
(d) "COMMON STOCK" means the Common Stock of the Company.
(e) "COMPANY" means Mylex Corporation, a Delaware corporation.
(f) "CONTINUOUS EMPLOYMENT" means the absence of any interruption or
termination of service as an Employee with the Company and/or its
Participating Subsidiaries. Continuous Employment shall not be considered
interrupted in the case of a leave of absence agreed to in writing by the
Company, provided that such leave is for a period of not more than sixty
(60) days or reemployment upon the expiration of such leave is guaranteed by
contract or statute.
(g) "ELIGIBLE COMPENSATION" means, with respect to each Participant for
each pay period, the full salary and wages paid to such Participant by the
Company or a Participating Subsidiary, including commissions, bonuses and
overtime pay. Except as otherwise determined by the Committee, "Eligible
Compensation" does not include:
(i) any amounts contributed by the Company or a Participating
Subsidiary to any pension plan or plan of deferred compensation;
(ii) any automobile or relocation allowance (or reimbursement for
any such expenses);
(iii) any amounts paid as a starting bonus or finder's fee;
(iv) any amounts realized from the exercise of qualified or
non-qualified stock options;
(v) any amounts paid by the Company or a Participating Subsidiary
for other fringe benefits, such as health care, hospitalization and group
life insurance benefits, or perquisites, or paid in lieu of such benefits
or perquisites, such as cash-out of credit generated under a plan
qualified under Code Section 125;
(vi) other similar forms of extraordinary compensation; or
(vii) any Participant's commissions, bonus or overtime pay to the
extent such Participant has elected to exclude, in a writing acceptable
to the Committee, such compensation from his or her Eligible
Compensation.
(h) "ELIGIBLE EMPLOYEE" means an Employee who is eligible to participate
in the Plan, as described in Section 5 below.
(i) "EMPLOYEE" means any person, including an officer, who is
customarily employed for at least twenty (20) hours per week and more than
five (5) months in a calendar year by the Company or one of its
Participating Subsidiaries.
(j) "ENROLLMENT DATE" means December 16, 1998, for the first Offering
Period under the Plan and, thereafter, the first day of each Offering
Period.
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(k) "EXERCISE DATE" means the last Trading Day of each Offering Period.
(l) "EXERCISE PRICE" means the price per share of shares offered in a
given Offering Period determined as provided in Section 10 below.
(m) "FAIR MARKET VALUE" means, with respect to a share of Common Stock
as of any date, the last sale price of such Common Stock on the NASDAQ-NMS
on such date, as reported in the Wall Street Journal. In the event that such
price is not available for an Enrollment Date or an Exercise Date, the Fair
Market Value of a share of Common Stock on such date shall be the last sale
price of a share of the Common Stock on the NASDAQ-NMS on the last business
day prior to such date or such other amount as may be determined by the
Committee by any fair and reasonable means.
(n) "NASDAQ-NMS" means the National Association of Securities Dealers,
Inc. Automated Quotation National Market System.
(o) "OFFERING PERIOD" means the period during which an option granted
pursuant to the Plan may be exercised. Except as modified in accordance with
the provisions of Section 6 below, each offering period shall be
approximately six (6) months in duration. A new Offering Period shall begin
on the first Trading Day on or after each June 1 and December 1 (December
16, 1998, for the first Offering Period) and ending on the last Trading Day
in the period on or before November 30 or May 31.
(p) "PARTICIPANT" means an Eligible Employee who has elected to
participate in the Plan by filing an enrollment agreement with the Company,
as provided in Section 7 below.
(q) "PARTICIPATING SUBSIDIARY" means any Subsidiary other than a
Subsidiary excluded from participating in the Plan by the Committee, in its
sole discretion.
(r) "PLAN" means this Mylex Corporation 1998 Employee Stock Purchase
Plan.
(s) "SUBSIDIARY" means any corporation, domestic or foreign, of which
the Company owns, directly or indirectly, not less than 50% of the total
combined voting power of all classes of stock or other equity interests and
that otherwise qualifies as a "subsidiary corporation" within the meaning of
Section 424(f) of the Code or any successor thereto.
(t) "TRADING DAY" shall mean a day on which national stock exchanges and
the NASDAQ-NMS are open for trading.
(u) "1934 ACT" means the Securities Exchange Act of 1934, as amended.
2. PURPOSE OF THE PLAN
The purpose of the Plan is to provide present and future employees of the
Company and its Participating Subsidiaries an incentive in the performance of
their services by giving them an opportunity to acquire a proprietary interest
(or increase an existing proprietary interest) in the Company through the
purchase of Common Stock and to profit from increases in the value of the Common
Stock. It is the intention of the Company that the Plan qualify as an "employee
stock purchase plan" under Section 423 of the Code. Accordingly, the provisions
of the Plan shall be administered, interpreted and construed in a manner
consistent with the requirements of that section of the Code.
3. SHARES RESERVED FOR THE PLAN
There shall be reserved for issuance and purchase by Employees under the
Plan an aggregate of 500,000 shares of Common Stock, subject to adjustment as
provided in Section 15 below. Shares of Common Stock subject to the Plan may be
newly issued shares or shares reacquired in private transactions or open market
purchases. If and to the extent that any right to purchase reserved shares shall
not be exercised by any Employee for any reason or if such right to purchase
shall terminate as provided herein, shares that have not been so purchased
hereunder shall again become available for the purposes of the Plan unless the
Plan shall have been terminated, but all shares sold under the Plan, regardless
of source, shall be counted against the limitation set forth above.
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4. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by a Committee appointed by, and which
shall serve at the pleasure of, the Board. However, the Board may elect to
function as the Committee. The Committee shall consist of not less than two
members of the Board who are not officers or employees of the Company or of any
of its Subsidiaries. The Committee shall have authority to interpret the Plan,
to prescribe, amend and rescind rules and regulations relating to the Plan, and
to make all determinations necessary or advisable for the administration of the
Plan, all of which actions and determinations shall be final, conclusive and
binding on all persons.
(b) The Committee may request advice or assistance or employ such other
persons as it in its absolute discretion deems necessary or appropriate for the
proper administration of the Plan, including, without limitation, employing a
brokerage firm, bank or other financial institution to assist in the purchase of
shares hereunder, delivery of reports or other administrative aspects of the
Plan.
5. ELIGIBILITY TO PARTICIPATE IN THE PLAN
Subject to the provisions of the Plan and any limitations imposed by any
future amendments to Section 423(b) of the Code (or successor provisions), any
person who, as of an Enrollment Date, is an Employee of the Company or a
Participating Subsidiary (after it becomes a Participating Subsidiary) shall be
eligible to participate in the Plan for the Offering Period beginning on that
Enrollment Date.
6. OFFERING PERIODS
Shares shall be available for purchase under the Plan during consecutive
Offering Periods, with the first Offering Period commencing on December 16,
1998, and, thereafter, with a new Offering Period commencing on each June 1 and
December 1 during the term of the Plan, or as otherwise determined by the
Committee. The Committee shall have the power to change the duration of the
Offering Periods, after the first Offering Period, from time to time, without
stockholder approval if such change is announced to all Eligible Employees at
least fifteen (15) days prior to the scheduled beginning of the first Offering
Period to be so affected.
7. ELECTION TO PARTICIPATE IN THE PLAN
(a) Each Eligible Employee may elect to participate in the Plan with respect
to an Offering Period by completing an enrollment agreement in the form provided
by the Company and filing such enrollment agreement with the Company prior to
the applicable Enrollment Date, unless another time for filing the enrollment
form with respect to a given Offering Period is set by the Committee.
(b) All Participant purchases pursuant to the Plan shall be made only by the
proceeds of payroll deductions. Payroll deductions for a Participant shall
commence on the first payroll date following his or her Enrollment Date and
shall end on the last payroll date in the applicable Offering Period, unless
sooner terminated by the Participant as provided in Section 12 below.
(c) Unless an Eligible Employee elects otherwise prior to the Enrollment
Date for any Offering Period by submitting to the Company a form provided by the
Company for such purpose, such Eligible Employee, if he or she is participating
in the immediately preceding Offering Period (the "Prior Offering Period") as of
such Enrollment Date, shall be deemed to have (i) elected to participate in such
Offering Period, and (ii) authorized the same payroll deduction for such
Offering Period as was in effect for such Eligible Employee, as of such
Enrollment Date, for the Prior Offering Period.
(d) The Committee, in its discretion, may terminate the participation of all
Participants in any Offering Period as of the last day of any Offering Period (a
"Termination Date") and, upon the occurrence of such a termination, all such
Participants shall be automatically enrolled, as described below, in the new
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Offering Period commencing immediately following such Termination Date if the
Exercise Price determined as of the Enrollment Date for such new Offering Period
is lower than the Exercise Price determined as of the Enrollment Date of the
Offering Period for which the Participants' participation is being terminated.
In such event, each of such Participants shall be deemed for purposes of this
Plan to have (i) elected to participate in such new Offering Period, and (ii)
authorized the same payroll deduction for such new Offering Period as was in
effect for such Participant immediately prior to the Termination Date.
8. PAYROLL DEDUCTIONS
(a) At the time a Participant files the enrollment agreement with respect to
an Offering Period, the Participant shall authorize payroll deductions to be
made on each payroll date during the Offering Period in an amount of from 1% to
10% of the Eligible Compensation which the Participant receives on such payroll
date. The amount of such payroll deductions shall be a whole percentage (i.e.,
1%, 2%, 3%, etc.) of the Participant's Eligible Compensation.
(b) All payroll deductions made for a Participant shall be deposited in the
Company's general corporate account and shall be credited to the Participant's
account under the Plan. No interest shall accrue or be credited with respect to
the payroll deductions of a Participant under the Plan. A Participant may not
make any additional payments into such account. All payroll deductions received
or held by the Company under the Plan may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
(c) A Participant may discontinue participation in the Plan as provided in
Section 12 below. A Participant may at any time, but no more than once, during
an Offering Period reduce or increase (subject to the limitations of Section
8(a) above) the rate of his or her payroll deductions by completing and filing
with the Company a change notice in the form provided by the Company. A
Participant may suspend his or her payroll deductions in any Offering Period and
may recommence payroll deductions, effective the first date of any subsequent
Offering Period, by completing and filing with the Company such change notice.
Any such increase or reduction in the rate of a Participant's payroll deductions
and any such suspension shall be effective as of first pay period ending at
least ten (10) days after the Participant files the change notice with the
Company.
9. GRANT OF OPTIONS
(a) On the Enrollment Date of each Offering Period, subject to the
limitations set forth in Sections 3 and 9(b) hereof, each Eligible Employee
shall be granted an option to purchase on the Exercise Date of each Offering
Period (at the Exercise Price as of such Exercise Date determined as provided in
Section 10 below) up to a number of shares of the Common Stock determined by
dividing such Employee's payroll deductions accumulated during the Offering
Period ending on such Exercise Date by the Exercise Price (as determined in
accordance with Section 10 below); provided that the number of shares subject to
the option for each Offering Period shall not exceed 1,250 (subject to the
adjustment as provided in Section 15 below).
(b) Notwithstanding any provision of the Plan to the contrary, no Employee
shall be granted an option under the Plan (i) if, immediately after the grant,
such Employee (or any other person whose stock would be attributed to such
Employee pursuant to Section 424(d) of the Code) would own stock and/or hold
outstanding options to purchase stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
Subsidiary of the Company, or (ii) which permits such Employee's rights to
purchase Common Stock under all employee stock purchase plans of the Company and
its Subsidiaries, including, without limitation, this Plan, to accrue at a rate
which exceeds $25,000 of the Fair Market Value of such stock (determined at the
time such option is granted) for each calendar year in which such option is
outstanding at any time.
B-4
<PAGE>
10. EXERCISE PRICE
The Exercise Price of each of the shares in each Offering Period shall be
the lower of (a) 85% of the Fair Market Value of a share of the Common Stock on
the applicable Enrollment Date, or (b) 85% of the Fair Market Value of a share
of the Common Stock on the applicable Exercise Date.
11. EXERCISE OF OPTIONS
Unless a Participant withdraws from the Plan as provided in Section 12
below, the Participant's option for the purchase of shares of Common Stock will
be exercised automatically on the Exercise Date of each Offering Period, and the
maximum number of full shares of Common Stock subject to such option will be
purchased for the Participant, at the applicable Exercise Price, with the
accumulated payroll deductions in the Participant's account. Any amount
remaining in the Participant's account after an Exercise Date shall be returned
to the Participant within fifteen (15) days after such Exercise Date.
12. WITHDRAWAL AND TERMINATION OF EMPLOYMENT
(a) A Participant may withdraw all, but not less than all, of the payroll
deductions credited to the Participant's account under the Plan at any time by
giving written notice to the Company on a form provided by the Company for such
purpose. Upon the receipt of such notice of withdrawal from a Participant, all
of such Participant's payroll deductions credited to such Participant's account
will be paid to him or her within fifteen (15) days after receipt of such notice
of withdrawal, such Participant's participation in the Plan will be
automatically terminated, and no further payroll deductions for the purchase of
shares by such Participant will be made. Payroll deductions will not resume on
behalf of a Participant who has withdrawn from the Plan unless a new enrollment
agreement is delivered to the Company in accordance with Section 7(a) above and,
in any event, may not resume during the Offering Period in which such withdrawal
occurs.
(b) Upon termination of a Participant's employment with the Company and/or
its Participating Subsidiaries for any reason, including, without limitation,
retirement or death, prior to the Exercise Date of an Offering Period, the
payroll deductions credited to such Participant's account will be returned to
such Participant or, in the case of death, to such Participant's estate, within
fifteen (15) days after the date of such termination, and such Participant's
options to purchase shares under the Plan will be automatically terminated as of
such date.
(c) In the event an Employee fails to maintain Continuous Employment for at
least twenty (20) hours per week during an Offering Period in which such
Employee is a Participant, such Employee will be deemed to have elected to
withdraw from the Plan, the payroll deductions credited to such Employee's
account will be returned to the Employee within thirty (30) days after the last
day of the week in which such Employee failed to work at least twenty (20)
hours, and the Employee's options to purchase shares under the Plan will be
terminated as of such date.
(d) A Participant's withdrawal from an Offering Period will not have any
effect upon such Participant's eligibility to participate in any succeeding
Offering Period or in any other stock purchase or other benefit plan adopted by
the Company.
13. TRANSFERABILITY
Options to purchase Common Stock granted under the Plan are not transferable
by a Participant other than by will or the laws of descent and distribution and
are exercisable during a Participant's lifetime only by the Participant.
B-5
<PAGE>
14. REPORTS
Individual accounts will be maintained for each Participant in the Plan.
Statements of account, as of each Exercise Date, will be given to participating
Employees semi-annually within thirty (30) days after such Exercise Date. Each
statement will set forth the amounts of payroll deductions, the per share
purchase price, the number of shares purchased and the remaining cash balance,
if any, as of the applicable Exercise Date.
15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
(a) If the outstanding shares of Common Stock are increased or decreased, or
are changed into or are exchanged for a different number or kind of shares, as a
result of one or more reorganizations, restructurings, recapitalizations,
reclassifications, stock splits, reverse stock splits, stock dividends or the
like, upon authorization of the Committee, appropriate adjustments shall be made
in the number and/or kind of shares, and the per-share option price thereof,
which may be issued to any Participant upon exercise of options granted under
the Plan. No fractional share of stock shall be issued under the Plan pursuant
to any adjustment authorized under the provisions of this Section 15.
(b) In the event of the sale, merger, dissolution or liquidation of the
Company or a sale of all or substantially all of the Company's assets, any then
current Offering Period will terminate immediately prior to the date on which
such proposed action is to be consummated, unless otherwise determined by the
Committee. Upon any such termination, unless otherwise determined by the
Committee, all options to purchase shares will be exercised automatically, on
such date (which shall thus be deemed to constitute an Exercise Date), to
purchase the maximum number of full shares that may be purchased at the
applicable Exercise Price with each Participant's accumulated payroll
deductions.
16. AMENDMENT OF THE PLAN
(a) The Board may at any time, or from time to time, amend the Plan in any
respect; provided, however, that the Plan may not be amended in any way that
will cause rights issued under the Plan to fail to meet the requirements for
employee stock purchase plans provided in Section 423 of the Code or any
successor thereto, including, without limitation, as result of the failure to
obtain stockholder approval of such amendment, if required. To the extent
necessary to comply with Section 423 of the Code (or any other applicable law,
regulation or stock exchange rule), the Company shall obtain stockholder
approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
Participant rights may be considered to have been "adversely affected," the
Board (or its Committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a Participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each Participant properly correspond with amounts withheld from the
Participant's compensation, and establish such other limitations or procedures
as the Board (or its Committee) determines in its sole discretion to be
advisable and which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of the Plan
may result in an unfavorable financial accounting consequence, the Board may, in
its discretion and, to the extent necessary
B-6
<PAGE>
or desirable, modify or amend the Plan to reduce or eliminate such accounting
consequence, including, but not limited to:
(1) altering the Purchase Price for any Offering Period, including,
without limitation, an Offering Period underway at the time of the change in
Purchase Price;
(2) shortening any Offering Period so that Offering Period ends on a new
Exercise Date, including an Offering Period underway at the time of such
action; and
(3) allocating less than all of the shares of Common Stock purchased
during an Offering Period among the Participants in such Offering Period.
Such modifications or amendments shall not require stockholder approval or
the consent of any Plan participants.
17. TERMINATION OF THE PLAN
The Plan and all rights of Participants hereunder shall terminate on the
earlier of:
(a) the Exercise Date that Participants become entitled to purchase a
number of shares greater than the number of reserved shares remaining
available for purchase under the Plan; or
(b) November 30, 2008, unless sooner terminated by the Board at any time
in its discretion.
In the event that the Plan terminates under circumstances described in
Section 17(a) above, reserved shares remaining as of the termination date shall
be sold to Participants pro rata, based on the number of shares that each of the
Participants is entitled to purchase as of such termination.
18. NOTICES
All notices or other communications by a Participant to the Company under or
in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, and by the
person, designated by the Company for the receipt thereof. All notices or other
communications by the Company to a Participant under or in connection with the
Plan shall be deemed to have been duly given when delivered personally to such
Participant or two (2) business days after deposit in the U.S. mail, addressed
to such Participant at the last address for such Participant provided in writing
to the Company.
19. SHAREHOLDER APPROVAL
Continuance of the Plan shall be subject to approval by the stockholders of
the Company within twelve (12) months before or after the date the Plan is
adopted by the Board. If such stockholder approval is obtained at a duly held
stockholders' meeting, it may be obtained by the affirmative vote of the holders
of a majority of the outstanding shares of the Company present, or represented
by proxy, at such meeting and entitled to vote thereon.
20. CONDITIONS UPON ISSUANCE OF SHARES
(a) The Plan, the grant and exercise of options to purchase shares of Common
Stock under the Plan, and the Company's obligation to sell and deliver shares
upon the exercise of options to purchase shares shall be subject to all
applicable federal, state and foreign laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may, in the opinion of
counsel for the Company, be required. In addition, no option may be exercised
unless (i) a registration statement under the Securities Act of 1933, as
amended, shall at the time of exercise of the option be in effect with respect
to the shares issuable under exercise of the option, or (ii) in the opinion of
counsel to the Company, the shares issuable upon exercise of the option may be
issued in accordance with the terms of an applicable exemption from
B-7
<PAGE>
the registration requirements of such act. As a condition to the exercise of an
option, the Company may require the Participant to satisfy any qualifications
that may be necessary or appropriate, to evidence compliance with any applicable
law or regulation, and to make any representations and warranties with respect
thereto as may be requested by the Company.
(b) The Company may make such provisions as it deems appropriate for
withholding by the Company pursuant to federal or state income tax laws of such
amounts as the Company determines it is required to withhold in connection with
the purchase or sale by a Participant of any Common Stock acquired pursuant to
the Plan. The Company may require a Participant to satisfy any relevant tax
requirements before authorizing any issuance of Common Stock to such
Participant.
21. EXPENSES OF THE PLAN
All costs and expenses incurred in administering the Plan shall be paid by
the Company, except that any stamp duties or transfer taxes applicable to
participation in the Plan may be charged to the account of such Participant by
the Company. Any brokerage fees for the purchase or sale of shares by a
Participant shall be borne by the Participant.
22. NO EMPLOYMENT RIGHTS
The Plan does not, directly or indirectly, create any right for the benefit
of any employee or class of employees to purchase any shares under the Plan
except pursuant to the terms of the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the Company.
The Plan shall not be deemed to interfere in any way with the Company's right to
terminate, or otherwise modify, an employee's employment at any time.
23. EFFECT OF THE PLAN
The provisions of the Plan shall, in accordance with its terms, be binding
upon, and inure to the benefit of, all successors of each Participant,
including, without limitation, such Participant's estate and the executors,
administrators or trustees thereof, heirs and legatees, and any receiver,
trustee in bankruptcy or representative of creditors of such employee.
24. APPLICABLE LAW
The laws of the State of California shall govern all matters relating to
this Plan except to the extent (if any) superseded by the laws of the United
States.
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<PAGE>
DETACH HERE
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PROXY
MYLEX CORPORATION
PROXY FOR 1999 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of MYLEX CORPORATION, a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders
and Proxy Statement, each dated April 16, 1999, and hereby appoints Al
Montross, Colleen Gray and Ismael Dudhia, each with the power to act without
the others and with full power of substitution, to vote and otherwise
represent all of the shares registered in the name of the undersigned at the
1999 Annual Meeting of Stockholders of MYLEX CORPORATION to be held on
Monday, May 17, 1999, at 2:00 p.m., at the Sheraton Palo Alto, located at 625
El Camino Real, Palo Alto, California 94301, and at any adjournment or
adjournments thereof, with the same effect as if the undersigned were present
and voting such shares, on the matters set forth on the reverse side.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE>
DETACH HERE
- ------------------------------------------------------------------------------
/ X / PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATION MADE. IF NO SPECIFICATION IS MADE, SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR EACH OF THE NOMINEES LISTED BELOW AND FOR PROPOSALS
2, 3 AND 4 AND FOR OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, AS
THE PROXY HOLDERS DEEM ADVISABLE.
<TABLE>
<S> <C>
FOR AGAINST ABSTAIN
1. Election of Directors 2. To approve adoption of the Company's / / / / / /
Nominees: Al Montross, Dr. Inder M. Singh, 1998 Stock Option and Incentive Plan
Dr. M. Yaqub Mirza, Ismael Dudhia, and the reservation of 2,000,000
Stephen McKenzie, and Walter Wilson shares of Common Stock for issuance
thereunder.
FOR WITHHELD 3. To approve adoption of the Company's / / / / / /
ALL / / / / FROM ALL 1998 Employee Stock Purchase Plan
NOMINEES NOMINEES and the reservation of 500,000
shares of Common Stock for issuance
thereunder.
4. To ratify the appointment of KPMG / / / / / /
/ / Peat Marwick LLP as independent
public accountants of the Company
--------------------------------------- for the fiscal year ending December
For all nominees except as noted above 25, 1999.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
Please sign exactly as your name appears on your stock certificate.
If such stock is held by joint tenants, both persons should sign.
When signing as attorney, executor, administrator, trustee or guardian,
please note your title as such. If the stock is registered in the
name of a corporation, please sign in the corporation's name by the
president or any other authorized officer. If the stock is registered
in the name of a partnership, please sign in the partnership's name
by an authorized person.
</TABLE>
Signature: Date: Signature: Date:
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