<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
HUTCHINSON TECHNOLOGY INCORPORATED
- --------------------------------------------------------------------------------
(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)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED
40 West Highland Park
Hutchinson, Minnesota 55350
320/587-3797
December 18, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to be
held at the Minneapolis Marriott City Center Hotel, 30 South Seventh Street,
Minneapolis, Minnesota, commencing at 1:30 p.m., Minneapolis time, on Wednesday,
January 29, 1997.
The Secretary's Notice of Annual Meeting and the Proxy Statement which
follow describe the matters to come before the meeting. During the meeting, we
will also review the activities of the past year and items of general interest
about the Company.
We hope that you will be able to attend the meeting in person and we look
forward to seeing you. Please mark, date and sign the enclosed Proxy and return
it in the accompanying envelope as quickly as possible, even if you plan to
attend the Annual Meeting. You may revoke the Proxy and vote in person at that
time if you so desire.
Sincerely,
[SIGNATURE]
Wayne M. Fortun
CHIEF EXECUTIVE OFFICER
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 29, 1997
------------------------
The Annual Meeting of Shareholders of Hutchinson Technology Incorporated
will be held at the Minneapolis Marriott City Center Hotel, 30 South Seventh
Street, Minneapolis, Minnesota, commencing at 1:30 p.m., Minneapolis time, on
Wednesday, January 29, 1997 for the following purposes:
1. To elect a Board of Directors of seven directors, to serve until the next
Annual Meeting of Shareholders or until their successors have been duly
elected and qualified.
2. To approve the Hutchinson Technology Incorporated 1996 Incentive Plan.
3. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for the fiscal year ending September 28, 1997.
4. To transact such other business as may properly be brought before the
meeting.
The Board of Directors has fixed December 13, 1996 as the record date for
the meeting, and only shareholders of record at the close of business on that
date are entitled to receive notice of and vote at the meeting.
YOUR PROXY IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. EVEN IF YOU OWN
ONLY A FEW SHARES, AND WHETHER OR NOT YOU EXPECT TO BE PRESENT, YOU ARE URGENTLY
REQUESTED TO DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE
THAT IS PROVIDED. THE PROXY MAY BE REVOKED BY YOU AT ANY TIME PRIOR TO BEING
EXERCISED, AND RETURNING YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON
IF YOU ATTEND THE MEETING AND REVOKE THE PROXY.
By Order of the Board of Directors,
[SIGNATURE]
John A. Ingleman
SECRETARY
Hutchinson, Minnesota
December 18, 1996
<PAGE>
------------------------
PROXY STATEMENT
------------------------
GENERAL INFORMATION
The enclosed Proxy is being solicited by the Board of Directors of
Hutchinson Technology Incorporated (the "Company") for use in connection with
the Annual Meeting of Shareholders to be held on Wednesday, January 29, 1997 at
the Minneapolis Marriott City Center Hotel, 30 South Seventh Street,
Minneapolis, Minnesota at 1:30 p.m. and at any adjournments thereof. Only
shareholders of record at the close of business on December 13, 1996 will be
entitled to vote at such meeting or adjournment. Proxies in the accompanying
form which are properly signed, duly returned to an officer of the Company and
not revoked will be voted in the manner specified. A shareholder executing a
Proxy retains the right to revoke it at any time before it is exercised by
notice in writing to an officer of the Company of termination of the Proxy's
authority or a properly signed and duly returned proxy bearing a later date.
The address of the principal executive office of the Company is 40 West
Highland Park, Hutchinson, Minnesota 55350 and the telephone number is (320)
587-3797. The mailing of this Proxy Statement and the Board of Directors' form
of Proxy to shareholders will commence on or about December 18, 1996.
Shareholder proposals intended to be presented at the 1998 Annual Meeting of
Shareholders must be received by the Company at its principal executive office
no later than August 19, 1997 for inclusion in the Proxy Statement for that
meeting.
The affirmative vote of the holders of a majority of the voting power of the
outstanding shares of Common Stock of the Company present and entitled to vote
is required for approval of each proposal presented in this Proxy Statement. A
shareholder voting through a Proxy who abstains with respect to a certain
proposal is considered to be present and entitled to vote on such proposal at
the meeting, and is in effect a negative vote, but a shareholder (including a
broker) who does not give authority to a Proxy to vote, or withholds authority
to vote, on a certain proposal shall not be considered present and entitled to
vote on such proposal.
1
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth, as of November 27, 1996, the ownership of
Common Stock of the Company by each shareholder who is known by the Company to
own beneficially more than 5% of the outstanding Common Stock of the Company,
each director, each executive officer named in the Summary Compensation Table on
page 9, and all executive officers and directors as a group. At November 27,
1996 there were 5,452,410 shares of Common Stock, par value $.02, issued and
outstanding, each of which is entitled to one vote.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENTAGE OF
OR IDENTITY OF GROUP BENEFICIAL OWNERSHIP (1) OUTSTANDING SHARES
- -------------------------------- ------------------------- ------------------
<S> <C> <C>
Jeffrey W. Green 471,822(2) 8.44
Sioux Falls, South Dakota 57103
Wayne M. Fortun 213,606(3) 3.82
W. Thomas Brunberg 550(4) *
Archibald Cox, Jr. 10,000 *
James E. Donaghy 400(5) *
Harry C. Ervin, Jr. 4,500 *
Richard N. Rosett 4,145(6) *
John A. Ingleman 46,190(7) *
R. Scott Schaefer 17,440(8) *
Richard C. Myers 50,915(9) *
Executive officers and directors 883,896(10) 15.15
as a group (15 persons)
</TABLE>
- --------------------------
* Less than 1%.
(1)Unless otherwise indicated in the footnotes to this table, the listed
beneficial owner has sole voting power and investment power with respect to
such shares.
(2)Of these shares, 220 are held by Mr. Green in joint tenancy with his wife
and 44,600 shares are held in an IRA for Mr. Green. Includes 137,100 shares
covered by currently exercisable options granted to Mr. Green.
(3)Of these shares, 5,575 are held by Mr. Fortun in joint tenancy with his
wife. Includes 136,390 shares covered by currently exercisable options
granted to Mr. Fortun.
(4)Of these shares, 250 shares are held in trusts, 200 shares are held in an
IRA for Mr. Brunberg and 100 shares are held in an IRA for Mr. Brunberg's
wife.
(5)Of these shares, 300 are held by Mr. Donaghy's wife and 100 shares are held
in a living trust of which Mr. Donaghy is settlor, beneficiary and
co-trustee, and over which he exercises both investment control and the
power to revoke the trust.
(6)Includes 100 shares held in an IRA for Mr. Rosett's wife.
(7)Of these shares, 23,900 are held by Mr. Ingleman in joint tenancy with his
wife and 100 are held by Mr. Ingleman as custodian for his son under the
Minnesota Uniform Transfers to Minors Act. Includes 22,190 shares covered by
currently exercisable options granted to Mr. Ingleman.
(8)All of these shares are covered by currently exercisable options granted to
Mr. Schaefer.
(9)Of these shares, 10,400 are held by Mr. Myers in joint tenancy with his wife
and 10,000 shares are held by Mr. Myers' wife. Includes 29,970 shares
covered by currently exercisable options granted to Mr. Myers.
(10)Includes 382,537 shares covered by currently exercisable options granted to
10 executive officers of the Company, and the spouse of one such officer who
is an employee of the Company.
2
<PAGE>
ELECTION OF DIRECTORS
The By-Laws of the Company provide that the business of the Company shall be
managed by or under the direction of a Board of Directors of not less than three
nor more than nine directors, which number shall be determined by the
shareholders at their annual meeting. Each director shall be elected at the
Annual Meeting of Shareholders for a term of one year or until a successor is
elected and has qualified. The Board of Directors has recommended that the
number of directors to be elected for the ensuing year be set at seven and has
nominated the seven persons named below for election as directors. Proxies
solicited by the Board of Directors will, unless otherwise directed, be voted to
elect the seven nominees named below to constitute the entire Board of
Directors.
All of the nominees named below are current directors of the Company. Each
nominee has indicated a willingness to serve as a director for the ensuing year,
but in case any nominee is not a candidate at the meeting for any reason, the
Proxies named in the enclosed form of Proxy may vote for a substitute nominee in
their discretion.
The affirmative vote of the holders of at least a majority of the voting
power of the outstanding shares of Common Stock of the Company present and
entitled to vote on the election of directors is required for election to the
Board of Directors of each of the seven nominees named below.
The following table sets forth certain information as to each nominee for
the office of director:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------ --- --------------------------------------------
<S> <C> <C>
Jeffrey W. Green 56 Chairman of the Board and Director
Wayne M. Fortun 47 President, Chief Executive Officer and Chief
Operating Officer and Director
W. Thomas Brunberg 56 Director
Archibald Cox, Jr. 56 Director
James E. Donaghy 62 Director
Harry C. Ervin, 67 Director
Jr.
Richard N. Rosett 68 Director
</TABLE>
Mr. Green is a co-founder of the Company and has served as a director since
the Company's formation in 1965. Mr. Green has been Chairman of the Board since
January 1983, and served as the Company's Chief Executive Officer from January
1983 to May 1996.
Mr. Fortun was elected a director in 1983. He has been with the Company
since 1975 and was elected President and Chief Operating Officer in January 1983
and Chief Executive Officer in May 1996. Mr. Fortun is also a director of G&K
Services, Inc.
Mr. Brunberg became a director of the Company in 1975. He is a certified
public accountant and has been a shareholder in the Minneapolis accounting firm
of Brunberg, Thoresen & Associates, Ltd. since March 1991. He was a partner in
the Minneapolis office of the accounting firm of Pannell Kerr Forster from 1987
through January 1991, which firm filed a petition under the Federal bankruptcy
laws in 1993.
Mr. Cox became a director of the Company in May 1996. Mr. Cox has been Vice
Chairman and President of Magnequench International, Inc., a manufacturer of
magnets and magnetic material, since October 1995. He has been Chairman of
Sextant Group, Inc., a financial advisory firm, since
3
<PAGE>
August 1993. Mr. Cox served as President and Chief Executive Officer of The
First Boston Corporation, an investment banking firm, from July 1990 to August
1993, and as a Managing Director of Tiger Management Company, a hedge fund, from
November 1993 to June 1994.
Mr. Donaghy became a director of the Company in 1992. Since January 1991,
Mr. Donaghy has been the Chief Executive Officer and President and a director of
Sheldahl, Inc., a manufacturer of laminates, composite materials and flexible
electronic interconnects.
Mr. Ervin became a director of the Company in 1969. Mr. Ervin, who is now
retired, was a Vice President of Dain Bosworth Incorporated, an investment
banking firm, from April 1988 through June 1996.
Mr. Rosett became a director of the Company in 1986. He has been a Professor
of Economics at the Rochester Institute of Technology ("RIT") since July 1990,
and Director of Quality Cup Programs at RIT since July 1995. Mr. Rosett was Dean
of the College of Business of RIT from July 1990 to July 1996.
None of the above nominees is related to each other or to any executive
officer of the Company, except that Mr. Rosett is married to Mr. Green's first
cousin.
The Company has an audit committee consisting of Richard N. Rosett, W.
Thomas Brunberg and Harry C. Ervin, Jr. The audit committee had four meetings in
fiscal 1996. The audit committee meets with the Chief Financial Officer, the
Company's internal auditor and independent public accountants and approves the
scope and timing of the independent public accountants' audit, evaluates the
independent public accountants' opinions as to internal controls and discusses
the meaning and significance of the audited financial results. The Company has a
compensation committee consisting of Harry C. Ervin, Jr., W. Thomas Brunberg and
James E. Donaghy, which grants or makes recommendations to the Board of
Directors concerning employee stock options, bonuses and other compensation. The
compensation committee had three meetings in fiscal 1996. The Company does not
have a nominating committee.
The Board of Directors held seven meetings during fiscal 1996. Mr. Cox was
elected to the Board of Directors in May 1996 and was absent for the July 1996
meeting of the Board.
Each non-employee director of the Company receives an annual fee of $16,000
and a fee of $900 for each Board meeting and $500 for each Board committee
meeting attended by the director.
All persons serving as non-employee directors of the Company are entitled to
receive retirement benefits under the Company's Directors' Retirement Plan (the
"Retirement Plan"). Under the Retirement Plan, following cessation of service as
a director of the Company (i) after at least five years of service on the Board
of Directors, (ii) upon reaching age 65, or (iii) regardless of the length of
service on the Board of Directors, as a result of such non-employee director's
death or permanent disability while a director, a non-employee director (or his
or her beneficiary) will receive a cash retirement benefit equal on an annual
basis to the amount of the annual retainer fee (exclusive of meeting fees) in
effect at the time such individual ceases to serve on the Board of Directors.
The benefit is payable no less frequently than annually for a period equal to
one-half of the period such non-employee director served on the Board of
Directors up to a maximum payment period of five years. Payments otherwise due
in installments may become payable in a lump sum upon the occurrence of certain
change of control events specified in the Retirement Plan.
4
<PAGE>
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The compensation committee of the Company's Board of Directors (the
"Committee"), which is composed entirely of independent, outside directors,
establishes the general compensation policies of the Company and specific
compensation for each executive officer of the Company, and administers the
Company's stock option program. The Committee's intent is to make the
compensation packages of the executive officers of the Company sufficient to
attract and retain persons of exceptional quality, and to provide effective
incentives to motivate and reward Company executives for achieving the financial
and strategic goals of the Company essential to the Company's long-term success
and to growth in shareholder value. The Company's executive compensation package
consists of three main components: (1) base salary; (2) annual cash bonuses; and
(3) stock options. Internal Revenue Code Section 162(m) ("Section 162(m)")
generally limits the deductibility of compensation over $1 million paid by a
company to certain executive officers. The Section 162(m) limit does not apply
to "performance-based compensation", and the stock options granted to executives
pursuant to the Company's 1988 Stock Option Plan have been structured to qualify
as performance-based compensation for these purposes. Traditionally, the
combination of base salary and annual cash bonuses for any executive officer has
not exceeded $1 million. However, the Company has no policy regarding compliance
with the Section 162(m) limitations and has taken no steps to qualify any cash
bonuses as performance-based compensation for Section 162(m) purposes.
BASE SALARY
The base salary of each of the executive officers, including the Company's
Chief Executive Officer (the "CEO"), is determined annually by the Committee
after considering the compensation levels of personnel with similar
responsibilities at other companies in the high technology industry and
manufacturing generally and, to a lesser extent, the Company's financial
performance during the prior fiscal year. In the case of executive officers
other than the CEO and the Company's Chairman of the Board of Directors (the
"Chairman"), the individual performance of each executive officer is also given
significant weight. Salary decisions concerning executive officers are made by
the Committee at the beginning of each fiscal year of the Company in a review
process which includes recommendations of the CEO and the Chairman for all
executive officers other than themselves.
To maintain a competitive level of executive compensation and retain
superior personnel, the Committee annually evaluates the salary for each
executive officer's position based on three surveys on executive compensation
for manufacturers in the high technology industry and for manufacturers
generally (the "Surveys"). Using the Surveys, the base salaries of the CEO and
the Chairman were targeted in fiscal year 1996 by the Committee to be above the
midrange of their respective salary ranges. With respect to all other executive
officers, base salaries are targeted initially to be in line with the industry
median for similar positions, as presented in the Surveys, with variations above
or below the median based on individual performance, experience and job
responsibility. Three of the four peer companies constituting the Peer Composite
Index presented in the performance graph on page 12 of this Proxy Statement are
included in one of the Surveys, and all four peer companies are included in
another of the Surveys.
With respect to all executive officers, including both the CEO and the
Chairman, in addition to the Surveys, the Company's financial performance during
the prior fiscal year also is considered in the
5
<PAGE>
Committee's annual review of base salaries. Current measures of financial
performance are operating income and return on assets, each of which is of
substantially equivalent importance in determining compensation.
With respect to all executive officers other than the CEO and the Chairman,
the individual performance and achievements of each executive officer in the
prior fiscal year also are given significant weight in the Committee's annual
review of base salaries. Individual performance is assessed by an annual written
performance appraisal and by review of specific "results objectives". The
appraisal evaluates each officer's performance in areas such as leadership,
vision setting, motivation and development of employees and global economic
marketing and business know-how, and is prepared by the CEO following interviews
by the CEO and certain members of his executive staff with each officer's peers
and subordinates and discussion with the Chairman. In addition, the CEO assesses
each officer's achievement of specific "results objectives" developed by turning
corporate financial and strategic goals into specific personal objectives to be
accomplished by each officer. These results objectives are reviewed and
redefined by the CEO each fiscal quarter after discussion with each officer.
ANNUAL INCENTIVE COMPENSATION
Under the Company's bonus program (the "Incentive Compensation Program"),
each executive officer and other management employees are eligible to receive a
cash bonus for each fiscal year, contingent upon the Company's financial
performance during such fiscal year. Bonuses for the CEO and the Chairman are
determined by the Committee after assessing overall corporate financial
performance and reviewing incentive compensation information for individuals in
similar positions, as presented in the Surveys. Bonuses for executive officers
other than the CEO and the Chairman are based on a target bonus percentage of
base salary which is assigned to each officer after comparing each such
officer's job responsibilities to those of comparable jobs, and the target bonus
percentage associated with such comparable jobs, also as presented in the
Surveys. Individual performance, in addition to overall corporate financial
performance, also is an important factor in determining bonuses in the case of
officers other than the CEO and the Chairman. The Incentive Compensation Program
is designed to motivate each executive officer and each other management
employee to maximize his or her individual performance while attaining or
exceeding corporate performance goals.
Bonuses for executive officers, including the CEO and the Chairman, are paid
under the Incentive Compensation Program only if the Company achieves threshold
levels of overall corporate financial performance. Overall corporate financial
performance is measured first by the Company's actual return on assets in the
fiscal year, and second by the achievement of operating income and return on
assets goals for that fiscal year. These corporate goals are approved by the
Committee in conjunction with annual recommendations by the CEO and the Chairman
at the start of each fiscal year. Bonuses are paid only if the Company achieves
both a minimum prescribed level of return on assets as well as a minimum
prescribed percentage of the corporate goals for operating income and return on
assets.
The bonus amounts actually paid out to all executive officers other than the
Chairman and the CEO will vary from the target bonus percentage based on the
magnitude of positive overall corporate financial performance over the threshold
level and on individual performance reviews. The maximum bonus that will be paid
out under the Incentive Compensation Program to any participating employee,
including all executive officers, is twice the target bonus percentage of base
salary.
6
<PAGE>
In the case of the CEO and the Chairman, once the required threshold levels
of overall corporate financial performance are achieved, bonuses are determined
by the Committee, in its discretion, after reviewing the incentive compensation
information presented in the Surveys.
In the case of executive officers other than the CEO and the Chairman, once
the required threshold levels of overall corporate financial performance are
achieved, each such executive officer participates in one of several bonus
pools. Participation in a particular pool is based on the Company's
organizational structure and the target bonus percentage of each participant.
Each officer in a pool is assigned a target bonus percentage determined by
evaluating the individual's job responsibilities and reviewing the incentives
paid to personnel in jobs with similar responsibilities, as presented in the
Surveys. The Committee approves target bonus percentages for each officer (based
upon the recommendations of the CEO for executive officers other than himself
and the Chairman) that are in line with the industry median for incentives paid
to individuals in similar positions. The total cash available for bonuses to all
executive officers in a particular bonus pool is calculated by multiplying (i)
the percent of the corporate goal achieved for return on assets, (ii) the
percent of the corporate goal achieved for operating income, (iii) the
applicable target bonus percentage, and (iv) the aggregate base salaries for all
executive officers in the pool.
The CEO also reviews the individual performance of each executive officer,
other than himself and the Chairman, for the subject fiscal year, based on the
written performance appraisals and "results objectives" described above and
makes bonus recommendations to the Committee based on such review. Each bonus
pool is then allocated by the Committee among the executive officers eligible to
share in that pool based on the recommendations of the CEO.
The Company's fiscal year 1996 overall corporate financial performance was
above the prescribed threshold level for the Company's actual return on assets.
However, although the Company reported overall positive operating income and
return on assets for fiscal year 1996, neither measure of the Company's
financial performance was sufficient to meet the minimum prescribed percentage
of the corporate goals for these measures in fiscal year 1996. As a result,
neither the CEO nor the Chairman nor any other executive officer received any
cash bonus for fiscal year 1996.
STOCK OPTIONS
The Company's stock option program is intended to provide a long-term
incentive for executive officers and other key employees. The purpose of the
program is to promote the interests of the Company and its shareholders by
providing all employees with an opportunity to acquire a proprietary interest in
the Company and thereby develop a stronger incentive to put forth maximum effort
for the continued success and growth of the Company. In addition, it is believed
that the opportunity to acquire a proprietary interest in the Company will aid
in attracting and retaining personnel of outstanding ability.
The Company's 1988 Stock Option Plan is administered by the Committee and
authorizes the Committee to grant to key employees, including all executive
officers, options to purchase Common Stock of the Company. Generally, options
are granted annually to purchase shares of Common Stock over a ten-year period
at the fair market value per share at the time the options are granted. Options
granted during fiscal year 1996 generally are not exercisable for one year after
the date of grant.
The number of shares to be awarded to the CEO and the Chairman is determined
by the Committee on the basis of its view of each such officer's long-term
individual performance and the
7
<PAGE>
overall strategic contribution of each such individual to corporate performance.
Option grants to the CEO and the Chairman are made on the same terms as all
other options granted by the Committee to other employees of the Company. In
determining the number of options to be granted, the Committee takes into
account the number of options then held by the CEO and the Chairman.
The number of shares to be awarded to each executive officer, other than the
CEO and the Chairman, is proposed by the CEO on the basis of his view of each
officer's long-term individual performance and the overall strategic
contribution of such officer to corporate performance, taking into account
individual promotions during the fiscal year. The Committee reviews the
recommendations of the CEO and approves the final list of such option recipients
and the amounts of the awards. As with the CEO and the Chairman, in determining
the number of options to be granted, the Committee takes into account the number
of options then held by the officers receiving such grants.
Compensation Committee:
Harry C. Ervin, Jr., Chairman
W. Thomas Brunberg
James E. Donaghy
8
<PAGE>
SUMMARY COMPENSATION TABLE
The following table shows, for the Company's Chief Executive Officer and
each of the four other most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers"), information concerning
compensation earned for services in all capacities during the fiscal year ended
September 29, 1996, as well as compensation earned by each such person for the
two previous fiscal years:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------
ANNUAL COMPENSATION SECURITIES
NAME AND ----------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($) (1)
- --------------------------- --------- ---------- ---------- ----------- ---------------------
<S> <C> <C> <C> <C> <C>
Wayne M. Fortun 1996 343,947 0 40,000 8,350
President, Chief Executive 1995 316,380 200,000 30,000 7,528
Officer and Chief 1994 269,708 2,910 1,930 7,686
Operating Officer (2)
1996 405,197 0 30,000 8,030
Jeffrey W. Green 1995 373,258 200,000 40,000 8,074
Chairman of the Board (3) 1994 349,844 3,585 2,280 6,581
John A. Ingleman 1996 175,614 0 3,100 4,500
Vice President, Chief 1995 161,170 82,000 3,000 5,644
Financial Officer and 1994 144,677 1,589 1,040 4,425
Secretary
R. Scott Schaefer 1996 170,630 0 3,000 4,500
Vice President of Disk 1995 135,202 72,500 2,500 5,419
Drive Components Business 1994 113,220 1,233 810 3,463
Development
Richard C. Myers 1996 166,892 0 2,800 4,500
Vice President of 1995 146,899 74,000 1,190 5,577
Administration 1994 140,595 1,547 980 4,406
</TABLE>
- ------------------------
(1) Amounts for fiscal year 1996 represent (a) Company matching cash
contributions under the Company's 401-K Plan as follows: $4,580 to Mr.
Fortun; $4,500 to Mr. Green; $4,500 to Mr. Ingleman; $4,500 to Mr.
Schaefer; and $4,500 to Mr. Myers; and (b) premiums paid by the Company on
the portions of certain life insurance policies maintained for the benefit
of certain officers as follows: $3,770 for Mr. Fortun and $3,530 for Mr.
Green.
(2) Mr. Fortun became Chief Executive Officer of the Company on May 16, 1996.
(3) Mr. Green was Chief Executive Officer of the Company until May 16, 1996.
9
<PAGE>
OPTION TABLES
The following tables summarize stock option grants to and exercises by the
Named Executive Officers during the fiscal year ended September 29, 1996, and
certain other information relative to such options:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ------------------------------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (3)
OPTIONS GRANTED EMPLOYEES IN BASE PRICE ------------------------
NAME (#) (1) FISCAL YEAR ($/SHR) (2) EXPIRATION DATE 5% ($) 10% ($)
- --------------------- --------------- ------------- ----------- ----------------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Wayne M. Fortun 40,000 27.37 49.00 November 27, 2005 1,232,800 3,123,600
Jeffrey W. Green 30,000 20.52 49.00 November 27, 2005 924,600 2,342,700
John A. Ingleman 3,100 2.12 49.00 November 27, 2005 95,542 242,079
R. Scott Schaefer 3,000 2.05 49.00 November 27, 2005 92,460 234,270
Richard C. Myers 2,800 1.92 49.00 November 27, 2005 86,296 218,652
</TABLE>
- ------------------------
(1) All such options are granted under the Company's 1988 Stock Option Plan (the
"1988 Plan"), are intended to be non-statutory options, and generally are
not exercisable for one year after the date of grant. Such options become
immediately exercisable, however, upon (a) death or disability of the
holder, (b) a change of control (defined as certain changes in the Company's
Board of Directors, certain concentrations of voting power, certain mergers,
sales of corporate assets, statutory share exchanges or similar
transactions, or liquidation or dissolution of the Company), or (c)
cancellation of such options by the committee administering the 1988 Plan
(the "Committee") in the event of the proposed dissolution or liquidation of
the Company or certain mergers, sales of corporate assets, statutory share
exchanges or similar transactions. The holder is permitted to pay the
exercise price and (if permitted by the Committee and subject to certain
restrictions) any withholding taxes due upon exercise with either cash or
shares of Common Stock.
(2) The exercise price of such options is not less than the fair market value
(as defined in the 1988 Plan) of a share of Common Stock at the time of
grant.
(3) The hypothetical potential appreciation shown in these columns reflects the
required calculations at annual rates of 5% and 10% set by the Securities
and Exchange Commission ("SEC"), and is not intended to represent either
historical appreciation or anticipated future appreciation of the Company's
Common Stock price.
10
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR-END IN-THE-MONEY OPTIONS AT
SHARES VALUE (#) FISCAL YEAR-END ($) (2)
ACQUIRED ON REALIZED -------------------------- --------------------------
NAME EXERCISE (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wayne M. Fortun -- -- 96,390 40,000 2,199,878 0
Jeffrey W. Green -- -- 107,100 30,000 2,238,090 0
John A. Ingleman -- -- 19,090 3,100 466,083 0
R. Scott Schaefer -- -- 14,440 3,000 355,606 0
Richard C. Myers -- -- 27,170 2,800 688,620 0
</TABLE>
- ------------------------
(1) Market value of underlying securities on date of exercise minus the exercise
price.
(2) Market value of underlying securities at fiscal year-end minus the exercise
price.
11
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph comparing, for a period of five fiscal years
ended September 29, 1996, the yearly cumulative total shareholder return on the
Company's Common Stock with the yearly cumulative total shareholder return of
the S&P 500 Index and an index of a group of peer companies selected by the
Company (the "Peer Composite Index"). The comparison of total shareholder
returns assumes that $100 was invested on September 29, 1991 in each of the
Company, the S&P 500 Index and the Peer Composite Index, and that dividends were
reinvested when and as paid. The companies in the peer group are Adaptec
Incorporated, Applied Magnetics Corporation, Cirrus Logic Incorporated and Komag
Incorporated. The Company is not included in the peer group. In calculating the
yearly cumulative total shareholder return of the Peer Composite Index, the
shareholder returns of the companies included in the peer group are weighted
according to the stock market capitalizations of such companies at the beginning
of each period for which a return is indicated.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HUTCHINSON TECHNOLOGY PEER COMPOSITE S&P 500 INDEX
<S> <C> <C> <C>
1991 $100.00 $100.00 $100.00
1992 287.67 102.00 107.36
1993 230.00 124.08 118.59
1994 298.63 104.45 119.12
1995 745.21 248.00 150.75
1996 413.70 168.00 177.82
</TABLE>
<TABLE>
<CAPTION>
HTI'S FISCAL YEAR ENDING
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Hutchinson Technology $ 100.00 $ 287.67 $ 230.14 $ 298.63 $ 745.21 $ 413.70
Peer Composite 100.00 102.00 124.08 104.45 248.34 168.00
S&P 500 Index 100.00 107.36 118.59 119.12 150.75 177.82
</TABLE>
12
<PAGE>
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder require directors and certain officers of the
Company and persons who own more than ten percent of the Company's Common Stock
to file reports of their ownership of the Company's Common Stock and changes in
such ownership with the SEC. Larry G. Moehring, the Company's Vice President of
Disk Drive Components Assembly Operations, failed to file on a timely basis four
reports regarding his indirect ownership of employee stock options for shares of
Common Stock granted to his wife in each of July 1993, November 1993, November
1994 and November 1995.
PROPOSAL TO APPROVE THE
HUTCHINSON TECHNOLOGY INCORPORATED
1996 INCENTIVE PLAN
Effective November 19, 1996, the Board of Directors of the Company approved,
subject to shareholder approval, the Hutchinson Technology Incorporated 1996
Incentive Plan (the "Plan"). Awards may be made pursuant to the Plan prior to
approval by the shareholders of the Company, but if the Plan is not approved by
the shareholders of the Company on or prior to March 31, 1997, then any awards
granted under the Plan shall be null and void.
The full text of the Plan is contained in Exhibit A to this proxy statement.
Reference is made to such exhibit for a complete statement of the terms of the
Plan. The following summary description of the Plan is qualified by reference to
the Plan.
PURPOSE
The purpose of the Plan is to promote the interests of the Company and its
shareholders by providing employees of the Company and any subsidiaries of the
Company with an opportunity to acquire a proprietary interest in the Company.
The Plan provides for the granting of awards consisting of (i) stock options,
which may be either non-statutory stock options or incentive stock options
meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and (ii) stock awards, which may be grants of unrestricted
shares of Common Stock or shares subject to such conditions, limitations or
restrictions as the Committee (as defined below) may impose.
ADMINISTRATION
The Plan is administered by a committee of two or more directors of the
Company (the "Committee") appointed by the Company's Board of Directors (the
"Board"). Each member of the Committee must not be an employee of the Company or
any subsidiary of the Company and must be a "non-employee director" as that term
is defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). Notwithstanding the foregoing, if the Board
does not appoint a committee to administer the Plan, then the Board shall
administer the Plan and shall constitute the Committee. Subject to the
provisions of the Plan, the Committee may from time to time establish such rules
for the administration of the Plan as it deems appropriate and may fix any other
terms and conditions for the grant or exercise of any award under the Plan. For
purposes of granting and administering awards to persons who are not subject to
Section 16 of the Exchange Act, the Committee may delegate its authority to the
Chief Executive Officer of the Company, who may in turn delegate such authority
to another officer. Notwithstanding the appointment of a Committee to
13
<PAGE>
administer the Plan and notwithstanding any contrary statement below, any grant
of awards under the Plan to any director of the Company who is not an employee
of the Company or a subsidiary of the Company at the time of grant, and any
action taken by the Company with respect to any such awards, shall be subject to
prior approval by the Board.
SHARES AVAILABLE
Not more than 1,000,000 shares of Common Stock of the Company may be made
subject to awards granted under the Plan (subject to adjustment, at the
discretion of the Committee, in the event of a merger, reorganization or other
relevant change). If an option lapses or terminates before such option has been
completely exercised, the shares covered by the unexercised portion of such
option may again be made subject to awards granted under the Plan. Shares issued
as stock awards and shares issued upon exercise of options granted under the
Plan shall be authorized but theretofore unissued shares of Common Stock of the
Company.
ELIGIBLE PARTICIPANTS
Awards may be granted under the Plan to any full-time employee of the
Company or any subsidiary, including any such person who is also an officer or
director of the Company or any subsidiary. Awards (other than incentive stock
options) may also be granted to any other employee of the Company or a
subsidiary, any director of the Company who is not an employee of the Company or
any subsidiary, other individuals or entities who are not employees but who
provide services to the Company or a subsidiary in the capacity of an advisor or
consultant, and any individual or entity that the Company desires to induce to
become an employee, advisor or consultant (but any such grant shall be
contingent upon such individual or entity becoming employed by the Company or a
subsidiary). For purposes of the Plan, the terms "employed," "employment" and
similar terms (except "employee") include the providing of services in the
capacity of an advisor or consultant or as a director. Approximately 5,500
employees and others are currently eligible to participate in the Plan.
WRITTEN AGREEMENTS
Options granted under the Plan shall be evidenced by a written agreement in
such form or forms as the Committee may from time to time determine. Stock
awards granted under the Plan may, but need not, be subject to a written
agreement in such form or forms as the Committee may from time to time
determine.
TERM OF PLAN
The Plan shall remain in effect until all shares subject to the Plan are
distributed or the Plan is terminated by the Board. No award of an incentive
stock option may be made under the Plan after November 18, 2006 (or such other
limit as may be required by the Code) if such limitation is necessary to qualify
the option as an incentive stock option.
STOCK AWARDS
The Committee may grant stock awards to eligible participants in the Plan.
In determining the participants to whom stock awards will be granted and the
number of shares to be covered by each stock award, the Committee may take into
account the nature of the services rendered by the respective participants,
their present and potential contributions to the success of the Company, and
such other factors as the Committee in its sole discretion may deem relevant.
Shares issued pursuant to stock awards may be unrestricted or may be subject to
such conditions, limitations and restrictions, if any, as the Committee may
determine. Subject to adjustment, at the discretion of the Committee, in
14
<PAGE>
the event of a merger, reorganization or other relevant change, the maximum
number of shares that may be granted as stock awards under the Plan shall not
exceed 150,000 and the maximum number of shares that may be granted to any one
participant pursuant to any stock award under the Plan in any fiscal year of the
Company shall not exceed 100,000 shares.
STOCK OPTIONS
GENERAL. Eligible participants may be granted options to purchase such
number of shares of Common Stock of the Company on such terms and conditions as
the Committee may determine. The number of shares covered by an outstanding
option and the price per share of such option may, at the discretion of the
Committee, be adjusted in the event of a merger, reorganization or other
relevant change. In determining the participants to whom options shall be
granted and the number of shares to be covered by each option, the Committee may
take into account the nature of the services rendered by the respective
participants, their present and potential contributions to the success of the
Company, and such other factors as the Committee in its sole discretion may deem
relevant. More than one option may be granted to the same participant. In the
case of an incentive stock option, the aggregate fair market value, determined
at the time the option is granted, of shares of Common Stock of the Company with
respect to which incentive stock options held by the optionholder first become
exercisable in any calendar year (under the Plan and all other incentive stock
option plans of the Company and its parent corporations and subsidiaries) shall
not exceed $100,000. The maximum number of shares subject to options that may be
granted to any one participant under the Plan in any fiscal year of the Company
shall not exceed 100,000 shares (subject to adjustment, at the discretion of the
Committee, in the event of a merger, reorganization or other relevant change).
PURCHASE PRICE. The purchase price of each share subject to an option shall
be fixed by the Committee. For non-statutory stock options, such purchase price
may be set at any price the Committee may determine that is not less than 85% of
the fair market value (as defined in the Plan) of a share on the date of grant.
For incentive stock options, such purchase price shall be not less than 100% of
the fair market value of a share on the date of grant, provided that if an
incentive stock option is granted to an employee of the Company who owns, at the
time the incentive stock option is granted, stock of the Company possessing more
than 10% of the total combined voting power of all classes of stock of the
Company (a "10% shareholder"), such purchase price shall be not less than 110%
of the fair market value of a share on the date of grant. The purchase price of
the shares with respect to which an option is exercised must be paid in full in
cash or, at the discretion of the person exercising the option, by delivery to
the Company of unencumbered shares of Common Stock of the Company, by a
reduction in the number of shares delivered upon exercise of the option, or by a
combination of cash and such shares; provided that no person will be permitted
to pay any portion of the purchase price with shares if the Committee, in its
sole discretion, determines that payment in such manner is undesirable. On
December 11, 1996, the closing sale price of a share of Common Stock of the
Company on the Nasdaq National Market System was $75.375.
NON-TRANSFERABILITY. During the lifetime of an optionee, only such optionee
or his or her guardian or legal representative may exercise options granted
under the Plan, and no option granted under the Plan is assignable or
transferable by the optionee other than by will or the laws of descent and
distribution or pursuant to a domestic relations order as defined in the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended from
time to time; provided that the Committee may in any option agreement or by an
amendment to an outstanding option agreement permit an optionee to transfer,
without consideration, a non-statutory stock option to a member or members of
15
<PAGE>
his or her immediate family or to one or more trusts for the benefit of such
family members or partnerships in which such family members are the only
partners. Any option held by any such transferee continues to be subject to the
same terms and conditions that were applicable to such option immediately prior
to its transfer, and the option may be exercised by such transferee only as and
to the extent that such option has become exercisable and has not been
terminated in accordance with the provisions of the Plan and the applicable
option agreement.
VESTING. Each option agreement shall specify when each option granted under
the Plan shall become exercisable. Notwithstanding the provisions of any option
agreement, the Committee may, in its sole discretion, declare at any time that
any option granted under the Plan shall be immediately exercisable. In the event
of the disability or death of an optionee, any option granted to such optionee
that was not previously exercisable shall become immediately exercisable in full
if the disabled or deceased employee shall have been continuously employed by
the Company or a subsidiary between the date such option was granted and the
date of such disability or death. Upon the occurrence of a change in control of
the Company (as defined in the Plan) then each option granted under the Plan and
not already exercised in full or otherwise terminated, expired or cancelled
shall become immediately exercisable in full. In the event of a "paragraph 13
declaration" (discussed below), each option that has not previously been
exercised in full, expired or been cancelled shall immediately become
exercisable in full. Notwithstanding the foregoing, no option granted under the
Plan may be exercised before the Plan is approved by the shareholders of the
Company and a registration statement covering the shares of Common Stock of the
Company for which the option may be exercised has become effective under the
Securities Act of 1933, as amended.
TERMINATION OF OPTIONS. Each option granted under the Plan shall expire and
all rights to purchase shares thereunder shall terminate ten years after the
date such option is granted (or in the case of an incentive stock option granted
to a 10% shareholder, five years after the date such option is granted) or on
such date prior thereto as may be fixed by the Committee on or before the date
such option is granted. During the lifetime of an optionee, an option granted to
such optionee may be exercised only while the optionee is employed by the
Company or a subsidiary thereof, and only if such optionee has been continuously
so employed since the date the option was granted, except that: (i) an option
shall continue to be exercisable for three months after termination of the
optionee's employment, but only to the extent that the option was exercisable
immediately prior to such optionee's termination of employment; (ii) in the case
of an optionee who is disabled while employed or whose employment terminates by
reason of death, an option shall continue to be exercisable for one year after
termination of such optionee's employment; and (iii) as to any optionee whose
termination occurs following a paragraph 13 declaration, an option may be
exercised at any time permitted by such declaration. Any option that is not
exercised within the periods provided in the preceding sentence shall terminate;
provided that the Committee has the power to extend such periods. In the event
of a change in control of the Company, then, under certain circumstances as set
forth in the Plan, the Committee, in its sole discretion and without the consent
of the holder of any option affected thereby, may determine that some or all
outstanding options shall be cancelled as of the effective date of any such
change in control and that the holder or holders of such cancelled options shall
receive certain cash payments; and options granted pursuant to the Plan as to
which such determination is made shall expire as of the effective date of such
change in control. In the event of a paragraph 13 declaration, each outstanding
option, whether or not exercisable, shall be cancelled at the time of the
occurrence of the event giving rise to the paragraph 13 declaration.
16
<PAGE>
PARAGRAPH 13 DECLARATION. In the event of (a) the proposed dissolution or
liquidation of the Company, (b) a proposed sale of substantially all of the
assets of the Company, or (c) a proposed merger, consolidation of the Company
with or into any other entity, regardless of whether the Company is a surviving
corporation, or a proposed statutory share exchange with any other entity, the
Committee may, but shall not be obligated to, either (i) in the event of a
merger, consolidation or statutory share exchange, make appropriate provision
for the protection of outstanding options granted under the Plan by the
substitution, in lieu of such options, of options to purchase appropriate voting
Common Stock (the "Survivor's Stock") of the corporation surviving any such
merger or consolidation (or the parent corporation of the Company or such
surviving corporation, if appropriate) or by the delivery of shares of
Survivor's Stock as provided in the Plan, or (ii) declare (a "paragraph 13
declaration") that each outstanding option, whether or not then exercisable,
shall be cancelled at the time of the event giving rise to the paragraph 13
declaration (unless it shall have been exercised prior to the occurrence of such
event). In connection with any paragraph 13 declaration, the Committee may, but
shall not be obligated to, cause a cash payment to be made in exchange for each
cancelled option in an amount provided in the Plan. In the event of a paragraph
13 declaration, each outstanding option granted under the Plan that shall not
have been exercised prior to the event giving rise to such paragraph 13
declaration shall be cancelled at the time of such event.
ADJUSTMENTS. In the event of any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, or extraordinary dividend or divestiture
(including a spin-off), or any other change in the corporate structure or the
shares of the Company, the Committee (or a comparable committee of the Board of
Directors of the Company surviving any such transaction) may, without the
consent of any holder of an option, make such adjustment as it determines in its
discretion to be appropriate as to the number and kind of securities subject to
and reserved under the Plan and the number and kind of securities issuable upon
exercise of outstanding options and the exercise price thereof.
AMENDMENT AND DISCONTINUANCE OF PLAN
The Board may at any time suspend or discontinue the Plan; provided that no
amendment may, without the consent of the holder of an option, alter or impair
an option previously granted under the Plan. To the extent necessary to comply
with applicable provisions of the Code, any such amendments to the Plan may be
made subject to approval by the shareholders of the Company.
FEDERAL TAX CONSIDERATIONS
INCENTIVE STOCK OPTIONS. No taxable income to an optionee will be realized,
and the Company will not be entitled to any related deduction, at the time any
incentive stock option is granted under the Plan. If certain statutory
employment and holding period conditions are satisfied before the optionee
disposes of shares acquired pursuant to the exercise of such an option, then no
taxable income will result upon the exercise of such option and the Company will
not be entitled to any deduction in connection with such exercise. Upon
disposition of the shares after expiration of the statutory holding periods, any
gain or loss realized by an optionee will be a long-term capital gain or loss.
The Company will not be entitled to a deduction with respect to a disposition of
the shares by an optionee after the expiration of the statutory holding periods.
Except in the event of death, if shares acquired by an optionee upon the
exercise of an incentive stock option granted under the Plan are disposed of by
such optionee before the expiration of the statutory holding periods (a
"disqualifying disposition"), such optionee will be considered to have realized
as compensation in the year of disposition an amount, not exceeding the gain
realized on such disposition, equal to the difference
17
<PAGE>
between the exercise price and the fair market value of the shares on the date
of exercise of the option. The Company will be entitled to a deduction at the
same time and in the same amount as the optionee is deemed to have realized such
ordinary income. Generally, any gain realized on the disposition in excess of
the amount treated as compensation or any loss realized on the disposition will
constitute capital gain or loss, respectively. If the optionee pays the option
price with shares that were originally acquired pursuant to the exercise of an
incentive stock option and the statutory holding periods for such shares have
not been met, the optionee will be treated as having made a disqualifying
disposition of such shares, and the tax consequences of such disqualifying
disposition will be as described above.
NON-STATUTORY STOCK OPTIONS. No taxable income to an optionee will be
realized, and the Company will not be entitled to any related deduction, at the
time any non-statutory stock option is granted under the Plan. Generally, at the
time shares are issued pursuant to the exercise of a non-statutory stock option,
the optionee will realize ordinary income equal to the excess of the fair market
value of the stock on the date of exercise over the option price. The Company
will be entitled to a deduction at the same time and in the same amount as the
optionee is considered to have realized ordinary income as a result of exercise
of a non-statutory stock option. Upon disposition of the shares, any additional
gain or loss realized by the optionee will be taxed as a capital gain or loss.
The Company will not be entitled to a deduction with respect to the disposition
of shares by an optionee.
STOCK AWARDS. The tax consequences of a stock award will depend on whether
the stock is subject to forfeiture and transferability conditions that result in
such stock being treated as "restricted" stock for tax purposes. Unless a
recipient files an election to be taxed under Section 83(b) of the Code, (a) the
recipient will not realize income upon the grant of restricted stock, (b) the
recipient will realize ordinary income, and the Company will be entitled to a
corresponding deduction, when the restrictions have been removed or expire, and
(c) the amount of such ordinary income and deduction will be the fair market
value of the restricted stock on the date the restrictions are removed or
expire. If the recipient files an election to be taxed under Section 83(b) of
the Code, the tax consequences to the recipient and the Company will be
determined as of the date of the grant of the restricted stock rather than as of
the date of the removal or expiration of the restrictions. With respect to
awards of unrestricted stock, (a) the recipient will realize ordinary income and
the Company will be entitled to a corresponding deduction upon the grant of the
unrestricted stock, and (b) the amount of such ordinary income and deduction
will be the fair market value of such unrestricted stock on the date of grant.
When the recipient disposes of restricted or unrestricted stock, the difference
between the amount received upon such disposition and the fair market value of
such shares on the date the recipient realizes ordinary income will be treated
as a capital gain or loss.
WITHHOLDING. Delivery of shares pursuant to a stock award or upon exercise
of a non-statutory stock option shall be subject to any required withholding
taxes. A recipient may, as a condition precedent to the issuance of shares upon
receipt of a stock award or exercise of an option, be required to pay the
Company a cash amount equal to the amount of such required withholdings. The
Committee may permit an optionee to elect to cover all or any part of the
required withholdings through a delivery to the Company of unencumbered shares
of the Company, a reduction in the number of shares issued upon exercise of the
option or a subsequent return to the Company of shares issued upon exercise of
the option.
18
<PAGE>
GRANTS UNDER 1988 STOCK OPTION PLAN
On November 27, 1995 the Committee granted non-statutory options covering an
aggregate of 146,170 shares having an exercise price of $49.00 per share (the
closing sale price of the Common Stock of the Company on the NASDAQ National
Market System on November 24, 1995) and an expiration date of November 27, 2005
as follows: Jeffrey W. Green, 30,000 shares; Wayne M. Fortun, 40,000 shares;
John A. Ingleman, 3,100 shares; Richard S. Schaefer, 3,000 shares; Richard C.
Myers, 2,800 shares; executive officers as a group, 90,300 shares; and all
employees of the Company (other than executive officers), 55,870 shares. The
Committee also granted limited stock appreciation rights relating to all shares
covered by executive officer options.
VOTING REQUIREMENTS AND RECOMMENDATION
The affirmative vote of holders of at least a majority of the outstanding
shares of Common Stock of the Company entitled to vote and represented at the
meeting is required for approval of the Plan. Proxies solicited by the Board of
Directors will be voted for approval of the Plan, unless shareholders specify
otherwise in their proxies.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS OF
THE COMPANY VOTE FOR APPROVAL OF THE INCENTIVE PLAN.
RELATIONSHIP WITH AND APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Arthur Andersen LLP, independent public accountants, has been
the auditors for the Company since 1979. The Board of Directors again has
selected Arthur Andersen LLP to serve as the Company's independent public
accountants for the fiscal year ending September 28, 1997, subject to
ratification by the shareholders. While it is not required to do so, the Board
of Directors is submitting the selection of that firm for ratification in order
to ascertain the view of the shareholders. If the selection is not ratified, the
Board of Directors will reconsider its selection. Proxies solicited by the Board
of Directors will, unless otherwise directed, be voted to ratify the appointment
of Arthur Andersen LLP as independent public accountants for the Company for the
fiscal year ending September 28, 1997.
A representative of Arthur Andersen LLP will be present at the Annual
Meeting of Shareholders and will be afforded an opportunity to make a statement
if such representative so desires and will be available to respond to
appropriate questions during the meeting.
GENERAL
The Annual Report of the Company for the fiscal year 1996, including
financial statements, is being mailed with this Proxy Statement.
As of the date of this Proxy Statement, management knows of no matters that
will be presented for determination at the meeting other than those referred to
herein. If any other matters properly come before the meeting calling for a vote
of shareholders, it is intended that the shares represented by the Proxies
solicited by the Board of Directors will be voted by the Proxies named therein
in accordance with their best judgment.
The Company will pay the cost of soliciting Proxies in the accompanying
form. In addition to solicitation by the use of mails, certain directors,
officers and regular employees of the Company may solicit Proxies by telephone,
telegram or personal interview, and may request brokerage firms and
19
<PAGE>
custodians, nominees and other record holders to forward soliciting materials to
the beneficial owners of stock of the Company and will reimburse them for their
reasonable out-of-pocket expenses in so forwarding such materials.
SHAREHOLDERS WHO WISH TO OBTAIN A COPY OF THE COMPANY'S 10-K ANNUAL REPORT,
FILED WITH THE SEC FOR THE FISCAL YEAR ENDED SEPTEMBER 29, 1996, MAY DO SO
WITHOUT CHARGE BY WRITING TO JOHN A. INGLEMAN, VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND SECRETARY, AT THE COMPANY'S OFFICES, 40 WEST HIGHLAND PARK,
HUTCHINSON, MINNESOTA 55350.
By Order of the Board of Directors,
[SIGNATURE]
John A. Ingleman
SECRETARY
Dated: December 18, 1996
20
<PAGE>
EXHIBIT A
HUTCHINSON TECHNOLOGY INCORPORATED
1996 INCENTIVE PLAN
1. PURPOSE. The purpose of this 1996 Incentive Plan (the "Plan") is to
promote the interests of Hutchinson Technology Incorporated, a Minnesota
corporation (the "Company"), and its shareholders by providing personnel of the
Company and any subsidiaries thereof with an opportunity to acquire a
proprietary interest in the Company and thereby develop a stronger incentive to
put forth maximum effort for the continued success and growth of the Company. In
addition, the opportunity to acquire a proprietary interest in the Company will
aid in attracting and retaining personnel of outstanding ability. This Plan
provides for the issuance of certain awards consisting of options granted as
provided in paragraph 5 hereof and stock awards granted as provided in paragraph
6 hereof.
2. ADMINISTRATION.
(a) GENERAL. This Plan shall be administered by a committee of two or
more directors of the Company (the "Committee") appointed by the Company's Board
of Directors (the "Board"). If the Board has not appointed a committee to
administer this Plan, then the Board shall constitute the Committee. The
Committee shall have the power, subject to the limitations contained in this
Plan, to fix any terms and conditions for the grant or exercise of any award
under this Plan. No director shall serve as a member of the Committee unless
such director shall be a "non-employee director" as that term is defined in Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any successor statute or regulation comprehending the same
subject matter. A majority of the members of the Committee shall constitute a
quorum for any meeting of the Committee, and the acts of a majority of the
members present at any meeting at which a quorum is present or the acts
unanimously approved in writing by all members of the Committee shall be the
acts of the Committee. Subject to the provisions of this Plan, the Committee may
from time to time adopt such rules for the administration of this Plan as it
deems appropriate. The decision of the Committee on any matter affecting this
Plan or the rights and obligations arising under this Plan or any award granted
hereunder, shall be final, conclusive and binding upon all persons, including
without limitation the Company, shareholders and optionees.
(b) INDEMNIFICATION. To the full extent permitted by law, (i) no
member of the Committee or person to whom authority under this Plan is delegated
shall be liable for any action or determination taken or made in good faith with
respect to this Plan or any award granted hereunder and (ii) the members of the
Committee and each person to whom authority under this Plan is delegated shall
be entitled to indemnification by the Company against and from any loss incurred
by such member or person by reason of any such actions and determinations.
(c) DELEGATION OF AUTHORITY. The Committee may delegate all or any
part of its authority under this Plan to the Chief Executive Officer of the
Company for purposes of granting and administering awards granted to persons
other than persons who are then subject to the reporting requirements of Section
16 of the Exchange Act ("Section 16 Individuals"). The Chief Executive Officer
of the Company may, in turn, delegate such authority to such other officer of
the Company as the Chief Executive Officer may determine.
(d) ACTION BY BOARD. Notwithstanding subparagraph 2(a), above, any
grant of awards hereunder to any director of the Company who is not an employee
of the Company at the time of grant ("Non-Employee Director Award"), and any
action taken by the Company with respect to any Non-Employee Director Award,
including any amendment thereto, and any modification of the terms,
<PAGE>
conditions or restrictions relating to any stock award constituting a
Non-Employee Director Award, any acceleration of the vesting of any option
constituting a Non-Employee Director Award, any extension of the time within
which any option constituting a Non-Employee Director Award may be exercised,
any determination pursuant to paragraph 9 relating to the payment of the
purchase price of Shares (as defined in paragraph 3 below) subject to an option
constituting a Non-Employee Director Award, or any action pursuant to paragraph
10 relating to the payment of withholding taxes, if any, through the use of
Shares with respect to a Non-Employee Director Award shall be subject to prior
approval by the Board.
3. SHARES. The shares that may be made subject to awards granted under
this Plan shall be authorized and unissued shares of Common Stock of the
Company, par value $.02 per share ("Shares," and each individually a "Share"),
and they shall not exceed 1,000,000 Shares in the aggregate, subject to
adjustment as provided in paragraph 14, below, except that, if any option lapses
or terminates for any reason before such option has been completely exercised,
the Shares covered by the unexercised portion of such option may again be made
subject to options granted under this Plan.
4. ELIGIBLE PARTICIPANTS. Stock awards and options may be granted under
this Plan to any full-time employee of the Company, or any parent or subsidiary
thereof, including any such person who is also an officer or director of the
Company or any parent or subsidiary thereof. Stock awards and non-statutory
stock options (as defined in subparagraph 5(a) below) also may be granted to (i)
any other employee of the Company, or any parent or subsidiary thereof, (ii) any
director of the Company who is not an employee of the Company or any parent or
subsidiary thereof, (iii) other individuals or entities who are not employees
but who provide services to the Company or a parent or subsidiary thereof in the
capacity of an advisor or consultant, and (iv) any individual or entity that the
Company desires to induce to become an employee, advisor or consultant, but any
such grant shall be contingent upon such individual or entity becoming employed
by the Company or a parent or subsidiary thereof. References herein to
"employment" and similar terms (except "employee") shall include the providing
of services in the capacity of an advisor or consultant or as a director. The
employees and other individuals and entities to whom options may be granted
pursuant to this paragraph 4 are referred to herein as "Eligible Participants."
5. TERMS AND CONDITIONS OF EMPLOYEE, ADVISOR, CONSULTANT AND DIRECTOR
OPTIONS.
(a) GENERAL. Subject to the terms and conditions of this Plan, the
Committee may, from time to time during the term of this Plan, grant to such
Eligible Participants as the Committee may determine options to purchase such
number of Shares of the Company on such terms and conditions as the Committee
may determine. In determining the Eligible Participants to whom options shall be
granted and the number of Shares to be covered by each option, the Committee may
take into account the nature of the services rendered by the respective Eligible
Participants, their present and potential contributions to the success of the
Company, and such other factors as the Committee in its sole discretion may deem
relevant. The date and time of approval by the Committee of the granting of an
option shall be considered the date and the time of the grant of such option.
The Committee in its sole discretion may designate whether an option granted to
an employee is to be considered an "incentive stock option" (as that term is
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any amendment thereto) or a non-statutory stock option (an option
granted under this Plan that is not intended to be an "incentive stock option").
The Committee may grant both incentive stock options and non-statutory stock
options to the same employee. However, if an incentive stock option and a
non-statutory stock option are awarded simultaneously, such options shall be
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deemed to have been awarded in separate grants, shall be clearly identified, and
in no event shall the exercise of one such option affect the right to exercise
the other. To the extent that the aggregate Fair Market Value (as defined in
paragraph 8 below) of Shares with respect to which incentive stock options are
exercisable for the first time by any employee during any calendar year (under
all plans of the Company and its parent and subsidiary corporations) exceeds
$100,000, such options shall be treated as non-statutory stock options. The
maximum number of Shares subject to options that may be granted to any one
Eligible Participant under the Plan in any fiscal year of the Company may not
exceed 100,000 Shares (subject to adjustment pursuant to paragraph 14 hereof).
Notwithstanding the foregoing, no incentive stock option may be granted under
this Plan unless this Plan is approved by the shareholders of the Company within
twelve months after the effective date of this Plan.
(b) PURCHASE PRICE. The purchase price of each Share subject to an
option granted pursuant to this paragraph 5 shall be fixed by the Committee,
subject, however, to the remainder of this subparagraph 5(b). For non-statutory
stock options, such purchase price may be set at any price the Committee may
determine; provided, however, that such purchase price shall be not less than
85% of the Fair Market Value of a Share on the date of grant. For incentive
stock options, such purchase price shall be no less than 100% of the Fair Market
Value of a Share on the date of grant, provided that if such incentive stock
option is granted to an employee who owns, or is deemed under Section 424(d) of
the Code to own, at the time such option is granted, stock of the Company (or of
any parent or subsidiary of the Company) possessing more than 10% of the total
combined voting power of all classes of stock therein (a "10% Shareholder"),
such purchase price shall be no less than 110% of the Fair Market Value of a
Share on the date of grant.
(c) VESTING. Each option agreement provided for in paragraph 7 shall
specify when each option granted under this Plan shall become exercisable with
respect to the Shares covered by the option. Notwithstanding the provisions of
any option agreement provided for in paragraph 7, the Committee may, in its sole
discretion, declare at any time that any option granted under this Plan shall be
immediately exercisable.
(d) TERMINATION. Each option granted pursuant to this paragraph 5
shall expire, and all rights to purchase Shares thereunder shall terminate, on
the earliest of:
(i) ten years after the date such option is granted (or in the case of
an incentive stock option granted to a 10% Shareholder, five years after the
date such option is granted) or on such date prior thereto as may be fixed
by the Committee on or before the date such option is granted;
(ii) the expiration of the period after the termination of the
optionee's employment within which the option is exercisable as specified in
paragraph 11(b) or 11(c), whichever is applicable (provided that the
Committee may, in any option agreement provided for in paragraph 7 or by
Committee action with respect to any outstanding option, extend the periods
specified in paragraph 11(b) and 11(c)); or
(iii) the date, if any, fixed for cancellation pursuant to paragraph
12(c) or 13 below.
6. TERMS AND CONDITIONS OF EMPLOYEE, ADVISOR, CONSULTANT AND DIRECTOR STOCK
AWARDS. The Committee may, from time to time during the term of this Plan,
grant stock awards to such Eligible Participants as the Committee may determine,
such stock awards consisting of grants of Shares to be issued to the designated
Eligible Participants. In determining the Eligible Participants to whom stock
awards shall be granted and the number of Shares to be covered by each stock
award, the Committee may take into
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account the nature of the services rendered by the respective Eligible
Participants, their present and potential contributions to the success of the
Company, and such other factors as the Committee in its sole discretion may deem
relevant. Shares issued pursuant to any stock award may be unrestricted or may
be subject to such conditions, limitations and restrictions, if any, as the
Committee may determine, including, if the Committee shall so provide in the
written agreement pursuant to paragraph 7 providing for a stock award, or any
amendment thereto, the lapse or modification of conditions or restrictions with
respect to the stock award upon the occurrence of a Change In Control, as
defined in paragraph 12. The maximum number of Shares that may be granted as
stock awards under this Plan shall not exceed 150,000 (subject to adjustment
pursuant to paragraph 14 hereof) and the maximum number of Shares that may be
granted to any one Eligible Participant pursuant to any stock award under this
Plan in any fiscal year of the Company may not exceed 100,000 Shares (subject to
adjustment pursuant to paragraph 14 hereof).
7. OPTION AGREEMENTS. All options granted under this Plan shall be
evidenced by a written agreement in such form or forms as the Committee may from
time to time determine, which agreement shall, among other things, designate
whether the options being granted thereunder are non-statutory stock options or
incentive stock options. Stock awards granted under this Plan may, but need not,
be made subject to a written agreement in such form or forms as the Committee
may from time to time determine.
8. FAIR MARKET VALUE. For purposes of this Plan, the "Fair Market Value"
of a Share at a specified date shall, unless otherwise expressly provided in
this Plan, mean the closing sale price of a Share on the date immediately
preceding such date or, if no sale of Shares shall have occurred on that date,
on the next preceding day on which a sale of Shares occurred, on the Composite
Tape for New York Stock Exchange listed shares or, if Shares are not quoted on
the Composite Tape for New York Stock Exchange listed shares, on the Nasdaq
National Market or any similar system then in use or, if Shares are not included
in the Nasdaq National Market or any similar system then in use, the mean
between the closing "bid" and the closing "asked" quotation of a Share on the
date immediately preceding the date as of which such Fair Market Value is being
determined, or, if no closing bid or asked quotation is made on that date, on
the next preceding day on which a quotation is made, on the Nasdaq SmallCap
Market or any similar system then in use, provided that if the Shares in
question are not quoted on any such system, Fair Market Value shall be what the
Committee determines in good faith to be 100% of the fair market value of a
Share as of the date in question. Notwithstanding anything stated in this
paragraph 8, if the applicable securities exchange or system has closed for the
day by the time the determination is being made, all references in this
paragraph to the date immediately preceding the date in question shall be deemed
to be references to the date in question.
9. MANNER OF EXERCISE OF OPTIONS. A person entitled to exercise an option
granted under this Plan may, subject to its terms and conditions and the terms
and conditions of this Plan, exercise it in whole at any time, or in part from
time to time, by delivery to the Company at its principal executive office, to
the attention of its Vice President, Human Resources, of written notice of
exercise, specifying the number of Shares with respect to which the option is
being exercised. The purchase price of the Shares with respect to which an
option is being exercised shall be payable in full at the time of exercise,
provided that, to the extent permitted by law, the holder of an option may
simultaneously exercise an option and sell all or a portion of the Shares
thereby acquired pursuant to a brokerage or similar relationship and use the
proceeds from such sale to pay the purchase price of such Shares. The purchase
price of each Share on the exercise of any option shall be paid in full in cash
(including check,
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bank draft or money order) or, at the discretion of the person exercising the
option, by delivery to the Company of unencumbered Shares, by a reduction in the
number of Shares delivered upon exercise of the option, or by a combination of
cash and such Shares (in each case such Shares having an aggregate Fair Market
Value on the date of exercise equal to the amount of the purchase price being
paid through such delivery or reduction of Shares); provided, however, that no
person shall be permitted to pay any portion of the purchase price with Shares
if the Committee, in its sole discretion, determines that payment in such manner
is undesirable. The granting of an option to a person shall give such person no
rights as a shareholder except as to Shares issued to such person.
10. TAX WITHHOLDING. Delivery of Shares pursuant to a stock award or upon
exercise of any non-statutory stock option granted under this Plan shall be
subject to any required withholding taxes. A person receiving a stock award or
exercising a non-statutory stock option may, as a condition precedent to
receiving the Shares, be required to pay the Company a cash amount equal to the
amount of any required withholdings. In lieu of all or any part of such a cash
payment, the Committee may, but shall not be required to, provide in any option
agreement provided for in paragraph 7 (or provide by Committee action with
respect to any outstanding option) that a person exercising an option may cover
all or any part of the required withholdings, and any additional withholdings up
to the amount needed to cover the individual's full FICA and federal, state and
local income tax liability with respect to income arising from the exercise of
the option, through the delivery to the Company of unencumbered Shares, through
a reduction in the number of Shares delivered to the person exercising the
option or through a subsequent return to the Company of Shares delivered to the
person exercising the option (in each case, such Shares having an aggregate Fair
Market Value on the date of exercise equal to the amount of the withholding
taxes being paid through such delivery, reduction or subsequent return of
Shares).
11. TRANSFERABILITY AND TERMINATION OF EMPLOYMENT.
(a) TRANSFERABILITY. During the lifetime of an optionee, only such
optionee or his or her guardian or legal representative may exercise options
granted under this Plan, and no option granted under this Plan shall be
assignable or transferable by the optionee otherwise than by will or the laws of
descent and distribution or pursuant to a domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder; provided, however, that any optionee may transfer a non-statutory
stock option granted under this Plan to a member or members of his or her
immediate family (i.e., his or her children, grandchildren and spouse) or to one
or more trusts for the benefit of such family members or partnerships in which
such family members are the only partners, if (i) the option agreement with
respect to such options expressly so provides either at the time of initial
grant or by amendment to an outstanding option agreement and (ii) the optionee
does not receive any consideration for the transfer. Any options held by any
such transferee shall continue to be subject to the same terms and conditions
that were applicable to such options immediately prior to their transfer and may
be exercised by such transferee as and to the extent that such option has become
exercisable and has not terminated in accordance with the provisions of the Plan
and the applicable option agreement. For purposes of any provision of this Plan
relating to notice to an optionee or to vesting or termination of an option upon
the death, disability or termination of employment of an optionee, the
references to "optionee" shall mean the original grantee of an option and not
any transferee.
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(b) TERMINATION OF EMPLOYMENT DURING LIFETIME. During the lifetime of
an optionee, an option granted to such optionee may be exercised only while the
optionee is employed by the Company or by a parent or subsidiary thereof, and
only if such optionee has been continuously so employed since the date the
option was granted, except that:
(i) an option shall continue to be exercisable for three months after
termination of the optionee's employment but only to the extent that the
option was exercisable immediately prior to such optionee's termination of
employment;
(ii) in the case of an optionee who is disabled (as hereinafter defined)
while employed, an option shall continue to be exercisable for one year
after termination of such optionee's employment; and
(iii) as to any optionee whose termination occurs following a declaration
pursuant to paragraph 13 below, an option may be exercised at any time
permitted by such declaration.
(c) TERMINATION UPON DEATH. With respect to an optionee whose
employment terminates by reason of death, any option granted to such optionee
may be exercised within one year after the death of such optionee.
(d) VESTING UPON DISABILITY OR DEATH. In the event of the disability
(as hereinafter defined) or death of an optionee, any option granted to such
optionee that was not previously exercisable shall become immediately
exercisable in full if the disabled or deceased optionee shall have been
continuously employed by the Company or a parent or subsidiary thereof between
the date such option was granted and the date of such disability or death.
"Disability" of an optionee shall mean any physical or mental incapacitation
whereby such optionee is therefore unable for a period of twelve consecutive
months or for an aggregate of twelve months in any twenty-four consecutive month
period to perform his or her duties for the Company or any parent or subsidiary
thereof. "Disabled," with respect to any optionee, shall mean that such optionee
has incurred a Disability.
(e) TRANSFERS AND LEAVES OF ABSENCE. Neither the transfer of
employment of a person to whom an option is granted between any combination of
the Company, a parent corporation or a subsidiary thereof, nor a leave of
absence granted to such person and approved by the Committee, shall be deemed a
termination of employment for purposes of this Plan. The terms "parent" or
"parent corporation" and "subsidiary" as used in this Plan shall have the
meaning ascribed to "parent corporation" and "subsidiary corporation",
respectively, in Sections 424(e) and (f) of the Code.
(f) RIGHT TO TERMINATE EMPLOYMENT. Nothing contained in this Plan, or
in any option granted pursuant to this Plan, shall confer upon any optionee any
right to continued employment by the Company or any parent or subsidiary of the
Company or limit in any way the right of the Company or any such parent or
subsidiary to terminate such optionee's employment at any time.
(g) EXPIRATION DATE. In no event shall any option be exercisable at
any time after the time it shall have expired in accordance with paragraph 5(d)
of this Plan. When an option is no longer exercisable, it shall be deemed to
have lapsed or terminated and will no longer be outstanding.
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12. CHANGE IN CONTROL.
For purposes of this Plan, a "Change in Control" of the Company shall be
deemed to occur if any of the following occur:
(a) (1) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) acquires or becomes a "beneficial owner" (as defined in
Rule 13d-3 or any successor rule under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities entitled
to vote generally in the election of directors ("Voting Securities"),
provided, however, that the following shall not constitute a Change in
Control pursuant to this paragraph (a)(1):
(A) any acquisition or beneficial ownership by the Company or a
Subsidiary;
(B) any acquisition or beneficial ownership by any employee benefit
plan (or related trust) sponsored or maintained by the Company or
one or more of its Subsidiaries;
(C) any acquisition or beneficial ownership by any corporation with
respect to which, immediately following such acquisition, more than
70% of both the combined voting power of the Company's then
outstanding Voting Securities and the Shares of the Company is then
beneficially owned, directly or indirectly, by all or substantially
all of the persons who beneficially owned Voting Securities and
Shares of the Company immediately prior to such acquisition in
substantially the same proportions as their ownership of such
Voting Securities and Shares, as the case may be, immediately prior
to such acquisition;
(2) A majority of the members of the Board of Directors of the
Company shall not be Continuing Directors. "Continuing Directors" shall
mean: (A) individuals who, on the date hereof, are directors of the
Company, (B) individuals elected as directors of the Company subsequent
to the date hereof for whose election proxies shall have been solicited
by the Board of Directors of the Company or (C) any individual elected or
appointed by the Board of Directors of the Company to fill vacancies on
the Board of Directors of the Company caused by death or resignation (but
not by removal) or to fill newly-created directorships;
(3) Approval by the shareholders of the Company of a reorganization,
merger or consolidation of the Company or a statutory exchange of
outstanding Voting Securities of the Company, unless immediately
following such reorganization, merger, consolidation or exchange, all or
substantially all of the persons who were the beneficial owners,
respectively, of Voting Securities and Shares of the Company immediately
prior to such reorganization, merger, consolidation or exchange
beneficially own, directly or indirectly, more than 70% of, respectively,
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors and the then
outstanding shares of common stock, as the case may be, of the
corporation resulting from such reorganization, merger, consolidation or
exchange in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger, consolidation or
exchange, of the Voting Securities and Stock of the Company, as the case
may be; or
(4) Approval by the shareholders of the Company of (x) a complete
liquidation or dissolution of the Company or (y) the sale or other
disposition of all or substantially all of the
assets of the Company (in one or a series of transactions), other than to
a corporation with respect to which, immediately following such sale or
other disposition, more than 70% of,
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respectively, the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors and the then outstanding shares of common stock of such
corporation is then beneficially owned, directly or indirectly, by all or
substantially all of the persons who were the beneficial owners,
respectively, of the Voting Securities and Shares of the Company
immediately prior to such sale or other disposition in substantially the
same proportions as their ownership, immediately prior to such sale or
other disposition, of the Voting Securities and Shares of the Company, as
the case may be.
(b) ACCELERATION OF VESTING. Notwithstanding anything in subparagraph
5(c) above to the contrary, if a Change of Control of the Company shall occur,
then, without any action by the Committee or the Board, each option granted
under this Plan and not already exercised in full or otherwise terminated,
expired or canceled shall become immediately exercisable in full.
(c) CASH PAYMENT. If a Change in Control of the Company shall occur,
then, so long as a majority of the members of the Board are Continuing
Directors, the Committee, in its sole discretion, and without the consent of the
holder of any option affected thereby, may determine that some or all
outstanding options shall be cancelled as of the effective date of any such
Change in Control and that the holder or holders of such cancelled options shall
receive, with respect to some or all of the Common Shares subject to such
options, as of the date of such cancellation, cash in an amount, for each Share
subject to an option, equal to the excess of the per Share Fair Market Value of
such Shares immediately prior to such Change in Control of the Company over the
exercise price per Share of such options.
(d) LIMITATION ON CHANGE IN CONTROL PAYMENTS. Notwithstanding anything
in subparagraph 12(b) or 12(c) above or paragraph 13 below to the contrary, if,
with respect to an optionee, the acceleration of the exercisability of an option
or the payment of cash in exchange for all or part of an option as provided in
subparagraph 12(b) or 12(c) above or paragraph 13 (which acceleration or payment
could be deemed a "payment" within the meaning of Section 280G(b)(2) of the
Code), together with any other payments which such optionee has the right to
receive from the Company or any corporation which is a member of an "affiliated
group" (as defined in Section 1504(a) of the Code without regard to Section
1504(b) of the Code) of which the Company is a member, would constitute a
"parachute payment" (as defined in Section 280G(b)(2) of the Code), then such
acceleration of exercisability and payments pursuant to subparagraph 12(b) or
12(c) above or paragraph 13 shall be reduced to the largest amount as, in the
sole judgment of the Committee, will result in no portion of such payments being
subject to the excise tax imposed by Section 4999 of the Code.
13. DISSOLUTION, LIQUIDATION, MERGER. In the event of (a) the proposed
dissolution or liquidation of the Company, (b) a proposed sale of substantially
all of the assets of the Company or (c) a proposed merger, consolidation of the
Company with or into any other entity, regardless of whether the Company is the
surviving corporation, or a proposed statutory share exchange with any other
entity (the actual effective date of the dissolution, liquidation, sale, merger,
consolidation or exchange being herein called an "Event"), the Committee may,
but shall not be obligated to, either (i) if the Event is a merger,
consolidation or statutory share exchange, make appropriate provision for the
protection of outstanding options granted under this Plan by the substitution,
in lieu of such options, of options to purchase appropriate voting common stock
(the "Survivor's Stock") of the corporation surviving any such merger or
consolidation or, if appropriate, the parent corporation of the Company or such
surviving corporation, or, alternatively, by the delivery of a number of shares
of the Survivor's Stock which has a Fair Market Value as of the effective date
of such merger, consolidation or statutory share exchange equal to the product
of (x) the excess of (A) the Event Proceeds per Share (as hereinafter
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defined) covered by the option as of such effective date over (B) the exercise
price per Share of the Shares subject to such option, times (y) the number of
Shares covered by such option or (ii) declare, at least twenty days prior to the
Event, and provide written notice to each optionee of the declaration, that each
outstanding option, whether or not then exercisable, shall be canceled at the
time of, or immediately prior to the occurrence of, the Event (unless it shall
have been exercised prior to the occurrence of the Event). In connection with
any declaration pursuant to clause (ii) of the preceding sentence, the Committee
may, but shall not be obligated to, cause payment to be made, within twenty days
after the Event, in exchange for each cancelled option to each holder of an
option that is cancelled, of cash equal to the amount (if any), for each Share
covered by the canceled option, by which the Event Proceeds per Share (as
hereinafter defined) exceeds the exercise price per Share covered by such
option. At the time of any declaration pursuant to clause (ii) of the first
sentence of this paragraph 13, each option that has not previously expired
pursuant to subparagraph 5(d)(i) or 5(d)(ii) of this Plan or been cancelled
pursuant to paragraph 12(c) of this Plan shall immediately become exercisable in
full and each holder of an option shall have the right, during the period
preceding the time of cancellation of the option, to exercise his or her option
as to all or any part of the Shares covered thereby. In the event of a
declaration pursuant to clause (ii) of the first sentence of this paragraph 13,
each outstanding option granted pursuant to this Plan that shall not have been
exercised prior to the Event shall be canceled at the time of, or immediately
prior to, the Event, as provided in the declaration, and this Plan shall
terminate at the time of such cancellation, subject to the payment obligations
of the Company provided in this paragraph 13. Notwithstanding the foregoing, no
person holding an option shall be entitled to the payment provided in this
paragraph 13 if such option shall have expired pursuant to subparagraph 5(d)(i)
or 5(d)(ii) of this Plan or been cancelled pursuant to paragraph 12(c) of this
Plan. For purposes of this paragraph 13, "Event Proceeds per Share" shall mean
the cash plus the fair market value, as determined in good faith by the
Committee, of the non-cash consideration to be received per Share by the
shareholders of the Company upon the occurrence of the Event.
14. ADJUSTMENTS. In the event of any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, stock dividend,
stock split, combination of shares, rights offering, or extraordinary dividend
or divestiture (including a spin-off), or any other change in the corporate
structure or Shares of the Company, the Committee (or if the Company does not
survive any such transaction, a comparable committee of the Board of Directors
of the surviving corporation) may, without the consent of any holder of an
option, make such adjustment as it determines in its discretion to be
appropriate as to the number and kind of securities subject to and reserved
under this Plan and, in order to prevent dilution or enlargement of rights of
participants in this Plan, the number and kind of securities issuable upon
exercise of outstanding options and the exercise price thereof.
15. SUBSTITUTE OPTIONS. Options may be granted under this Plan from time
to time in substitution for stock options held by employees of other
corporations who are about to become employees of the Company, or any parent or
subsidiary thereof, or whose employer is about to become a subsidiary of the
Company, as the result of a merger or consolidation of the Company or a
subsidiary of the Company with another corporation, the acquisition by the
Company or a subsidiary of the Company of all or substantially all the assets of
another corporation or the acquisition by the Company or a subsidiary of the
Company of at least 50% of the issued and outstanding stock of another
corporation. The terms and conditions of the substitute options so granted may
vary from the terms and conditions set forth in this Plan to such extent as the
Board at the time of the grant may deem appropriate to
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conform, in whole or in part, to the provisions of the stock options in
substitution for which they are granted, but with respect to stock options which
are incentive stock options, no such variation shall be permitted which affects
the status of any such substitute option as an incentive stock option.
16. COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) GENERAL. No certificate for Shares distributable under this Plan
shall be issued and delivered unless the issuance of such certificate complies
with all applicable legal requirements including, without limitation, compliance
with the provisions of applicable state securities laws, the Securities Act of
1933, as amended, and the Exchange Act.
(b) RULE 16B-3. With respect to Section 16 Individuals, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
this Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
17. GOVERNING LAW. To the extent that federal laws do not otherwise
control, this Plan and all determinations made and actions taken under this Plan
shall be governed by the laws of the State of Minnesota, without regard to the
conflicts of law provisions thereof, and construed accordingly.
18. AMENDMENT AND DISCONTINUANCE OF PLAN. The Board may at any time amend,
suspend or discontinue this Plan; provided, however, that no amendment to this
Plan shall, without the consent of the holder of the option, alter or impair any
option previously granted under this Plan. To the extent considered necessary to
comply with applicable provisions of the Code, any such amendments to this Plan
may be made subject to approval by the shareholders of the Company.
19. TERM.
(a) EFFECTIVE DATE. This Plan shall be effective as of November 19,
1996, provided that this Plan is approved and ratified by the affirmative vote
of the holders of a majority of the outstanding Shares present or represented
and entitled to vote in person or by proxy at a meeting of the shareholders of
the Company no later than March 31, 1997. Awards may be granted hereunder prior
to such shareholder approval, but such awards shall be subject to such
shareholder approval. If this Plan is not so approved by such holders, any
awards granted under this Plan subject to such approval shall be null and void.
(b) TERMINATION. This Plan shall remain in effect until all Shares
subject to it are distributed or this Plan is terminated under paragraph 18
above. No award of an incentive stock option shall be made under this Plan more
than ten years after the effective date of this Plan (or such other limit as may
be required by the Code) if such limitation is necessary to qualify the option
as an incentive stock option.
A-10
<PAGE>
PROXY
HUTCHINSON TECHNOLOGY INCORPORATED
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS -- JANUARY 29, 1997
The undersigned, revoking any proxy heretofore given, hereby appoints
Jeffrey W. Green, Wayne M. Fortun and Harry C. Ervin, Jr., and each of them, as
Proxies, each with full power of substitution, for and in the name of the
undersigned to vote, as designated below, and on the reverse side hereof, all
the shares of Common Stock of Hutchinson Technology Incorporated registered in
the name of the undersigned at the close of business on December 13, 1996, upon
the following matters more fully described in the Notice of and Proxy Statement
for the Annual Meeting of Shareholders to be held on January 29, 1997, and at
any adjournment thereof.
1. Election of Directors. Nominees of the Board of Directors are W.
Thomas Brunberg, Archibald Cox, Jr., James E. Donaghy, Harry C.
Ervin, Jr., Wayne M. Fortun, Jeffrey W. Green and Richard N. Rosett.
/ / FOR ALL NOMINEES LISTED ABOVE / / WITHHOLD AUTHORITY
except vote withheld from the to vote for all
following nominee(s), nominees listed above
if any:
--------------------------------------------------------------------
2. Proposal to Approve the 1996 Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Ratification of the appointment of Arthur Andersen LLP as
independent public accountants for the 1997 fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
3. ANY OTHER BUSINESS WHICH MAY PROPERLY BE CONSIDERED AND ACTED UPON
AT SAID MEETING.
THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. THIS PROXY WHEN PROPERLY
EXECUTED WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE, BUT IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
Dated: ______________ , 19___
Please sign exactly as this proxy
is addressed.
__________________________________
__________________________________
(Signature)
Joint owners should each sign
personally. When signing as
attorney, executor, administrator,
guardian, custodian, or corporate
official, sign name and title.
