<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)(1)
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:
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<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED
40 West Highland Park
Hutchinson, Minnesota 55350
320/587-3797
December 17, 1998
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 10:00 a.m., Minneapolis time, on Tuesday,
January 26, 1999.
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,
/s/ Wayne M. Fortun
Wayne M. Fortun
CHIEF EXECUTIVE OFFICER
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 26, 1999
------------------------
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 10:00 a.m., Minneapolis time, on
Tuesday, January 26, 1999 for the following purposes:
1. To elect a Board of Directors of eight 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 Employee Stock Purchase
Plan.
3. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for the fiscal year ending September 26, 1999.
4. To transact such other business as may properly be brought before the
meeting.
The Board of Directors has fixed November 30, 1998 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,
/s/ John A. Ingleman
John A. Ingleman
SECRETARY
Hutchinson, Minnesota
December 17, 1998
<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 Tuesday, January 26, 1999 at
the Minneapolis Marriott City Center Hotel, 30 South Seventh Street,
Minneapolis, Minnesota at 10:00 a.m. and at any adjournments thereof. Only
shareholders of record at the close of business on November 30, 1998 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 17, 1998.
Shareholder proposals intended to be presented at the Annual Meeting of
Shareholders in the year 2000 that are requested to be included in the Proxy
Statement for that meeting must be received by the Company at its principal
executive office no later than August 19, 1999. Any other shareholder proposals
intended to be presented at the Annual Meeting of Shareholders in the year 2000
must be received by the Company at its principal executive office no later than
November 2, 1999.
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 December 1, 1998, 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 director-nominee, each executive officer named in the
Summary Compensation Table on page 10, and all executive officers, directors and
director-nominees as a group. At December 1, 1998 there were 19,784,489 shares
of Common Stock, par value $.01, 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>
Bowman Capital Management, LLC 1,060,000(2) 5.36
San Mateo, California 94402
Gotham Advisors, Inc., Zweig-DiMenna International 1,037,000(3) 5.24
Managers, Inc., Zweig-DiMenna Investors, L.P.,
Zweig-DiMenna Partners, L.P. and Zweig-DiMenna
Special Opportunities, L.P. (3)
New York, New York 10022
Zweig-DiMenna International Limited(3)
Nassau, Bahamas
Jeffrey W. Green 997,668(4) 4.95
Wayne M. Fortun 819,426(5) 4.02
W. Thomas Brunberg 4,650(6) *
Archibald Cox, Jr. 33,000(7) *
James E. Donaghy 5,000(8) *
Harry C. Ervin, Jr. 16,500(9) *
Steven E. Landsburg 5,000(10) *
Richard N. Rosett (11) 16,435(12) *
Richard C. Solum 3,000(13) *
John A. Ingleman 170,640(14) *
Richard J. Penn 98,320(15) *
R. Scott Schaefer 83,890(16) *
Executive officers and directors as a group (14 2,543,957(17) 12.01
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) The number of shares indicated is based on information reported to the
Securities and Exchange Commission in a Schedule 13G filed by Bowman Capital
Management, LLC ("Bowman, LLC") and
2
<PAGE>
Lawrence A. Bowman on May 22, 1998, and reflects beneficial ownership by
Bowman, LLC as of May 15, 1998.
(3) The 1,037,000 shares indicated in the table is based on information
reported to the Securities and Exchange Commission in a Schedule 13G filed
jointly on June 12, 1998 by Gotham Advisors, Inc., Zweig-DiMenna
International Managers, Inc., Zweig-DiMenna Investors, L.P., Zweig-DiMenna
Partners, L.P., Zweig-DiMenna Special Opportunities, L.P. and Zweig-DiMenna
International Limited (the "Entities"), and reflects aggregate beneficial
ownership of the Entities as of June 2, 1998.
(4) Of these shares, 660 are held by Mr. Green in joint tenancy with his wife
and 133,800 are held in an IRA for Mr. Green. Includes 351,300 shares
covered by currently exercisable options granted to Mr. Green.
(5) Of these shares, 150,989 are held by Mr. Fortun in joint tenancy with his
wife. Includes 614,170 shares covered by currently exercisable options
granted to Mr. Fortun.
(6) Of these shares, 750 are held in trusts, 600 are held in an IRA for Mr.
Brunberg and 300 are held in an IRA for Mr. Brunberg's wife. Includes 3,000
shares covered by currently exercisable options granted to Mr. Brunberg.
(7) Includes 3,000 shares covered by currently exercisable options granted to
Mr. Cox.
(8) Of these shares, 1,700 are held by Mr. Donaghy's wife and 300 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. Includes 3,000 shares covered by currently exercisable options
granted to Mr. Donaghy.
(9) Includes 3,000 shares covered by currently exercisable options granted to
Mr. Ervin.
(10) Includes 3,000 shares covered by currently exercisable options granted to
Mr. Landsburg.
(11) Mr. Rosett, a director, has reached retirement age and will not be a
nominee for re-election to the Board of Directors.
(12) Of these shares, 12,135 are held by Mr. Rosett's wife and 300 are held in
an IRA for Mr. Rosett's wife. Includes 3,000 shares covered by currently
exercisable options granted to Mr. Rosett.
(13) All of these shares are held in an IRA for Mr. Solum.
(14) Of these shares, 71,700 are held by Mr. Ingleman in joint tenancy with his
wife. Includes 98,940 shares covered by currently exercisable options
granted to Mr. Ingleman.
(15) All of these shares are covered by currently exercisable options granted to
Mr. Penn.
(16) Includes 40,570 shares covered by currently exercisable options granted to
Mr. Schaefer.
(17) Includes 1,396,950 shares covered by currently exercisable options granted
to executive officers and directors of the Company.
3
<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 eight and has
nominated the eight persons named below for election as directors. Proxies
solicited by the Board of Directors will, unless otherwise directed, be voted to
elect the eight nominees named below to constitute the entire Board of
Directors.
All of the nominees named below, except Mr. Solum, 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 eight 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 58 Chairman of the Board and Director
Wayne M. Fortun 49 President, Chief Executive Officer and Chief
Operating Officer and Director
W. Thomas Brunberg 58 Director
Archibald Cox, Jr. 58 Director
James E. Donaghy 64 Director
Harry C. Ervin, 69 Director
Jr.
Steven E. 44 Director
Landsburg
Richard B. Solum 54 Director-Nominee
</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. Green is also a director of Mediwave, Inc. and Applied
Biometrics, Inc.
Mr. Fortun became 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. and Excelsior-Henderson Motorcycle Manufacturing Company.
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 Diaby & Associates, Ltd. since March 1991.
4
<PAGE>
Mr. Cox became a director of the Company in 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 August 1993. Mr. Cox
served 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 Chief Executive Officer and a director of Sheldahl, Inc.
("Sheldahl"), a manufacturer of laminates, composite materials and flexible
electronic interconnects, and served as the President of Sheldahl from January
1991 to September 1997.
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. Landsburg became a director of the Company in 1997. He has been an
Associate Professor of Economics at the University of Rochester since September
1991.
Mr. Solum has been a partner in the law firm of Dorsey & Whitney LLP since
July 1, 1998. Mr. Solum was a judge of the Hennepin County District Court from
January 1992 through June 1998. Mr. Solum previously served as a director of the
Company from 1977 until January 1992.
None of the above nominees is related to each other or to any executive
officer of the Company.
The Company has an audit committee consisting of Richard N. Rosett (Mr.
Rosett has reached retirement age and will not be a nominee for re-election to
the Board of Directors), W. Thomas Brunberg and James E. Donaghy. The audit
committee had three meetings in fiscal year 1998. The audit committee meets with
the Chief Financial Officer and the Company's internal auditor and independent
public accountants, and monitors and reviews the Company's system of internal
controls, approves the scope and timing of the independent public accountants'
audit and discusses the meaning and significance of the audited financial
results. The Company has a compensation committee consisting of Harry C. Ervin,
Jr., Archibald Cox, Jr. and Steven E. Landsburg, 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 year 1998. The Company does not have a nominating committee.
The Board of Directors held ten meetings during fiscal year 1998.
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.
5
<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: (i) base salary; (ii) annual cash bonuses;
and (iii) stock options. Section 162(m) ("Section 162(m)") of the Internal
Revenue Code of 1986, as amended (the "Code"), 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 in
fiscal year 1998 pursuant to the Company's 1988 Stock Option Plan and the
Company's 1996 Incentive Plan have been structured to qualify as
performance-based compensation for these purposes. The Company also believes
that cash bonuses paid under the Hutchinson Technology Incorporated Incentive
Bonus Plan (the "Bonus Plan"), if any, will qualify as performance-based
compensation for Section 162(m) purposes and be deductible by the Company under
current federal income tax laws.
BASE SALARY
The base salary of each executive officer of the Company other than the
Company's Chairman of the Board of Directors (the "Chairman"), but 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 high technology industry and in
manufacturing generally and, to a lesser extent, the Company's financial
performance during the prior fiscal year. With respect to the Company's
Chairman, base salary is determined annually by the Committee after considering
the compensation levels of personnel with similar responsibilities at
Minnesota-based publicly-held corporations, as well as, 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 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 (other than the Chairman) based on two surveys on
executive compensation for manufacturers in high technology industry and for
manufacturers generally (the "Surveys"). Using the Surveys, the base salary of
the CEO was targeted in fiscal year 1998 by the Committee to be at the median of
the salary range for chief executive officers. 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. All four peer companies constituting the Peer Composite
Index presented in the performance graph on page 13 of this Proxy Statement are
included in one of the Surveys, and three of the four of such peer companies are
included in the other Survey.
6
<PAGE>
With respect to the Company's Chairman, the Committee reviews salary data
contained in a survey on executive compensation for chief executives, including
chairmen of the board, of one hundred Minnesota-based publicly-held corporations
(the "Minnesota Data"), focusing on corporations in which the executive position
of "chairman of the board" is separate from the executive position of "chief
executive officer". The Minnesota Data indicated wide variations in base salary
for the executive position of "chairman of the board." The Committee assessed
the expected job responsibilities of the Chairman for fiscal year 1998 and the
time required to meet such duties, and arrived at a base salary for such fiscal
year based on a proportion of the base salary paid to the Chairman in fiscal
year 1997.
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 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 quarterly reviews 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 and
certain members of his executive staff assess each officer's achievement of
specific "results objectives" developed by turning corporate financial and
strategic goals into specific personal objectives to be accomplished each fiscal
quarter by each officer.
ANNUAL INCENTIVE COMPENSATION
The Bonus Plan is designed (i) to provide incentives to the executive
officers of the Company and its subsidiaries to produce a superior return to the
Company's shareholders, (ii) to encourage such executive officers to remain in
the employ of the Company and its subsidiaries, and (iii) to qualify
compensation paid pursuant to the Bonus Plan as performance-based compensation
within the meaning of Section 162(m). Executive officers of the Company and its
subsidiaries are eligible to participate in the Bonus Plan, which is
administered by the Committee. The Committee selects annually the executive
officers it deems appropriate to participate in the Bonus Plan for that year. In
fiscal year 1998, all of the nine eligible executive officers of the Company,
including the CEO and the Chairman, were selected by the Committee to
participate in the Bonus Plan.
The Bonus Plan provides that within 90 days following the start of a
specified "Performance Period," which is the Company's fiscal year, the
Committee will select performance targets ("Targets"), the attainment of which
will entitle the designated participants for that year to receive an award of
bonus compensation, payable under the Bonus Plan in cash. Targets selected by
the Committee for a Performance Period may be based on any one or more of the
following: net earnings before or after income taxes; gross revenues; operating
expenses; operating income; total shareholder return; or return on assets.
Targets may be expressed in absolute amounts or measured on a per share basis or
as a percentage change from preceding Performance Periods, and Targets may
relate to one or more of corporate, group, unit, division, affiliate or
individual performance.
7
<PAGE>
For fiscal year 1998, the Committee selected Targets intended as a means of
assessing the Company's overall corporate financial performance. The Targets set
(i) a minimum threshold to be achieved with respect to the Company's actual
return on assets, and (ii) the Company's corporate goals for both operating
income and return on assets. The Targets for corporate goals were selected by
the Committee in conjunction with recommendations by the CEO and the Chairman at
the start of the fiscal year. Bonuses for executive officers, including the CEO
and the Chairman, are paid under the Bonus Plan only if the Company achieves
both the minimum prescribed level of actual return on assets as well as a
minimum prescribed percentage of the corporate goals for operating income and
return on assets that have been set as Targets under the Bonus Plan.
If the required threshold levels of overall corporate financial performance
(set by the Committee as Targets under the Bonus Plan) are achieved, bonuses for
executive officers, including the CEO and the Chairman, are determined by the
Committee based on a percentage (the "Bonus Percentage") of base salary that is
assigned to each participating executive officer by the Committee at the start
of the fiscal year. With respect to the CEO, the Bonus Percentage is set by the
Committee after reviewing incentive compensation information for individuals in
a similar position, as presented in the Surveys. With respect to the Chairman,
the Bonus Percentage is set by the Committee after assessing the expected job
responsibilities of the Chairman for the upcoming fiscal year. The Bonus
Percentage for executive officers other than the CEO and the Chairman is set by
the Committee after comparing each such officer's job responsibilities to those
of comparable jobs, and the bonus percentage associated with such comparable
jobs, as presented in the Surveys.
The bonus amount actually paid to each executive officer, including the
Chairman and the CEO, will be based on the magnitude of positive overall
corporate financial performance over the threshold level. If the threshold level
of return on assets is attained, the total bonus paid to each executive officer
is calculated by multiplying (i) the ratio of the Company's actual return on
assets to the corporate goal for return on assets, (ii) the ratio of the
Company's actual operating income to the corporate goal for operating income,
(iii) the applicable Bonus Percentage for such officer, and (iv) the base salary
for such executive officer. The maximum percentage of base salary that will be
paid under the Bonus Plan to each officer is twice the Bonus Percentage assigned
to such officer.
The Bonus Plan permits the Committee, at any time during or after a
Performance Period, and in its sole discretion, to reduce or eliminate an award
payable to any participant for any reason. To that end, the CEO 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 summarizes such reviews
for the Committee. Based on such reviews of individual performance, the
Committee may determine to reduce or eliminate any award that would otherwise be
payable under the Bonus Plan.
The Company's fiscal year 1998 overall corporate financial performance did
not meet the minimum prescribed threshold level for the Company's actual return
on assets or the minimum prescribed percentages of the Company's corporate goals
for operating income and return on assets, set as Targets under the Bonus Plan
by the Committee. As a result, neither the CEO nor the Chairman nor any other
executive officer received any cash bonus for fiscal year 1998.
8
<PAGE>
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, the Company
believes the program will aid in attracting and retaining personnel of
outstanding ability by providing such personnel with an opportunity to acquire a
proprietary interest in the Company.
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. The Company's 1996
Incentive Plan is administered by the Committee and authorizes the Committee to
grant options to purchase Common Stock of the Company to any full-time employee,
including all executive officers, and to other individuals who are not employees
but who provide services as advisors or consultants. Generally, options (under
either the Company's 1988 Stock Option Plan or 1996 Incentive Plan) 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 1998 generally are not exercisable for one year after the
date of grant.
The number of options 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 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 and the number of options granted as a
percentage of all outstanding shares.
The number of options 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 and the number of
options granted as a percentage of all outstanding shares.
Compensation Committee:
Harry C. Ervin, Jr., Chairman
Archibald Cox, Jr.
Steven E. Landsburg
9
<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 27, 1998, 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 1998 477,459 -- 40,000 9,600
President, Chief 1997 395,515 470,400 225,000 9,600
Executive Officer and 1996 343,947 -- 120,000 8,350
Chief Operating Officer
Jeffrey W. Green 1998 225,014 -- -- 9,600
Chairman of the Board 1997 257,856 189,000 -- 9,600
1996 405,197 -- 90,000 8,030
John A. Ingleman 1998 211,546 -- 17,370 10,200
Vice President, Chief 1997 191,364 147,420 15,000 9,000
Financial Officer and 1996 175,614 -- 9,300 4,500
Secretary
Richard J. Penn 1998 204,290 -- 16,570 10,984
Vice President of Sales 1997 173,671 132,308 75,000 9,011
and Marketing 1996 141,270 -- 6,750 5,022
R. Scott Schaefer 1998 200,850 -- 16,570 10,708
Vice President and Chief 1997 179,443 136,837 15,000 8,354
Technical Officer 1996 170,630 -- 9,000 4,500
</TABLE>
- ------------------------
(1) Amounts for fiscal year 1998 represent Company matching cash contributions
under the Company's 401(k) Plan.
10
<PAGE>
OPTION TABLES
The following tables summarize stock option grants to and exercises by the
Named Executive Officers during the fiscal year ended September 27, 1998, and
certain other information relative to such options:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- --------------------------------------------------------------------------------------------- VALUE AT ASSUMED
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 11.08 24.75 November 19, 2007 622,800 1,578,000
Jeffrey W. Green -- -- -- -- -- --
John A. Ingleman 17,370 4.81 24.75 November 19, 2007 270,451 685,247
Richard J. Penn 16,570 4.59 24.75 November 19, 2007 257,995 653,687
R. Scott Schaefer 16,570 4.59 24.75 November 19, 2007 257,995 653,687
</TABLE>
- ------------------------
(1) All such options are granted under either the Company's 1988 Stock Option
Plan (the "1988 Plan"), or the Company's 1996 Incentive Plan (the "1996
Plan"). Of the total number of such options granted to each Named Executive
Officer, 4,040 are intended to be "incentive stock options" as that term is
defined in Section 422 of the Internal Revenue Code of 1986, as amended,
(the "Code") and the remainder are non-statutory stock options. Such options
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, which
administers the 1988 Plan and the 1996 Plan, 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 or the 1996 Plan, as the case may be) 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.
11
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE FISCAL YEAR-END (#) FISCAL YEAR-END ($) (2)
ACQUIRED ON REALIZED -------------------------- ---------------------------
NAME EXERCISE (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ------------- ---------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Wayne M. Fortun -- -- 574,170 40,000 3,255,691 --
Jeffrey W. Green 60,000 1,432,500 351,300 -- 3,281,684 --
John A. Ingleman -- -- 81,570 17,370 795,743 --
Richard J. Penn -- -- 81,750 16,570 56,207 --
R. Scott Schaefer 43,320 874,024 24,000 16,570 23,517 --
</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.
12
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph comparing, for a period of five fiscal years
ended September 27, 1998, 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 26, 1993 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, Komag Incorporated and Cirrus Logic
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 PEER S&P 500
<S> <C> <C> <C>
Technology Composite Index
1993 $100.00 $100.00 $100.00
1994 $129.76 $84.18 $100.45
1995 $323.81 $200.15 $127.12
1996 $179.76 $135.40 $149.94
1997 $475.00 $122.54 $206.55
1998 $256.25 $27.37 $228.30
</TABLE>
<TABLE>
<CAPTION>
HTI'S FISCAL YEAR ENDING
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Hutchinson Technology $ 100.00 $ 129.76 $ 323.81 $ 179.76 $ 475.00 $ 256.25
Peer Composite 100.00 84.18 200.15 135.40 122.54 27.37
S&P 500 Index 100.00 100.45 127.12 149.94 206.55 228.30
</TABLE>
13
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
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. To the Company's knowledge, based solely on a
review of copies of forms submitted to the Company during and with respect to
fiscal year 1998, all required reports were filed on a timely basis during
fiscal year 1998.
PROPOSAL TO APPROVE THE
HUTCHINSON TECHNOLOGY INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
INTRODUCTION. On November 18, 1998, the Board of Directors approved,
subject to shareholder approval, the Hutchinson Technology Incorporated Employee
Stock Purchase Plan (the "Purchase Plan") and directed that the Purchase Plan be
submitted to a vote of the shareholders at the meeting. If approved by the
shareholders, the Purchase Plan will become effective on the date of such
approval. The full text of the proposed Employee Stock Purchase Plan is set
forth in Exhibit A to this Proxy Statement and the following summary description
is qualified in its entirety by the full text of the Purchase Plan.
PURPOSE. The purpose of the Purchase Plan is to provide the employees of
the Company and its subsidiaries with an opportunity to acquire a proprietary
interest in the Company through the purchase of Common Stock of the Company (the
"Common Stock") and, thus, to develop a stronger incentive to work for the
continued success of the Company. The Plan is intended to be an "employee stock
purchase plan" within the meaning of Section 423 of the Code, and shall be
interpreted and administered in a manner consistent with such intent.
ADMINISTRATION. The Purchase Plan will be administered by a committee of
the Board of Directors (the "Committee"). The Committee is authorized to make
such uniform rules as may be necessary to carry out its provisions. The
Committee shall determine any questions arising in the administration,
interpretation and application of the Purchase Plan, and all such determinations
shall be conclusive and binding on all parties. If the Board of Directors has
not designated a committee to administer the Purchase Plan, then the
Compensation Committee of the Board of Directors shall constitute the Committee.
ELIGIBILITY AND NUMBER OF SHARES. Up to 1,500,000 shares of Common Stock
are available for distribution under the Purchase Plan, subject to appropriate
adjustments by the Committee in the event of certain changes in the outstanding
shares of Common Stock by reason of stock dividends, stock splits, reverse stock
splits, corporate separations, recapitalizations, mergers, consolidations,
combinations, exchanges of shares or similar transactions.
Any employee of the Company or, subject to approval by the Board of
Directors, a parent or subsidiary corporation of the Company (including officers
and any directors who are also employees) will be eligible to participate in the
Purchase Plan for any Purchase Period so long as the employee is customarily
employed at least 20 hours per week. "Purchase Period" means each quarter of the
Company's fiscal year.
14
<PAGE>
Any eligible employee may elect to become a participant in the Purchase Plan
for any Purchase Period by filing an election form with the Company at any time
during the Purchase Period. The election to authorize payroll deductions will be
effective as soon as administratively feasible after the election form is filed
and will continue to be effective until the employee modifies his or her
authorization or ceases to be eligible to participate in the Purchase Plan.
No employee may participate in the Purchase Plan if such employee would be
deemed for purposes of the Code to own stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company.
As of December 1, 1998, the Company had approximately 8,175 employees who
would be eligible to participate in the Purchase Plan.
PARTICIPATION. An eligible employee who elects to participate in the
Purchase Plan will authorize the Company to make payroll deductions of a
specified whole percentage from 1% to 10% of the employee's Compensation (as
defined in the Purchase Plan). A participant may, at any time during a Purchase
Period, direct the Company to increase or decrease the amount of deductions
(within those limits), make no further deductions or elect to withdraw some or
all of the balance of his or her payroll deductions from the Purchase Plan at
any time before the end of a Purchase Period. The amount of such a withdrawal
will be paid to the participant in cash within 15 days after receipt of notice
of the withdrawal by the Company. Unless the participant elects otherwise,
withdrawal of some or all of the participant's payroll deductions from the
Purchase Plan will not alter the participant's future payroll deductions.
Amounts deducted under the Purchase Plan will be held by the Company as part
of its general assets until the end of the Purchase Period and then applied to
the purchase of Common Stock. No interest will be credited to a participant for
amounts withheld.
PURCHASE OF STOCK. Amounts deducted for a participant in the Purchase Plan
will be used to purchase Common Stock as of the last day of the Purchase Period
at a price equal to 85% of the Fair Market Value (as defined in the Purchase
Plan) of a share of Common Stock on the last day of the Purchase Period. All
amounts so deducted will be used to purchase the number of shares of Common
Stock (including fractional shares) that can be purchased with such amount,
unless the participant has properly notified the Company that he or she elects
to purchase a lesser number of shares of Common Stock or to receive all or a
portion of the amount in cash.
If purchases by all participants would exceed the number of shares of Common
Stock available for purchase under the Purchase Plan, each participant will be
allocated a ratable portion of such available shares of Common Stock. Any amount
not used to purchase shares of Common Stock will be refunded to the participant
in cash.
Certificates for the number of shares of Common Stock purchased by a
participant will be issued and delivered to him or her only upon request.
No more than $25,000 in Fair Market Value of shares of Common Stock may be
purchased under the Purchase Plan and all other employee stock purchase plans by
any participant for each calendar year.
DEATH, DISABILITY, RETIREMENT OR OTHER TERMINATION OF EMPLOYMENT. If the
employment of a participant is terminated for any reason, including death,
disability or retirement, the amounts previously withheld will be refunded in
cash to the participant within 15 days after the date of termination of
employment.
15
<PAGE>
RIGHTS NOT TRANSFERABLE. The rights of a participant under the Purchase
Plan are exercisable only by the participant during his or her lifetime. No
rights of any participant in the Purchase Plan may be sold, pledged, assigned,
transferred or disposed of in any manner other than by will or the laws of
descent and distribution.
AMENDMENT OR MODIFICATION. The Board of Directors may at any time amend the
Purchase Plan in any respect that will not adversely affect the rights of
participants pursuant to shares of Common Stock previously acquired under the
Purchase Plan, except that approval by the shareholders of the Company is
required to (i) increase the number of shares of Common Stock reserved under the
Purchase Plan, or (ii) change the designation of corporations whose employees
may be eligible to participate in the Purchase Plan.
TERMINATION. All rights of participants under the Purchase Plan will
terminate at the earlier of (i) the day that participants become entitled to
purchase a number of shares of Common Stock equal to or greater than the number
of shares of Common Stock remaining available for purchase, or (ii) at any time,
at the discretion of the Board of Directors. Except as otherwise determined by
the Board of Directors, upon termination of the Purchase Plan, the Company will
pay to each participant cash in an amount equal to the balance previously
withheld from the participant and not used to purchase Common Stock.
FEDERAL TAX CONSIDERATIONS. Payroll deductions under the Purchase Plan will
be made after taxes. Participants will not recognize any additional income as a
result of participation in the Purchase Plan until the disposal of shares of
Common Stock acquired under the Purchase Plan or the death of the participant.
Participants who hold their shares of Common Stock for more than two years or
die while holding their shares of Common Stock will recognize ordinary income in
the year of disposition or death equal to the lesser of (i) the excess of the
fair market value of the shares of Common Stock on the date of disposition or
death over the purchase price paid by the participant, or (ii) the excess of the
fair market value of the shares of Common Stock on the date they were purchased
over the purchase price paid by the participant. If the two-year holding period
has been satisfied when the participant sells the shares of Common Stock or if
the participant dies while holding the shares of Common Stock, the Company will
not be entitled to any deduction in connection with the disposition of such
shares by the participant.
Participants who dispose of their shares of Common Stock within two years
after the shares of Common Stock were purchased will be considered to have
realized ordinary income in the year of disposition in an amount equal to the
excess of the fair market value of the shares of Common Stock on the date they
were purchased by the participant over the purchase price paid by the
participant. If such dispositions occur, the Company generally will be entitled
to a deduction at the same time and in the same amount as the participants who
make those dispositions are deemed to have realized ordinary income.
Participants will have a basis in their shares of Common Stock equal to the
purchase price of their shares of Common Stock plus any amount that must be
treated as ordinary income at the time of disposition of the shares of Common
Stock, as explained above. Any additional gain or loss realized on the
disposition of shares of Common Stock acquired under the Purchase Plan will be
capital gain or loss.
VOTING REQUIREMENTS AND RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock of the Company present and entitled to vote in person or by
proxy at the meeting is required for approval of the
16
<PAGE>
Purchase Plan. Proxies solicited by the Board of Directors will be voted for
approval of the Purchase 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 PURCHASE 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 26, 1999, 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 26, 1999.
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 1998, 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,
director-nominees, officers and regular employees of the Company may solicit
Proxies by telephone, telegram or personal interview, and may request brokerage
firms and 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.
17
<PAGE>
SHAREHOLDERS WHO WISH TO OBTAIN A COPY OF THE COMPANY'S 10-K ANNUAL REPORT,
TO BE FILED WITH THE SEC FOR THE FISCAL YEAR ENDED SEPTEMBER 27, 1998, 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,
/s/ John A. Ingleman
John A. Ingleman
SECRETARY
Dated: December 17, 1998
18
<PAGE>
EXHIBIT A
HUTCHINSON TECHNOLOGY INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE AND SCOPE OF PLAN. The purpose of this Hutchinson Technology
Incorporated Employee Stock Purchase Plan (the "Plan") is to provide the
employees of Hutchinson Technology Incorporated (the "Company") and its
subsidiaries with an opportunity to acquire a proprietary interest in the
Company through the purchase of its common stock and, thus, to develop a
stronger incentive to work for the continued success of the Company. The Plan is
intended to be an "employee stock purchase plan" within the meaning of Section
423 of the Internal Revenue Code, and shall be interpreted and administered in a
manner consistent with such intent.
2. DEFINITIONS.
2.1. The terms defined in this section are used (and capitalized)
elsewhere in this Plan:
(a) "Affiliate" means each domestic or foreign corporation that is a
"parent corporation" or "subsidiary corporation" of the Company, as defined
in Sections 424(e) and 424(f) of the Code or any successor provision and
whose participation in the Plan the Board of Directors has expressly
approved.
(b) "Board of Directors" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(d) "Committee" means three or more Disinterested Persons designated by
the Board of Directors to administer the Plan under Section 13.
(e) "Common Stock" means the par value $.01 per share common stock of
the Company.
(f) "Company" means Hutchinson Technology Incorporated.
(g) "Compensation" means the gross cash compensation (including wage,
salary, commission, bonus, and overtime earnings) paid by the Company or any
Affiliate to a Participant in accordance with the terms of employment.
(h) "Disinterested Person" means a member of the Board of Directors who
is considered a disinterested person within the meaning of Exchange Act Rule
16b-3 or any successor definition.
(i) "Eligible Employee" means any employee of the Company or an
Affiliate whose customary employment is at least 20 hours per week;
provided, however, that "Eligible Employee" shall not include any person who
would be deemed, for purposes of Section 423(b)(3) of the Code, to own stock
possessing 5% or more of the total combined voting power or value of all
classes of stock of the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
(k) "Fair Market Value" of a share of Common Stock as of any date means,
if the Company's Common Stock is listed on a national securities exchange or
traded in the national market system, the mean between the high and low sale
prices for such Common Stock on such exchange or market on said date, or, if
no sale has been made on such exchange or market on said date, on the last
preceding
A-1
<PAGE>
day on which any sale shall have been made. If such determination of Fair
Market Value is not consistent with the then current regulations of the
Secretary of the Treasury applicable to plans intended to qualify as an
"employee stock purchase plan" within the meaning of Section 423(b) of the
Code, however, Fair Market Value shall be determined in accordance with such
regulations. The determination of Fair Market Value shall be subject to
adjustment as provided in Section 14.
(l) "Participant" means an Eligible Employee who has elected to
participate in the Plan in the manner set forth in Section 4.
(m) "Plan" means this Hutchinson Technology Incorporated Employee Stock
Purchase Plan, as amended from time to time.
(n) "Purchase Period" means a fiscal quarter corresponding with the
fiscal year of the Company.
(o) "Recordkeeping Account" means the account maintained in the books
and records of the Company recording the amount withheld from each
Participant through payroll deductions made under the Plan.
3. SCOPE OF THE PLAN. Shares of Common Stock may be sold by the Company to
Eligible Employees at any time after this Plan has been approved by the
shareholders of the Company, but not more than 1,500,000 shares of Common Stock
(subject to adjustment as provided in Section 14) shall be sold to Eligible
Employees pursuant to this Plan. All sales of Common Stock pursuant to this Plan
shall be subject to the same terms, conditions, rights and privileges.
4. ELIGIBILITY AND PARTICIPATION. To be eligible to participate in the
Plan for a given Purchase Period, an employee must be an Eligible Employee on
the last day of such Purchase Period. An Eligible Employee may elect to
participate in the Plan by filing with the Company an election form that
authorizes regular payroll deductions from Compensation beginning as soon as
administratively feasible following the filing of the election form and
continuing until such Participant modifies his or her authorization, or ceases
to be an Eligible Employee, as hereinafter provided.
5. AMOUNT OF COMMON STOCK EACH ELIGIBLE EMPLOYEE MAY PURCHASE.
5.1. Subject to the provisions of this Plan, each Eligible Employee
shall be offered the right to purchase on the last day of the Purchase Period
the maximum number of shares of Common Stock (including fractional shares) that
can be purchased at the price specified in Section 5.2 with the entire balance
in the Participant's Recordkeeping Account; provided, however, that no more than
$25,000 in Fair Market Value (determined as of the last day of each Purchase
Period) of shares of Common Stock may be purchased under the Plan and all other
employee stock purchase plans (within the meaning of Section 423(b) of the
Code), if any, of the Company and its Affiliates by any Participant for each
calendar year. If the purchases by all Participants would otherwise cause the
aggregate number of shares of Common Stock to be sold under the Plan to exceed
the number specified in Section 3, however, each Participant shall be allocated
a ratable portion of the maximum number of shares of Common Stock which may be
sold.
5.2. The purchase price of each share of Common Stock sold pursuant to
this Plan will be 85% of the Fair Market Value of such share on the last day of
the Purchase Period.
A-2
<PAGE>
6. METHOD OF PARTICIPATION.
6.1. The Company shall give notice to each Eligible Employee of the
opportunity to purchase shares of Common Stock pursuant to this Plan and the
terms and conditions for such offering. Such notice is subject to revision by
the Company at any time prior to the date of purchase of such shares. The
Company contemplates that for tax purposes the last day of a Purchase Period
will be the date of the offering of such shares.
6.2. Each Eligible Employee who desires to participate in the Plan for a
Purchase Period shall signify his or her election to do so by signing and filing
with the Company an election form developed by the Committee. An Eligible
Employee may elect to have any whole percent of Compensation withheld as a
payroll deduction, but not exceeding ten percent (10%) per pay period. An
election to authorize payroll deductions as described herein shall be effective
as soon as administratively feasible following the filing of the election form
and shall remain in effect unless and until such Participant modifies his or her
authorization, or ceases to be an Eligible Employee, as hereinafter provided.
7. RECORDKEEPING ACCOUNT.
7.1. The Company shall maintain a Recordkeeping Account for each
Participant. Payroll deductions pursuant to Section 6 will be credited to such
Recordkeeping Accounts on each payday.
7.2. No interest will be credited to a Participant's Recordkeeping
Account.
7.3. The Recordkeeping Account is established solely for accounting
purposes, and all amounts credited to the Recordkeeping Account will remain part
of the general assets of the Company.
7.4. A Participant may not make any separate cash payment into a
Recordkeeping Account.
8. RIGHT TO ADJUST PARTICIPATION; WITHDRAWALS FROM RECORDKEEPING ACCOUNT.
8.1. A Participant may at any time direct the Company to make no further
deductions from his or her Compensation or to increase or decrease the
percentage amount of such deductions from future Compensation, subject to the
limitation in Section 6.2. As soon as administratively feasible following any
such action, future payroll deductions with respect to such Participant shall
cease or shall be increased or decreased in accordance with the Participant's
direction.
8.2. At any time before the end of a Purchase Period, any Participant
may request a withdrawal of all or any portion of the balance in such
Participant's Recordkeeping Account. Within 15 days after such request, the
Company will pay to the Participant in cash all or such portion of the
Participant's Recordkeeping Account. Unless the Participant elects otherwise, a
request for a withdrawal from the Participant's Recordkeeping Account will not
alter future payroll deductions.
8.3. Notification of a Participant's election to increase, decrease, or
terminate deductions, or to withdraw all or any portion of the balance in such
Participant's Recordkeeping Account shall be made by signing and filing with the
Company an appropriate form developed by the Committee.
9. TERMINATION OF EMPLOYMENT. If the employment of a Participant is
terminated for any reason, including death, disability, or retirement, the
entire balance in the Participant's Recordkeeping Account will be refunded in
cash to the Participant within 15 days after the date of termination of
employment.
A-3
<PAGE>
10. PURCHASE OF SHARES.
10.1. As of the last day of the Purchase Period, the entire balance in
each Participant's Recordkeeping Account will be used to purchase shares
(including fractional shares) of Common Stock (subject to the limitations of
Section 5) unless the Participant has filed an appropriate form with the Company
in advance of that date (which either elects to purchase a specified number of
shares which is less than the number described above or elects to receive all or
a portion of the balance in cash). Any amount in a Participant's Recordkeeping
Account that is not used to purchase shares pursuant to this Section 10.1 will
be refunded to the Participant.
10.2. Certificates for the number of shares of Common Stock purchased by
each Participant shall be issued and delivered to him or her upon request after
the end of each Purchase Period.
11. RIGHTS AS A SHAREHOLDER. A Participant shall not be entitled to any of
the rights or privileges of a shareholder of the Company with respect to shares
of Common Stock, including the right to receive any dividends which may be
declared by the Company, until (a) he or she actually has paid the purchase
price for such shares, and (b) certificates for such shares have been issued to
him or her, both as provided in Section 10.
12. RIGHTS NOT TRANSFERABLE. A Participant's rights under this Plan are
exercisable only by the Participant during his or her lifetime, and may not be
sold, pledged, assigned, transferred or disposed of in any manner other than by
will or the laws of descent and distribution. Any attempt to sell, pledge,
assign, transfer or dispose of the same shall be null and void and without
effect. The amounts credited to a Recordkeeping Account may not be sold,
pledged, assigned, transferred or disposed of in any way, and any attempted
sale, pledge, assignment, transfer or other disposition of such amounts will be
null and void and without effect.
13. ADMINISTRATION OF THE PLAN. This Plan shall be administered by the
Committee, which is authorized to make such uniform rules as may be necessary to
carry out its provisions. The Committee shall determine any questions arising in
the administration, interpretation and application of this Plan, and all such
determinations shall be conclusive and binding on all parties. If the Board of
Directors has not designated a committee to administer this Plan, then the
Compensation Committee of the Board of Directors shall constitute the Committee.
14. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any change
in the Common Stock of the Company by reason of stock dividends, stock splits,
reverse stock splits, corporate separations, recapitalizations, mergers,
consolidations, combinations, exchanges of shares and the like, the aggregate
number and class of shares available under this Plan and the number, class and
purchase price of shares available but not yet purchased under this Plan, may be
adjusted appropriately by the Committee.
15. REGISTRATION OF CERTIFICATES. Stock certificates will be registered in
the name of the Participant, or jointly in the name of the Participant and
another person, as the Participant may direct on an appropriate form filed with
the Company.
16. AMENDMENT OF PLAN. The Board of Directors may at any time amend this
Plan in any respect which shall not adversely affect the rights of Participants
pursuant to shares previously acquired under the Plan, except that, without
shareholder approval, no amendment shall be made to (a) increase the number of
shares reserved under this Plan, or (b) change the designation of corporations
whose employees may be eligible to participate in the Plan.
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<PAGE>
17. EFFECTIVE DATE OF PLAN. This Plan shall be effective upon approval
thereof by the shareholders of the Company. All rights of Participants in any
offering hereunder shall terminate at the earlier of (a) the day that
Participants become entitled to purchase a number of shares of Common Stock
equal to or greater than the number of shares remaining available for purchase
or (b) at any time, at the discretion of the Board of Directors. Except as
otherwise determined by the Board of Directors, upon termination of this Plan,
the Company shall pay to each Participant cash in an amount equal to the entire
balance in such Participant's Recordkeeping Account.
18. GOVERNMENTAL REGULATIONS AND LISTING. All rights granted or to be
granted to Eligible Employees under this Plan are expressly subject to all
applicable laws and regulations and to the approval of all governmental
authorities required in connection with the authorization, issuance, sale or
transfer of the shares of Common Stock reserved for this Plan, including,
without limitation, there being a current registration statement of the Company
under the Securities Act of 1933, as amended, covering the shares of Common
Stock purchasable on the last day of the Purchase Period applicable to such
shares, and if such a registration statement shall not then be effective, the
term of such Purchase Period shall be extended until the first business day
after the effective date of such a registration statement, or post-effective
amendment thereto. If applicable, all such rights hereunder are also similarly
subject to effectiveness of an appropriate listing application to a national
market system covering the shares of Common Stock under the Plan upon official
notice of issuance.
19. MISCELLANEOUS.
19.1. This Plan shall not be deemed to constitute a contract of
employment between the Company and any Participant, nor shall it interfere with
the right of the Company to terminate any Participant and treat him or her
without regard to the effect which such treatment might have upon him or her
under this Plan.
19.2. Wherever appropriate as used herein, the masculine gender may be
read as the feminine gender, the feminine gender may be read as the masculine
gender, the singular may be read as the plural and the plural may be read as the
singular.
19.3. This Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Minnesota.
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<PAGE>
PROXY
HUTCHINSON TECHNOLOGY INCORPORATED
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS -- JANUARY 26, 1999
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 November 30, 1998, 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 26, 1999, 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, Steven E. Landsburg
and Richard C. Solom.
/ / 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 Hutchinson Technology Incorporated Employee
Stock Purchase Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Ratification of the appointment of Arthur Andersen LLP as
independent public accountants for the 1999 fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
4. 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.
