<PAGE>
SCHEDULE 14A INFORMATION
------------------------
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. XXX)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definite Additional Materials
[ ] Soliciting Material Pursuant to [S]240.14a-11(c) or [S]240.14a-12
Conner Peripherals Inc.
- - ------------------------------------------------
(Name of Registrant as specified in its charter)
Conner Peripherals Inc.
- - ------------------------------------------------
(Name of person(s) filing proxy statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: n/a
(2) Aggregate number of securities to which transaction applies: n/a
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: n/a
(4) Proposed maximum aggregate value of transacton: n/a
- - ------------
(A) Set forth the amount on which the filing fee is calculated and
show how it was determined.
[ ] 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: 0
(2) Form, Schedule or Registration Statement No.: -
(3) Filing Party: -
(4) Date Filed: -
<PAGE>
March 18, 1994
TO THE STOCKHOLDERS OF CONNER PERIPHERALS, INC.:
You are cordially invited to attend the Annual Meeting of Stockholders of
Conner Peripherals, Inc. on Tuesday, April 19, 1994 at 10:00 a.m., local time.
The Annual Meeting will be held at the Fairmont Hotel, 170 South Market Street,
San Jose, California 95113.
At the meeting, in addition to electing directors for the next year and
ratifying the appointment of Price Waterhouse as the Company's independent
public accountants, you will be asked to ratify and approve an amendment to the
Company's Employee Stock Purchase Plan, increasing the number of shares of the
Company's Common Stock reserved for issuance thereunder by 1,500,000 shares,
and the Company's Performance-Based Executive Compensation Plan.
Whether or not you plan to attend the Annual Meeting, please mark, sign, date
and return the enclosed proxy card promptly in the accompanying envelope. By
returning the proxy, you can help the Company avoid the expense of duplicate
proxy solicitations and possibly having to reschedule the Annual Meeting if a
quorum of the outstanding shares is not present or represented by proxy. If you
attend the Annual Meeting and wish to change your proxy vote, you may do so
simply by voting in person at the Annual Meeting.
FINIS F. CONNER
Chairman and Chief Executive Officer
<PAGE>
CONNER PERIPHERALS, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
TO BE HELD ON APRIL 19, 1994
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Conner
Peripherals, Inc., a Delaware corporation, will be held on Tuesday, April 19,
1994 at 10:00 a.m., local time, at the Fairmont Hotel, 170 South Market Street,
San Jose, California 95113, for the following purposes:
1. To elect directors of the Company to serve for the ensuing year and
until their successors are elected;
2. To ratify and approve an amendment to the Company's Employee Stock
Purchase Plan increasing the number of shares of the Company's Common Stock
reserved for issuance thereunder by 1,500,000 shares;
3. To ratify and approve the Company's Performance-Based Executive
Compensation Plan;
4. To ratify the appointment of Price Waterhouse as the independent
public accountants for the Company for the fiscal year ending December 31,
1994; and
5. To transact such other business as may properly come before the
meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 4, 1994 are
entitled to vote at the Annual Meeting.
FOR THE BOARD OF DIRECTORS
Marla Ann Stark
Secretary
San Jose, California
March 18, 1994
YOUR VOTE IS IMPORTANT
TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE-
PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. IF YOU ATTEND THE MEETING, YOU
MAY VOTE IN PERSON EVEN IF YOU RETURNED A PROXY.
<PAGE>
CONNER PERIPHERALS, INC.
PROXY STATEMENT
PROCEDURAL MATTERS
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of Conner
Peripherals, Inc. ("Conner" or the "Company") for use at the Annual Meeting of
Stockholders to be held on Tuesday, April 19, 1994 at 10:00 a.m. local time, or
at any continuation or adjournment thereof. The Annual Meeting will be held at
the Fairmont Hotel, 170 South Market Street, San Jose, California 95113.
The Company's principal executive offices are located at 3081 Zanker Road,
San Jose, California 95134. The Company's telephone number at that address is
(408) 456-4500.
This Proxy Statement was mailed to stockholders on or about March 18, 1994.
RECORD DATE AND SHARE OWNERSHIP
Stockholders of record at the close of business on March 4, 1994 (the "Record
Date") are entitled to vote at the meeting. At the Record Date, 50,678,912
shares of the Company's Common Stock, $.001 par value, were issued and
outstanding. For information regarding security ownership by management and by
5% stockholders, see "Other Information--Share Ownership by Principal
Stockholders and Management." The closing price of the Company's Common Stock
on the New York Stock Exchange ("NYSE") on the Record Date was $18.875 per
share.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
VOTING AND SOLICITATION
Each share of Common Stock has one vote on all matters. Stockholders do not
have the right to cumulate their votes in the election of directors.
The cost of soliciting proxies will be borne by the Company. The Company is
retaining Corporate Investor Communications, Inc. to solicit proxies for a cost
of approximately $7,500, plus out-of-pocket expenses. In addition, the Company
expects to reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation, in
person or by telephone or telegram.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR",
"AGAINST" OR "WITHHELD FROM" a matter are treated as being present at the
meeting for purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such
matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both
1
<PAGE>
(i) the presence or absence of a quorum for the transaction of business and
(ii) the total number of Votes Cast with respect to a proposal (other than the
election of directors). In the absence of a controlling precedent to the
contrary, the Company intends to treat abstentions in this manner. Accordingly,
abstentions will have the same effect as a vote against the proposal.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
Court held that, while broker non-votes should be counted for purposes of
determining the presence or absence of a quorum for the transaction of
business, broker non-votes should not be counted for purposes of determining
the number of Votes Cast with respect to the particular proposal on which the
broker has expressly not voted. Accordingly, the Company intends to treat
broker non-votes in this manner. Thus, a broker non-vote will not have an
affect on the outcome of the voting on a proposal.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented by
such stockholders at the Company's next annual meeting of stockholders must be
received by the Company no later than November 18, 1994 in order that they may
be considered for possible inclusion in the proxy statement and form of proxy
relating to that meeting.
FISCAL YEAR END
The Company's fiscal year ends on the Saturday nearest to December 31. Fiscal
1993 ended on January 1, 1994 ("1993 Fiscal Year End") and is referred to
herein as the "Last Fiscal Year."
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES FOR DIRECTOR
A board of seven directors will be elected at the Annual Meeting. Mr. John
Squires and Mr. Roger Penske have advised the Company that they will not stand
for re-election to the Company's Board of Directors at the Annual Meeting. In
January 1994 the Board resolved that, upon completion of the terms of office of
each of Mr. Penske and Mr. Squires, the exact number of directors designated in
the Company's Bylaws shall be reduced from nine to seven. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
seven nominees of the Board of Directors named below, all of whom are currently
directors of the Company. In the event that any nominee of the Company is
unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the
current Board of Directors to fill the vacancy. The Company is not aware of any
nominee who will be unable or will decline to serve as a director. In the event
that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a manner as will
assure the election of as many of the nominees listed below as possible. The
proxies cannot be voted for a greater number of persons than the number of
directors to be elected.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
LISTED BELOW:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION
--------------- --- --------------------
<C> <C> <S>
Finis F. Conner....... 50 Chairman of the Board and Chief Executive Officer
of the Company
David T. Mitchell..... 52 President and Chief Operating Officer of the
Company
William J. Schroeder.. 49 Vice Chairman of the Company
William S. Anderson... 74 Retired Chairman of the Board of Directors of NCR
Corporation
L. Paul Bremer........ 52 Managing Partner, Kissinger Associates, Inc.
Linda Wertheimer Hart. 53 Vice Chairman of Hart Group, Inc.
Mark Rossi............ 37 Vice President of Prudential Equity Investors,
Inc.
</TABLE>
The term of office of each person elected as a director will continue until
the next annual meeting of stockholders or until his or her successor has been
elected. There are no family relationships between any directors or executive
officers of the Company.
Mr. Conner founded the Company in June 1985 and has served as Chairman of the
Board and Chief Executive Officer of the Company since its formation.
Mr. Mitchell joined the Company in October 1992 as President and Chief
Operating Officer. In December 1992, Mr. Mitchell was appointed as a director
of the Company. Prior to joining the Company, Mr. Mitchell co-founded Seagate
Technology, Inc., a manufacturer of rigid magnetic disk drives, and served as
its President, Chief Operating Officer and a director from 1983 to 1991.
Mr. Schroeder joined the Company as President, Chief Operating Officer and a
director in December 1986. He served as President and Chief Operating Officer
until January 1989, when he became the Vice Chairman of the Board of Directors.
From January 1989 to January 1990 he also served as President of the Company's
New Products Group. Mr. Schroeder is a director of Xircom, Inc.
3
<PAGE>
Mr. Anderson has been a director of the Company since April 1990. From 1945
until his retirement in 1984, Mr. Anderson held various positions at NCR
Corporation, including Chairman of the Board of Directors, President and Chief
Executive Officer. From 1984 until 1989, Mr. Anderson continued his affiliation
with NCR Corporation as Chairman of the Executive Committee of its Board of
Directors.
Mr. Bremer has been a director of the Company since October 1992. In 1989,
Mr. Bremer became Managing Director of Kissinger Associates, Inc., a strategic
consulting firm, after a 23-year career in the United States Diplomatic
Service. While in the United States Diplomatic Service, Mr. Bremer served most
recently as a Career Minister in the Senior Foreign Service with the rank of
Ambassador-at-Large from 1986 to 1989. Mr. Bremer is a director of Air Products
and Chemicals, Inc.
Ms. Hart has been a director of the Company since July 1992. Ms. Hart has
served as the Vice Chairman of Hart Group, Inc., a diversified group of
companies involved in insulation manufacturing and residential and commercial
services, since February 1990. Prior to joining Hart Group, Inc. in February
1990, Ms. Hart was a partner with the law firm of Vinson & Elkins from July
1986 to January 1990.
Mr. Rossi has served as a director of the Company since September 1987. Since
1984, Mr. Rossi has served as Vice President of Prudential Equity Investors,
which is the general partner of three private equity investment partnerships,
Prudential Venture Partners, Prudential Venture Partners II and Prudential
Private Equity Investors III.
VOTE REQUIRED
The seven nominees for director receiving the highest number of affirmative
votes of the shares entitled to be voted for them shall be elected as
directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum for the transaction of
business, but have no other legal effect under Delaware law.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held nine meetings during the Last
Fiscal Year. No incumbent director attended fewer than 75% of the aggregate of
all meetings of the Board of Directors occurring during his or her tenure as a
director and any committees of the Board on which he or she served. The Board
of Directors has an Audit Committee, a Compensation Committee and a Nominating
Committee.
The Audit Committee currently consists of directors William S. Anderson, Mark
Rossi and Linda Wertheimer Hart. During the Last Fiscal Year, the Audit
Committee held four meetings. The Audit Committee recommends engagement of the
Company's independent accountants and is primarily responsible for approving
the services performed by the Company's independent accountants and for
reviewing and evaluating the Company's accounting principles and its system of
internal accounting controls.
The Compensation Committee currently consists of directors Mark Rossi,
William S. Anderson, Linda Wertheimer Hart and L. Paul Bremer. During the Last
Fiscal Year, the Compensation Committee held eight meetings. The Compensation
Committee reviews and makes recommendations to the Board concerning the
Company's executive compensation policy. See "Board Compensation Committee
Report on Executive Compensation."
In January 1994, the Board of Directors appointed a Nominating Committee
consisting of directors L. Paul Bremer and William S. Anderson. The Nominating
Committee (i) reviews the size, diversity, independence and composition of the
Board and (ii) recommends potential candidates for director. The Nominating
Committee will consider nominations for directors submitted by stockholders in
the manner contemplated by the Company's Bylaws and applicable law.
4
<PAGE>
DIRECTOR COMPENSATION
Directors are reimbursed for out-of-pocket travel expenses associated with
their attendance at Board meetings. Non-employee directors ("Outside
Directors") receive an annual retainer fee of $20,000 plus compensation of
$1,000 per meeting, in addition to the automatic grant of stock options
pursuant to the Company's 1986 Incentive Stock Plan (the "1986 Plan"). Employee
directors are not compensated for their service on the Board of Directors or on
committees of the Board.
In order to provide an incentive to Outside Directors of the Company, options
are granted to Outside Directors pursuant to Section 4(c) of the 1986 Plan (the
"Automatic Grant Program"). Options may not be granted to Outside Directors of
the Company except under the Automatic Grant Program.
Under the Automatic Grant Program, each Outside Director automatically
receives an option to purchase 20,000 shares of the Company's Common Stock on
the date such person becomes an Outside Director of the Company (the "Initial
Option"). Subsequent to the grant of the Initial Option, each Outside Director
receives an option to purchase an additional 6,000 shares of the Company's
Common Stock on the first day of each fiscal year of the Company. The exercise
price of options granted under the Automatic Grant Program is the fair market
value of the Company's Common Stock on the date of the automatic grant. Options
granted to Outside Directors become exercisable cumulatively with respect to
1/36th of the underlying shares on the first day of each month following the
date of grant of such option. Options granted to Outside Directors have a term
of five years from the date of grant.
During the Last Fiscal Year, each of directors Hart, Rossi, Anderson, Bremer
and Penske received options to purchase 6,000 shares at an exercise price of
$20.75 per share pursuant to the Automatic Grant Program.
PROPOSAL NO. 2
RATIFICATION AND APPROVAL OF AMENDMENT OF THE COMPANY'S
EMPLOYEE STOCK PURCHASE PLAN
In March 1988, the Board of Directors adopted and approved the Company's
Employee Stock Purchase Plan (the "Purchase Plan"). The stockholders approved
the Purchase Plan in April 1988. A total of 500,000 shares of Common Stock were
initially reserved for issuance under the Purchase Plan. Through April 1993,
the stockholders have approved amendments to the Purchase Plan increasing the
number of shares reserved for issuance thereunder to 3,000,000 shares.
PROPOSED AMENDMENT
On October 19, 1993, the Board of Directors approved, subject to stockholder
approval, an amendment to the Purchase Plan to further increase the number of
shares reserved for issuance thereunder to 4,500,000 shares. At the Annual
Meeting, the stockholders are being requested to ratify and approve this
amendment to the Purchase Plan to increase the number of shares reserved
thereunder by 1,500,000 shares. The Board of Directors believes that it is in
the Company's best interests to increase the number of shares reserved for
issuance under the Purchase Plan so that the Company may continue to provide
ongoing incentives to the Company's employees through an opportunity to
purchase the Company's Common Stock at a discount through payroll deductions.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
ratify and approve the proposed amendment to the Purchase Plan.
5
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
AMENDMENT OF THE PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCE THEREUNDER.
GENERAL
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Internal Revenue Code of 1986, as amended (the "Code").
As of 1993 Fiscal Year End, an aggregate of 2,601,135 shares of the Company's
Common Stock had been sold pursuant to the Purchase Plan. There are
approximately 9,000 employees currently eligible to participate in the Purchase
Plan, of whom approximately 3,500 are participating in the current offering
period which will end on April 29, 1994.
SUMMARY OF THE PURCHASE PLAN
A description of the principal features of the Purchase Plan, as amended to
date, is set forth below.
Purpose. The purpose of the Purchase Plan is to provide employees of the
Company who participate in the plan with an opportunity to purchase Common
Stock of the Company at a discount through payroll deductions.
Administration. The Purchase Plan may be administered by the Board of
Directors or a committee appointed by the Board (the "Administrator"), and is
currently being administered by the Compensation Committee of the Board of
Directors. All questions of interpretation of the Purchase Plan are determined
by the Administrator, whose decisions are final and binding upon all
participants.
Eligibility. Any person who is customarily employed by the Company (or any of
its majority-owned subsidiaries) for at least 20 hours per week and more than
five months in a calendar year is eligible to participate in the Purchase Plan,
provided that the employee is employed on the first day of an offering period
and subject to certain limitations imposed by Section 423 of the Code. Eligible
employees become participants in the Purchase Plan by delivering to the Company
a subscription agreement authorizing payroll deductions prior to the applicable
offering date, unless a later time for filing the subscription agreement has
been set by the Administrator for all eligible employees with respect to a
given offering.
Offering Dates. The Purchase Plan is implemented by one offering during each
six-month period of the plan. The first offering period commenced on April 12,
1988. The Administrator may alter the duration of the offering periods without
stockholder approval.
Purchase Price. The purchase price per share at which shares are sold under
the Purchase Plan is equal to the lower of 85% of the fair market value of the
Common Stock on the date of commencement of the six-month offering period or
85% of the fair market value of the Common Stock on the last day of the
offering period. The fair market value of the Common Stock on a given date is
the closing price of the Common Stock on the NYSE as of such date.
Payment of Purchase Price; Payroll Deductions. The purchase price of the
shares is accumulated by payroll deductions during the offering period. The
deductions may not exceed 15% of a participant's eligible compensation, which
is defined in the plan to include the regular straight time gross earnings, in
effect at the beginning of the offering period, exclusive of any payments for
overtime, bonuses, commissions or incentive compensation. Beginning April 30,
1994, the first day of the next offering period, the definition of compensation
under the Purchase Plan will include regular straight time gross earnings and
commissions, in effect at the beginning of the offering period, exclusive of
any payments for overtime, bonuses, or incentive compensation. A participant
may discontinue his or her participation in the plan or may decrease, but not
increase, the rate of payroll deductions at any time during the offering
period. Payroll deductions commence on the first payday following the offering
date, and continue at the same rate until the end of the offering period unless
decreased by the participant.
6
<PAGE>
Purchase of Stock; Exercise of Option. The maximum number of shares placed
under option to a participant in an offering is that number determined by
dividing the amount of the participant's total payroll deductions to be
accumulated during the offering period by 85% of the fair market value of the
Common Stock at the beginning of the offering period. Unless a participant
withdraws from the plan, such participant's option for the purchase of shares
will be exercised automatically at the end of the offering period for up to the
maximum number of shares at the lower of the fair market value of the Common
Stock at the beginning or the end of the offering period.
Notwithstanding the foregoing, no employee will be permitted to subscribe for
shares under the Purchase Plan if immediately after the grant of the option,
the employee would own 5% or more of the voting power or value of all classes
of stock of the Company or of a parent or of any of its subsidiaries (including
stock which may be purchased under the Purchase Plan or pursuant to any other
options), nor shall any employee be granted an option which would permit the
employee to buy pursuant to the plan more than $25,000 worth of stock
(determined based on the fair market value of the shares at the time the option
is granted) in any calendar year.
Withdrawal. A participant's interest in a given offering may be terminated in
whole, but not in part, by signing and delivering to the Company a notice of
withdrawal from the plan. Such withdrawal may be elected at any time prior to
the end of the applicable six-month offering period. Any withdrawal by the
participant of accumulated payroll deductions for a given offering
automatically terminates the participant's interest in that offering. The
failure to remain in the continuous employ of the Company or its majority-owned
subsidiaries for at least 20 hours per week during an offering period will be
deemed to be a withdrawal from that offering.
Capital Changes. In the event any change is made in the Company's
capitalization, such as a stock split or stock dividend, which results in an
increase or decrease in the number of outstanding shares of Common Stock
without receipt of consideration by the Company, appropriate adjustments will
be made by the Administrator to the shares subject to purchase under the
Purchase Plan and in the purchase price per share.
Nonassignability. No rights or accumulated payroll deductions of a
participant under the Purchase Plan may be pledged, assigned or transferred for
any reason and any such attempt may be treated by the Company as an election to
withdraw from the Purchase Plan.
Amendment and Termination of the Plan. The Board of Directors may at any time
amend or terminate the Purchase Plan, except that no such amendment or
termination shall affect options previously granted if it would adversely
affect the rights of any participant. No amendment may be made to the Purchase
Plan without prior approval of the stockholders of the Company if such
amendment would increase the number of shares reserved under the plan, permit
payroll deductions in excess of 15% of the participant's compensation,
materially modify the eligibility requirements or materially increase the
benefits which may accrue under the plan.
TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
at the time of grant of the option or purchase of the shares. Upon disposition
of the shares, the participant will generally be subject to tax and the amount
of the tax will depend upon the participant's holding period. If the shares
have been held by the participant for more than two years after the date of the
option grant, the lesser of (a) the excess of the fair market value of the
shares at the time of such disposition over the purchase price or (b) an amount
computed as 15% of the fair market value of the shares as of the grant date
will be treated as ordinary income, and any further gain or loss will be
treated as long-term capital gain or loss. If the shares are disposed of before
the expiration of this holding period, the excess of the fair
7
<PAGE>
market value of the shares on the purchase date over the purchase price will be
treated as ordinary income, and any further gain or loss on such disposition
will be long-term or short-term capital gain or loss, depending on the holding
period. Different rules may apply with respect to optionees subject to Section
16 of the Securities Exchange Act of 1934, as amended. The Company is not
entitled to a deduction for amounts taxed as ordinary income or capital gain to
a participant except to the extent of ordinary income reported by participants
upon disposition of shares within two years from date of grant.
The foregoing brief summary of the effect of federal income taxation upon the
participant and the Company with respect to the purchase of shares under the
Purchase Plan does not purport to be complete, and reference should be made to
the applicable provisions of the Code. In addition, this summary does not
discuss the tax consequences of a participant's death or the provisions of the
income tax laws of any municipality, state or foreign country in which the
participant may reside.
PARTICIPATION IN PURCHASE PLAN
Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her determination as to
the level of payroll deductions. Accordingly, future purchases under the
Purchase Plan are not determinable. No purchases have been made under the
Purchase Plan since the amendment being submitted for stockholder approval at
the Annual Meeting. Outside Directors are not eligible to participate in the
Purchase Plan.
The following table sets forth certain information regarding shares purchased
during the Last Fiscal Year by each of the Named Officers who participated in
the Purchase Plan, all current executive officers as a group and all other
employees who participated in the Purchase Plan as a group:
<TABLE>
<CAPTION>
NUMBER OF
NAME OF INDIVIDUAL SHARES DOLLAR
OR IDENTITY OF GROUP AND POSITION PURCHASED(#) VALUE($)(1)
--------------------------------- ------------ -----------
<S> <C> <C>
Finis F. Conner.................................... 1,851 $ 5,747
Chairman of the Board and Chief Executive Officer
C. Scott Holt...................................... 1,851 5,747
Executive Vice President--Sales and Marketing
All current executive officers as a group.......... 3,702 11,494
All other employees as a group..................... 968,291 $2,570,908
</TABLE>
- - --------
(1) Market value of shares on date of purchase, minus the purchase price under
the Purchase Plan.
8
<PAGE>
PROPOSAL NO. 3
APPROVAL OF PERFORMANCE--BASED EXECUTIVE COMPENSATION PLAN
In February 1994, the Compensation Committee of the Board of Directors of the
Company approved the adoption of the Company's Performance-Based Executive
Compensation Plan (the "Plan"), and the Board of Directors directed that the
Plan be submitted to the stockholders of the Company for their approval at the
Annual Meeting.
At the Annual Meeting, the stockholders are being requested to approve the
Plan. The Plan will not become effective until its approval by the
stockholders. No payments may be made pursuant to the Plan if the Plan is not
approved by the stockholders at the Annual Meeting.
PURPOSE OF THE PLAN
The purposes of the Plan are to: (i) enhance the alignment between employees,
Company success, and stockholder interests; (ii) provide an objective structure
and process for setting goals, evaluating performance, and making pay
decisions; (iii) provide a leveraged financial incentive to meet corporate
goals, business unit goals, and individual goals, and (iv) attract and retain
key employees.
SUMMARY
Administration. The Plan will be administered by the Compensation Committee
of the Board of Directors of the Company (the "Committee"), which shall consist
of two or more members of the Board who are not employees of the Company and
who otherwise qualify as "outside directors" within the meaning of Section
162(m) of the Code and the regulations thereunder. Other than with respect to
"covered employees" within the meaning of Section 162(m) of the Code ("Covered
Employees"), the Chief Executive Officer (the "CEO") of the Company may assist
in, and make recommendations regarding, the administration of the Plan.
Eligibility and Participation In the Plan. Any employee of the Company who
holds the position of Vice President (or equivalent position) and above,
including any executive officer who is also a director of the Company, shall be
eligible to participate in the Plan. Employees holding sales commission-
eligible positions will not be eligible to participate in the Plan.
Target Award Opportunity. The Committee shall determine a dollar-denominated
target award opportunity for each participant based on the participant's salary
and level of responsibility. For non-162-(m) participants, the percentage of
the target award opportunity actually paid shall be based on the extent to
which corporate, business unit, and individual performance objectives are
achieved. For Covered Employees, the percentage of the target award opportunity
actually paid shall be based on the extent to which corporate and business unit
performance objectives are achieved. Each component may be weighted differently
depending on the participant's role and level within the Company. The higher a
participant's level and broader impact on the Company's performance, the more
weight will be attached to corporate performance results.
Corporate, business unit, and individual performance measures will be
approved by the Committee and are consistent with the Company's annual business
plan. At the corporate level, performance shall be based on operating income
and net sales. However, return on assets, asset turns, inventory turns or other
financial criteria may also be designated by the Committee as secondary
measures. These measures are designed to relate directly to value creation and
focus on profitability, growth, and asset utilization.
For Covered Employees, awards may be earned and paid based on the achievement
of semi-annual and annual performance objectives. A semi-annual award will be
calculated for each Covered Employee at the end of the first six months in the
Plan year. The semi-annual amount earned shall be paid in cash within thirty
(30) days following the end of the first semi-annual period.
9
<PAGE>
An annual award will also be calculated for each Covered Employee at the end
of the Plan year based on the achievement of annual corporate and business unit
performance objectives. The amount earned shall be paid in cash within sixty
(60) days following the end of the Plan year.
Employees are not entitled to any award under the Plan if minimum corporate
and business unit performance objectives are not achieved. However, the
Committee, in its sole discretion and pursuant to circumstances it deems
relevant, may reward outstanding individual performers for their contribution
to the organization for the Plan year.
The amount to be paid to each Plan participant under the Plan will depend on
the factors set forth above. However, the maximum amount that any Plan
participant could ever be eligible to receive under the Plan is $2,500,000 in a
Plan year.
Estimate of Benefits. The amounts that will be paid pursuant to the Plan are
not currently determinable. The amounts that would have been awarded to each of
the Named Officers, to all executive officers as a group and all other
employees for fiscal 1993 if the Plan had been in effect are as follows:
NEW PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
DOLLAR
NAME AND POSITION VALUE ($)
----------------- ---------
<S> <C>
Finis F. Conner............................................ $ 0
Chairman and Chief Executive Officer
David T. Mitchell.......................................... $ 0
President and Chief Operating Officer
C. Scott Holt.............................................. $ 0
Executive Vice President--Sales and Marketing
William Schroeder.......................................... $ 0
Vice Chairman
P. Jackson Bell............................................ $ 0
Executive Vice President and Chief Financial Officer
All Executive Officers as a Group.......................... $ 0
All Other Employees........................................ Not
Determinable
</TABLE>
Outside Directors are not eligible to participate in the Plan.
Amendment and Termination of the Plan. The Committee may terminate, suspend,
or amend the Plan, in whole or in part, from time to time, including to adopt
amendments deemed necessary or desirable to correct any defect, supply any
omission, or reconcile any inconsistency in the Plan or in any award granted
under the Plan so long as any stockholder approval required by Section 162(m)
of the Code has been obtained. No amendment, termination, or modification may
adversely affect outstanding awards under the Plan, in any manner, without the
consent of the affected participants. The Committee must determine that an
amendment or modification is in the best interest of all persons to whom awards
have previously been granted, and may not adopt an amendment or modification
which would result in an increase in the amount of compensation payable under
the Plan.
Change in Control. In the event of a change in control of the Company,
subject to the Committee's discretion, participants would become entitled to an
award which is the greater of (i) actual performance to the date of the change
in control; or (ii) their target award opportunity. In such event, awards would
be paid in cash at the time of the change in control.
10
<PAGE>
Federal Income Tax Consequences. Under present Federal income tax
regulations, participants will realize ordinary income equal to the amount of
the award received in the year of receipt. The Company will receive a deduction
for the amount constituting ordinary income to the participant, provided that
the Plan satisfies the requirements of Code Section 162(m), which limits the
deductibility of nonperformance-related compensation paid to certain corporate
executives. It is the Company's intention that the Plan be administered in a
manner which maximizes the deductibility of compensation for the Company under
Code Section 162(m).
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the adoption of the Plan.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE COMPANY'S PERFORMANCE-BASED EXECUTIVE COMPENSATION PLAN. PROXIES
RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY
A CONTRARY CHOICE IN THEIR PROXIES.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse, independent
accountants, to audit the financial statements of the Company for the year
ending December 31, 1994 and recommends that the stockholders ratify such
selection. In the event of a negative vote, the Board of Directors will
reconsider its selection. Price Waterhouse has audited the Company's financial
statements since the Company's inception in June 1985. Representatives of Price
Waterhouse are expected to be present at the Annual Meeting with the
opportunity to make a statement if they desire to do so, and are expected to be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF PRICE WATERHOUSE AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR
THE FISCAL YEAR ENDING DECEMBER 31, 1994.
11
<PAGE>
OTHER INFORMATION
EXECUTIVE OFFICERS
In addition to Messrs. Conner, Mitchell, and Schroeder, the following persons
were executive officers of the Company as of March 4, 1994:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
P. Jackson Bell......... 52 Executive Vice President and Chief Financial Officer
C. Scott Holt........... 52 Executive Vice President--Sales and Marketing
Dr. Michael L. Workman.. 37 Senior Vice President--Engineering and Chief Technical Officer
</TABLE>
Mr. Bell joined the Company in September 1993 as an Executive Vice President
and the Chief Financial Officer. Prior to joining the Company, Mr. Bell was
employed from April 1991 to September 1993 by American Airlines, Inc. as Senior
Vice President--Planning and by AMR, Inc., a subsidiary of American Airlines,
Inc., as Senior Vice President--Strategic Planning. From February 1989 to March
1991, Mr. Bell was employed by Burlington Northern, Inc. as Executive Vice
President and Chief Financial Officer and by BNRR, a subsidiary of Burlington
Northern, Inc., as Executive Vice President and Chief Financial Officer.
Mr. Holt joined the Company as Vice President--Marketing in April 1986. In
December 1986, Mr. Holt was appointed Executive Vice President--Sales and
Marketing of the Company.
Dr. Workman joined the Company in December 1992 as Senior Vice President--
Engineering. In February 1994, Dr. Workman was appointed to serve as the
Company's Chief Technical Officer. Prior to joining the Company, Dr. Workman
was employed from July 1978 to December 1992 by International Business Machines
Corporation, a computer manufacturer, most recently as the Director of the
Storage Development laboratory in San Jose, California.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file certain reports
regarding ownership of, and transactions in, the Company's securities with the
Securities and Exchange Commission (the "SEC") and with the NYSE. Such
officers, directors and ten percent stockholders are also required by SEC rules
to furnish the Company with copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that during fiscal 1993 all Section 16(a) filing requirements applicable to its
officers, directors and ten percent stockholders were complied with, except
that former officers Mr. Hua Bee Chan and Mr. David G. Ludvigson each filed one
Form 4 late with respect to one transaction.
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of
the Company as of the Record Date by: (a) each director; (b) each of the Named
Officers; (c) all directors and executive officers as a group; and (d) each
person known to the Company who beneficially owns more than 5% or more of the
outstanding shares of its Common Stock. The number and percentage of shares
beneficially owned is determined under the rules of the SEC, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any shares as to which
the individual has sole or shared voting power or investment power and also any
shares that the individual has the right to acquire within 60 days of the
Record Date through the exercise of any stock option or other right. Unless
otherwise indicated, each person has sole voting and investment power (or
shares such powers with his or her spouse) with respect to the shares shown as
beneficially owned.
12
<PAGE>
A total of 50,678,912 shares of the Company's Common Stock were issued and
outstanding as of the Record Date.
<TABLE>
<CAPTION>
SHARES APPROXIMATE
NAME OF PERSON BENEFICIALLY PERCENT
OR IDENTITY OF GROUP OWNED OWNED
-------------------- ------------ -----------
<S> <C> <C>
Franklin Resources,
Inc.(1)................ 3,224,124 6.25%
777 Mariners Island
Boulevard
San Mateo, CA 94404
J. P. Morgan & Co.
Incorporated(2)........ 2,617,885 5.13
60 Wall Street
New York, NY 10260
Finis F. Conner(3)...... 1,779,900 3.48
John P. Squires(4)...... 1,229,414 2.41
David T. Mitchell(5).... 243,750 *
C. Scott Holt(6)........ 181,148 *
William J. Schroeder(7). 126,751 *
Mark Rossi(8)........... 62,586 *
William S. Anderson(9).. 44,165 *
Roger S. Penske(10)..... 30,165 *
P. Jackson Bell......... 25,000 *
Linda Wertheimer
Hart(11)............... 15,554 *
L. Paul Bremer(12)...... 13,887 *
All directors and execu-
tive officers as a
group
(12 persons)(13)....... 3,780,027 7.29
</TABLE>
- - --------
* Less than 1%.
(1) Based on the initial filing of a Schedule 13G dated February 3, 1994 by
Franklin Resources, Inc. ("Franklin") with the SEC. Franklin, which acts
as a registered investment adviser, an investment company and a parent
holding company, has sole voting power with respect to 3,221,124 shares,
shared voting power with respect to 3,000 shares and shared dispositive
power with respect to all shares. Includes 871,124 shares issuable upon
conversion of 24,700,000 convertible debentures of the Company.
(2) Based on Amendment No. 3 to Schedule 13G dated December 31, 1993 filed by
J.P. Morgan & Co. Incorporated ("J.P. Morgan") with the SEC. J.P. Morgan,
a parent holding company, has sole voting power with respect to 1,104,385
shares and sole dispositive power with respect to all shares. Includes the
right to acquire 315,585 shares.
(3) Includes 431,250 shares issuable upon exercise of options held by Mr.
Conner, which options are exercisable within 60 days of the Record Date.
(4) Includes 257,314 shares issuable upon exercise of options held by Mr.
Squires, which options are exercisable within 60 days of the Record Date
and 8,000 shares held by Mr. Squires' wife.
(5) Includes 93,750 shares issuable upon exercise of options held by Mr.
Mitchell, which options are exercisable within 60 days of the Record Date.
(6) Includes 157,291 shares issuable upon exercise of options held by Mr.
Holt, which options are exercisable within 60 days of the Record Date.
(7) Includes 83,751 shares issuable upon exercise of options held by Mr.
Schroeder, which options are exercisable within 60 days of the Record
Date.
13
<PAGE>
(8) Includes 34,165 shares issuable upon exercise of options held by Mr.
Rossi, which options are exercisable within 60 days of the Record Date.
Also includes 25,264 shares held by Prudential Equity Investors, Inc. Mr.
Rossi disclaims beneficial ownership of such shares.
(9) Includes 34,165 shares issuable upon exercise of options held by Mr.
Anderson, which options are exercisable within 60 days of the Record Date.
(10) Includes 28,165 shares issuable upon exercise of options held by Mr.
Penske, which options are exercisable within 60 days of the Record Date.
(11) Includes 15,554 shares issuable upon exercise of options held by Ms. Hart,
which options are exercisable within 60 days of the Record Date.
(12) Includes 13,887 shares issuable upon exercise of options held by Mr.
Bremer, which options are exercisable within 60 days of the Record Date.
(13) Includes 1,166,999 shares issuable upon exercise of options held by all
executive officers and directors as a group, which options are exercisable
within 60 days of the Record Date.
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table discloses compensation earned by the Company's Chief
Executive Officer and the four other most highly paid executive officers (based
on salary plus bonus for the Last Fiscal Year) for the last three fiscal years.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- ------------------- -------
OTHER RESTRICTED
ANNUAL STOCK LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($)(3) (#)(4) ($) ($)(5)
------------------ ---- -------- ---------- ------------ ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Finis F. Conner......... 1993 $615,632 $ 0 $ -- $ 0 $ 0 $ 0 $4,826
Chairman and Chief 1992 548,654 1,247,109 0 1,687,500 300,000 0 3,596
Executive Officer 1991 495,673 368,820 * 0 0 0 *
David T. Mitchell....... 1993 443,517 0 157,789 0 250,000 0 4,513
President and Chief 1992 87,690 292,486 -- 2,925,000 350,000 0 1,080
Operating Officer
C. Scott Holt........... 1993 274,285 83,438 -- 0 20,000 0 3,060
Executive Vice 1992 274,352 375,778 0 168,750 50,000 0 2,832
President--Sales and 1991 249,039 164,470 * 0 50,000 0 *
Marketing
William J. Schroeder.... 1993 301,882 0 -- 0 0 0 1,895
Vice Chairman 1992 264,596 616,209 -- 337,500 100,000 0 1,653
1991 249,039 157,944 * 0 50,000 0 *
P. Jackson Bell(6)...... 1993 99,523 50,000 130,645 268,750 125,000 0 1,250
Executive Vice
President and Chief
Financial Officer
</TABLE>
- - --------
* Under the SEC's transition rules, no disclosure is required in these columns
for fiscal 1991.
(1) Includes (i) bonuses paid with respect to services rendered in the fiscal
year indicated, whether or not such bonus was actually paid during such
fiscal year, and (ii) payments under the Company's cash profit sharing
plan.
(2) Includes the following:
(a) Payment by the Company in 1993 to Mr. Bell of relocation expenses in
the amount of $130,645.
(b) Payment by the Company in 1993 to Mr. Mitchell of relocation expenses
in the amount of $143,029 and taxable business travel and certain
medical expenses for a total of $14,760.
14
<PAGE>
(3) The total number of restricted shares and the aggregate market value at
January 1, 1994 (1993 Fiscal Year End) is as follows: Mr. Conner (100,000
shares, $1,462,500); Mr. Mitchell (150,000 shares, $2,193,750); Mr. Holt
(10,000 shares, $146,250); Mr. Schroeder (20,000 shares, $292,500); and Mr.
Bell (25,000 shares, $365,625). Aggregate market value is based on the
closing price on the NYSE on December 31, 1993 ($14.625 per share). Persons
holding restricted stock are entitled to receive any dividends paid to
stockholders generally; however, stock issued in stock splits or dividends
is subject to the same restrictions as the restricted stock with respect to
which it is issued.
(4) The Company repriced Mr. Mitchell's outstanding options in 1993 in the
following manner: The option to purchase 350,000 shares granted in October
1992 at an exercise price of $18.625 per share was cancelled in exchange
for an option to purchase 250,000 shares at an exercise price of $9.25 per
share, the fair market value of the Company's Common Stock on the date of
the exchange, July 19, 1993.
(5) The amounts disclosed in the "All Other Compensation" column for the Last
Fiscal Year include:
(a) Payment by the Company in 1993 of premiums for term life insurance as
follows: Mr. Conner, $4,826; Mr. Mitchell, $4,513; Mr. Holt, $2,880;
Mr. Schroeder, $1,770; and Mr. Bell, $1,250; and
(b) Payment by the Company in 1993 of the Company's 401(k) matching
contributions for Mr. Holt, $180, and Mr. Schroeder, $125.
(6) Mr. Bell became an executive officer of the Company in September 1993.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to options granted in
fiscal 1993 to the Named Officers.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(3)
---------------------------------------------------------- -------------------
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING OPTIONS TO EMPLOYEES PRICE EXPIRATION
GRANTED (3)(1) IN FISCAL YEAR(2) ($/SH) DATE 5%($) 10%($)
-------------------- ----------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Finis F. Conner......... 0 -- -- -- -- --
David T. Mitchell....... 250,000 7.59% $9.25 7/19/03 1,456,875 3,676,875
C. Scott Holt........... 20,000 0.61% 9.25 7/19/03 116,550 294,150
William J. Schroeder.... 0 -- -- -- -- --
P. Jackson Bell......... 125,000 3.80% 10.75 10/19/03 846,563 2,136,563
</TABLE>
- - --------
(1) All options in this table were granted under the Company's 1986 Plan and
have exercise prices equal to the fair market value of the Company's Common
Stock on the date of grant. The options become exercisable over a period of
four years and expire ten years from the date of grant. The 1986 Plan is
currently administered by the Compensation Committee of the Board of
Directors, which has broad discretion and authority to amend outstanding
options and to reprice options, whether through an exchange of options or
an amendment thereto.
(2) The Company granted options to purchase an aggregate of 3,292,099 shares to
employees in fiscal 1993.
(3) Potential realizable value assumes that the stock price increases from the
date of grant until the end of the option term (10 years) at the annual
rate specified (5% and 10%). Annual compounding results in total
appreciation of approximately 63% (at 5% per year) and 159% (at 10% per
year). If the price of the Company's Common Stock were to increase at such
rates from the price at 1993 Fiscal Year End ($14.625 per share) over the
next 10 years, the resulting stock price at 5% and 10% appreciation would
be $23.84 and $37.88, respectively. The assumed annual rates of
appreciation are specified in SEC rules and do not represent the Company's
estimate or projection of future stock price. The Company does not
necessarily agree that this method can properly determine the value of an
option.
15
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table provides information with respect to option exercises in
fiscal 1993 by the Named Officers and the value of such officers' unexercised
options at 1993 Fiscal Year End.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT THE-MONEY OPTIONS AT
FISCAL YEAR-END(#) FISCAL YEAR END ($)(2)
------------------------- -------------------------
VALUE
SHARES ACQUIRED REALIZED
NAME ON EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Finis F. Conner......... 0 -- 393,749 206,251 $395,311 $ 17,189
David T. Mitchell....... 0 -- 72,916 177,084 391,924 951,827
C. Scott Holt........... 0 -- 143,749 76,251 131,770 113,230
William J. Schroeder.... 10,000 71,250 68,125 86,460 17,189 2,866
P. Jackson Bell......... 0 -- 0 125,000 0 484,375
</TABLE>
- - --------
(1) Market value of underlying securities based on the closing price of the
Company's Common Stock on the NYSE on the date of exercise, minus the
exercise price.
(2) Market value of securities underlying unexercised in-the-money options
based on the closing price of the Company's Common Stock on December 31,
1993 (the last trading day of the Last Fiscal Year) on the NYSE of $14.625,
minus the exercise price.
The following table sets forth information regarding all repricings of
options held by any executive officer since the Company' initial public
offering of its Common Stock on April 12, 1988.
<TABLE>
<CAPTION>
MARKET PRICE LENGTH OF ORIGINAL
NUMBER OF SECURITIES OF STOCK AT EXERCISE PRICE OPTION TERM
UNDERLYING TIME OF AT TIME OF NEW REMAINING AT
OPTIONS REPRICED REPRICING OR REPRICING OR EXERCISE DATE OF REPRICING
NAME AND POSITION DATE OR AMENDED(#)(1) AMENDMENT($ ) AMENDMENT($ ) PRICE($) OR AMENDMENT
----------------- ---- -------------------- ------------ -------------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
David T. Mitchell 7/19/93 250,000 $9.25 $18.625 $9.25 9 years
President and Chief 4 months
Operating Officer
</TABLE>
- - --------
(1) Options to purchase 350,000 shares granted on October 21, 1992 were
cancelled in exchange for the grant of the option to purchase 250,000
shares on July 19, 1993.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the Last Fiscal Year, the Compensation Committee consisted of
directors William S. Anderson, L. Paul Bremer, Linda Wertheimer Hart and Mark
Rossi.
The Company and Kissinger Associates, Inc., a strategic consulting firm
("KAI"), entered into a consulting agreement dated November 29, 1992 (the
"Consulting Agreement"), pursuant to which KAI agreed to provide consultation
with respect to international developments that may affect the Company's
business. In consideration for such services, the Company agreed to pay KAI the
sum of $175,000 per annum. The Consulting Agreement expires on November 29,
1994. Ambassador L. Paul Bremer, a director of the Company, is the Managing
Director of KAI.
16
<PAGE>
CERTAIN TRANSACTIONS
See also "Executive Officer Compensation--Compensation Committee Interlocks
and Insider Participation" above.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report is presented by the Committee with respect to the
compensation of its executive management. Actual compensation during 1993 for
the Named Officers is shown in the Summary Compensation Table contained in
this proxy.
INTRODUCTION
The Company's executive compensation policies are designed to provide a
strong and direct link between the Company's performance and executive pay,
provide competitive levels of compensation, and to assist the Company in
attracting and retaining the most qualified executives in the industry. Target
levels of the executive management's overall compensation are intended to be
competitive with other executives in the Company's industry. The Compensation
Committee of the Board of Directors (the "Committee") generally determines
base salary levels as a primary element of compensation for executive
management of the Company at or about the start of the fiscal year based upon
competitive data and corporate and individual performance.
COMPENSATION PHILOSOPHY
The goals of the Company's compensation program are to align management
compensation with business objectives and stockholder interests through
incentive and motivational criteria, performance measures and objectives, and
use of stock-based incentives. In order to achieve that, the Company has
historically positioned its executive base salary levels at approximately the
50th percentile of survey data, which includes both the Company's direct
competitors and the companies with whom the Company competes for executive
talent. Other key elements of the Company's compensation philosophy include
establishing compensation programs that provide competitive pay systems to
help the Company attract, retain and motivate its executive management and
encourage and facilitate long-term executive stock ownership. Pay is
sufficiently variable that above-average performance results in above-average
total compensation, and below-average performance for the Company or the
individual results in below-average total compensation. The focus is on
achievement of the pre-set business plan for operating income, net sales and
individual performance against the business plan.
1993 WORLDWIDE COMPENSATION PROGRAM
In 1993, the Company's compensation program consisted of both cash and
equity-based compensation. The three primary components of the compensation
program were (i) base salary, (ii) profit sharing and annual bonus and (iii)
long-term incentives.
At the beginning of the 1993 year, the Committee approved setting of base
salary levels for the executives based on competitive data, the prior year's
corporate performance and individual recommendations of executive management.
The Committee subsequently discussed, approved and implemented, based on the
performance of the Company during 1993, a reduction of such base salary levels
to the prior December 1992 levels. In addition, at its regular meetings at
year end, the Committee considered but decided not to award bonuses or profit
sharing to any of the Company's executives based on the performance of the
Company in 1993. In January 1994, the Committee reinstated the 1993 annual
base salary levels, previously approved by the Committee in early 1993, to be
effective as of October 2, 1993, the first day of the Company's fourth
quarter. This decision was based on the Company's return to profitability in
the fourth quarter of 1993.
17
<PAGE>
In February 1994, the Committee adopted, and approved for stockholder
submission and approval, the Company's Performance-Based Executive Compensation
Plan (the "Plan") for implementation beginning in 1994. See "Proposal No. 3--
Approval of Performance-Based Executive Compensation Plan" for a description of
the Plan.
Annual performance-based awards will be paid from a pool calculated as the
sum of the annual target award payments which can be made under the Plan.
Long-term incentives are provided through grants of stock options and
restricted stock. Based on recommendations of executive management, the
Committee is responsible for determining, subject to the terms of these plans,
the individuals to whom grants should be made, the timing of grants, the
exercise or purchase price per share and the number of shares subject to each
option or restricted stock award. Stock options are granted under the 1986
Incentive Stock Plan and are primarily used to motivate executives to maximize
stockholder value. The option program also utilizes vesting periods to
encourage key employees to continue in the employ of the Company. The 1986
Incentive Stock Plan permits the grant of options at below fair market value.
Restricted stock is granted under the 1992 Restricted Stock Plan. With
restricted stock, the value of the award to executives also increases with
increasing stock price. However, a substantial purpose of restricted stock is
to provide incentives for experienced executives to remain with the Company for
the long term. The Committee has the authority under this plan to determine the
vesting schedule. To date, all restricted stock grants have been subject to the
following vesting schedule: No shares vest for three years after the date of
grant, at which time only 15% of the shares granted become vested. To become
fully vested, the executive must remain with the Company for seven years after
the date of grant. The Company believes that low turnover in experienced
management is critical to the Company's long-term success and profitability.
The time-phased restrictions encourage such executive retention.
An additional important purpose of both the stock option and the restricted
stock awards is to motivate executives to make the types of long-term changes
in the financial performance of the business that will maximize long-term total
return to stockholders. In accordance with the provisions of the Company's 1986
Incentive Stock Plan, the Committee granted stock options to certain new hires
and some key executives of the Company during 1993.
In July 1993, the Committee authorized the grant of options to purchase a
total of 250,000 shares at an exercise price equal to the then fair market
value to David T. Mitchell, President and Chief Operating Officer of the
Company, in exchange for the cancellation of options to purchase a total of
350,000 shares that had been granted to him upon joining the Company in October
1992. See the table on page 16 for more information regarding the above.
COMPANY PERFORMANCE AND CEO COMPARISON
As indicated above, the Company's 1993 executive compensation plan is based
on corporate and individual performance, with a high percentage of variable
compensation. Specifically, the Chairman and Chief Executive Officer's target
base pay level is typically set at approximately the 50th percentile for high
technology companies, using data specifically for high technology companies of
similar size. In the past, Mr. Conner's total compensation has tracked closely
the overall financial performance of the Company. In 1993, Mr. Conner received
a base salary of $615,632 and no bonus as set forth in the Summary Compensation
Table. Also, the Committee did not grant any stock options or award any
restricted stock to Mr. Conner during 1993.
18
<PAGE>
OTHER
In addition to the compensation paid to executive management as described
above, executive management and other key employees receive benefits under the
Company's Medical Reimbursement Plan and the Executive Medical Reimbursement
Plan. They also receive, along with and on the same terms as other employees,
matching contributions by the Company under the Company's Pre-Tax Savings Plan
(the Company's 401(k) plan). Finally, they are eligible to participate in the
Company's Employee Stock Purchase Plan, which permits the purchase of stock at
a discount through payroll deductions.
Respectfully submitted by:
William S. Anderson Linda Wertheimer Hart
L. Paul Bremer Mark Rossi
PERFORMANCE GRAPH
The following graph shows a comparison of five-year cumulative total
stockholder return, calculated on a dividend reinvested basis, from December
31, 1988 (the last day of the Company's 1988 fiscal year) through 1993 Fiscal
Year End for Conner, the Standard & Poor's 500 Index (the "S&P 500") and a peer
group constructed by the Company (the "Peer Group"). The graph assumes that
$100 was invested in each of these three on December 31, 1988. The Peer Group
is composed of Exabyte Corporation, Maxtor Corporation, Micropolis Corporation,
Quantum Corporation, Rexon, Inc., Seagate Technology, Inc., Western Digital
Corp. and Archive Corporation (from December 31, 1988 through December 29,
1992, when Archive Corporation was acquired by the Company). Returns for the
Peer Group are weighted based on market capitalization at the beginning of each
period presented. Note that historic stock price performance is not necessarily
indicative of future stock price performance.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG CONNER PERIPHERALS, INC., S&P 500 INDEX AND PEER GROUP
<CAPTION> CONNER S&P
Measurement Period PERIPHERALS 500 PEER
(Fiscal Year Covered) INC. INDEX GROUP
- - ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-
FYE 12/31/88 $100 $100 $100
FYE 12/31/89 $167 $132 $143
FYE 12/31/90 $300 $128 $171
FYE 12/31/91 $200 $166 $195
FYE 12/31/92 $263 $179 $356
FYE 12/31/93 $186 $197 $370
</TABLE>
19
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of proxy to vote the shares they represent
as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: March 18, 1994
20
<PAGE>
CONNER PERIPHERALS,INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R
O The undersigned stockholder of Conner Peripherals, Inc., a Delaware
X corporation (the "Company"), hereby appoints Finis F. Conner and David T.
Y Mitchell, and each of them, each with full power of substitution, as proxy
for the undersigned to vote and otherwise represent all the shares registered
in the name of the undersigned at the Annual Meeting of Stockholders of the
Company to be held on Tuesday, April 19, 1994 at 10:00 a.m. at the Fairmont
Hotel, 170 South Market Street, San Jose, California and at any adjournment
thereof, with the same effect as if the undersigned were present and voting
such shares, on the following matters and in the following manner as further
described in the accompanying Proxy Statement.
Either of such proxies and attorneys-in-fact, or their substitutes, as
shall be present and shall act at said meeting or any adjournment or
adjournments thereof shall have and may exercise all the powers of said
proxies and attorneys-in-fact hereunder.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders, the Proxy Statement and the Company's 1993 Annual Report to
Stockholders.
-------------
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY. SEE REVERSE
SIDE
-------------
<PAGE>
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATION MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES AND PROPOSALS AND, IN THE
DISCRETION OF THE PROXY HOLDERS, ON ANY OTHER MATTERS THAT MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
1. The election of the following persons as Directors of the Company to
serve until the next Annual Meeting of Stockholders and until their
successors shall be duly elected and qualified.
NOMINEES: Finis F. Conner, William S. Anderson, William J. Schroeder,
Mark Rossi, David T. Mitchell, Linda Wertheimer Hart and L. Paul Bremer.
FOR ALL NOMINEES [ ] [ ] WITHHELD FROM ALL NOMINEES
[ ]
---------------------------------------------------
FOR all nominees except those listed on the line above
FOR AGAINST ABSTAIN
2. Ratification and approval of the amendment [ ] [ ] [ ]
to the Company's Employee Stock Purchase Plan
increasing the number of shares reserved for
issuance thereunder by 1,500,000 shares.
3. Approval of the Company's Performance-Based [ ] [ ] [ ]
Executive Compensation Plan.
4. Ratification and approval of the selection [ ] [ ] [ ]
of Price Waterhouse & Co. as independent
certified public accountants for the
Company for the fiscal year ending
December 31, 1994.
The proxies are authorized to vote and otherwise represent the shares
of the undersigned on any other matters which may properly come before
the meeting or any adjournments, according to their decision and in
their discretion.
MARK HERE [ ] MARK HERE [ ]
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
If the shares are held jointly, each holder should sign. If signing for
estates, trusts, partnerships or corporations, title or capacity should be
stated. Sign exactly as the name(s) appear on the stock certificate(s).
Signature: ______________________________ Date ____________________________
Signature: ______________________________ Date ____________________________
