<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
STORMEDIA INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee.
[ ] $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:
---------------------------------------------------------------------
(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:
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
Set forth the amount on which the filing fee is calculated and state 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:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
STORMEDIA INCORPORATED
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 24, 1997
------------------------
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of StorMedia
Incorporated, a
Delaware corporation (the "Company") will be held on April 24, 1997 at 3:00
p.m., Pacific daylight savings time, at the Santa Clara Marriott Hotel, located
at 2700 Mission College Boulevard, Santa Clara, California 95054, for the
following purposes:
1. To elect four (4) directors to serve for the ensuing year or until
their successors are elected and qualified (Proposal 1);
2. To ratify the appointment of KPMG Peat Marwick, LLP as independent
auditors of the Company for the fiscal year ending December 31, 1997
(Proposal 2); and
3. To transact such other business as may properly be brought before
the meeting and any adjournment(s) thereof.
Stockholders of record at the close of business on February 28, 1997 shall
be entitled to notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting. However, to
assure your representation at the meeting, you are urged to mark, sign, date and
return the enclosed proxy card as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person even if he or she has returned a proxy.
Sincerely,
WILLIAM J. ALMON
Chairman of the Board and Chief
Executive Officer
Santa Clara, California
March 21, 1997
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 3
STORMEDIA INCORPORATED
385 REED STREET
SANTA CLARA, CALIFORNIA 95050
------------------------
PROXY STATEMENT
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
StorMedia Incorporated (the "Company") for use at the Annual Meeting of
Stockholders to be held at the Santa Clara Marriott Hotel, 2700 Mission College
Boulevard, Santa Clara, California 95054 on April 24, 1997 at 3:00 p.m., Pacific
daylight savings time, and at any adjournment(s) thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of Stockholders.
The Company's principal office is located at 385 Reed Street, Santa Clara,
California 95050 and its telephone number is (408) 327-8400. These proxy
solicitation materials were mailed on or about March 25, 1997 to all
stockholders entitled to vote at the meeting.
RECORD DATE AND SHARE OWNERSHIP
Stockholders of record at the close of business on February 28, 1997 (the
"Record Date") are entitled to notice of and to vote at the meeting and at any
adjournment(s) thereof. At the Record Date, 13,299,655 shares of the Company's
Class A Common Stock, $0.013 par value, and 4,362,001 shares of Class B Common
Stock, $0.013 par value, were issued and outstanding.
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 (Attention:
Henry Lo) 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 Class A Common Stock has one vote on all matters. Class B
Common Stock is not entitled to vote except upon the occurrence of a "Voting
Event" (as defined in the Company's Amended and Restated Certificate of
Incorporation). None of the matters set forth herein constitute a Voting Event.
The cost of this solicitation will be borne by the Company. The Company has
retained the services of Corporate Investor Communications, Inc. (the
"Solicitor") to aid in the solicitation of proxies from brokers, bank nominees
and other institutional owners. The Company estimates that it will pay the
Solicitor a fee not to exceed $3,500 for its services and will reimburse it for
reasonable out-of-pocket expenses estimated to be an additional $3,500. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone or telegram.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The Company's Bylaws provide that stockholders holding a majority of the
outstanding shares of the corporation entitled to vote on the Record Date and
represented by person or by proxy shall constitute a quorum at meetings of
stockholders. Shares that are voted "FOR," "AGAINST" or "WITHHELD" on a matter
are treated as being present at the meeting for purposes of establishing a
quorum and are also treated as "entitled to vote on the subject matter" (the
"Votes Cast") at the Annual Meeting with respect to such matter.
<PAGE> 4
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 the presence or absence of a
quorum for the transaction of business and the total number of Votes Cast with
respect to a particular matter (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, with the exception of the proposal for
the election of directors, abstentions will have the same effect as a vote
against the proposal. Because directors are elected by a plurality vote,
abstentions in the election of directors have no impact once a quorum exists.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
Court held that while broker non-votes may 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. Broker non-votes with respect to proposals set forth in
this Proxy Statement will therefore not be considered "Votes Cast" and,
accordingly, will not affect the determination as to whether the requisite
majority of Votes Cast has been obtained with respect to a particular matter.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
at the 1998 Annual Meeting of Stockholders must be received by the Company no
later than November 21, 1997 and must otherwise be in compliance with applicable
laws and regulations in order to be considered for inclusion in the proxy
statement and form of proxy relating to that meeting.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
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 reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Such officers, directors and ten-percent stockholders are also
required by SEC rules to furnish the Company with copies of all forms that they
file pursuant to Section 16(a). Based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons
that no filings were required for such persons, the Company believes that all
Section 16(a) filing requirements applicable to its officers, directors and
ten-percent stockholders were complied with.
STOCKHOLDER INFORMATION
A copy of the Company's Annual Report on Form 10-K, including financial
statements and schedules is enclosed with these proxy solicitation materials. IN
COMPLIANCE WITH RULE 14A-3 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF
1934, THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON
UPON WRITTEN REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K,
INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES THERETO. REQUESTS FOR
SUCH COPIES SHOULD BE DIRECTED TO STORMEDIA INCORPORATED, 385 REED STREET, SANTA
CLARA, CALIFORNIA 95050, ATTENTION: INVESTOR RELATIONS.
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A board of four (4) directors is to be elected at the meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the election of the four nominees named below, all of whom are presently
directors of the Company. Each nominee has consented to be named a nominee in
this Proxy Statement and to continue to serve as a director if elected. Should
any nominee become unable or decline to serve as a director or should additional
persons be nominated at the meeting, the proxy holders intend to vote all
proxies received by them in such a manner as will assure the election of as many
nominees listed below as
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<PAGE> 5
possible (or, if new nominees have been designated by the Board of Directors, in
such a manner as to elect such nominees) and the specific nominees to be voted
for will be determined by the proxy holders. The Company is not aware of any
reason that any nominee will be unable or will decline to serve as a director.
Each director elected at this Annual Meeting will serve until the next Annual
Meeting of Stockholders or until such director's successor has been elected and
qualified. There are no arrangements or understandings between any director or
executive officer and any other person pursuant to which he is or was to be
selected as a director or officer of the Company.
The names of the nominees and certain information about them, are set forth
below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- -------------------------------- --- --------------------------------------------- --------
<S> <C> <C> <C>
William J. Almon................ 64 Chief Executive Officer and Chairman of the 1994
Board of Directors of the Company
John A. Downer(1)(2)............ 39 Vice President, Prudential Equity Investors, 1994
Inc.
Francis J. Lunger(1)............ 51 Chief Financial Officer, Oak Industries Inc. 1994
Mark S. Rossi(2)................ 40 President, Prudential Equity Investors, Inc. 1994
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years.
Mr. Almon has served as Chairman of the Board of Directors and Chief
Executive Officer since the Company's organization in May 1994, and served as
President from its organization to May 1995. Prior to joining the Company, Mr.
Almon served as an independent consultant from February 1993 until May 1994 and
as President, Chief Operating Officer and a director of Conner Peripherals, Inc.
from December 1989 to February 1993.
Mr. Lunger has served as Senior Vice President and Chief Financial Officer
of Oak Industries Inc., since November 1995. From March 1994 until August 1995,
Mr. Lunger served as Chief Administrative Officer, and from August 1995 until
November 1995, as Acting Chief Executive Officer of Nashua Corporation. From
January 1983 until March 1994, Mr. Lunger served as a Vice President of Raychem
Corporation, most recently serving as Vice President and General Manager of the
Interconnect Components and Medical Division.
VOTE REQUIRED
Directors will be elected by a plurality vote of the shares of the
Company's Class A Common Stock present or represented and entitled to vote on
this matter at the meeting. Accordingly, the four candidates receiving the
highest number of affirmative votes of shares represented and voting on this
proposal at the meeting will be elected directors of the Company. Votes withheld
from a nominee and broker non-votes will be counted for purposes of determining
the presence or absence of a quorum but because directors are elected by a
plurality vote, will have no impact once a quorum is present. See "Information
Concerning Solicitation and Voting -- Quorum; Abstentions; Broker Non-Votes."
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE NOMINEES LISTED ABOVE
3
<PAGE> 6
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of eight meetings and
took a total of seven actions by written consent during the fiscal year ended
December 31, 1996. No director serving during such fiscal year attended fewer
than 75% of the aggregate of all meetings of the Board of Directors and the
committees of the Board upon which such director served. The Board of Directors
has two committees, the Audit Committee and the Compensation Committee.
The Audit Committee of the Board of Directors which consists of Messrs.
Downer and Lunger, held one meeting during the last fiscal year. The Audit
Committee reviews and advises the Board of Directors regarding the Company's
accounting matters and is responsible for reviewing and recommending the annual
appointment of the independent public accountants, recommending the engagement
of the Company's independent public accountants and the services to be performed
by them, and reviewing and evaluating the accounting principles being applied to
the Company's financial reports.
The Compensation Committee of the Board of Directors which consists of
Messrs. Downer and Rossi, held two meetings during the last fiscal year. The
Compensation Committee reviews and advises the Board of Directors regarding all
forms of compensation to be provided to the officers, employees, directors and
consultants of the Company.
The Board of Directors has no nominating committee or any committee
performing such functions.
DIRECTOR COMPENSATION
Each non-employee director of the Company receives a fee of $2,000 per
quarter, plus $1,000 for each Board meeting attended and $500 for each Board
committee meeting attended.
The Director Plan provides for the automatic and non-discretionary grant of
nonqualified stock options to purchase 12,000 shares of the Company's Class A
Common Stock to directors who are not employed by the Company nor are
stockholders of the Company ( "Outside Director") on the last to occur of the
adoption of the plan or the date upon which such person first becomes a director
("Initial Option"). Thereafter, each Outside Director is automatically granted
an option to purchase 3,000 shares of Class A Common Stock on April 1 of each
year, beginning April 1, 1996 ("Subsequent Option"), provided he or she has
served as a director for at least six months as of such date. The exercise price
of options granted under the Director Plan is 100% of the fair market value of
the Company's Class A Common Stock on the date of grant. Initial Options vest
and become exercisable as to 25% of the shares on each anniversary of the date
of grant. Subsequent Options vest and become exercisable as to 100% of the
shares on the fourth anniversary of the date of grant.
In February 1995, Mr. Lunger was granted an Initial Option to purchase
12,000 shares of Class A Common Stock at an exercise price of $2.67 per share.
On April 1, 1996, a Subsequent Option to purchase 3,000 shares of Class A Common
Stock was granted to Mr. Lunger at an exercise price of $16.17, and on April 1,
1997, a Subsequent Option to purchase 3,000 shares of Class A Common Stock will
automatically be granted to Mr. Lunger at an exercise price equal to the fair
market value on the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Rossi and Downer. Mr. Almon
also participates in discussions regarding salaries and incentive compensation
for all employees (including officers) and consultants to the Company, except
that Mr. Almon is excluded from discussions regarding his own salary and
incentive compensation.
4
<PAGE> 7
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick, LLP, independent
auditors, to audit the financial statements of the Company for the fiscal year
ending December 31, 1997, and recommends that stockholders vote for ratification
of such appointment. Representatives of KPMG Peat Marwick, LLP are expected to
be present at the 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.
REQUIRED VOTE
The ratification of the appointment of KPMG Peat Marwick, LLP requires the
affirmative vote of a majority of the shares of the Company's Class A Common
Stock present or represented and entitled to vote on this subject matter at the
meeting. An abstention is not an affirmative vote and, therefore, will have the
same effect as a vote against the proposal. A broker non-vote will not be
treated as entitled to vote on this subject matter at the meeting. See
"Information Concerning Solicitation and Voting -- Quorum; Abstentions; Broker
Non-Votes."
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK, LLP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Class A Common Stock as of the Record Date by (i)
each person (or group of affiliated persons) known to the Company to be the
beneficial owner of more than 5% of the Company's Class A Common Stock, (ii)
each director, (iii) each of the Company's executive officers named in the
Summary Compensation Table appearing herein, and (iv) all of the Company's
directors and executive officers as a group. Other than the provisions set forth
in its Amended and Restated Certificate of Incorporation with respect to the
rights of the Class B Common Stock to vote upon the occurrence of certain
"Voting Events" as defined therein, the Company knows of no agreements among its
stockholders which relate to voting or investment power of its shares of Class A
Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
-------------------------------------
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF TOTAL
- -------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Prudential Private Equity Investors III, LP (2)............... 1,375,499 10.42
717 Fifth Avenue
New York, NY 1002
William J. Almon(3)........................................... 1,265,124 9.59
Mark S. Rossi(4).............................................. 1,375,499 10.42
John A. Downer(4)............................................. 1,375,499 10.42
Francis J. Lunger(5).......................................... 6,500 *
Stephen M. Abely(6)........................................... 21,283 *
Atef Eltoukhy(7).............................................. 545 *
Michael E. Oxsen(8)........................................... 42,915 *
Sherman Silverman(9).......................................... 24,081 *
All directors and executive officers as a group (8
persons)(10)................................................ 2,735,947 20.73
</TABLE>
- ---------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission and generally
includes voting or investment power with respect to securities. Options to
purchase shares of Class A Common Stock which are currently exercisable or
will become exercisable within 60 days of the Record Date, are deemed to be
outstanding for purposes of computing
5
<PAGE> 8
the percentage of the shares held by an individual but are not outstanding
for purposes of computing the percentage of any other person. Except as
indicated otherwise in the footnotes below, and subject to community
property laws where applicable, the persons named in the table above have
sole voting and investment power with respect to all shares of Class A
Common Stock shown as beneficially owned by them.
(2) Does not include 4,362,001 shares of Class B Common Stock (representing
100% of the outstanding shares of Class B Common Stock) which are
convertible into shares of Class A Common Stock on a one for one basis
under certain conditions set forth in the Company's Amended and Restated
Certificate of Incorporation.
(3) Includes 431,250 shares subject to outstanding options held by Mr. Almon
which are exercisable within 60 days of the Record Date.
(4) Messrs. Rossi and Downer are President and Vice President, respectively, of
the general partner of Prudential Private Equity Investors III, LP and, as
such, may be deemed to beneficially own the shares owned by such
partnership. Mr. Rossi and Mr. Downer each disclaim personal beneficial
ownership of any or all of these shares except to the extent of their
respective individual proportionate ownership interests therein.
(5) Includes 6,500 shares subject to outstanding options held by Mr. Lunger
which are exercisable within 60 days of the Record Date.
(6) Includes 21,283 shares subject to outstanding options held by Mr. Abely
which are exercisable within 60 days of the Record Date.
(7) No shares subject to outstanding options held by Mr. Eltoukhy are
exercisable within 60 days of the Record Date.
(8) Includes 27,364 shares subject to outstanding options held by Mr. Oxsen
which are exercisable within 60 days of the Record Date.
(9) Includes 12,831 shares subject to outstanding options held by Mr. Silverman
which are exercisable within 60 days of the Record Date.
(10) Includes 499,228 shares subject to outstanding options which are
exercisable within 60 days of the Record Date. See footnotes 3, and 5
through 9 above. Excludes 4,362,001 shares of Class B Common Stock owned by
Prudential Private Equity Investors III, L.P., an entity affiliated with
certain directors.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table shows, as to the Chief Executive Officer and each of
the other four most highly compensated executive officers, information
concerning compensation awarded to, earned by or paid for services to the
Company in all capacities during 1996. For the period from May 20, 1994 through
December 31, 1994 William J. Almon was the only executive officer whose salary
and bonus exceeded $100,000. Prior to May 20, 1994, the date of the Company's
inception, no compensation was paid to any individual.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------- AWARDS
(1) OTHER ANNUAL ------------
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#)
- -------------------------------------- ---- --------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
William J. Almon...................... 1996 254,615 25,000 4,835(3) --
Chairman of the Board of Directors 1995 226,925 34,715 4,835(3) --
and Chief Executive Officer 1994 116,157(2) 200 54,823(4) 731,250
Michael E. Oxsen...................... 1996 205,768 25,000 2,500(6) 50,000
President and Chief Operating
Officer 1995 179,808(5) -- -- 112,500
1994 91,269 -- -- --
Atef Eltoukhy......................... 1996 204,615 35,000 2,500(6) 50,000
Senior Vice President Chief 1995 176,923 -- -- 112,500
Technical Officer 1994 43,846 -- -- --
Stephen M. Abely...................... 1996 164,615 25,000 2,500(6) 50,000
Chief Financial Officer and 1995 143,848 -- -- 56,250
Assistant Secretary 1994 76,195 -- -- --
Sherman Silverman..................... 1996 177,844 25,000 -- 50,000
Vice President, Sales and Marketing 1995 168,431(5) -- -- 56,250
1994 88,470 -- -- --
</TABLE>
- ---------------
(1) Includes amounts paid in 1996 for services rendered in 1995.
(2) Period from May 20, 1994 to December 31, 1994.
(3) Represents $4,835 in premiums paid on a $1 million life insurance policy,
the proceeds of which are payable to Mr. Almon's estate ("Life Insurance
Policy").
(4) Represents premiums paid on Life Insurance Policy, and $50,000 paid in
consideration of Mr. Almon's personal guarantee of certain loans on behalf
of the Company.
(5) Includes amounts paid in lieu of vacation time.
(6) Represents the Company's matching contribution to its 401(k) Plan.
7
<PAGE> 10
STOCK OPTION GRANTS AND EXERCISES
The following table shows, as to the individuals named in the Summary
Compensation Table above, information concerning stock options granted during
the fiscal year ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
INDIVIDUAL GRANTS OF ASSUMED ANNUAL
-------------------------------------------------------------- RATES
% OF TOTAL OF STOCK PRICE
NUMBER OF OPTIONS APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OPTION TERM(3)
UNDERLYING OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SH) DATE 5%($) 10%($)
- ---------------------- ------------------ -------------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
William J. Almon...... -- -- -- -- -- --
Michael E. Oxsen...... 50,000 3.2 $15.50 12/27/06 487,393 1,235,150
Atef Eltoukhy......... 50,000 3.2 $15.50 12/27/06 487,393 1,235,150
Stephen M. Abely...... 50,000 3.2 $15.50 12/27/06 487,393 1,235,150
Sherman Silverman..... 50,000 3.2 $15.50 12/27/06 487,393 1,235,150
</TABLE>
- ---------------
(1) See "Other Employee Benefit Plans" for a description of the terms of the
Company's option plans.
(2) The Company granted options to purchase an aggregate of 1,353,135 shares of
Class A Common Stock to all employees other than executive officers and
granted options to purchase an aggregate of 200,000 shares of Class A Common
Stock to all executive officers as a group (5 persons), during fiscal 1996.
(3) This column sets forth hypothetical gains or "option spreads" for the
options at the end of their respective ten-year terms, as calculated in
accordance with the rules of the Securities and Exchange Commission. Each
gain is based on an arbitrarily assumed annualized rate of compound
appreciation of the market price at the date of grant of 5% and 10% from the
date the option was granted to the end of the option term. The 5% and 10%
rates of appreciation are specified by the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of future Class A Common Stock prices. The Company does not
necessarily agree that this method properly values an option. Actual gains,
if any, on option exercises are dependent on the future performance of the
Company's Common Stock and overall market conditions and the timing of
option exercises, if any.
The following table shows, as to the individuals named in the Summary
Compensation Table above, information concerning stock options exercised during
the fiscal year ended December 31, 1996 and the value of unexercised options at
such date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 1996(#)(2) DECEMBER 31, 1996($)(3)
EXERCISE REALIZED ----------------------------- -----------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William J. Almon.... -- -- 431,250 -- 6,871,969 --
Michael E. Oxsen.... 42,048 711,985 28,249 125,953 405,232 1,120,796
Atef Eltoukhy....... 33,509 452,654 3,038 125,953 43,580 1,120,796
Stephen M. Abely.... 35,298 567,031 16,726 87,976 239,934 576,016
Sherman Silverman... 33,750 662,325 18,274 87,976 262,141 576,016
</TABLE>
- ---------------
(1) Calculated by determining the difference between the closing price of the
Company's Class A Common Stock on the Nasdaq National Market on the date of
exercise and the exercise price of the options.
(2) The Company has not granted any stock appreciation rights and its stock
plans do not provide for the granting of such rights.
8
<PAGE> 11
(3) Calculated by determining the difference between the fair market value of
the securities underlying the options at year end ($16.13 per share) and the
exercise price of the options.
EMPLOYMENT AGREEMENTS
The Company has no employment contracts with any of its officers, and has
no compensatory plan or arrangement which is activated upon resignation,
termination or retirement of any such officer upon a change in control of the
Company. Both the NSO Plan (defined below) and the Director Plan provide for the
accelerated vesting of all outstanding options upon a change in control.
However, because competition for talented employees is intense, the Company may
in the future consider entering into severance agreements with certain of its
key employees.
OTHER EMPLOYEE BENEFIT PLANS
1994 Stock Option Plans
In June 1994, the Board of Directors and the stockholders of the Company
approved the 1994 Incentive Stock Option Plan (the "ISO Plan") and the 1994
Non-Qualified Stock Option Plan (the "NSO Plan", jointly the "Plans"), both of
which were amended and restated in March 1995. A total of 3,131,250 shares of
Class A Common Stock have been reserved for issuance under the ISO Plan and a
total of 1,518,750 shares of Class A Common Stock have been reserved for
issuance under the NSO Plan. As amended, the ISO Plan provides for the granting
to employees of "incentive stock options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, as well as the granting to
employees and consultants of nonqualified stock options. The NSO Plan provides
for the grant of nonqualified stock options to employees (including officers)
and consultants. The purposes of the Plans are to attract and retain the best
available personnel to the Company and to encourage stock ownership by employees
of the Company to give them a greater personal interest in the success of the
Company.
The Plans are currently administered by the Board of Directors or by a
committee of the Board (the "Administrator"). The Administrator has the power to
determine the persons to whom options are granted and the terms of the options
granted, including the exercise price, the number of shares subject to the
option and the exercisability thereof. Generally, options granted under the ISO
Plan become exercisable with respect to 6/48ths of the shares covered by the
option six months after the date of grant, and thereafter vest and become
exercisable at a rate of 1/48th of the shares subject to the option each month,
with the option being fully exercisable four years after the date of grant.
Certain options granted under the NSO Plan become exercisable seven years after
the date of the grant, subject to acceleration of such vesting upon the
achievement of certain financial objectives. Other options granted under the NSO
Plan vest over four years, with vesting commencing 11 months after the date of
grant and the shares vesting ratably over the ensuing 36 months. In the event of
a merger of the Company with or into another corporation or the sale of all or
substantially all of the Company's assets, the options granted under the ISO
Plan may be assumed by the successor company, and, if they are not assumed,
become fully exercisable immediately prior to the closing of such transaction.
Options granted under the NSO Plan become fully exercisable immediately prior to
the closing of such a merger or sale of assets. The Plans terminate in June
2004.
The exercise price of incentive stock options granted under the Plans must
be at least equal to the fair market value of the shares on the date of grant.
Nonqualified options granted under the NSO Plan may be granted at such exercise
prices as the Administrator approves. No options have been granted at prices
less than 100% of the fair market value on the date of grant, as determined by
the Board of Directors. The term of options granted under the Plans may not
exceed ten years. No option granted under the Plans may be transferred by the
optionee other than by will or the laws of descent or distribution and each
option may be exercised, during the lifetime of the optionee, only by such
optionee.
As of December 31, 1996, there were options outstanding under the ISO Plan
to purchase 1,532,819 shares of Class A Common Stock at a weighted average
exercise price of $8.46 per share. As of December 31, 1996, 536,107 shares of
Class A Common Stock had been issued (net of repurchases) pursuant to option
exercises under the ISO Plan and 1,062,324 shares remained available for future
option grants.
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As of December 31, 1996, there were options outstanding under the NSO Plan
to purchase 725,395 shares of Class A Common Stock at a weighted average
exercise price of $0.40 per share. As of December 31, 1996, 793,355 shares of
Class A Common Stock had been issued pursuant to option exercises under the NSO
Plan and no shares remained available for future grant.
1995 Employee Stock Purchase Plan
In April 1995, the Board of Directors and the stockholders of the Company
approved the 1995 Employee Stock Purchase Plan (the "Purchase Plan") which
became effective on May 4, 1995. The purpose of the Purchase Plan is to provide
employees who are employed by the Company on the first day of a given offering
period an opportunity to purchase Class A Common Stock of the Company through
accumulated payroll deductions. The Purchase Plan was amended in March 1996 and
subsequently approved by the stockholders at the 1996 Annual Meeting. A total of
412,500 shares of Class A Common Stock have been reserved for issuance under the
Purchase Plan. The Purchase Plan, which is intended to qualify under Section 423
of the Internal Revenue Code of 1986, was initially implemented with an offering
period which commenced simultaneously with the initial public offering and ended
approximately 12 months later on May 10, 1996. As amended, the Purchase Plan
provides for overlapping 24-month offering periods which commence on the first
trading day on or after May 15 and November 15 of each year. Each offering
period consists of four purchase periods of approximately six months in length
and four exercise dates which occur on the last day of each purchase period. The
first purchase period commences on the enrollment date and ends approximately 6
months later. The purchase price for the shares is an amount equal to 85% of the
fair market value of a share of Class A Common Stock (as defined in the Purchase
Plan) on either the enrollment date the exercise date, whichever is lower.
As of December 31, 1996, 181,104 shares had been issued under the Purchase
Plan and 231,396 shares remained available for future issuance.
401(k) Plan
The Company sponsors a 401(k) Plan, under which eligible employees may
contribute, on a pre-tax basis, up to 15% of the employee's total annual income
from the Company excluding bonuses, subject to certain IRS limitations. All
full-time employees who have attained age 18 are eligible to participate in the
plan. The Company matches up to 50% of an employee's contribution, not to exceed
$2,500 per employee. All contributions are allocated to the employee's
individual account and, at the employee's election, are invested in one or more
investment funds available under the plan. Contributions are fully vested and
nonforfeitable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1994, the Company acquired substantially all of the assets and
certain of the liabilities of the film disk division of Nashua Corporation
("Nashua"). In connection with such acquisition, the Company entered into a
supply agreement with Nashua for the supply of certain substrates used in the
manufacture of the Company's disks. Under the supply agreement the Company is
required to purchase 75% of its requirements for such substrates from Nashua
during a two-year period following the closing of the acquisition. Francis J.
Lunger, a director of the Company, was Chief Financial Officer of Nashua until
November 1995.
The Company purchases equipment from H&R Consultants, a company owned and
controlled by the brother-in-law of Mr. Oxsen, the President and Chief Operating
Officer of the Company. During 1996 the Company purchased approximately $5.2
million in equipment from such company. All transactions were conducted on an
arms-length basis.
In the first quarter of 1997, the Company entered into certain agreements
with HDI Instrumentation, Inc., ("HDI") including the license of certain
intellectual property rights relating to the measurement of lubricant, in
exchange for shares of HDI's Series A Preferred Stock. Mr. Almon, the Company's
Chief Executive Officer and Chairman of the Board of Directors, and Dr.
Eltoukhy, the Company's Chief Technical Officer, each purchased 60,000 shares of
HDI's Series A Preferred Stock at $1.00 per share. The transaction was approved
by the disinterested members of the Company's Board of Directors.
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The Board of Directors has adopted a policy which provides that all
material transaction with affiliates must be on terms no less favorable to the
Company than those available from unaffiliated third parties and must be
approved by a majority of the disinterested members of the Board of Directors.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Exchange Act of 1933, as amended, or the
Securities Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following report and
the Performance Graph on page 12 shall not be incorporated by reference into any
such filings.
GENERAL
The Compensation Committee (the "Committee") of the Board of Directors
establishes the overall executive compensation strategies of the Company and
approves compensation elements for the chief executive officer and other
executive officers. The Committee is comprised of two of the independent, non-
employee members of the Board of Directors, neither of whom have interlocking
relationships as defined by the Securities and Exchange Commission. The
Committee has available to it such external compensation advice and data as the
Committee deems appropriate to obtain.
The compensation philosophy of the Committee is to provide a comprehensive
compensation package for each executive officer that is tailored to the
Company's accomplishment of business strategies, objectives and initiatives.
Accordingly, the Committee follows a compensation strategy which has used
vesting terms to incentivize and reward executives as the Company addresses the
challenges associated with growth. As the Committee applies this compensation
philosophy in determining appropriate executive compensation levels and other
compensation factors, the Committee reaches its decisions with a view towards
the Company's overall financial performance. The Committee strives to structure
each officer's overall compensation package to enable the Company to attract,
retain and reward personnel who contribute to the success of the Company.
EXECUTIVE OFFICER COMPENSATION
The Committee's executive compensation policies are designed to enhance the
financial performance of the Company and thus stockholder value, by aligning the
financial interests of the key executives with those of the stockholders. The
executive compensation program is viewed in total considering all of its
component parts: base salary, a discretionary performance-based annual bonus and
long-term incentive opportunity in the form of stock options and stock
ownership. The annual compensation component consists of base salaries which are
generally competitive with those offered by other companies in the industry at
similar phases of growth. In determining individual salaries, the Committee
considers the individual experience, performance and breadth of responsibilities
of each executive officer within the Company in light of the accomplishment of
business strategies, objectives and initiatives set forth by the Board
periodically. These factors are reviewed for each executive officer annually. In
addition to base salary, during 1996, the Committee approved discretionary
annual bonuses to the executive officers, based on performance. The Committee
did not adopt a formal bonus plan during 1996.
The Company's ISO Plan and NSO Plan (collectively "Option Plans") and
Purchase Plan are long-term incentive plans for all employees. These plans are
intended to align stockholder and employee interest by creating a direct link
between long-term rewards and the value of the Company's shares. The Committee
believes that long-term stock ownership by executive officers and all employees
is an important factor in achieving both above average growth in share value and
retaining valued employees. Since the value of an option bears a direct
relationship to the Company's stock price, the Committee believes that options
motivate executive officers to manage the Company in a manner which will benefit
all stockholders.
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The Option Plans authorize the Committee to award available stock options
to employees at any time. Options are generally granted at the time of initial
employment with the Company, and at later dates at the discretion of the
Committee. The size of the initial and later grants are determined by a number
of factors including comparable grants to executive officers and employees by
other companies which compete in the Company's industry. The exercise price per
share of the stock options is generally equal to the prevailing market value of
a share of the Company's Class A Common Stock on the date the options are
granted.
The Company has adopted certain broad-based employee benefit plans in which
all employees, including the executive officers, are permitted to participate on
the same terms and conditions relating to eligibility and generally subject to
the same limitations on the amounts that may be contributed or the benefits
payable under those plans.
CEO COMPENSATION
Compensation for the Chief Executive Officer aligns with the philosophies
and practices described above for executive officers in general. In June 1996,
Mr. Almon's base salary was increased from $250,000 to $290,000. However, the
increase was temporarily rescinded between July 1996 and December 1996, due to a
down-turn in the Company's performance. The Board reinstated Mr. Almon's salary
increase effective January 1997. Mr. Almon was also paid a bonus of $25,000 for
his services rendered during 1996. No options have been granted to Mr. Almon
since the Company's inception in May 1994.
COMPENSATION COMMITTEE
John A. Downer
Mark S. Rossi
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COMPANY STOCK PRICE PERFORMANCE
The following graph demonstrates a comparison of cumulative total
stockholder returns, calculated on a dividend reinvestment basis and based upon
an initial investment of $100 in the Company's Class A Common Stock as compared
with the Nasdaq Stock Market -- US Index and the Nasdaq Computer Manufacturer
Index. No cash dividends have been declared or paid on the Company's Class A
Common Stock during such period. The stock price performance shown on the graph
below is not necessarily indicative of future price performance. The Company's
Class A Common Stock began trading on the Nasdaq National Market on May 4, 1995.
The graph reflects the Company's stock price performance from the initial public
offering through the end of fiscal 1996.
COMPARISON OF 20 MONTH CUMULATIVE TOTAL RETURN*
AMONG STORMEDIA INCORPORATED, THE NASDAQ STOCK MARKET-US INDEX
AND THE NASDAQ COMPUTER MANUFACTURER INDEX
STORMEDIA NASDAQ STOCK NASDAQ COMPUTER
MEASUREMENT PERIOD INCORPORATED MARKET-US MANUFACTURER
5/04/95 100 100 100
12/95 228 125 141
12/96 151 154 190
- -----------------
* $100 INVESTED ON 5/04/95 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
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 21, 1997
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
STORMEDIA INCORPORATED
1997 ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 1997
The undersigned stockholder of StorMedia Incorporated, a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated March 21, 1997, and hereby appoints
William J. Almon and Stephen M. Abely, or either of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1997 Annual Meeting
of Stockholders of StorMedia Incorporated to be held on April 24, 1997, at 3:00
p.m. Pacific daylight savings time, at the Santa Clara Marriott Hotel, located
at 2700 Mission College Blvd., Santa Clara, California 95054, and at any
adjournment(s) thereof and to vote all shares of Class A Common Stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth below:
1. ELECTION OF DIRECTORS: ___ FOR all nominees listed below
(except as indicated).
___ WITHHOLD authority to vote for
all nominees listed below.
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE(S), STRIKE A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST
BELOW:
William J. Almon John A. Downer Francis J. Lunger Mark S. Rossi
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK, LLP AS
INDEPENDENT AUDITORS:
____ FOR ____ AGAINST ____ ABSTAIN
and, in their discretion, upon such other matter or matters which may properly
come before the meeting and any adjournment(s) thereof.
<PAGE> 17
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, AND FOR RATIFICATION OF
THE APPOINTMENT OF THE COMPANY'S INDEPENDENT AUDITORS, AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING AND ANY
ADJOURNMENT(S) THEREOF.
Dated: ________________, 1997 ___________________________________
Signature
___________________________________
Signature
(THIS PROXY SHOULD BE MARKED, DATED, SIGNED BY THE STOCKHOLDER(S)
EXACTLY AS HIS OR HER NAME APPEARS HEREON, AND RETURNED PROMPTLY IN THE
ENCLOSED ENVELOPE. PERSONS SIGNING IN A FIDUCIARY CAPACITY SHOULD SO
INDICATE. IF SHARES ARE HELD BY JOINT TENANTS OR AS COMMUNITY PROPERTY,
BOTH SHOULD SIGN.)
