<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
----------------
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
----------------
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or
(S)240.14a-12
----------------
STORAGE TECHNOLOGY CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
REGISTRANT
(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:_______
(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:__________(A)
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:_____________________
- --------
(A) 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:____________
(4) Date Filed:______________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(LOGO OF STORAGETEK APPEARS HERE)
STORAGE TECHNOLOGY CORPORATION
2270 SOUTH 88TH STREET
LOUISVILLE, COLORADO 80028-0001
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 1994
Dear Stockholder:
On behalf of the Board of Directors and management, I cordially invite you to
attend the Annual Meeting of Stockholders of Storage Technology Corporation
(the "Company"), a Delaware corporation, to be held on Wednesday, May 25, 1994,
at 10:00 a.m. MDT, at the Boulderado Hotel, 2115 Thirteenth Street, Boulder,
Colorado to act upon the following matters:
(a) PROPOSAL 1. The election of eleven Directors;
(b) PROPOSAL 2. The approval of an amendment to the 1987 Employee Stock
Purchase Plan in order to increase the number of shares of Common Stock
issuable thereunder by 1,250,000;
(c) PROPOSAL 3. The approval of the material terms of a performance-based
incentive plan;
(d) PROPOSAL 4. The ratification of the appointment of Price Waterhouse as
the Company's independent accountants for the current fiscal year; and
(e) The transaction of such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Stockholders of Common Stock of record at the close of business on March 27,
1994, will be entitled to notice of and to vote at the meeting. The stock
transfer books of the Company will remain open.
WE INVITE EACH OF YOU TO ATTEND THE MEETING. IF YOU CANNOT ATTEND, PLEASE
MARK, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE
PROVIDED. NO STAMP IS NECESSARY IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
W. RUSSELL WAYMAN
Corporate Secretary
Louisville, Colorado
April 19, 1994
YOUR VOTE IS IMPORTANT
WHETHER YOU OWN A FEW OR MANY SHARES OF STOCK AND WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, YOU ARE URGED TO MARK, DATE, SIGN AND RETURN YOUR PROXY
PROMPTLY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND IN
ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED. THE PROMPT RETURN OF YOUR
SIGNED PROXY WILL AID THE COMPANY IN REDUCING THE EXPENSE OF PROXY
SOLICITATION.
<PAGE>
STORAGE TECHNOLOGY CORPORATION
PROXY STATEMENT
April 19, 1994
THIS PROXY STATEMENT IS FURNISHED TO THE STOCKHOLDERS OF STORAGE TECHNOLOGY
CORPORATION (THE "COMPANY") IN CONNECTION WITH THE SOLICITATION OF PROXIES BY
AND ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY TO BE VOTED AT THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AT 10:00 A.M., MDT, ON WEDNESDAY, MAY
25, 1994, OR AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF. Stockholders of common
shares of record at the close of business on March 27, 1994, will be entitled
to notice of and to vote at the meeting. The Annual Meeting will be held at the
Boulderado Hotel, 2115 Thirteenth Street, Boulder, Colorado. Proxies received
prior to the meeting will be voted in accordance with the instructions
contained in the proxy and, if no choice is specified, will be voted in favor
of each of management's nominees for Director and in favor of each of the
proposals set forth in the Notice of Annual Meeting of Stockholders. A
stockholder who signs and returns the enclosed proxy may revoke it at any time
before it is voted by a written revocation delivered to any of the proxy
holders named therein, by submitting another valid proxy bearing a later date
or by attending the meeting and voting in person. Stockholders wishing to vote
at the meeting who are not of record on the Company's books (e.g., persons
holding in street name) must bring to the meeting a Power of Attorney signed by
their broker in order to be able to vote.
Initial solicitation of proxies by the Board of Directors of the Company will
be by mail. Further solicitation by the Board of Directors or employees of the
Company can also be made by mail, telephone, telegraph or personal interview.
No additional compensation will be paid to the Directors or employees of the
Company for solicitation of proxies. The Company has no present plans to engage
an outside firm to assist in the solicitation of proxies. This proxy statement
and the form of proxy are first being mailed to the stockholders beginning
April 19, 1994.
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock issued and outstanding on the record
date (excluding treasury stock). 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 votes eligible to be
cast by the Common Stock present in person or represented by proxy at the
Annual Meeting and "entitled to vote on the subject matter" (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 in the election
of Directors, the Company believes that abstentions should be counted for
purposes of determining both the presence of a quorum for the transaction of
business and the total number of Votes Cast with respect to a particular
matter. In the absence of controlling precedent to the contrary, the Company
intends to treat abstentions in this manner. The Delaware Supreme Court has
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. Based upon New York
Stock Exchange rules, the Company believes that all of management's proposals,
including the amendment to the Employee Stock Purchase Plan and the approval of
the material terms of the performance-based incentive plan, are considered
"discretionary" and, accordingly, brokerage firms may vote on behalf of their
clients if no voting instructions have been furnished by such clients within 10
days of the meeting.
This proxy statement is accompanied by the Company's Annual Report to
Stockholders for its fiscal year ended December 31, 1993 (the "Annual Report").
Stockholders are referred to the Annual Report for information concerning the
Company's business and activities, but the Annual Report is not part of the
proxy soliciting materials. THE COMPANY ANNUALLY FILES AN ANNUAL REPORT ON FORM
10-K WITH THE SECURITIES AND
1
<PAGE>
EXCHANGE COMMISSION; THIS REPORT CONTAINS ADDITIONAL INFORMATION ABOUT THE
COMPANY'S OPERATIONS AND IS AVAILABLE, WITHOUT CHARGE, TO THOSE REQUESTING IT.
CERTAIN OTHER MATERIALS ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST.
PLEASE CONTACT CORPORATE COMMUNICATIONS, STORAGE TECHNOLOGY CORPORATION, 2270
SOUTH 88TH STREET, LOUISVILLE, COLORADO 80028-4310, (303) 673-5020, IF YOU
WOULD LIKE TO REQUEST SUCH ADDITIONAL MATERIALS. THE COMPANY'S PRINCIPAL
EXECUTIVE OFFICES ARE LOCATED AT 2270 SOUTH 88TH STREET, LOUISVILLE, COLORADO
80028, (303) 673-5151.
VOTING SECURITIES OF THE COMPANY
On the record date for the Annual Meeting, March 27, 1994, the Company had
issued, outstanding and entitled to vote 43,310,370 shares of its common
stock, $.10 par value ("Common Stock"). The Company also has 3,450,000 shares
of $3.50 Convertible Exchangeable Preferred Stock, $.01 par value ("Preferred
Stock") issued and outstanding. The Preferred Stock is not entitled to vote at
the Annual Meeting. Holders of shares of the Common Stock on March 27, 1994,
are entitled to vote at the Annual Meeting and at all adjournments or
postponements thereof. Each holder of shares of the Common Stock is entitled
to one vote for each share. In the election of Directors, such holder has the
right to vote the number of shares owned for as many persons as there are
Directors to be elected. There is no cumulative voting in the election of
Directors.
PRINCIPAL HOLDERS OF SECURITIES
The Company believes, based upon Schedule 13G filings received prior to
March 27, 1994, that the only persons who own, directly or beneficially, more
than 5% of its Common Stock are identified in the table below:
<TABLE>
<CAPTION>
PERCENT
OWNER AND ADDRESS AMOUNT AND NATURE OF OWNERSHIP OF CLASS (1)
----------------- ------------------------------ ------------
<S> <C> <C>
TCW Group, Inc. 5,190,611 shares common (Sole 11.60%
865 South Figueroa Street voting and dispositive power)(2)
Los Angeles, CA 90017
FMR Corp. 2,328,677 shares common (Sole 5.40%
82 Devonshire Street dispositive power)
Boston, MA 02109
Entities affiliated with 2,207,900 shares common (Sole 5.36%
SunBank Capital Management, voting and dispositive power)(3)
National Association
200 South Orange Avenue
Tower
Orlando, FL 32801
</TABLE>
- --------
(1) Calculated based upon share ownership shown on the Schedule 13G filings
dated as of December 31, 1993.
(2) Includes 1,497,686 shares of Common Stock issuable upon conversion of the
Preferred Stock and 41,135 shares of Common Stock issuable upon conversion
of the Company's 8% Convertible Debentures (the "Debentures") that are
convertible into Common Stock.
(3) SunBank Capital Management, National Association ("SCM"), a national
banking association with trust powers, owns the shares on behalf of
multiple fiduciary accounts for which SCM serves as investment advisor and
individually managed accounts. SCM is wholly owned by Sun Banks, Inc.,
which is wholly owned by SunTrust Banks, Inc., both of which entities are
also deemed to have beneficial ownership of the shares.
2
<PAGE>
SECURITY OWNERSHIP OF NAMED EXECUTIVES
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP OF
PRINCIPAL OCCUPATION SHARES OF PERCENT
NAME AND AGE AND BUSINESS EXPERIENCE STOCK (1) OF CLASS
------------ ----------------------- ------------- ---------
<C> <S> <C> <C>
Ryal R. Poppa,..... See description under Election --
Age 60 of Directors, below.
Derek A. Thompson,. Mr. Thompson became Executive 35,926(2) (8)
Age 64 Vice President of Worldwide Common
Field Operations in March 1991.
From May 1986 to March 1991, he
was the Vice President of
Europe, Africa and Middle East.
L. Thomas Gooch,... Mr. Gooch became Executive Vice 27,515(3) (8)
Age 49 President of Operations in Common
January 1989. From June 1987 to
January 1989, he was Corporate
Vice President of Manufacturing;
from January 1987 to June 1987,
he was Vice President of
Americas/Pacific Operations.
Gregory A. Tymn,... Mr. Tymn became Senior Vice 22,015(4) (8)
Age 44 President and Chief Financial Common
Officer in March 1991. He was
also the Corporate Vice
President of Program Management
from November 1989 through June
1992. From November 1987 through
October 1989, he was the Vice
President and General Manager of
StorageTek Printer Operations.
John V. Williams,.. Mr. Williams became Senior 8,704(5) (8)
Age 50 Corporate Vice President of Common
Americas in September 1993. He
was a Corporate Vice President
from February 1992 to September
1993. He was Vice President of
Americas from September 1990 to
September 1993. From 1987 to
1990, Mr. Williams was employed
by GRiD Systems Corp., a
manufacturer of laptop personal
computers, purchased by Tandy
Corp. in 1988, where he last
served as Vice President of
Marketing.
Harris Ravine,..... Mr. Ravine served as Executive 161,125(6) (8)
Age 51 Vice President Midrange Common
Operations from June 1992 until
October 1993 when he resigned as
an officer of the Company.
Previously, he served as the
Executive Vice President Europe,
Africa and Middle East from
March 1991 to June 1992. He was
the Executive Vice President
Finance and Administration from
October 1989 to March 1991. From
January 1988 to October 1989, he
was Executive Vice President of
Customer Satisfaction. From June
1985 until October 1989, he was
General Counsel.
Geoffroy de Mr. de Belloy served as 22,153(7) (8)
Belloy,........... Executive Vice President Common
Age 57 Midrange Markets-Europe from
June 1992 until December 31,
1993, when he resigned as an
officer of the Company. From
January 1994 through April 1994,
he acted as liaison for the
Company with key customers and
the European Community. He
previously served as the
Executive Vice President
Midrange Markets from August
1991 to June 1992 and was Senior
Vice President from November
1990 until August 1991. From
1985 to August 1990, he was a
Vice President with Wang
Laboratories, a manufacturer of
word processing systems and
computers.
</TABLE>
- --------
(1) The number of shares stated as being owned beneficially is as of March 27,
1994, and includes shares of Common Stock issuable upon conversion of
Preferred Stock and Debentures, as well as shares of Common Stock believed
to be held beneficially by spouses, minor children, grandchildren and
other relatives of the executive officers. The inclusion of these shares,
however, does not constitute an admission of ownership by the executive
officer of such shares. Further, the number of shares includes options
granted that are exercisable within 60 days of March 27, 1994. SEE
FOOTNOTES TO "ELECTION OF DIRECTORS" FOR INFORMATION ON STOCK HELD BY ALL
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP.
(2) Includes 26,316 shares of Common Stock issuable upon exercise of options
held by Mr. Thompson, which options are exercisable within 60 days of
March 27, 1994.
(3) Includes 8,805 shares of Common Stock issuable upon exercise of options
held by Mr. Gooch, which options are exercisable within 60 days of March
27, 1994.
(4) Includes 7,966 shares of Common Stock issuable upon exercise of options
held by Mr. Tymn, which options are exercisable within 60 days of March
27, 1994.
(5) Includes 1,253 shares of Common Stock issuable upon exercise of options
held by Mr. Williams, which options are exercisable within 60 days of
March 27, 1994.
(6) Includes 161,125 shares of Common Stock issuable upon exercise of options
held by Mr. Ravine, which options are exercisable within 60 days of March
27, 1994.
(7) Includes 12,396 shares of Common Stock issuable upon exercise of options
held by Mr. de Belloy, which options are exercisable within 60 days of
March 27, 1994.
(8) Less than 1% of the class.
3
<PAGE>
ELECTION OF DIRECTORS
PROPOSAL 1.
In accordance with the Company's bylaws, the number of Directors constituting
the entire Board of Directors of the Company has been established as eleven.
Accordingly, eleven Directors are to be elected at this annual meeting to serve
until the next annual meeting or until their respective successors shall be
elected and qualified. The Company's nominees, each of whom is currently a
Director, are set forth on the table below. If the enclosed Proxy is duly
executed and received in time for the meeting, it is the intention of the
persons named therein to vote the shares represented thereby, unless otherwise
directed, in favor of the eleven nominees identified in the following table.
The eleven nominees receiving the highest number of affirmative votes of the
shares present or represented and 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.
If, at the time of the meeting, one or more of the nominees have become
unavailable to serve, shares represented by proxies will be voted for the
remaining nominees and for any substitute nominee or nominees designated by the
Governance and Nominating Committee of the Board of Directors. The Governance
and Nominating Committee knows of no reason why any of the nominees will be
unavailable or unable to serve.
The following table sets forth information, as of March 27, 1994, concerning
the nominees for election as Directors of the Company and beneficial ownership
of Common Stock of the Company by such persons and by all Directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
PRINCIPAL OCCUPATION, FIRST OWNERSHIP OF
BUSINESS BECAME SHARES OF PERCENT
NAME AND AGE EXPERIENCE AND DIRECTORSHIPS DIRECTOR STOCK (1) OF CLASS
------------ ---------------------------- -------- ----------------- ---------
<C> <S> <C> <C> <C>
Ryal R. Poppa,..... President of the Company 1985 516,776 Common(2) 1.18%
Age 60 since January 1988 as 5,000 Preferred (14)
well as Chairman of the
Board and Chief
Executive Officer of the
Company since January
1985.
Judith E.N. President of University 1991 13,116 Common(3) (14)
Albino,........... of Colorado since June
Ph.D., 1991. From 1989 to June
Age 50 1991 she served as Dean
of the Graduate School
at the State University
of New York at Buffalo,
and from 1987 to 1989
she served as Dean of
the School of
Architecture and
Planning. Director of
Colorado National Bank
Advisory Board.
William L. Chairman of the Board of 1991 15,000 Common(4) (14)
Armstrong,........ Directors of Ambassador
Age 57 Media Corp., a
television broadcasting
company, since 1983.
United States Senator,
Colorado, from 1979 to
1990; Chairman of the
Board of Directors of
Cherry Creek Mortgage
Co.; El Paso Mortgage
Co.; and Broadway
Ventures, Inc. Director
of: NaTec Resources,
Inc.; Provident Life and
Accident Insurance
Company of America;
Helmerich & Payne; and
International Family
Entertainment, Inc.
Robert A. Burgin,.. Retired as Chairman and 1978 11,000 Common(5) (14)
Age 69 Chief Executive Officer
of Leaseway
Transportation
Corporation, a physical
distribution
transportation company,
in 1982. Director of
Provident Life and
Accident Insurance Co.
Paul Friedman,..... Practicing tax attorney 1987 76,333 Common(6) (14)
Age 69 at Paul Friedman, P.C.
since 1964.
Stephen J. Keane,.. Management consultant 1987 13,350 Common(7) (14)
Age 64 since April 1985.
Director of
Summagraphics Inc. and
MaxServ Inc.
Robert E. LaBlanc,. Founder and President, 1979 23,277 Common(8) (14)
Age 60 Robert E. LaBlanc
Associates, Inc., an
investment consulting
firm, since October
1981; Director of: M/A-
Com, Inc.; Tribune
Company;
TIE/Communications,
Inc.; Prudential Global
Funds, Inc.; Prudential
Short-Term Global Income
Fund, Inc.; Prudential
Pacific Growth Fund,
Inc.; and Contel
Cellular, Inc. Trustee
for Prudential U.S.
Government Fund.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
PRINCIPAL OCCUPATION, FIRST OWNERSHIP OF
BUSINESS BECAME SHARES OF PERCENT
NAME AND AGE EXPERIENCE AND DIRECTORSHIPS DIRECTOR STOCK (1) OF CLASS
------------ ---------------------------- -------- ---------------------- ---------
<C> <S> <C> <C> <C>
Robert E. Lee,..... Executive Director of 1989 21,084 Common(9) (14)
Age 58 The Denver Foundation, a
community foundation,
since March 1989.
Retired as Chairman,
First Interstate Bank of
Denver in February 1989.
Director of: First
Interstate Bank of
Denver; Equitable of
Iowa Companies; and
Meredith Corporation.
Harrison Shull, Provost, Naval 1983 31,692 Common(10) (14)
Ph.D.,............ Postgraduate School,
Age 70 Monterey, California
since July 1988;
Chancellor of the
University of Colorado,
Boulder, from March 1982
to September 1985 and
Professor of Chemistry
since March 1982.
Richard C. Private investor since 1970 27,202 Common(11) (14)
Steadman,......... January 1981; Chairman
Age 61 of the Board of
Directors of National
Convenience Stores, Inc.
Robert C. Wilson,.. Chairman of Wilson & 1987 41,277 Common(12) (14)
Age 74 Chambers, a venture 10,000 Preferred (14)
capital firm since 1983;
Chairman of the Board of
Directors of Southwall
Technologies, Inc.
Director of: Giga-
Tronics Corporation;
Syquest Technology;
Andros Incorporated;
ReSound Corporation; and
Photonics Corporation.
All Directors and executive (23 persons) officers as a 1,128,236 Common(13) 2.55%
group.................................................... 17,000 Preferred (14)
</TABLE>
- --------
(1) The number of shares stated as being owned beneficially is as of March 27,
1994, and includes shares of Common Stock issuable upon conversion of
Preferred Stock and Debentures, as well as shares of Common Stock owned
directly or believed to be held beneficially by spouses, minor children,
grandchildren and other relatives of the Directors. The inclusion of
beneficially owned shares, however, does not constitute an admission by
any Director of ownership by the Director of such shares. Further, the
number of shares includes options granted that are exercisable within 60
days of March 27, 1994.
(2) Includes (i) 10,638 shares of Common Stock issuable upon conversion of
Preferred Stock held by Mr. Poppa; and (ii) 434,908 shares of Common Stock
issuable upon exercise of options held by Mr. Poppa, which options are
exercisable within 60 days of March 27, 1994.
(3) Includes 11,666 shares of Common Stock issuable upon exercise of options
held by Ms. Albino, which options are exercisable within 60 days of March
27, 1994.
(4) Includes 15,000 shares of Common Stock issuable upon exercise of options
held by Mr. Armstrong, which options are exercisable within 60 days of
March 27, 1994.
(5) Includes 10,000 shares of Common Stock issuable upon exercise of options
held by Mr. Burgin, which options are exercisable within 60 days of March
27, 1994.
(6) Includes (i) 13,333 shares of Common Stock issuable upon conversion of
Debentures held by Mr. Friedman; and (ii) 20,000 shares of Common Stock
issuable upon exercise of options held by Mr. Friedman, which options are
exercisable within 60 days of March 27, 1994.
(7) Includes 7,952 shares of Common Stock issuable upon exercise of options
held by Mr. Keane, which options are exercisable within 60 days of March
27, 1994.
(8) Includes 20,000 shares of Common Stock issuable upon exercise of options
held by Mr. LaBlanc, which options are exercisable within 60 days of March
27, 1994.
(9) Includes (i) 284 shares of Common Stock issuable upon conversion of
Debentures held by Mr. Lee; and (ii) 20,000 shares of Common Stock
issuable upon exercise of options held by Mr. Lee, which options are
exercisable within 60 days of March 27, 1994.
(10) Includes (i) 2,837 shares of Common Stock issuable upon conversion of
Debentures held by Mr. Shull; (ii) 4,255 shares of Common Stock issuable
upon conversion of Preferred Stock held by Mr. Shull; and (iii) 20,000
shares of Common Stock issuable upon exercise of options held by Mr.
Shull, which options are exercisable within 60 days of March 27, 1994.
(11) Includes 20,000 shares of Common Stock issuable upon exercise of options
held by Mr. Steadman, which options are exercisable within 60 days of
March 27, 1994.
(12) Includes (i) 21,277 shares of Common Stock issuable upon conversion of
Preferred Stock held by Mr. Wilson; and (ii) 20,000 shares of Common
Stock issuable upon exercise of options held by Mr. Wilson, which options
are exercisable within 60 days of March 27, 1994.
(13) Includes (i) 16,454 shares of Common Stock issuable upon conversion of
Debentures; (ii) 36,170 shares of Common Stock issuable upon conversion
of Preferred Stock; and (iii) 866,821 shares of Common Stock subject to
options exercisable within 60 days of March 27, 1994 held by Directors
and executive officers.
(14) Less than 1% of the class.
5
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Company has a standing Audit Committee consisting of five members. The
current members were appointed in March 1994 and include Messrs. Shull,
Friedman, LaBlanc, Steadman and Wilson. The Audit Committee held six meetings
during the last fiscal year. Its principal functions are to review the
Company's financial statements, the arrangements for and scope of the
independent audit, as well as the results of the audit engagement; to review
the Company's internal auditing procedures and personnel; to review the scope
of non-auditing services performed by the independent accountants and their
independence; and to monitor the adequacy of and compliance with policies to
prohibit unethical, questionable or illegal activities by employees of the
Company. The members of the Audit Committee are not employees and are, in the
opinion of the Board of Directors, free from any relationship that would
interfere with the exercise of independent judgment.
The Company has a standing Human Resources and Compensation Committee (the
"Compensation Committee") consisting of five members. The current members were
appointed in March 1994 and include Messrs. Keane and Lee, and Ms. Albino, as
well as two members who were re-appointed, Messrs. Armstrong and Burgin. Prior
to March 1994, Messrs. Steadman, Friedman and LaBlanc served the Compensation
Committee. The Compensation Committee met five times in 1993. Its principal
function is to review compensation arrangements for management and key
employees of the Company, to make salary recommendations, to administer equity
compensation plans, and award bonuses and stock options. The members of the
Compensation Committee are not employees and are, in the opinion of the Board
of Directors, free from any relationship that would interfere with the exercise
of independent judgment.
The Company also has a Governance and Nominating Committee which met four
times in 1993. The current members were appointed in March 1994 and include
Messrs. Burgin, Armstrong, Keane and Lee, and Ms. Albino. This Committee
nominates candidates for the Board, and it will consider nominees recommended
by stockholders. Under the bylaws of the Company, nominations for the election
of Directors may be made by any stockholder entitled to vote in the election of
Directors, but only if written notice of such stockholder's intent to make such
nominations has been received by the Company at its principal executive office
not less than 60 days nor more than 90 days prior to the meeting at which
directors are to be elected; provided, however, that in the event that less
than 70 days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such stockholder's notice shall set forth: (a) with
respect to each proposed nominee, the name, age, business and residence
address, principal occupation or employment, class and number of shares of
stock of the Company owned and any other information that is required to be
disclosed in solicitations of proxies for election of directors pursuant to
Regulation 14A of the Securities Exchange Act of 1934; and (b) with respect to
the stockholder giving the notice, the name, address and class and number of
shares of the Company that are beneficially owned by such stockholder. The
presiding officer of the meeting may refuse to acknowledge the nomination of
any person not made in compliance with the foregoing procedure.
During 1993 the Company's Board of Directors held eight meetings and
Committees of the Board held, in the aggregate, 19 meetings. The average
attendance at the aggregate number of meetings of the Board and Committees of
the Board was 94%. No Director attended fewer than 75% of the aggregate number
of meetings of the Board and Committees, if any, on which such Director served
during the last fiscal year.
STANDARD ARRANGEMENTS FOR COMPENSATION OF DIRECTORS
CASH COMPENSATION
In 1993 each Director who was not an employee of the Company received a
standard annual fee of $24,300. Directors received an additional $900 for each
meeting of the Board of Directors attended in excess of eight. Further, each
Director who was not employed by the Company received $900 for each committee
6
<PAGE>
meeting attended. The chairman of each committee was paid an annual fee of
$1,800 as compensation for such chairmanship. The chairman of each committee
has been named first in the list of committee members referenced above, under
the caption "Election of Directors--Board Meetings and Committees." For 1993
and continuing in 1994, these amounts reflect a voluntary fee reduction of 10%,
in recognition of similar salary and wage reductions on the part of management
and employees of the Company.
OPTIONS
The Company has a Nonemployee Director Stock Option Plan (the "Director
Plan"). Under the Director Plan, the Company has granted options to purchase
shares, at an exercise price equal to 100% of the fair market value of the
Common Stock on the date of grant, to its nonemployee Directors on a set
schedule. All options expire 10 years from the date of grant, unless earlier
terminated pursuant to the provisions of the Director Plan. The initial grant
of options for most of the Directors under the Director Plan occurred in
October 1987 at an exercise price of $18.75 per share. A second option to
purchase 2,500 shares was granted in October 1989 at an exercise price of
$13.50 per share to those nonemployee Directors who had served two consecutive
years after receipt of the initial option. These options are collectively
referred to as the "Initial Options."
In 1991 stockholders approved the amendment and restatement of the Director
Plan. Under the amended Director Plan, each nonemployee Director who was such
on November 7, 1990, received, and each person who first becomes a nonemployee
Director after that date shall receive, an option (the "New Option"), granted
as of the later to occur of November 7, 1990, or their first election as a
nonemployee Director, to purchase a number of shares of Common Stock equal to
25,000 less any shares subject to Initial Options granted to such Director.
Presently, the Director Plan has 100,000 shares available for future grant and
227,952 shares subject to outstanding options. No options were granted under
the Director Plan in 1993.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation earned by
those persons who were, at December 31, 1993, the Chief Executive Officer
("CEO") and the other four most highly compensated executive officers, as well
as two additional individuals who were not serving as executive officers at the
end of the fiscal year (collectively, the "Named Executive Officers") of the
Company.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
NAME ------------------------------------------- ----------------------
AND OTHER ALL
PRINCIPAL ANNUAL RESTRICTED OPTIONS OTHER
POSITION YEAR SALARY($)(1) BONUS($) COMPENSATION($)(2) STOCK($)(3) (#) COMPENSATION($)(4)
--------- ---- ------------ -------- ------------------ ----------- ------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. POPPA 1993 $587,500 $ -0- $ 68,371(5) $ -0- 75,833 $ 42,455
Chairman, President & 1992 648,500 -0- -- 325,682 22,100 32,109
CEO 1991 584,038 702,000 -- 307,589 11,839 --
D. THOMPSON 1993 297,000 -0- 227,073(6) -0- 19,810 27,320
Executive Vice President 1992 297,000 -0- 273,431 88,002 6,624 27,707
1991 222,639 207,900 -- 92,345 23,943 --
L. GOOCH 1993 225,961 -0- -- -0- 19,167 6,301
Executive Vice President 1992 249,423 -0- -- 79,712 6,000 4,670
1991 224,231 202,500 -- 75,281 3,214 --
G. TYMN 1993 203,365 -0- -- -0- 16,500 3,924
Senior Corporate Vice 1992 223,961 -0- -- 71,741 5,400 3,590
President 1991 174,019 144,000 -- 60,225 4,571 --
J. WILLIAMS 1993 198,172 66,629(7) 67,517(8) -0- 18,500 5,124
Senior Corporate Vice 1992 209,615 69,254 88,313 71,745 4,034 4,559
President 1991 (9) -- -- -- -- --
H. RAVINE 1993 257,596 -0- 268,466(10) -0- -0- 398,268(11)
Former Executive Vice 1992 284,538 -0- 325,201 90,872(12) 6,840 6,134
President 1991 264,711 238,500 -- 88,651(12) 3,786 --
G. DE BELLOY 1993 244,526 -0- 123,250(13) -0- -0- 421,613(14)
Former Executive Vice 1992 260,000 -0- 64,678 82,901(15) 6,240 8,370
President 1991 238,461 208,000 -- 87,005(15) 5,714 --
</TABLE>
7
<PAGE>
- --------
(1) Salary and bonus is reported in the year it was earned even if not
actually paid until the following year. Any compensation that was deferred
at the executive officer's election is included in the salary or bonus
column for the year in which it was earned.
(2) Other Annual Compensation includes perquisites, expenses due to overseas
assignments as described in footnotes (6), (10) and (13) below, and
amounts reimbursed for the payment of taxes. Perquisite amounts are not
required to be reported for fiscal years 1993 and 1992 if amounts paid
were not more than the lesser of $50,000 or 10% of the executive's annual
salary and bonus. Other Annual Compensation amounts are not required to be
reported for fiscal year 1991.
(3) Restricted stock vests upon the employee's retirement from the Company
after age 65 if continuously employed by the Company for at least five
years since the date of grant. Vesting may be accelerated in years three,
four and five if, in the Compensation Committee's view, the Company
achieves certain predetermined financial goals. A participant has all the
rights of a stockholder with respect to these shares, including the right
to receive dividends, if any, except that the stock is subject to a
repurchase right by the Company and may not be disposed of until the
repurchase right lapses. Aggregate number of restricted shares and their
fair market value at 1993 fiscal year-end (net of purchase price) were as
follows: Poppa--61,520 shares valued at $1,962,488; Thompson--9,610 shares
valued at $306,559; Gooch--14,080 shares valued at $449,152; Tymn--8,522
shares valued at $271,851; Williams--7,451 shares valued at $237,686;
Ravine--17,962 shares valued at $572,987 (see Footnote 12); and de
Belloy--10,769 shares valued at $343,531 (see Footnote 15).
(4) All Other Compensation amounts are not required to be reported for fiscal
year 1991. The items reported for 1993 include (i) the value of premiums
paid by the Company for Executive Group Term Life Insurance on behalf of
the Named Executive Officers as follows: Poppa--$34,090; Thompson--
$27,320; Gooch--$5,132; Tymn--$3,851; Williams--$5,124; Ravine--$6,703;
and de Belloy--0; and (ii) above-market interest earned on deferred
compensation as follows: Poppa--$8,365; Gooch--$1,169; and de Belloy--
$499. No Company contributions were made for 1993 to the Profit Sharing
and Thrift Plan.
(5) Includes payments of $57,210 for financial services for Mr. Poppa.
(6) Includes payments of $220,722 in connection with expenses of the overseas
assignment of Mr. Thompson.
(7) Represents marketing commissions earned in 1993 and 1992, and an incentive
payout for 1993, as head of sales and customer services functions for the
Americas group.
(8) Includes payments of $58,301 made in lieu of relocation expense
reimbursement that was a part of Mr. Williams' offer of employment.
(9) Mr. Williams became an executive officer of the Company in February 1992.
Compensation is reported for the full fiscal year of 1992 including
compensation attributable to the portion of the year in which he was an
employee but did not serve as an executive officer. No compensation is
reported for fiscal year 1991 since Mr. Williams did not serve as an
executive officer at any time during that year.
(10) Includes payments of $148,189 in connection with expenses of the overseas
assignment of Mr. Ravine and $104,084 in connection with tax payments
related to the overseas assignment.
(11) Includes estimated amounts to be paid to Mr. Ravine during 1994 pursuant
to a severance agreement, dated as of October 8, 1993. See "--Employment
Contracts and Termination of Employment and Change-in-Control
Arrangements."
(12) All shares of restricted stock have been repurchased from Mr. Ravine as
of January 31, 1994, at the original purchase price of $.10 per share.
(13) Includes payments of $106,867 in connection with expenses of the overseas
assignment of Mr. de Belloy.
(14) Includes estimated severance payments to be paid to Mr. de Belloy during
1994, in accordance with the termination provisions included in his
employment agreement, and estimated amounts to be paid under a consulting
agreement entered into on March 8, 1994. See "--Employment Contracts and
Termination of Employment and Change-in-Control Arrangements."
(15) All shares of restricted stock have been repurchased from Mr. de Belloy
as of December 31, 1993, at the original purchase price of $.10 per
share.
8
<PAGE>
OPTION GRANTS TABLE
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------
% OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (1)
OPTIONS EMPLOYEES IN OR BASE ----------------------------------
GRANTED FISCAL PRICE EXPIRATION
NAME (#) 1993(2) ($/SH) DATE 0% ($) 5% ($) 10% ($)
---- ----------- ------------- -------- ---------- ------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Poppa................ 52,000(3) 4.88% $29.875 11/16/03 -0- $ 976,987 $ 2,475,878
23,833(4) 2.24 29.875 11/16/03 -0- 477,779 1,134,761
D. Thompson............. 13,830(3) 1.30 29.875 11/16/03 -0- 259,841 658,488
5,980(4) .56 29.875 11/16/03 -0- 112,353 284,726
L. Gooch................ 13,750(3) 1.29 29.875 11/16/03 -0- 258,338 654,679
5,417(4) .51 29.875 11/16/03 -0- 101,775 257,919
G. Tymn................. 11,625(3) 1.09 29.875 11/16/03 -0- 218,413 553,501
4,875(4) .46 29.875 11/16/03 -0- 91,592 232,113
J. Williams............. 2,000(3) .19 27.625 09/21/03 -0- 34,746 88,054
11,625(3) 1.09 29.875 11/16/03 -0- 218,413 553,501
4,875(4) .46 29.875 11/16/03 -0- 91,592 232,113
H. Ravine............... -0- -- -- -- -- -- --
G. de Belloy............ -0- -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
Increase in market value of the Common Stock for
ALL STOCKHOLDERS (as of year-end 43,063,439 shares) at
assumed annual rates of appreciation $809,075,892 $2,050,379,521
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- --------
(1) Potential realizable value is calculated based on an assumption that the
price of the Company's Common Stock appreciates at the annual rate shown
(0%, 5% and 10%), compounded annually, from the date of grant of the
option until the end of the option term (10 years). The value is net of
the exercise price but is not adjusted for the taxes that would be due
upon exercise. THE 5% AND 10% ASSUMED RATES OF APPRECIATION ARE MANDATED
BY THE RULES OF THE SECURITIES AND EXCHANGE COMMISSION AND DO NOT IN ANY
WAY REPRESENT THE COMPANY'S ESTIMATE OR PROJECTION OF FUTURE STOCK PRICES.
ACTUAL GAINS, IF ANY, UPON FUTURE EXERCISE OF ANY OF THESE OPTIONS WILL
DEPEND ON THE ACTUAL PERFORMANCE OF THE COMPANY'S COMMON STOCK, THE
CONTINUED EMPLOYMENT OF THE EXECUTIVE OFFICER HOLDING THE OPTION THROUGH
ITS VESTING PERIOD AND THE SUBSEQUENT EXERCISE OF THE OPTION BY THE
EXECUTIVE OFFICER. At 5% annual appreciation from $29.875 over a 10-year
term, the stock price would be $48.663. At 10% annual appreciation from
$29.875 over a 10-year term, the stock price would be $77.488.
(2) Based on options to purchase an aggregate of 1,065,775 shares granted
during fiscal 1993 to all employees under all of the Company's option
plans.
(3) Standard options were granted under the 1987 Equity Participation Plan.
The exercise price is 100% of fair market value on the date of grant.
Options vest in thirds each year beginning one year from the date of grant
and expire 10 years from the date of grant. Options are exercisable for 90
days after a voluntary termination to the extent vested at that time but
will terminate immediately upon a termination for cause. In the event of a
recapitalization, merger, consolidation or reorganization (excluding any
reorganization under the U.S. Bankruptcy Code), the number of shares and
exercise price will be adjusted, as appropriate. In the event of a hostile
tender offer, the vesting period of all options outstanding for at least
six months will accelerate and all restrictions on restricted stock awards
will immediately lapse. Options are not transferable.
(4) Performance-based options were granted under the 1987 Equity Participation
Plan. The exercise price is 100% of fair market value on the date of
grant. Performance-based options vest after six years unless accelerated
to the first, second and third years based on net-after-tax performance
goals. Performance-based options expire 10 years from the date of grant.
Performance-based options are exercisable for 90 days after a voluntary
termination to the extent vested at that time but will terminate
immediately upon a termination for cause. In the event of
recapitalization, merger, consolidation or reorganization (excluding any
reorganization under the U.S. Bankruptcy Code), the number of shares and
exercise price will be adjusted, as appropriate. In the event of a hostile
tender offer, the vesting period of all options outstanding for at least
six months will accelerate and all restrictions on restricted stock awards
shall immediately lapse. Options are not transferable.
9
<PAGE>
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
EXERCISE REALIZED OPTIONS AT 12/31/93(#) OPTIONS AT 12/31/93($)
NAME (#) ($) (1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (2)
---- ----------- -------- -------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
R. Poppa................ -0- -- 434,908 94,514 $9,444,575 $295,592
D. Thompson............. -0- -- 20,413 32,541 65,404 82,392
L. Gooch................ -0- -- 10,039 24,239 117,503 77,229
G. Tymn................. -0- -- 7,266 21,657 57,090 67,912
J. Williams............. -0- -- 11,130 21,476 128,869 62,126
H. Ravine............... -0- -- 161,125 5,822(3) 3,269,529 41,610
G. de Belloy............ -0- -- 20,896 -0-(4) 260,967 -0-
</TABLE>
- --------
(1) "Value Realized" is calculated by subtracting the total exercise price
from the fair market value of the securities underlying the options on the
date of exercise.
(2) Only the value of unexercised, in-the-money options are reported. Value is
calculated by (i) subtracting the exercise price per share from the year-
end market value of $32.00 per share; and (ii) multiplying by the number
of shares subject to the option. Options that have an exercise price equal
to or greater than the fiscal year-end market value are not included in
the value calculation.
(3) Mr. Ravine's termination date was January 31, 1994, and all options
covering unvested shares were canceled as of that date.
(4) Mr. de Belloy's termination date was December 31, 1993, and all options
covering unvested shares were canceled as of that date.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In December 1989 the Company and Mr. Poppa entered into an agreement to
renew and extend the terms of his prior employment agreement through January
20, 1996. Mr. Poppa's base salary for 1993 as determined by the Compensation
Committee was $585,000. The agreement provides for a Management By Objective
("MBO") bonus percentage of 60%. In the event of an involuntary termination
without cause, the agreement provides for a severance payment equal to the
greater of (i) the sum of his annual base compensation and 100% of his bonus
amount for the year of termination; or (ii) the sum of his annual base
compensation and 100% of the then current bonus percentage for each year
remaining in the employment term. In the event of a voluntary termination
within six months after a change in control, the Company would pay Mr. Poppa
an amount equal to twice his annual base salary and 100% of the then current
bonus amount. Upon termination for cause, compensation shall be paid only
through the date of termination. Mr. Poppa's employment agreement also
entitles him to annual payments upon termination for disability equal to 80%
of his base salary in effect on the date of disability for the remainder of
his life, reduced by any amounts received under any Company-funded disability
benefit plan.
In February 1991 the Company entered into an Employment Agreement and an
Expatriate Agreement with Mr. Thompson. The Expatriate Agreement provides for
an MBO bonus percentage of 45%, a foreign service premium of 10% of base pay,
a cost-of-living differential, and make-whole housing and tax equalization
payments. The agreement also provides for relocation expense reimbursement and
repatriation expenses upon completion of assignment or extension of such
assignment. Mr. Thompson's 1993 annual base salary as determined by the
Compensation Committee was $297,000. Mr. Thompson's Employment Agreement
provides that in the event of an involuntary termination without cause, the
Company shall pay Mr. Thompson an amount equal to the greater of (i) the sum
of his annual base compensation and 100% of his bonus amount for the year of
termination; or (ii) the sum of his annual base compensation and 100% of the
then current bonus percentage for each year remaining in the employment term.
In the event of a voluntary termination within six months after a change in
control, the Company would pay Mr. Thompson an amount equal to his annual base
salary and 100% of the bonus amount. Upon termination for cause, compensation
shall be paid only through the date of termination.
In February 1987 and February 1992, the Company entered into employment
agreements with Messrs. Gooch, Tymn and Williams which provide for an on-plan
target bonus of 45%, 40% and 35% of salary,
10
<PAGE>
respectively, under the Company's MBO bonus plan. The base salary for 1993 for
Messrs. Gooch, Tymn and Williams, as determined by the Compensation Committee,
was $225,000, $202,500, and $193,500, respectively. In the event of involuntary
termination without cause or in the event of death, each agreement provides for
a payment of 100% of the annual base compensation plus 100% of the on-plan
target bonus. In the event of a change of control followed by voluntary
termination within six months, the agreements provide for payment upon such
termination in the amount of one year's annual base salary plus 100% of the on-
plan target bonus. No compensation shall be paid under the agreements in the
event of a termination for cause. Mr. Williams' offer letter also provided for
a one-time payment in lieu of relocation expense reimbursement.
In October 1993 Mr. Ravine resigned as an officer of the Company and entered
into a severance agreement with the Company, which superseded his 1987
employment agreement. Under this agreement, Mr. Ravine will receive payments in
the aggregate amount of $391,565. The severance agreement provides that the
Company will pay all premiums for medical, dental and life insurance for a
period not to exceed 18 months, and up to $10,000 for outplacement services,
and includes a noncompete agreement.
Effective December 31, 1993, Mr. de Belloy resigned from the Company. Under
the terms of his employment agreement, Mr. de Belloy will receive payments in
the aggregate amount of $383,400. On March 8, 1994, the Company entered into a
consulting agreement with Mr. de Belloy, which expires on April 30, 1994, under
which the Company will pay him up to $37,714.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires certain
persons, including the Company's Directors and officers, to file reports of
ownership and changes in ownership of the Company's securities with the
Securities and Exchange Commission. The Company is required to disclose in this
proxy statement any late or missed filings of those reports during 1993 by its
Directors, officers and 10% stockholders. Under Section 16(a), directors,
officers and 10% stockholders are required to report on Form 3, within 10 days
of becoming such, all shares of the Company's stock beneficially owned by such
Director, officer or 10% stockholder. Based upon the Company's review of the
reporting forms received by it and written representations from certain persons
that no Form 5 reports were required to be filed by those persons, the Company
believes that all filing requirements applicable to its Directors, officers and
10% stockholders were complied with for fiscal year 1993, except that (i) each
of the Robert A. Burgin, Jr. Trust, of which Robert A. Burgin (a Director) is
trustee, and the Stephen J. Keane and Winifred M. Keane Trust, of which Stephen
J. Keane (a Director) is trustee, filed a late Form 3 with respect to the
respective trust's holdings of the Company's securities; and (ii) Sewell Sleek
(an officer, who is a general partner of a partnership which purchased shares
of Common Stock in 1984) filed a late Form 4 with respect to the purchase of
these shares.
11
<PAGE>
AMENDMENT OF THE
1987 EMPLOYEE STOCK PURCHASE PLAN
PROPOSAL 2.
On February 2, 1982, the Board of Directors of the Company (the "Board")
adopted the 1982 Employee Stock Purchase Plan, which was amended, restated, and
renamed in 1987 and which has become a significant vehicle for employee share
ownership. The Company now seeks stockholder approval of an amendment to this
plan to increase the number of shares issuable thereunder by 1,250,000. The
Employee Stock Purchase Plan, as so amended, shall hereinafter be referred to
as the "Plan." It is the intention of the Company that the Plan continue to
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"). The provisions
of the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
In the last five years, the Company has received over $36,000,000 paid by
employees of the Company and its subsidiaries through payroll deductions to
purchase stock under the Plan and a plan assumed by the Company in connection
with an acquisition.
SUMMARY OF THE PLAN
General. The Plan provides a method whereby employees of the Company and its
subsidiaries have an opportunity to acquire an equity interest in the Company
through the purchase of shares of Common Stock through payroll deductions
during the six-month offering period (the "Offering Period"). Participation is
completely voluntary. No employee shall be granted an option to participate in
the Plan (i) if, immediately after the grant, such employee would own stock,
and/or hold outstanding options to purchase stock, possessing 5% or more of the
total combined voting power or value of all classes of stock of the Company
(for purposes of this paragraph the rules of Section 425(d) of the Code shall
apply in determining Stock ownership of any employee); (ii) which permits his
or her rights to purchase stock under all employee stock purchase plans of the
Company to accrue at a rate which exceeds $25,000 of the fair market value of
the stock (determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time; or (iii) which permits
his or her rights to purchase stock to exceed 25,000 shares in any Offering
Period.
Administration of the Plan. The Plan is administered by the Compensation
Committee which consists of nonemployee Directors of the Company. The
interpretation and construction of any provision of the Plan and the adoption
of rules and regulations for administering the Plan will be made by the
Compensation Committee, subject, however, at all times to final Board
oversight. Determinations made by the Compensation Committee (and approved by
the Board, if necessary) with respect to any matter or provision contained in
the Plan will be final, conclusive and binding upon the Company and upon all
participants, their heirs or legal representatives.
Eligibility. Any person who is customarily employed by the Company or its
majority-owned subsidiaries for more than 20 hours per week and more than five
months in a calendar year is eligible to participate in the Plan. A person must
be so employed on the applicable Offering Commencement Date (as herein defined)
in order to participate in such Offering Period under the Plan. As of March 27,
1994, approximately 9,900 employees were eligible to participate.
Shares Subject to the Plan. If this proposed amendment is approved, the total
number of shares of Common Stock available for sale under the Plan may not
exceed 2,950,000 (including shares previously issued). The number of shares of
Common Stock reserved for issuance under the Plan and the price per share are
to be adjusted if there is an increase or decrease in the number of outstanding
shares of Common Stock through a stock dividend, stock split, reverse stock
split, consolidation or combination of shares, reclassification,
recapitalization or reorganization, or if the Company issues additional shares
of Common
12
<PAGE>
Stock or preferred stock or takes any other action of a similar nature
affecting such Common Stock, excluding, however, any reorganization under the
United States Bankruptcy Code. The extent and manner of adjustment will be
determined by the Board upon the recommendations of the Compensation Committee
as appropriate under the Plan.
The following sets forth the allocation of the additional shares and the
proposed offering periods therefor:
<TABLE>
<CAPTION>
OFFERING SHARES
PERIOD AVAILABLE
-------- ---------
<S> <C>
November 1, 1993- 204,110 (includes unsold balances
April 30, 1994 from earlier Offering Periods)
May 1, 1994- 300,000 plus any unsold balances
October 31, 1994 from earlier Offering Periods
November 1, 1994- 300,000 plus any unsold balances
April 30, 1995 from earlier Offering Periods
May 1, 1995- 300,000 plus any unsold balances
October 31, 1995 from earlier Offering Periods
November 1, 1995- 300,000 plus any unsold balances
April 30, 1996 from earlier Offering Periods
May 1, 1996- 50,000 plus any unsold balances
October 31, 1996 from earlier Offering Periods
</TABLE>
Subsequent Offering Periods shall offer all stock then remaining for issuance
under the Plan until all shares of Common Stock allocated under the Plan have
been purchased. The shares to be issued in respect of any Offering Period may
be increased or decreased by the Compensation Committee prior to the
commencement of the affected Offering Period within the limits of total shares
then available under the Plan.
Allocation of Shares. If less than the number of shares allocated with
respect to any Offering Period are purchased during such Offering Period, the
number of shares not purchased is carried over and made available for sale
under the Plan during any subsequent Offering or Offerings. If the total number
of shares which participants would otherwise be allowed to purchase on any
offering termination date exceeds the maximum number of shares available for
sale, the Company will make a pro rata allocation of the shares available for
delivery and distribution in as nearly uniform a manner as is practicable and
as it determines to be equitable, and the balance of payroll deductions
credited to the account of each participant, together with the net earnings
allocable thereto, will be returned to the employee.
Option to Purchase. On the first day of an Offering Period (the "Offering
Commencement Date"), a participant is deemed to have been granted an option to
purchase a maximum number of shares of Common Stock equal the lesser of (i) the
Option Price (defined below) divided into an amount equal to (x) that
percentage of the employee's base pay which he or she has elected to have
withheld, multiplied by (y) the employee's projected base pay for the
applicable Offering Period, calculated on the assumption that the employee's
base pay remains constant over the offering period; or (ii) 25,000 shares. The
market value of the Company's Common Stock will be the composite closing price
of the stock on the New York Stock Exchange on the applicable Offering
Commencement Date.
Option Price. The option price of Common Stock purchased with payroll
deductions made during each Offering Period for a participant therein will be
the lower of (i) 85% of the composite closing price of the stock on the New
York Stock Exchange on the applicable Offering Commencement Date; or (ii) 85%
of the composite closing price of the stock on the New York Stock Exchange on
the last day of the Offering Period (the "Offering Termination Date"). The
closing price of the Common Stock on the New York Stock Exchange on March 25,
1994, was $34.50 per share.
13
<PAGE>
Payroll Deductions. The employee shall elect to have deductions made from his
or her base pay during the time the employee is a participant in an Offering
Period at the rate of 1% to 10% of the base pay in effect on the Offering
Commencement Date. All payroll deductions made for a participant shall be
transferred to a segregated account as soon as practicable. A participant may
not make any separate cash payments into the Plan. Fractional shares will not
be issued under the Plan and any accumulated payroll deductions which would
have been used to purchase fractional shares, together with any amounts which
are in excess of the limitations described above, together with any net income
of the account allocable to each participant, will be returned to each
participant as soon as possible following the termination of an Offering. A
participant may discontinue participation in the Plan, but no other change can
be made during an Offering Period and, specifically, a participant may not
alter the rate of payroll deductions for that Offering Period.
Merger or Sale of Assets. In the event of a merger or consolidation of the
Company or the sale of all or substantially all of the assets of the Company,
the holder of each option then outstanding will be entitled to receive, at the
next Offering Termination Date, upon the exercise of such option for each share
as to which such option shall be exercised, the securities or property which a
holder of one share of the Common Stock was entitled to upon and at the time of
such merger, consolidation or sale of assets, subject to adjustment due to an
increase or decrease in the total number of outstanding shares of stock as a
result of the merger, consolidation or sale of assets.
Tax Information. The Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Section 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 shares. Upon disposition of
the shares, the participant will generally be subject to tax and the amount of
the tax will depend upon the holding period.
If the shares have been held by the participant for more than two years after
the date of option grant and for more than one year after the date of purchase,
the lesser of (i) the excess of the fair market value of the shares at the time
of such disposition over the option price; or (ii) the excess of the fair
market value of the shares at the time the option was granted over the option
price (which option price will be computed as of the grant date) will be
treated as ordinary income, and any further gain will be treated as a long-term
capital gain. If the shares are disposed of before the expiration of these
holding periods, the excess of the fair market value of the shares on the
exercise date over the option price will be treated as ordinary income, and any
further gain or loss on such dispositions will be long-term or short-term
capital gain or loss, depending on the holding period.
Different rules may apply with respect to participants subject to Section
16(b) 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 prior to the expiration of
the holding periods described above.
The foregoing is only a summary of the effect of federal income taxation upon
the participant and the Company with respect to the shares purchased under the
Plan, does not purport to be complete, and does not discuss the income tax laws
of any municipality, state or foreign country in which a participant may
reside.
Termination and Amendment. The Board may, at any time, amend or terminate the
Plan. However, no such action can affect options previously granted under the
Plan, nor may an amendment make any change in any option theretofore granted
which would adversely affect the rights of any participant. The Company's
stockholders must approve any amendment which would materially increase the
number of shares of stock that may be issued pursuant to the Plan, alter the
class of employees eligible to be granted options under the Plan, or materially
increase the benefits accruing to participants under the Plan.
14
<PAGE>
PARTICIPATION IN THE EMPLOYEE STOCK PURCHASE PLAN
Participation in the 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 Plan are not
determinable. Nonemployee Directors are not eligible to participate in the
Plan. No purchases have been made under the Plan since its amendment by the
Board. However, purchases were made under the Plan prior to its amendment. The
following table sets forth certain information regarding shares purchased under
the Plan during the last fiscal year and the payroll deductions accumulated at
the end of the last fiscal year in accounts under the Plan for each of the
Named Executive Officers, for all current executive officers as a group and for
all other employees who participated in the Plan as a group:
<TABLE>
<CAPTION>
PAYROLL
NUMBER OF DEDUCTIONS
NAME OF INDIVIDUAL SHARES DOLLAR AS OF
OR IDENTITY OF GROUP AND PURCHASED VALUE FISCAL
POSITION (#) ($)(1) YEAR END
------------------------- ---------- ---------- -----------
<S> <C> <C> <C>
R. Poppa,................................. 1,516 $ 5,250 $ 9,000
Chairman, President and Chief Executive
Officer
D. Thompson,.............................. -0- -0- -0-
Executive Vice President
L. Gooch,................................. 262 880 1,730
Executive Vice President
G. Tymn,.................................. -0- -0- -0-
Senior Corporate Vice President
J. Williams,.............................. -0- -0- -0-
Senior Corporate Vice President
H. Ravine,................................ -0- -0- -0-
Former Executive Vice President
G. de Belloy,............................. 870 2,930 3,600
Former Executive Vice President
All current executive officers as a group. 3,710 12,624 16,684
All other employees as a group............ 443,200 $1,488,104 $1,301,836(2)
</TABLE>
- --------
(1) Market value of shares on date of purchase, minus the purchase price under
the Plan.
(2) Does not include deductions for employees at XL/Datacomp, Inc., Amperif
Corporation or any international subsidiaries.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment of the Plan.
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT TO THE EMPLOYEE STOCK PURCHASE
PLAN. PROXIES RECEIVED BY THE COMPANY WILL BE SO VOTED UNLESS A CONTRARY VOTE
IS SPECIFIED.
15
<PAGE>
APPROVAL OF MATERIAL TERMS
OF PERFORMANCE-BASED INCENTIVE PLAN
PROPOSAL 3.
At the Annual Meeting, the stockholders are being asked to approve the
material terms of the Storage Technology Corporation Corporate Officer MBO
Bonus Plan (the "Bonus Plan"), a performance-based incentive plan established
for the Company's executive officers, in order to satisfy the requirements of
the performance-based exception to Section 162(m) of the Code with respect to
the deductibility by the Company of compensation. Bonus compensation is
critical to the retention and motivation of executive officers and is a key
feature of competitive compensation plans. The material terms of the Bonus Plan
consist of the following: (i) the individuals eligible to receive compensation
under the Bonus Plan; (ii) the business criteria on which annual and long-term
performance incentives to be awarded under the Bonus Plan are based; and (iii)
the maximum amounts of compensation payable to any individual under the Bonus
Plan.
ELIGIBLE INDIVIDUALS
All executive-level employees are eligible for performance-based incentive
awards under the Bonus Plan, including, without limitation, individuals holding
the following positions: Chief Executive Officer ("CEO"), Chief Operating
Officer, and such other officers whose compensation may in any year be
reportable in the Company's proxy statement. The number of executives currently
eligible to participate in the Bonus Plan is eleven.
BUSINESS CRITERIA
The Board believes one of the principal objectives of management is the long-
term creation of shareholder value. In keeping with this belief, the Board has
authorized and directed a committee of the Board that meets the requirements of
Section 162(m) of the Code, currently the Human Resources and Compensation
Committee (the "Compensation Committee"), to prescribe annual and long-term
performance-based incentive targets based on the achievement of objective,
quantifiable and measurable performance targets, including targets based on one
or more of the following criteria: reliability measurements of products and
component parts, measurements of adherence to product development and delivery
schedules, measurements of the product creation and delivery processes, market
penetration, net after-tax income, economic value added, return on assets,
return on equity, debt ratings, product revenue, revenue growth, and timely
updates and approval of strategic plans. The Compensation Committee believes
that information regarding details of these goals includes confidential
commercial or business information, the disclosure of which would have an
adverse effect on the Company.
MAXIMUMS
In no event will the sum of the annual performance-based compensation and
long-term performance-based compensation payable under the Bonus Plan in any
year to the CEO or any other executive officer exceed $2,000,000 or $1,000,000,
respectively. Actual results would need to significantly exceed target levels
for any executive officer to achieve these levels and, in fact, only the CEO is
expected to have the opportunity in the foreseeable future to approach these
amounts assuming current and anticipated salary levels. This performance-based
incentive plan has been in place in substantially this form for four years, and
no bonus was paid to any executive officer, including the CEO, for 1992 or 1993
performance under the existing plan. Future awards under the Bonus Plan are not
determinable. The maximum amount payable per year under the Bonus Plan would,
in no event, exceed 10% of the Company's average annual income before taxes for
the preceding five years.
The Bonus Plan, if approved by the stockholders, will first be implemented in
1995. With respect to 1994, the Company may grant performance-based bonuses to
the CEO and other executive officers under the existing incentive plan, which
is substantially similar to the Bonus Plan, except that it does not meet all
the requirements of Section 162(m) of the Code with respect to stockholder
approval, identifying maximum dollar
16
<PAGE>
limitations and the timing of the establishment of performance targets. No
further bonuses will be granted to the CEO and other executive officers under
the existing plan after 1994.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the material terms of the Bonus Plan. If the stockholders do not
approve this proposal, the Company will not make any payments under the Bonus
Plan.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE MATERIAL TERMS
OF THE PERFORMANCE-BASED INCENTIVE PLAN. PROXIES RECEIVED BY THE COMPANY WILL
BE SO VOTED UNLESS A CONTRARY VOTE IS SPECIFIED.
17
<PAGE>
RATIFICATION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
PROPOSAL 4.
The firm of Price Waterhouse was engaged as auditors for the year ended
December 31, 1993. There have been no disagreements on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope of
procedure or any reportable events with Price Waterhouse or KPMG Peat Marwick
("KPMG").
As described in the Company's filing on Form 8-K dated as of May 26, 1992, at
a meeting of the Company's Audit Committee held on May 26, 1992, the committee
determined to engage the accounting firm of Price Waterhouse as independent
accountants for all subsidiaries of the Company for 1992, subject to approval
of stockholders. The stockholders ratified the appointment on May 27, 1992, at
the Annual Meeting of Stockholders. As a result, one of the Company's
subsidiaries, XL/Datacomp, Inc., dismissed the accounting firm of KPMG and
retained the accounting firm of Price Waterhouse to perform the annual audit of
the financial statements of XL/Datacomp, Inc. Price Waterhouse, which had been
auditing the Company and all subsidiaries except XL/Datacomp, Inc., expressed
reliance upon KPMG's report in their report on the consolidated financial
statements of the Company for the 1991 fiscal year. KPMG's report on the
financial statements for 1991 contained no adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty or audit scope.
Additionally, there were no report modifications for accounting principles,
with the exception of an explanatory paragraph referencing XL/Datacomp's change
in its method of accounting for income taxes in the year ended December 31,
1991, with which KPMG concurred.
The Board of Directors requests that stockholders ratify the engagement of
Price Waterhouse for fiscal year 1994. A representative of Price Waterhouse is
expected to be present at the annual meeting and available to respond to
appropriate questions and, although Price Waterhouse has indicated that no
statement will be made, an opportunity for a statement will be provided. In the
event the proposal to ratify the selection of Price Waterhouse is defeated, the
adverse vote will be considered as a recommendation to the Board of Directors
to select other independent auditors for the next year. However, because of the
expense and difficulty in changing independent auditors after the beginning of
the year, the Board of Directors intends to allow the appointment for 1994 to
stand unless the Board of Directors finds other reasons for making a change.
Even if the selection is ratified, the Board of Directors, in its discretion,
may select a new independent accounting firm at any time during the year if the
Board of Directors believes that such a change would be in the best interests
of the Company and its stockholders.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE RATIFICATION OF THE
APPOINTMENT OF PRICE WATERHOUSE AS INDEPENDENT ACCOUNTANTS.
18
<PAGE>
The information provided below is expressly excluded from incorporation by
reference into any filings under the jurisdiction of the Securities and
Exchange Commission.
HUMAN RESOURCES AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the Human
Resources and Compensation Committee (the "Compensation Committee"), which is
composed entirely of outside Directors. The current members of the Compensation
Committee were appointed in March 1994 and include Messrs. Keane and Lee, and
Ms. Albino, as well as two members who were re-appointed, Messrs. Armstrong and
Burgin. As part of its duties, the Compensation Committee reviews compensation
levels of management, evaluates the performance of management and considers
management succession and related matters. The Compensation Committee also
administers various incentive plans, including retention and long-term
incentive plans for all employees.
Compensation Philosophy
The Company's compensation package for executives is formulated based on
three principles. First, compensation should support identified short- and
long-term business goals and strategies. Second, compensation levels should be
competitive with those of other companies in comparable markets and business
segments to those of the Company. Finally, the package must provide a tangible
link between the expectations of customers and stockholders and the interests
of executives as a means of expanding corporate opportunities as well as
retaining key personnel. The components of total compensation are salary,
bonus, equity grants and benefits. Each of these components is valued and
together comprise total compensation value. The mix of the components
determines how much emphasis is placed on risk compensation (i.e., bonus and
equity) or fixed compensation (i.e., base salary and benefits).
Each year, the Compensation Committee reviews executive compensation based
upon: (1) a valuation of the components of compensation; (2) the Company's
performance during the past year; and (3) compensation data available within
the industry. The Company's executive compensation program is designed so that
annual pay for senior executives remains competitive with similarly sized high-
technology companies. The Compensation Committee reviews the competitiveness of
the prior year's compensation based on surveys conducted by outside consulting
firms. The surveyed companies are a close reflection of the companies that
comprise the S & P Computer Systems Index presented in the performance graph,
to the extent that nine of the eleven index companies are included in the
survey used to review executive compensation.
As in prior years, the Compensation Committee used advice developed by an
outside compensation consultant to review the compensation of the CEO and the
other corporate officers. Based on both the survey results and the input from
the consultant, the Compensation Committee believes that the CEO's targeted
1993 total annual compensation, as well as that of other corporate officers,
was reasonable and appropriate, given the size, complexity and performance of
the Company.
Going forward into 1994 and beyond, the compensation plans for the CEO and
other executive officers will continue to be designed to retain and motivate
the executives, as well as to preserve beneficial tax treatment for amounts
paid as compensation. In light of the application of Section 162(m) of the
Internal Revenue Code, the Compensation Committee has elected to modify some
incentive plans to ensure they are treated as "performance-based plans,"
thereby preserving the Company's tax deductions for the compensation paid to
these employees pursuant to such plans. The Board of Directors is asking the
stockholders to approve the material terms of the Company's Corporate Officer
MBO Bonus Plan under which cash bonuses may be paid to officers of the Company.
The Company believes that the stock option plans under which its officers
receive grants of options comply with Rule 16b-3 and therefore qualify as
"performance-based" plans until the earlier of their amendment or 1997. The
Compensation Committee plans to amend such plans to include limitations that
will be necessary to continue to qualify them as performance-based plans prior
to 1997.
19
<PAGE>
Salary and Bonus
For 1993 the base salary of the CEO and all elected and appointed vice
presidents was reduced by 10%. The base salary of the majority of all other
employees was reduced by 5%. These actions, as well as the 10% reduction in
nonemployee Director fees, were part of the Company's austerity program. The
austerity program was designed to reduce expenses, yet protect the employee
base that was, and will be, needed in 1993 and 1994 to deliver and service a
series of new products.
The annual salaries of the executive officer group for 1993 (before the 10%
reduction) were measured and projected to be low, but within a few percentage
points of the competitive market median. The CEO's salary was not increased in
1993 and was subject to the 10% reduction. As a result, in 1993 his salary was
less than the projected median value for the job. Also, the reduction in salary
reduced the CEO's bonus potential by 10%.
The Company has developed variable bonus payouts, tied to individual and
group performance objectives, that place the CEO and the other officers in a
highly leveraged compensation position. This means that if the Company meets
all the target criteria controlling the distribution of bonus and equity, the
compensation plan for the officers (including the CEO) should be competitive
with like positions in similarly sized high-technology companies. This approach
is aimed at tying total compensation directly to the Company's performance.
If the Company's performance is lesser or greater than the targets, the CEO's
total compensation can vary from 50% to 125% of the targeted competitive total
compensation. The mix of components for the other Named Executive Officers
provides a slightly less leveraged total compensation plan. The value for Named
Executive Officers can range from 55% to 120% of the targeted total
compensation, while the value for other officers can range from 70% to 117%.
For 1993 performance objectives used to determine bonus compensation included
quality improvement, net after-tax income, asset management and the achievement
of strategic plan goals. The Company's performance in 1993 did not meet
expectations and, consequently, the Company did not pay a performance bonus for
1993 to any employee, except bonuses paid to sales and sales support people
working under leveraged commission or incentive plans, including one of the
Named Executive Officers. John Williams, Senior Corporate Vice President of
Americas, received an incentive payout for 1993 as head of the sales and
customer service function for the Americas. The incentive payout was for the
performance of this revenue-producing group.
The impact of the decision not to award a bonus to the CEO was to reduce his
projected cash compensation by approximately 38% and his projected total
compensation by 23%. For 1993 this reduction applied to cash and total
compensation, which already had been reduced by 10%. With respect to the other
Named Executive Officers, the impact of the decision not to award bonuses was
to reduce their total compensation by amounts ranging from 16% to 19%. For 1993
this decision further reduced compensation already subject to the 10%
reduction.
The benefit package offered to executive officers is substantially the same
as that for all employees for medical, dental, life and disability insurance,
except the officers pay all employee-paid premiums for medical and dental
coverage, and certain out-of-pocket expenses are reimbursed by the Company
(subject to a maximum of $5,000 per year). In addition, the life insurance
benefit is an individually owned universal policy, in an amount equal to
approximately three times the officers' salary (versus two times salary for
non-officers), and a deferred compensation plan is available. The Company
estimates the value of such benefits to represent approximately 10% of total
compensation.
Equity Grants
The Committee believes that, through the use of stock options and restricted
stock, executive interests are tied directly to enhancing stockholder value.
The size of the equity grants offered to the executive officers during any
given year are based upon the results of the competitive market compensation
survey. The
20
<PAGE>
Compensation Committee then specifies individual equity grants within the
ranges established by the survey. During 1993 the Compensation Committee again
reviewed the design of the stock-based incentive programs, and decided to only
use options and the Employee Stock Purchase Plan for equity incentives in 1993.
Stock options are granted with an exercise price equal to fair market value
as of the date of grant, and have a term of 10 years. The number of options
granted to any employee is determined based on a schedule that is designed to
compare the same competitive market used to analyze the other components of
total compensation. The number of options is determined from the schedule,
using the level and the salary of the employee as the criteria.
The Company uses a modified Black-Scholes model, calculated by a third-party
consultant, to project a value for the Company options. The consultant applies
the model to the companies included in the competitive market survey to measure
the value of their equity plans, as a benchmark for the Company's equity plan.
While the Company does not believe that there is any model that can accurately
value employee stock options, the model used does permit the Company to compare
its options to options granted by companies within the competitive market.
For 1993 two types of options were granted to corporate officers and key
employees: performance-based options and standard options. The performance-
based options, which account for approximately one-third of all such options,
have a longer-than-normal vesting period of six years, unless the Company's
operating plan net after-tax goals are met in each of the first three years
following the date of grant. If the net after-tax goals are met, the vesting
period accelerates to the first, second and third years.
The remaining two-thirds of these options were standard options and vest
based solely upon continued employment and have the normal vesting schedule of
three years. The grant of such options was approved by the Compensation
Committee as a tool to be used for incentive and retention of the key
contributors, as the competitive market attempted to solicit elected and
appointed officer groups away from the Company. While salary and bonus
components were reduced to control expenses, the options provided the executive
officers with more leverage (along with the attendant risk and reward) in order
to encourage a level of performance that would serve to increase the price of
the Company's stock.
The Compensation Committee continues to monitor legislative and regulatory
(including SEC and IRS) changes that may affect the cost of the various
components of executive compensation. Additional redesigning of the
compensation components will be studied and implemented as appropriate.
Summary
The Compensation Committee believes that the total compensation approach used
by the Company and the officer team is an important retention and motivation
tool. It ensures that there is a balanced view to the Company's short-term
goals (with bonus opportunity as the reward factor) and the Company's long-term
strategies (with equity growth, over vesting periods, as the reward factor).
The Compensation Committee also believes that having a significant amount of
total compensation tied to the interests of the stockholders is critical.
The reduced salary and bonus compensation paid for 1993, and the failure to
accelerate the vesting of restricted stock, previously granted, is evidence
that performance is an integral part of the Company's philosophy and practice.
Yet the potential for future gain from participation in the Company's equity
plans provides the means to retain the executive officers and the motivation to
produce results that benefit the stockholders.
This report has been provided by the Compensation Committee.
Stephen J. Keane, Chairman
Judith E.N. Albino
William L. Armstrong
Robert A. Burgin
Robert E. Lee
21
<PAGE>
The information provided is expressly excluded from incorporation by reference
into any filings under the jurisdiction of the Securities and Exchange
Commission.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock during the five years ended December 31, 1993, with the
cumulative total return on the S&P 500 Index and the S&P Computer Systems
Index. The comparison assumes $100 was invested on December 31, 1988, in the
Company's Common Stock and in each of such indices and assumes reinvestment of
dividends, if any. Note that historic stock price is not necessarily indicative
of future stock price performance.
(GRAPH APPEARS HERE)
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG Storage Technology Corporation,S&P 500 INDEX AND S&P Computer
Systems INDEX
<TABLE>
<CAPTION>
Storage S&P
Measurement period Technology S&P Computer
(Fiscal Year Covered) Corporation 500 Index Sustems Index
- --------------------- ----------- --------- -------------
<S> <C> <C> <C>
Measurement PT -
12/31/88 $ 100 $ 100 $ 100
FYE 12/31/89 $ 67 $ 132 $ 83
FYE 12/31/90 $ 123 $ 128 $ 93
FYE 12/31/91 $ 228 $ 166 $ 83
FYE 12/31/92 $ 119 $ 179 $ 61
FYE 12/31/93 $ 182 $ 197 $ 63
</TABLE>
The report of the Compensation Committee and the Performance Graph shall not
be deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of 1933
("1933 Act") or the Securities Exchange Act of 1934 ("1934 Act"), except to the
extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts and are not
to be deemed to be soliciting material.
22
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any other matters to be brought
before the meeting. However, if any other matters properly come before the
annual meeting, it is the intention of the appointees named in the enclosed
form of proxy to vote in accordance with their best judgment on such matters.
STOCKHOLDER PROPOSALS
Any proposal that a stockholder may desire to present to the Company's 1995
annual meeting of stockholders must be received in writing by the Corporate
Secretary of the Company on or before December 20, 1994, in order to be
considered for possible inclusion in the Company's proxy materials relating to
such meeting.
BY ORDER OF THE BOARD OF DIRECTORS
W. RUSSELL WAYMAN
Corporate Secretary
April 19, 1994
23
<PAGE>
(LOGO OF RECYCLED PAPER APPEARS HERE)
<PAGE>
STORAGE TECHNOLOGY CORPORATION
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Ryal R. Poppa and W. Russell Wayman,
or either of them, as the lawful agents and proxies of the undersigned (with
full power of substitution), to represent the undersigned and to vote all
shares of the Common Stock of Storage Technology Corporation (the "Company")
standing in the undersigned's name as of the record date at the Annual
Stockholders' Meeting of Storage Technology Corporation to be held on May 25,
1994, and any adjournment or postponement thereof, as follows:
(To be Signed on Reverse Side)
<PAGE>
[X] Please mark your
votes as in this
example.
FOR WITHHELD Nominees: Ryal R. Poppa
1. Election of Judith E.N. Albino
Directors. [ ] [ ] William L. Armstrong
Robert A. Burgin
Paul Friedman
Vote for, except withhold vote from the following Stephen J. Keane
nominee(s): Robert E. LaBlanc
Robert E. Lee
Harrison Shull
- ------------------------------------------------- Richard C. Steadman
Robert C. Wilson
FOR AGAINST ABSTAIN
2. Approval of an Amendment to the 1987
Employee Stock Purchase Plan to increase [ ] [ ] [ ]
the number of shares of Common Stock
issuable thereunder by 1,250,000.
3. Approval of the material terms of a
performance-based incentive plan. [ ] [ ] [ ]
4. Ratification of the appointment of
Price Waterhouse as the Company's [ ] [ ] [ ]
independent accountants for the current
fiscal year.
In their discretion, the proxies are authorized to vote on any other matters
that may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS INDICATED, THE PROXY WILL BE VOTED
FOR THE ELECTION OF THE DIRECTORS INDICATED AND FOR APPROVAL OF THE PROPOSALS
PRESENTED.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
PRE-PAID ENVELOPE.
SIGNATURE(S)_________________________________________ DATE____________________
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
<PAGE>
SIXTH AMENDMENT TO AND RESTATEMENT OF
STORAGE TECHNOLOGY-CORPORATION
------------------------------
1987 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
1. Recitals. On February 2, 1982, Storage Technology Corporation, a Delaware
--------
corporation (together with its Subsidiary Corporations, hereinafter referred to,
unless the context otherwise requires, as the "Company"), established the
Storage Technology Corporation 1982 Employee Stock Purchase Plan. Such plan was
subsequently amended and restated by the Board of Directors on June 15, 1987 and
renamed the Storage Technology Corporation 1987 Employee Stock Purchase Plan
(the "1987 Plan" or the "Plan"). Under the provisions of Paragraph 19 of the
1987 Plan, the Company reserved the power, through its Board of Directors, to
amend the Plan from time to time, subject in certain instances to approval of
the Company's stockholders. Pursuant to that power, the Plan is hereby amended
and restated in its entirety, effective at the time and under the conditions set
forth in Paragraph 22 below.
2. Purposes. The 1987 Plan is intended to provide a method whereby employees
--------
of the Company will have an opportunity to acquire a proprietary interest in the
Company through the purchase of shares of the $.10 par value voting Common Stock
of the Company (the "Common Stock"). It is the intention of the Company to have
the Plan qualify as an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code of 1986, as amended from time to time (the "Code"). The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
3. Definitions.
-----------
(a) "Account" means, an Employee's interest in the Segregated Account
-------
based on the contributions made thereto and the interest earned thereon.
(b) "Base pay" means, at the Employee's election, either: (i) an
--------
Employee's rate of regular straight time earnings (before deduction for
contributions to plans maintained pursuant to Sections 401(k) and 125 of the
Code) in effect on the Offering Commencement Date, but excluding payments for
---------
overtime, shift premium, incentive compensation, bonuses, and other similar
payments; or (ii) Employee's rate of regular straight time earnings (before
deduction for contributions to plans maintained pursuant to Sections 401(k) and
125 of the Code) in effect on the Offering Commencement Date, excluding payments
---------
for overtime, shift premium, and other similar payments, but including all
---------
payments for bonuses, incentive compensation and various forms of commissions.
(c) "Committee" means, the Compensation Committee of the Company's Board
---------
of Directors.
(d) "Employee" means, any person who is a Regular Employee (per CP-3-3-14)
--------
customarily employed for more than 20 hours per week and more than five months
in a calendar year by Storage Technology Corporation or any Subsidiary
Corporation.
(g) "Offering Commencement Date" shall mean January 1, 1991 and each
--------------------------
following November 1 and May 1 thereafter.
(h) "Offering Periods" shall mean the period commencing January 1, 1991
----------------
and ending October 31, 1991 and thereafter the periods commencing each November
1 and May 1 and ending on the next following April 30 and October 31,
respectively.
(i) "Offering Termination Date" shall mean October 31, 1991 and each
-------------------------
following April 30 and October 31 thereafter, or on the next preceding business
date on which shares of the Common Stock of the Company shall be traded on the
Exchange in the event that no shares of the Common Stock of the Company shall
have been traded on the above-described dates.
(j) "Segregated Accounts" shall mean the depository accounts established
-------------------
by the Company and by Subsidiary Corporations for collection of Employee
contributions to the Plan.
(k) "Subsidiary Corporation" shall mean any present or future corporation
----------------------
which (i) would be a subsidiary corporation with respect to the Company as that
term is defined in Section 425 of the Code, and (ii) is designated as a
participant in the Plan by the Committee described in Paragraph 14.
4. Eligibility.
-----------
(a) Participation in the Plan is completely voluntary. An Employee will
be eligible to become a participant in each Offering Period if employed by the
Company on the applicable Offering Commencement Date.
-1-
<PAGE>
(b) Any provision of the Plan to the contrary notwithstanding, no Employee
shall be granted options under the Plan:
(i) if, immediately after the grant, such Employee would own stock,
and/or hold outstanding options to purchase stock, possessing 5% or more of
the total combined voting power or value of all classes of stock of the
Company or of any Subsidiary Corporation (for purposes of this Paragraph
the rules of Section 425(d) of the Code shall apply in determining stock
ownership of any Employee); or
(ii) which permits his or her rights to purchase stock under all employee
stock purchase plans of the Company and its Subsidiary Corporations to
accrue at a rate which exceeds $25,000 of the fair market value of the
stock (determined at the time each option is granted) for each calendar
year in which such option is outstanding; or
(iii) for shares in excess of 25,000 in respect of any Offering Period,
provided that this limitation is subject to increase or decrease by the
Committee prior to the commencement of any Offering Period in respect of
such Offering Period.
5. Plan Offerings.
---------------
(a) The Plan is authorized to issue a total of 2,950,000 shares of stock
(of which 1,250,000 shares are subject to stockholder approval).
(b) From and after the effective date of this Plan, as amended, the Plan
will be implemented through offerings of Common Stock of the Company, as
follows:
(i)
<TABLE>
<CAPTION>
Offering Offering Shares
-------- -------- ------
Designation Period Available
----------- ------ ---------
<S> <C> <C>
Offering I January 1, 1991- 100,000 plus any unsold balances
October 31, 1991 from earlier Offering Periods
Offering II November 1, 1991- 150,000 plus any unsold balances
April 30, 1992 from earlier Offering Periods
Offering III May 1, 1992- 150,000 plus any unsold balances
October 31, 1992 from earlier Offering Periods
Offering IV November 1, 1992- 150,000 plus any unsold balances
April 30, 1993 from earlier Offering Periods
Offering V May 1, 1993- 250,000 plus any unsold balances
October 31, 1993 from earlier Offering Periods
Offering VI November 1, 1993- 200,000 plus any unsold balances
April 30, 1994 from earlier Offering Periods
Offering VII May 1, 1994- 300,000 plus any unsold balances
October 31, 1994 from earlier Offering Periods
Offering VIII November 1, 1994- 300,000 plus any unsold balances
April 30, 1995 from earlier Offering Periods
Offering IX May 1, 1995- 300,000 plus any unsold balances
October 31, 1995 from earlier Offering Periods
Offering X November 1, 1995 300,000 plus any unsold balances
April 30, 1996 from earlier Offering Periods
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
Offering Offering Shares
-------- -------- ------
Designation Period Available
----------- ------ ---------
<S> <C> <C>
Offering XI May 1, 1996- 50,000 plus any unsold balances
October 31, 1996 from earlier Offering Periods
</TABLE>
(ii) Subsequent Offering Periods shall offer all stock then remaining
for issuance under the Plan until all shares of Common Stock allocated
under the Plan have been purchased.
(iii) The shares to be issued in respect of any Offering Period may be
increased or decreased by the Committee prior to the commencement of the
affected Offering Period within the limits of total shares then available
under the Plan.
Participation in any of the Offerings under the Plan shall neither limit,
nor require, participation in any other offering.
6. Participation.
-------------
(a) An eligible Employee may become a participant by completing an
authorization for payroll deduction on the form provided by the Company and
filing it with the Benefits Department during the month immediately preceding
the applicable Offering Commencement Date, or at such other time or place as may
be established from time to time by the Company.
(b) Payroll deductions for a participant shall commence on the applicable
Offering Commencement Date when an authorization for a payroll deduction becomes
effective and shall end on the Offering Termination Date of the Offering Period
to which such authorization is applicable unless sooner terminated by the
participant as provided in Paragraph 11.
7. Payroll Deductions.
------------------
(a) At the time a participant files an authorization for a payroll
deduction, the participant shall elect to have deductions made from his or her
Base Pay, and, deposited in a Segregated Account, during the time the Employee
is a participant in an Offering Period at the rate of 1, 2, 3, 4, 5, 6, 7, 8, 9,
or 10% of the Base Pay in effect on the Offering Commencement Date.
(b) All payroll deductions made for a participant shall be transferred to
a Segregated Account as soon as practicable. For administrative convenience,
the Company may offset amounts advanced by the Company to pay participant
withdrawals pursuant to Paragraph 11 against amounts of payroll deductions
otherwise payable into the Segregated Account. A participant may not make any
separate cash payments into the Segregated Account. The Company shall maintain
appropriate accounting records to reflect at all times the interest and total
deductions of all participants in the Segregated Account.
(c) A participant may discontinue participation in the Plan as provided
in Paragraph 11, but no other change can be made during an Offering Period and,
specifically, a participant may not alter the rate of payroll deductions for
that Offering Period.
8. Terms and Conditions of Options.
-------------------------------
(a) On the applicable Offering Commencement Date, when a participant's
authorization for a payroll deduction becomes effective, the participant shall
be deemed to have been granted an option to purchase a maximum number of shares
of Common Stock, subject to the limitations pursuant to Article 4(b) above,
equal to the lesser of: (a) the Option Price (as defined below) divided into
the Employee's total deductions under the Plan in respect of the Offering Period
or (b) the Employee's pro-rata share of all shares available for issuance under
the Plan for that Offering Period, determined pursuant to Article 13, below.
(b) The option price (hereinafter "Option Price") of Common Stock
purchased with payroll deductions made during each Offering Period shall be the
lesser of:
(i) 85% of the composite closing price of the stock on the New York
Stock Exchange on the applicable Offering Commencement Date (or on the
next regular business date on which shares of the Common Stock of the
Company shall be traded on the Exchange in the event that no shares of the
Common Stock of the Company shall have been traded on the Offering
Commencement Date); or
(ii) 85% of the composite closing price of the stock on the New York
Stock Exchange on the applicable Offering Termination Date.
(c) Fractional shares will not be issued under the Plan and any
accumulated payroll deductions which would have been used to purchase fractional
shares, together with any amounts which are in excess of the limitations of
Paragraph 8(a), together with any net
-3-
<PAGE>
income of the Segregated Account allocable to each participant, shall be
returned to each participant promptly following the termination of an Offering.
9. Exercise of Option. Unless a participant gives a written notice of
------------------
withdrawal in accordance with Paragraph 11, his or her option to purchase Common
Stock with payroll deductions made during any Offering Period, and net earnings
of the Segregated Account on such amounts allocated to a participant's Account,
if any, will be deemed to have been exercised automatically on the applicable
Offering Termination Date, for the purchase of the number of full shares of
Common Stock which the accumulated payroll deductions, together with net
earnings of the Segregated Account allocated to his or her Account at that time
will purchase at the applicable Option Price (but not in excess of the number of
shares for which options have been granted the participant pursuant to Paragraph
8(a)), and any excess in his or her Account at that time will be returned to the
participant, together with any net income of the Segregated Account allocable to
his or her Account, as provided in paragraph 13.
10. Delivery. As promptly as practicable after the Offering Termination
--------
Date of each Offering Period, the Company will deliver to each participant, as
appropriate, the shares of Common Stock purchased upon the exercise of the
participant's option.
11. Withdrawal and Termination.
--------------------------
(a) Prior to the last pay period end date before the applicable Offering
Termination Date, any participant may withdraw payroll deductions and net
earnings thereon credited to the participant by giving written notice of
withdrawal to the designated Company representative, who shall then direct the
payment to the participant of all of the participant's payroll deductions
credited to his or her Account as promptly as practical after receipt of the
notice of withdrawal, together with any net earnings of the Segregated Account
allocable to the participant's Account. No further payroll deductions for such
participant will be made during such Offering Period. The Company may, for
administrative convenience, elect to pay to participants (or beneficiaries) the
amount of any withdrawals and earnings thereon and may then offset the amount of
any such payments against payroll deductions otherwise payable to the Segregated
Account. The Company may, at its option, treat any attempt to borrow by a
participant on the security of the accumulated payroll deductions allocated to
the participant's Account as an election, under this Paragraph 11(a), to
withdraw such amounts from the Segregated Account.
(b) A participant's withdrawal from any Offering Period will not have any
effect upon eligibility to participate in any subsequent Offering Period or in
any similar plan which may hereafter be adopted by the Company.
(c) Upon termination of the participant's employment with the Company for
any reason (including retirement but excluding death or disability while in the
employ of the Company), on or prior to any Offering Termination Date, the
payroll deductions credited to the participant, together with any net earnings
of the Segregated Account allocable to his or her account, will be returned to
the participant, or, in the case of a participant's death subsequent to the
termination of employment, to the person or persons entitled thereto under
Paragraph 15. For purposes of the Plan, a participant shall be considered
disabled if the Company determines that the participant is unable to perform the
usual and customary requirements of his or her job with the Company and will be
unable to do so for at least six months provided that such determination is
subject to review by the Committee at its discretion.
(d) Upon termination of the participant's employment because of death or
disability on or prior to the Offering Termination Date, the participant or the
participant's beneficiary (as defined in Paragraph 15) shall have the right to
elect, by written notice given to the Company's General Counsel prior to the
expiration of the period of 90 days commencing on the date of death or
disability of the participant, and prior to the Offering Termination Date,
either
(i) to withdraw all of the payroll deductions credited to the
participant, together with any net earnings of the Segregated Account
allocable to his or her account, or
(ii) to exercise the participant's option to purchase of Common Stock
for the then current Offering Period for the purchase of the number of
full shares of Common Stock which the amount allocated to the
participant's Account at the date of the participant's death or disability
will purchase at the applicable Option Price, and any excess credited to
such Account will be returned to said participant or his or her
beneficiary.
In the event that no such written notice of election shall be duly received by
the office of the Company's General Counsel within the required time period, the
participant or beneficiary shall automatically be deemed to have elected to
withdraw the payroll deductions credited to the participant, together with the
net earnings of the Segregated Account allocable to his or her account at the
date of the participant's death or disability, and the same will be paid
promptly to said participant or beneficiary. Notwithstanding the foregoing, if
a participant's employment with the Company and any Subsidiary Corporation
terminates because of disability more than three months prior to the Offering
Termination Date, the provisions of this Paragraph 11(d) shall not apply and the
provisions of Paragraph 11(c) shall apply to such participant.
-4-
<PAGE>
12. Income and Accounting.
---------------------
(a) Separate accounts shall not be established by the Company for
Employees who participate in the Plan. The Employee's payroll deductions shall
be transferred to the Segregated Account as soon as practical after each pay
period and credited to the participant.
(b) Each participant shall share proportionately in the income and
expense of the Segregated Account and any net income shall be taxable to the
participant, who shall be responsible for paying any income or other taxes
applicable thereto.
13. Stock.
-----
(a) The maximum number of shares of Common Stock which shall be made
available for sale under the Plan during any Offering Period under the Plan
shall be the number of shares set forth in Paragraph 5, subject to adjustment
upon changes in capitalization of the Company as provided in paragraph 18;
provided, however, that if less than the number of shares specified in Paragraph
- -----------------
5 with respect to any Offering Period are purchased during any period, the
number of shares not purchased may be carried over and made available for sale
under the Plan during any subsequent Offering Period. (For example, if only
75,000 shares were purchased during Offering I under the Plan, the shares not
purchased will be carried over to Offering II so that a maximum of 175,000
shares shall be made available for purchase during Offering II.) If the total
number of shares for which options are exercised on any Offering Termination
Date in accordance with Paragraph 9 exceeds the maximum number of shares
available for sale, subject to adjustment as aforesaid, the Company shall make a
pro rata allocation of the shares available for delivery and distribution in as
nearly a uniform manner as shall be practicable and as it shall determine to be
equitable, and the balance of payroll deductions credited to each participant,
together with the net earnings of the Segregated Account allocable thereto,
shall be returned to him or her as promptly as possible.
(b) A participant will have no interest in Common Stock covered by the
participant's option until such option has been exercised. The holder of shares
under the Plan shall have no rights as a stockholder with respect to any shares
covered by the Plan until the date of issue of a stock certificate to him or her
for such shares. Except as otherwise expressly provided in the Plan or in the
corporate action, no adjustment shall be made for dividends or other rights for
which the record date is prior to the date such stock certificate is issued.
(c) Common Stock to be delivered to a participant under the Plan will be
registered in the name of the participant.
(d) The Board of Directors may, in its discretion, require as conditions
to the exercise of any option that the shares of Common Stock reserved for
issuance upon the exercise of the option shall have been duly listed, upon
official notice of issuance, upon the New York Stock Exchange, and that either
(i) a Registration Statement under the Securities Act of 1933, as
amended, with respect to said shares shall have become effective, or
(ii) the participant shall have represented in form and substance
satisfactory to the Company that it is the participant's intention to
purchase for investment the shares being purchased under such option.
14. Administration. The Plan shall be administered by the Committee. The
--------------
interpretation and construction of any provision of the Plan or any Segregated
Account agreement and the adoption of rules and regulations for administering
the Plan shall be made by the Committee, subject, however, at all times to the
final concurrence of the Board of Directors of the Company. Determinations made
by the Committee and approved by the Board of Directors with respect to any
matter or provision contained in the Plan shall be final, conclusive and binding
upon the Company and upon all participants, their heirs or legal
representatives. Any rules, regulations or interpretations adopted by the
Committee shall remain in full force and effect unless and until altered,
amended, or repealed by the Board of Directors.
15. Designation of Beneficiary. A participant may file with the Company,
--------------------------
pursuant to rules adopted by the Committee, a written designation of a
beneficiary who is to receive any Common Stock and/or cash pursuant to the
provisions of the Plan in the event of the participant's death. Such
designation of beneficiary may be changed by the participant at any time by
written notice. Upon the death of a participant and upon receipt by the Company
of proof of the identity and existence at the participant's death of a
beneficiary validly designated by him under the Plan, the Company shall deliver
such Common Stock to such beneficiary and/or pay any cash in the participant's
account in the Segregated Account to the beneficiary, as may be required under
the provisions of Paragraph 11(d). In the event of the death of a participant
and in the absence of a beneficiary validly designated under the Plan who is
living at the time of such participant's death, the Company shall cause such
cash to be paid to the person or persons or the entity duly designated by the
participant, as shown on the Company's records, as his or her beneficiary for
the proceeds of Company paid life insurance. In the absence of such a
beneficiary who is living at the time of the participant's death, the Company
shall cause such cash to be paid to the executor or administrator of the estate
of the participant, or if no such executor or administrator of the estate has
been appointed (to the knowledge of the Company) the Company, in its discretion,
may cause such cash to be paid to the spouse or to any one or more dependents of
the
-5-
<PAGE>
participant as the Company may designate. No beneficiary shall, prior to
the death of the participant by whom he or she has been designated, acquire any
interest in the Common Stock or in amounts credited to the participant's
account.
16. Transferability. Neither payroll deductions credited to a participant,
---------------
nor earnings thereon, nor any rights with regard to the exercise of an option or
to receive Common Stock under the Plan may be assigned, transferred, pledged, or
otherwise disposed of in any way by the participant otherwise than by will or
the laws of descent and distribution. Any such attempted assignment, transfer,
pledge or other disposition shall be without effect, except that the Company may
treat such act as an election to withdraw funds in accordance with Paragraph 11.
17. Ownership of ESPP Assets. All payroll deductions received shall be the
------------------------
property of the respective participants in the Plan and the Company shall have
no interest in such amounts. All contributions paid into Segregated Accounts
shall be the property of the respective participants in the Plan and the Company
shall have no interest in such amounts while held in the Segregated Account.
18. Effect of Changes in Capital Structure. If the outstanding shares of
--------------------------------------
Common Stock are changed into or exchanged for a different number or kind of
shares or other securities of the Company by reason of any recapitalization,
reclassification, stock split, stock dividend, combination, or subdivision, or
if the Company takes any other action of a similar nature affecting such Common
Stock (excluding, however, any reorganization under the United States Bankruptcy
Code), then the number and class of shares of Common Stock which may thereafter
be optioned, or the rights assigned thereto (in the aggregate and to any
participant), shall be adjusted accordingly and, in the case of each option
outstanding at the time of any such action, the number and class of shares which
may thereafter be purchased pursuant to such option and the option price per
share shall be adjusted, in each case to such extent and in such manner, if at
all, as may be determined by the Board upon the recommendations of the
Committee, with the approval of independent public accountants and counsel, to
be necessary to preserve unimpaired the rights of the holder of such option.
19. Amendment or Termination. The Board of Directors of the Company may at
------------------------
any time terminate or amend the Plan. No such termination can affect options
previously granted, nor may an amendment make any change in any option
theretofore granted without prior approval of the stockholders of the Company if
such approval is required under the laws or regulations administered by the U.S.
Treasury, the Securities and Exchange Commission, any other agency of the U.S.
Government, or the New York Stock Exchange, or any other exchange or system on
which the Company's stock is then registered or traded.
20. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received by the Corporate Counsel of the Company.
21. Merger or Consolidation. If the Company shall at any time merge into or
-----------------------
consolidate with another corporation, the holder of each option then outstanding
will thereafter be entitled to receive at the next Offering Termination Date
upon the exercise of such option for each share as to which such option shall be
exercised the securities or property which a holder of one share of the Common
Stock was entitled to upon and at the time of such merger or consolidation, and
the Board shall take such steps in connection with such merger or consolidation
as the Board shall deem necessary to assure that the provisions of Paragraph 18
hereof shall thereafter be applicable, as nearly as reasonably may be, in
relation to the said securities or property as to which such holder of such
option might thereafter be entitled to receive thereunder. A sale of all or
substantially all of the assets of the Company shall be deemed a merger or
consolidation for the foregoing purposes.
22. Effective Date - Approval of Stockholders. The Plan, as amended and
-----------------------------------------
restated herein, has been adopted by the Board of Directors of the Company on
December 14, 1993, and such amendment and restatement is effective as of such
date, but such amendment and restatement to the extent stockholder approval is
required under Article 19, above is subject to the approval of the stockholders
of the Company at their next meeting. Offerings may commence under the Plan
prior to approval by the stockholders but no Common Stock requiring stockholder
approval may be purchased hereunder unless and until the requisite stockholder
approval has been received.
-6-
<PAGE>
STORAGE TECHNOLOGY CORPORATION
CORPORATE OFFICER MBO BONUS PLAN
1. Purposes of the Plan. The purposes of this Corporate Officer MBO
--------------------
Bonus Plan (the "Plan") are to motivate, reward and recognize executive level
employees ("Eligible Employees") of Storage Technology Corporation and its
subsidiaries (the "Company") for their role in helping achieve corporate
success and the traits critical for long term corporate success, namely:
- Responsibility for achievement of corporate quality improvement
objectives;
- Teamwork in the accomplishment of corporate goals; and
- Accountability for the overall success of the corporation.
2. Operation of the Plan. Under the Plan, each participant is assigned
---------------------
one or more performance targets established in writing while the outcome of
the targets is substantially uncertain. At the same time, formulas for
determining bonus payments based upon achievements of these performance
targets are established in writing. After the end of the ensuing fiscal year,
each participant's performance is scored and each participant's bonus for the
year is calculated by means of the pre-established formula.
The Committee reserves the right to reduce or entirely eliminate bonuses for a
year if, in its sole discretion, notwithstanding achievement of results which
would otherwise require a bonus, overall performance of the Company or
participant is determined to be unsatisfactory.
3. Administration of the Plan. The Plan will be administered by the
--------------------------
Compensation Committee of the Board of Directors of the Company (the "Board")
or such other committee (the "Committee") which the requirements of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "IRC")
and the Regulations issued thereunder. The Board will take reasonable steps to
ensure that the size and membership of the Committee continues to meet the
requirements of IRC Section 162(m)(4)(C)(i).
4. Functions of the Committee. Subject to the provisions of this Plan,
--------------------------
the Committee shall:
a. Select those Eligible Employees who may participate in the Plan
for the ensuing year ("participants").
b. Establish the objective performance targets for each participant
based upon one or more of the Business Criteria outlined in this
Plan.
c. Establish an objective formula or standard for computing the
amount of compensation payable to each participant if the
performance targets are met.
d. Establish other relevant provisions including the form of payment
to be made (including cash, stock or other property) and the
timing of payments.
<PAGE>
STORAGE TECHNOLOGY CORPORATION
CORPORATE OFFICER MBO BONUS PLAN
Page Two
e. Certify in writing prior to payment of the compensation that the
performance targets and any other material conditions were met
and the actual amount of the compensation to be paid.
f. Reduce (but not increase) or eliminate the amount of compensation
payable that would otherwise be due upon attainment of the
target.
5. Restrictions and Limitations. This Plan is subject to the following
----------------------------
restrictions and limitations:
a. Maximum Amounts Payable. In no event may the maximum amount
-----------------------
payable pursuant to this Plan exceed $2,000,000 in the case of
the Chief Executive Officer, and $1,000,000 in the case of any
other participant for any single year's performance.
b. Shareholder Approved Business Criteria. All amounts paid as
--------------------------------------
compensation pursuant to this Plan must be payable as the result
of the achievement of objective, quantifiable, measurable
performance targets, which targets are critical to the Company's
strategic priorities of customer satisfaction, financial strength
and market presence, including one or more of the following (the
"Business Criteria"):
. reliability measurements of products and component parts,
. measurements of adherence to product development and delivery
schedules,
. measurements of the product creation and delivery processes,
. market penetration,
. net-after-tax income,
. economic value added,
. return on assets,
. return on equity,
. debt ratings,
. revenue growth, product revenue and,
. timely updates and approval of strategic plans.
6. Amendments. The Plan may be amended by the Board without shareholder
----------
approval to, among other things, ensure continued compliance with the
requirements of "performance based compensation" as defined by IRC Section 162
(m)(4)(C) and the Regulations thereunder. No change may be made, however, to
the maximum amounts payable specified in subparagraph 5a or to the Business
Criteria in subparagraph 5b or the class of Eligible Employees, without
shareholder approval.
