<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
STORAGE TECHNOLOGY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
REGISTRANT
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[LOGO]
STORAGE TECHNOLOGY CORPORATION
2270 SOUTH 88TH STREET
LOUISVILLE, COLORADO 80028-0001
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 30, 1996
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" or "StorageTek"), a Delaware corporation, to be held on Thursday,
May 30, 1996, at 10:00 a.m., MDT, at the Boulderado Hotel, 2115 13th Street,
Boulder, Colorado 80302, to act upon the following matters:
(a) PROPOSAL 1. The election of 11 Directors;
(b) PROPOSAL 2. The ratification of amendments to the 1987 Employee
Stock Purchase Plan, including the reservation of an additional 1,750,000
shares of Common Stock for issuance to employees thereunder;
(c) PROPOSAL 3. The ratification of amendments to the Stock Option
Plan for Nonemployee Directors, including the reservation of an additional
180,000 shares of Common Stock for issuance thereunder;
(d) PROPOSAL 4. The ratification of the appointment of Price
Waterhouse LLP 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.
Only stockholders of Common Stock of record at the close of business on
April 7, 1996, 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 CARD 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 Vice President,
General Counsel and Secretary
Louisville, Colorado
April 10, 1996
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
CARD 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> 3
STORAGE TECHNOLOGY CORPORATION
PROXY STATEMENT
April 10, 1996
PROCEDURAL MATTERS
THIS PROXY STATEMENT IS FURNISHED TO THE STOCKHOLDERS OF STORAGE TECHNOLOGY
CORPORATION (THE "COMPANY" OR "STORAGETEK") 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
THURSDAY, MAY 30, 1996, OR AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
Stockholders of record of Common Stock of the Company at the close of business
on April 7, 1996 (the "Record Date"), will be entitled to notice of and to vote
at the meeting. The Annual Meeting will be held at the Boulderado Hotel, 2115
13th Street, Boulder, Colorado 80302. 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 management's 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. Beneficial owners wishing to vote at the meeting who are not
stockholders of record on the Company's books (e.g., persons holding in street
name) must bring to the meeting a Power of Attorney or proxy in their favor
signed by the holder of record in order to be able to vote.
SOLICITATION OF PROXIES
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. As of this date, the Company has no
plans to retain an outside firm to solicit proxies; however, prior to the Annual
Meeting, the Company may determine it is advisable to retain an outside firm to
solicit proxies, in which case the Company will bear the costs of the solicitor,
which costs would likely range from $10,000 to $20,000. This Proxy Statement and
the form of proxy are first being mailed to the stockholders beginning April 10,
1996.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
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 also are 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. Accordingly, abstentions will have the same
effect as a vote against the matter. The Delaware Supreme Court has held that,
while broker non-votes should be counted for purposes of determining the
presence or absence of a quorum for the transaction of business, broker
non-votes should not be counted for purposes of determining the number of Votes
Cast with respect to the particular proposal on which the broker has expressly
not voted. 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 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 Annual Meeting.
<PAGE> 4
ANNUAL REPORT
This Proxy Statement is accompanied by the Company's 1995 Annual Report
(the "Annual Report"). Stockholders are referred to the Annual Report for
information concerning the Company's business and operations, but the Annual
Report is not part of the proxy soliciting materials. CERTAIN OTHER INFORMATION
IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST. PLEASE CONTACT INVESTOR
RELATIONS, STORAGE TECHNOLOGY CORPORATION, 2270 SOUTH 88TH STREET, LOUISVILLE,
COLORADO 80028-4310, TELEPHONE 1-(800) 785-2217, IF YOU WOULD LIKE TO REQUEST A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 29, 1995, OR ADDITIONAL REPORTS. THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICES ARE LOCATED AT 2270 SOUTH 88TH STREET, LOUISVILLE, COLORADO 80028,
TELEPHONE (303) 673-5151.
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<PAGE> 5
VOTING SECURITIES OF THE COMPANY
On the Record Date for the Annual Meeting, April 7, 1996, the Company had
issued, outstanding and entitled to vote 53,680,405 shares of its common stock,
$.10 par value ("Common Stock"). Holders of shares of the Common Stock on the
Record Date 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.
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of the Company's
Common Stock as of the Record Date: (i) by all persons known by the Company to
be beneficial owners of more than 5% of the voting power of the Company's
outstanding Common Stock (based upon a review of Schedule 13D and 13G filings
received prior to the Record Date); (ii) by each Director and nominee for
Director; (iii) by each Named Executive Officer listed in the Summary
Compensation Table under the heading "COMPENSATION OF EXECUTIVE OFFICERS;" and
(iv) by all current Directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF OWNERSHIP(1) OF CLASS
- -------------------------------------------------------------- ----------------- --------
<S> <C> <C>
The TCW Group, Inc. and Robert Day............................ 4,339,548(2) 8%
865 South Figueroa Street (Sole voting and
Los Angeles, CA 90017 dispositive power)
Ryal R. Poppa................................................. 191,810(3) (20)
David E. Weiss................................................ 47,808(4) (20)
John V. Williams.............................................. 31,689(5) (20)
L. Thomas Gooch............................................... 52,133(6) (20)
W. Russell Wayman............................................. 25,088(7) (20)
Judith E.N. Albino............................................ 19,783(8) (20)
William L. Armstrong.......................................... 21,666(9) (20)
Robert A. Burgin.............................................. 22,000(10) (20)
Paul Friedman................................................. 84,867(11) (20)
William R. Hoover............................................. 8,333(12) (20)
Stephen J. Keane.............................................. 24,350(13) (20)
Robert E. LaBlanc............................................. 34,405(14) (20)
Robert E. Lee................................................. 32,084(15) (20)
Harrison Shull................................................ 42,692(16) (20)
Richard C. Steadman........................................... 38,202(17) (20)
Robert C. Wilson.............................................. 52,277(18) (20)
All current Directors and executive
officers (17 persons) as a group...........................1,569,433 Common(19) 2.85%
</TABLE>
- ---------------
(1) The number of shares stated as being beneficially owned includes shares of
Common Stock issuable upon conversion of the Company's 8% Convertible
Debentures ("8% Debentures") and 7% Convertible Subordinated Debentures
("7% Debentures"), as well as shares of Common Stock believed to be
indirectly beneficially owned. The inclusion of these shares, however, does
not constitute an admission of ownership of such shares. Further, the
number of shares includes stock options that are exercisable within 60 days
of the Record Date. Share ownership by 5% holders is based upon the
respective Schedule 13G filings, which reflect ownership as of December 31,
1995.
(2) Joint filing by The TCW Group, Inc., (including relevant subsidiaries of:
(i) Trust Company of the West; (ii) TCW Asset Management Company; and (iii)
TCW Funds Management, Inc.) and Robert Day, a control person of The TCW
Group, Inc., as well as Oakmont Corporation and Cypress International
Partners Limited.
(3) Includes (i) 10,638 shares of Common Stock issuable upon conversion of 7%
Debentures held by Mr. Poppa; and (ii) 108,093 shares of Common Stock
issuable upon exercise of options held by Mr. Poppa, which options are
exercisable within 60 days of the Record Date.
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<PAGE> 6
(4) Includes 33,156 shares of Common Stock issuable upon exercise of options
held by Mr. Weiss, which options are exercisable within 60 days of the
Record Date.
(5) Includes 16,835 shares of Common Stock issuable upon exercise of options
held by Mr. Williams, which options are exercisable within 60 days of the
Record Date.
(6) Includes 25,647 shares of Common Stock issuable upon exercise of options
held by Mr. Gooch, which options are exercisable within 60 days of the
Record Date.
(7) Includes 12,057 shares of Common Stock issuable upon exercise of options
held by Mr. Wayman, which options are exercisable within 60 days of the
Record Date.
(8) Includes 18,333 shares of Common Stock issuable upon exercise of options
held by Ms. Albino, which options are exercisable within 60 days of the
Record Date.
(9) Includes 21,666 shares of Common Stock issuable upon exercise of options
held by Mr. Armstrong, which options are exercisable within 60 days of the
Record Date.
(10) Includes 21,000 shares of Common Stock issuable upon exercise of options
held by Mr. Burgin, which options are exercisable within 60 days of the
Record Date. Of the exercisable options, 6,000 are subject to stockholder
approval of Proposal 3.
(11) Includes (i) 13,333 shares of Common Stock issuable upon conversion of 8%
Debentures held by Mr. Friedman; and (ii) 31,000 shares of Common Stock
issuable upon exercise of options held by Mr. Friedman, which options are
exercisable within 60 days of the Record Date. Of the exercisable options,
6,000 are subject to stockholder approval of Proposal 3.
(12) Includes 8,333 shares of Common Stock issuable upon exercise of options
held by Mr. Hoover, which options are exercisable within 60 days of the
Record Date.
(13) Includes 18,952 shares of Common Stock issuable upon exercise of options
held by Mr. Keane, which options are exercisable within 60 days of the
Record Date. Of the exercisable options, 6,000 are subject to stockholder
approval of Proposal 3.
(14) Includes 31,000 shares of Common Stock issuable upon exercise of options
held by Mr. LaBlanc, which options are exercisable within 60 days of the
Record Date. Of the exercisable options, 6,000 are subject to stockholder
approval of Proposal 3.
(15) Includes (i) 284 shares of Common Stock issuable upon conversion of 8%
Debentures held by Mr. Lee; and (ii) 31,000 shares of Common Stock issuable
upon exercise of options held by Mr. Lee, which options are exercisable
within 60 days of the Record Date. Of the exercisable options, 6,000 are
subject to stockholder approval of Proposal 3.
(16) Includes (i) 2,837 shares of Common Stock issuable upon conversion of 8%
Debentures held by Mr. Shull; (ii) 4,255 shares issuable upon conversion of
7% Debentures held by Mr. Shull; and (iii) 31,000 shares of Common Stock
issuable upon exercise of options held by Mr. Shull, which options are
exercisable within 60 days of the Record Date. Of the exercisable options,
6,000 are subject to stockholder approval of Proposal 3.
(17) Includes 31,000 shares of Common Stock issuable upon exercise of options
held by Mr. Steadman, which options are exercisable within 60 days of the
Record Date. Of the exercisable options, 6,000 are subject to stockholder
approval of Proposal 3.
(18) Includes (i) 21,277 shares of Common Stock issuable upon conversion of 7%
Debentures held by Mr. Wilson; and (ii) 31,000 shares of Common Stock
issuable upon exercise of options held by Mr. Wilson, which options are
exercisable within 60 days of the Record Date. Of the exercisable options,
6,000 are subject to stockholder approval of Proposal 3.
(19) Includes (i) 16,454 shares of Common Stock issuable upon conversion of 8%
Debentures; (ii) 14,894 shares of Common Stock issuable upon conversion of
7% Debentures; and (iii) 450,081 shares of Common Stock subject to options
exercisable within 60 days of the Record Date held by 11 Directors and five
current non-Director Executive Officers.
(20) Less than 1% of the class.
4
<PAGE> 7
ELECTION OF DIRECTORS
PROPOSAL 1.
In accordance with the Company's bylaws, the Board of Directors has reduced
the number of Directors constituting the entire Board of Directors of the
Company from 12 to 11 effective as of the date of the Annual Meeting. At this
Annual Meeting, 11 Directors are to be elected to serve until the next Annual
Meeting or until their respective successors shall be elected and qualified. The
nominees include all of the persons who currently serve as Directors except for
Robert Wilson, who is retiring from the Board. The eleven nominees are set forth
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 below. 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 are the Company's nominees for the
Board of Directors:
RYAL R. POPPA; AGE 62; CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Mr. Poppa has been a Director since 1985 and has been President of the
Company since January 1988, as well as Chairman of the Board and Chief Executive
Officer of the Company since January 1985. He also serves as a Director for
SemiTool, Inc.
JUDITH E.N. ALBINO; AGE 52; PRESIDENT EMERITA, UNIVERSITY OF COLORADO
Ms. Albino has been a Director since 1991 and is President Emerita and
Psychiatry Professor -- University of Colorado (a public university). She was
President of the University from June 1991 to December 1995. From 1989 to June
1991 she served as Dean of the Graduate School at the State University of New
York at Buffalo. She also serves on the Colorado National Bank Advisory Board.
WILLIAM L. ARMSTRONG; AGE 59; FORMER U.S. SENATOR, COLORADO
Mr. Armstrong has been a Director since 1991. He has served as Chairman of
Ambassador Media Corporation, a television broadcasting company, since 1990;
Chairman of Cherry Creek Mortgage Company since 1991; Chairman of El Paso
Mortgage Company since 1993; and Chairman of Centennial State Mortgage Company
and Frontier Real Estate, Inc. since 1994. From 1979 to 1991, Mr. Armstrong
served as a United States Senator, Colorado. Mr. Armstrong also currently serves
as Director of Provident Life and Accident Insurance Company of America;
Helmerich & Payne; and International Family Entertainment, Inc.
ROBERT A. BURGIN; AGE 71; FORMER GROUP EXECUTIVE, TRW INC.
Mr. Burgin has been a Director since 1978. He retired in 1982, having
formerly served as Group Executive, TRW Inc. and later Chairman and Chief
Executive Officer of Leaseway Transportation Corporation, a physical
distribution transportation company.
PAUL FRIEDMAN; AGE 71; ATTORNEY
Mr. Friedman has been a Director since 1987 and has been a practicing tax
attorney at Paul Friedman, P.C. since 1964.
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<PAGE> 8
WILLIAM R. HOOVER; AGE 66; CHAIRMAN, COMPUTER SCIENCES CORPORATION
Mr. Hoover has been a Director since 1995 and has served as Chairman of
Computer Sciences Corporation, an independent provider of information technology
services, since 1972. From November 1972, through March 30, 1995, Mr. Hoover
also served as Chief Executive Officer and President of Computer Sciences
Corporation. Mr. Hoover also is a Director of Merrill Lynch & Co.
STEPHEN J. KEANE; AGE 67; MANAGEMENT CONSULTANT
Mr. Keane has been a Director since 1987. Mr. Keane has been a management
consultant since 1985 and currently serves as a Director of Summagraphics Inc.
and MaxServ Inc.
ROBERT E. LABLANC; AGE 62; PRESIDENT, ROBERT E. LABLANC ASSOCIATES, INC.
Mr. LaBlanc has been a Director since 1979. Mr. LaBlanc is the founder and
President of Robert E. LaBlanc Associates, Inc., an investment consulting firm,
and has served in that capacity since October 1981. Mr. LaBlanc also is a
Director of Titan Corp.; Tribune Company; Prudential Global Funds, Inc.;
Prudential Limited Global Income Fund, Inc.; and Prudential Pacific Growth Fund,
Inc.
ROBERT E. LEE; AGE 60; EXECUTIVE DIRECTOR, THE DENVER FOUNDATION
Mr. Lee has been a Director since 1989. Since March 1989, Mr. Lee has
served as the Executive Director of The Denver Foundation, a community
foundation. He retired as Chairman of First Interstate Bank of Denver in
February 1989. Mr. Lee also serves as a Director of Equitable of Iowa Companies
and Meredith Corporation.
HARRISON SHULL; AGE 72; FORMER PROVOST, NAVAL POSTGRADUATE SCHOOL
Mr. Shull has been a Director since 1983. Mr. Shull was Provost, Naval
Postgraduate School, Monterey, California, from July 1988 until his retirement
in June 1995.
RICHARD C. STEADMAN; AGE 63; PRIVATE INVESTOR
Mr. Steadman has been a Director since 1970. Mr. Steadman has been a
private investor since January 1981.
BOARD MEETINGS AND COMMITTEES
The Company has a standing Audit Committee consisting of five members. The
current members are Directors Shull (Chair), Friedman, LaBlanc, Steadman and
Wilson. The Audit Committee held four 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 are
Directors Keane (Chair), Albino, Armstrong, Burgin and Lee. The Compensation
Committee met eight times during the last fiscal year. Its principal functions
are to evaluate executive management performance, and review succession planning
and compensation arrangements for executive management and key employees of the
Company. The Compensation Committee approves salary recommendations for
executive management, administers equity compensation bonus and stock option
plans. 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.
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<PAGE> 9
The Company also has a Governance and Nominating Committee, which met four
times during the last fiscal year. The current members are Directors Burgin
(Chair), Albino, Armstrong, Keane and Lee. 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 must 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.
In addition to these committees, the Company also has a Finance and
Acquisitions Committee, a Strategic Planning Committee and an Executive
Committee. During 1995, the Company's Board of Directors held eight meetings and
the committees of the Board held, in the aggregate, 25 meetings. The average
attendance at the aggregate number of meetings of the Board and the committees
of the Board was 92%. No Director attended fewer than 75% of the meetings of the
Board and the committees, if any, on which such Director served during the last
fiscal year.
STANDARD ARRANGEMENTS FOR COMPENSATION OF DIRECTORS
CASH COMPENSATION
Since July 1994, each Director who is not an employee of the Company has
received a standard annual retainer of $27,000. Mr. Burgin has served as Lead
Director since July 1994, and in such capacity receives a standard annual
retainer of $50,000. Nonemployee Directors receive an additional fee of $1,000
for each meeting of the Board of Directors attended in excess of eight per year.
Further, each nonemployee Director receives $1,000 for each committee meeting
attended. The chairman of each committee is paid an annual retainer of $2,000 as
compensation for such chairmanship. Each Director also receives a fee of $1,000
per day for time spent on matters pertaining to the Company's business pursuant
to a specific request by the Chairman of the Board of Directors.
OPTIONS
The Company has a Stock Option Plan for Nonemployee Directors (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 ten 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, the stockholders approved the Amended and Restated Stock Option
Plan for Nonemployee Directors. Under the Director Plan, as so amended, each
nonemployee Director who was such on November 7, 1990, was granted, and each
person who first becomes a nonemployee Director after that date shall be
granted, an option (the "New Option"), as of the later to occur of November 7,
1990, or their first election or
7
<PAGE> 10
appointment 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.
In 1995, the Director Plan was amended (the "1995 Amendment"), subject to
stockholder approval at this Annual Meeting. See Proposal 3 for discussion of
the proposed 1995 Amendment, which would provide for an additional grant of
18,000 shares to each Director as of July 26, 1995. Pursuant to the 1995
Amendment, Directors Albino, Armstrong, Burgin, Friedman, Keane, LaBlanc, Lee,
Shull, Steadman and Wilson were each granted an option to purchase 18,000 shares
of Common Stock at an exercise price of $24.875 per share (subject to
stockholder approval).
Assuming stockholder approval of the proposed 1995 Amendment, the Director
Plan has 75,000 shares available for future grant and 432,952 shares subject to
outstanding options. During 1995, options to purchase an aggregate of 230,000
shares were granted under the Director Plan, of which options to purchase
180,000 shares are subject to approval by the stockholders and options to
purchase 25,000 shares were canceled upon the resignation of a Director.
8
<PAGE> 11
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 1,750,000 and to
make certain other minor changes. The Employee Stock Purchase Plan, as so
amended, shall hereinafter be referred to as the "Purchase Plan." It is the
intention of the Company that the Purchase Plan continue to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986 (the "Code"), as amended from time to time. The provisions of the Purchase
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 $44,986,793 paid by
employees of the Company and its subsidiaries through payroll deductions to
purchase stock under the Purchase Plan and similar plans assumed by the Company
in connection with an acquisition.
SUMMARY OF THE PURCHASE PLAN
General. The Purchase 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 each offering period (the "Offering Period"), which is
typically six months in duration but which may be changed by the committee
administering the plan. Participation is completely voluntary. No employee shall
be granted an option to participate in the Purchase 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) that 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) that permits his or her rights to purchase
stock to exceed 25,000 shares in any Offering Period.
Administration of the Purchase Plan. The Purchase Plan is administered by
the Compensation Committee, which consists of nonemployee Directors of the
Company. The interpretation and construction of any provision of the Purchase
Plan and the adoption of rules and regulations for administering the Purchase
Plan will be made by the Compensation Committee, subject, however, 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 Purchase 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 any
of 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 Purchase Plan.
A person must be so employed at least 15 days prior to the applicable Offering
Commencement Date (as herein defined) in order to participate in such Offering
Period under the Purchase Plan. As of April 1, 1996, approximately 9,200
employees were eligible to participate.
Shares Subject to the Purchase Plan. If this proposed amendment is
approved, the total number of shares of Common Stock available for sale under
the Purchase Plan may not exceed 4,700,000 shares (including shares previously
issued). The number of shares of Common Stock reserved for issuance under the
Purchase 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 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
9
<PAGE> 12
extent and manner of adjustment will be determined by the Board upon the
recommendations of the Compensation Committee as appropriate under the Purchase
Plan.
A maximum of 300,000 shares of Common Stock (plus any unsold balances from
earlier Offering Periods) shall be issued during each Offering Period. The
maximum number of 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 Purchase Plan. In addition, the Compensation Committee may change the
duration of Offering Periods if such change is announced at least five days
prior to the affected Offering Period.
Allocation of Shares. If fewer 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 Purchase Plan during any subsequent Offering Period or Periods. If the total
number of shares that 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 to the lesser of (i)
the Option Price (defined below) divided into an amount equal to (x) that
percentage of the employee's base pay that 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 25,000
share limit may be increased or decreased by the Compensation Committee prior to
the commencement of an Offering Period. The market value of the Company's Common
Stock will be the closing price of the stock on the New York Stock Exchange as
reported in The Wall Street Journal for 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 closing price of the stock on the New York Stock
Exchange as reported in The Wall Street Journal for the applicable Offering
Commencement Date; or (ii) 85% of the closing price of the stock on the New York
Stock Exchange as reported in The Wall Street Journal for 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 April 4, 1996, was $25.125 per
share.
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. Base pay includes, at the employee's election, either (i)
base salary only; or (ii) base salary plus payments for bonuses, incentive
compensation and commissions. 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 Purchase Plan.
Fractional shares will not be issued under the Purchase Plan and any accumulated
payroll deductions that would have been used to purchase fractional shares,
together with any amounts that 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 Offering
Termination Date. A participant may discontinue participation in the Purchase
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. Unless the Board provides otherwise, in the event
of a merger 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 that a holder of one share of the
10
<PAGE> 13
Common Stock was entitled to upon and at the time of such merger or sale of
assets. The Board may, in its discretion, in lieu of such assumption or
substitution, shorten the Offering Period.
Federal Income Tax Consequences. The Purchase 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 "Exchange Act").
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 Purchase 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.
Amendment and Termination. The Board may, at any time, amend or terminate
the Purchase Plan; however, no such action can affect options previously granted
under the Purchase Plan, nor may an amendment make any change in any option
theretofore granted that would adversely affect the rights of any participant.
Under the Code and rules and regulations under the Exchange Act, the Company's
stockholders must approve any amendment that would materially increase the
number of shares of stock that may be issued pursuant to the Purchase Plan,
alter the class of employees eligible to be granted options under the Purchase
Plan, or materially increase the benefits accruing to participants under the
Purchase Plan.
PARTICIPATION IN THE EMPLOYEE STOCK PURCHASE PLAN
Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her determination as to
the level of payroll deductions. Accordingly, future purchases under the
Purchase Plan are not determinable. Nonemployee Directors are not eligible to
participate in the Purchase Plan. No purchases have been made under the Purchase
Plan since its amendment by the Board; however, purchases were made under the
Purchase Plan prior to its amendment. The following table sets forth certain
information regarding shares purchased under the Purchase Plan during the last
fiscal year and the payroll deductions accumulated at the end of the last fiscal
year in accounts under the Purchase 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 Purchase Plan as a group.
11
<PAGE> 14
1987 EMPLOYEE STOCK PURCHASE PLAN
AMENDED PLAN BENEFITS
<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>
RYAL R. POPPA,.......................................... 910 $ 2,830 $ 10,000
Chairman of the Board, President and CEO
DAVID E. WEISS,......................................... -0- -0- -0-
Executive Vice President and
Chief Operating Officer
L. THOMAS GOOCH,........................................ 283 880 -0-
Executive Vice President and
General Manager of Network Systems
JOHN V. WILLIAMS,....................................... -0- -0- -0-
Executive Vice President of
Worldwide Field Operations
W. RUSSELL WAYMAN,...................................... 866 4,570 3,077
Corporate Vice President,
General Counsel and Secretary
All current executive officers as a group............... 2,059 8,280 13,077
All other employees as a group.......................... 543,160 $2,986,098 $1,735,125(2)
</TABLE>
- ---------------
(1) Market value of shares on date of purchase, minus the purchase price under
the Purchase Plan.
(2) Does not include deductions for employees of any international subsidiaries.
VOTE REQUIRED
Approval of the amendments to the 1987 Employee Stock Purchase Plan
requires the affirmative vote of a majority of the Votes Cast. See "PROCEDURAL
MATTERS -- Quorum; Abstentions; Broker Non-Votes" above.
THE BOARD UNANIMOUSLY 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.
12
<PAGE> 15
AMENDMENT OF THE STOCK OPTION PLAN
FOR NONEMPLOYEE DIRECTORS
PROPOSAL 3.
Management believes it is in the best interests of the Company to
compensate its nonemployee Directors for their continued service by giving them
a direct interest in the Company's future success, and that the granting of
stock options to nonemployee Directors enables the Company to attract and retain
the services of individuals of outstanding quality and ability. In 1987, the
Company's stockholders established the Storage Technology Corporation Stock
Option Plan for Nonemployee Directors (the "1987 Director Plan"). In 1991, the
stockholders approved the Amended and Restated Stock Option Plan for Nonemployee
Directors (the "Amended Director Plan"), and in 1992, the stockholders approved
an amendment that reserved an additional 100,000 shares of Common Stock for
issuance under the Amended Director Plan. The proposed amendment (the "1995
Amendment") for which stockholder approval is being sought at this Annual
Meeting includes: (i) the reservation of an additional 180,000 shares of Common
Stock for issuance, bringing the total number of shares authorized for issuance
to 530,000 shares; (ii) the extension of the time within which options can be
exercised after a Director terminates his or her membership on the Board of
Directors; (iii) an amendment to the formula for option grants; and (iv) the
extension of the term of the Amended Director Plan until March 2010 (the Amended
Director Plan, as amended by the 1995 Amendment, being referred to herein as the
"Director Plan").
SUMMARY OF THE DIRECTOR PLAN
General. Under the terms of the 1987 Director Plan, each of the Company's
nonemployee Directors was to be granted a stock option to purchase shares of the
Company's Common Stock upon the adoption of the 1987 Director Plan or the
Director's first election to the Board, whichever occurred later. The 1987
Director Plan provided for the grant of a first option to purchase 2,500 shares
of the Company's Common Stock (i) to each nonemployee Director who was serving
as such in October 1987; and (ii) to each individual who became a nonemployee
Director of the Company in 1989 following his or her election to the Board. A
second option to purchase 2,500 shares was granted to each nonemployee Director
holding a first option who had served two consecutive years after receipt of the
first option, upon their election for an additional term. These options are
collectively referred to as the "Initial Options."
Under the Amended Director Plan, each nonemployee Director who was such on
November 7, 1990, or who first became such after November 7, 1990, will be
granted an Option (the "New Option"), as of the later to occur of November 7,
1990, or their first election as a nonemployee Director. The number of shares of
Common Stock subject to the New Option is equal to 25,000 shares less any shares
subject to Initial Options granted to the Director.
The 1995 Amendment modifies the formula for option grants and provides for
an additional option to purchase 18,000 shares of Common Stock (the "Additional
Option") to be granted to each Director who was such on July 26, 1995, or who is
later elected or appointed. The Additional Option is to be granted upon the
later of July 26, 1995, or the third anniversary of the Director's first
election or appointment as a Director. Each Additional Option shall become
exercisable in three increments of 6,000 shares on the first, second and third
anniversaries of the first date on which all shares that are subject to New
Options held by the Director have become exercisable. Upon adoption of the 1995
Amendment by the Board of Directors, Directors Albino, Armstrong, Burgin,
Friedman, Keane, LaBlanc, Lee, Shull, Steadman and Wilson were each granted an
Additional Option to purchase 18,000 shares at an exercise price of $24.875 per
share. All of these Additional Options are subject to stockholder approval at
the Annual Meeting.
The 1995 Amendment extends the time for option exercise with respect to
options granted on or after July 20, 1996. This amendment enables a Director
terminating his or her service with the Board to exercise options granted on or
after July 20, 1995, for the full remaining portion of the option term if such
options were granted at least six years prior to the date of termination or if
the Director has served on the Board for at least ten years. Also, the 1995
Amendment extends the term of the Directors Plan through March 29, 2010.
13
<PAGE> 16
Eligibility. Only nonemployee Directors are eligible to receive option
grants under the Director Plan. As of the Record Date, there were 11 nonemployee
Directors. Stock option agreements are executed between the Company and each
nonemployee Director that contain the terms and conditions described below and
others, if any, not inconsistent with the Director Plan for each option grant.
Grant and Exercise of Options. The exercise price for the shares subject to
all options granted under the Director Plan is 100% of the fair market value of
the shares on the date of the grant. Payment of the exercise price may be made
in cash or in shares of the Company's Common Stock (owned for more than six
months). Options are not transferable other than by testamentary will or
pursuant to the laws of descent and distribution, and will be exercisable during
the lifetime of the option holder only by that holder. Each New Option is
exercisable with respect to 5,000 shares six months after the date of grant and
the balance becomes exercisable in four or six equal annual installments.
Options expire ten years from the date of grant.
If a nonemployee Director dies or ceases to serve on the Board after
reaching age 70, all outstanding options held by the former Director immediately
become exercisable in full. In the event that a nonemployee Director ceases to
serve as a Director of the Company prior to reaching age 70, for any reason
other than his or her death or disability, all vested options may be exercised
either (i) within six months after the date of cessation (if otherwise within
the option term); or (ii) if the option was granted on or after July 20, 1995,
and either the option was granted at least six years prior to termination or the
Director has served on the Board for at least ten years, for the full remaining
portion of the option term.
If an option holder dies while serving as a Director of the Company (or
within the six-month period after termination of such status), all outstanding
options immediately become exercisable in full and may be exercised either (i)
at any time within 12 months following death (if otherwise within the option
term); or (ii) if the option was granted on or after July 20, 1995, and either
the option was granted at least six years prior to termination or the Director
has served on the Board for at least ten years, for the full remaining portion
of the option term. If a Director ceases to serve on the Board because he or she
becomes disabled while serving as a Director (or within the six-month period
after termination of such status), all vested options may be exercised either
(i) within 12 months following the date of cessation of service (if otherwise
within the option term); or (ii) if the option was granted on or after July 20,
1995, and either the option was granted at least six years prior to termination
or the Director has served on the Board for at least ten years, for the full
remaining portion of the option term.
Shares Subject to the Director Plan. There are currently 530,000 shares of
Common Stock issuable under the Director Plan (of which 180,000 shares are
subject to stockholder approval). The shares are subject to adjustment, upon
recapitalizations, stock splits, reverse stock splits or other similar events
that cause changes in the Company's stock. If any outstanding option under the
Director Plan expires or is terminated for any reason before the end of the
option term, the shares of stock allocable to the unexercised portion of such
option are available for future grants under the Director Plan.
Administration of the Director Plan. The Director Plan is construed,
interpreted and administered by the Compensation Committee (the "Committee")
appointed by the Board of Directors. The decisions of the Committee shall be
final and binding. The Committee is composed of nonemployee Directors who will
receive stock options under the Director Plan. The Committee, however, will have
no discretion to determine who will receive options, the number of shares
subject to such options or any principal terms of the options, including the
exercise price and the periods within which the options may be exercised. The
principal terms of all stock option grants that are to be made are fixed in the
Director Plan.
The Company intends that the Director Plan meet the requirements of Rule
16b-3 under the Exchange Act, so that the grants of the stock options thereunder
are exempt from Section 16(b) of the Exchange Act and the nonemployee Directors
who serve on the Committee and receive stock options under the Director Plan
will continue to be considered "disinterested" for the purpose of administering
any of the Company's other employee benefit or stock option plans.
Merger, Sale of Assets, Etc. In the event the Company is merged or
consolidated with another entity and the stockholders of the Company as of
immediately prior to such merger or consolidation own 50% or less of
14
<PAGE> 17
the voting power of the surviving entity, or in the event all or substantially
all of the assets are acquired, or more than 50% of the outstanding voting stock
of the Company is acquired, by another person or entity, or in case of
reorganization (other than a reorganization under the United States Bankruptcy
Code) or liquidation of the Company, (i) all outstanding options shall be
assumed or substituted on an equitable basis by the merged, consolidated or
otherwise reorganized entity; and (ii) all outstanding options under the
Director Plan shall immediately become exercisable in full.
Amendment and Termination. The Director Plan provides that the Board may
amend, modify, suspend or terminate the Director Plan but that no such action
will impair any option previously granted or deprive any Director of any shares
of stock that a Director may have acquired through or as a result of the
Director Plan. The Director Plan shall terminate whenever the Board adopts a
resolution to that effect or on March 29, 2010. No amendment, modification,
suspension or termination of the Director Plan may be made without the approval
of the stockholders if such approval is required by Rule 16b-3. As currently in
effect, Rule 16b-3 requires stockholder approval of any amendment that would
materially increase the benefits accruing to the participants, materially
increase the number of shares that may be issued, or materially alter the class
of recipients eligible to be granted options, in each case under the Director
Plan.
Federal Income Tax Consequences. Nonemployee Directors who are granted
stock options do not recognize any taxable income at the time of grant. Upon
exercise of the options, a nonemployee Director will recognize ordinary income
in an amount equal to the difference between (i) the fair market value of the
shares purchased, at the time of exercise; and (ii) the consideration paid for
the shares. In general, the Company will be entitled to a compensation expense
deduction in connection with the exercise of a nonemployee Director option for
any amounts includable by the nonemployee Director as ordinary income at the
time the nonemployee Director is taxed at ordinary income rates.
VOTE REQUIRED
Approval of the amendment to the Director Plan requires the affirmative
vote of a majority of the Votes Cast. See "PROCEDURAL MATTERS -- Quorum;
Abstentions; Broker Non-Votes" above.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENT TO THE
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN. PROXIES RECEIVED BY THE COMPANY WILL BE
SO VOTED UNLESS A CONTRARY VOTE IS SPECIFIED.
15
<PAGE> 18
RATIFICATION OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
PROPOSAL 4.
The firm of Price Waterhouse LLP served as the Company's auditors for the
year ended December 29, 1995, and has been engaged by the Audit Committee to
serve as auditors for the fiscal year ending December 27, 1996.
As described in the Company's Current Report on Form 8-K dated as of April
3, 1995, and amended by Forms 8-K/A dated April 7, 1995, and April 12, 1995, at
a meeting of the Company's Audit Committee held on March 16, 1995, the Audit
Committee determined to engage the accounting firm of Price Waterhouse LLP
("Price Waterhouse") as independent accountants for all subsidiaries of the
Company for 1995, subject to approval of the stockholders. The stockholders
ratified the appointment on May 24, 1995, at the Annual Meeting of Stockholders.
As a result, the Company's subsidiary, Network Systems Corporation, disengaged
the accounting firm of Ernst & Young LLP (Ernst & Young) and retained the
accounting firm of Price Waterhouse, that had been auditing the Company and all
subsidiaries except Network Systems Corporation. Price Waterhouse had expressed
reliance upon Ernst & Young's report in its report on the consolidated financial
statements of the Company for the years ended December 30, 1994, and December
31, 1993. Ernst & Young's report on the financial statements for 1994 and 1993
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 in the years ended December 30, 1994,
and December 31, 1993.
The Board of Directors requests that stockholders ratify the engagement of
Price Waterhouse LLP for fiscal year 1996. A representative of Price Waterhouse
LLP is expected to be present at the Annual Meeting and available to respond to
appropriate questions and, although Price Waterhouse LLP 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 LLP 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 1996 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 FOR RATIFICATION OF THE APPOINTMENT
OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS.
16
<PAGE> 19
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation earned
by the Chief Executive Officer ("CEO") and by each of the other four most highly
compensated executive officers of the Company (based on 1995 salary plus bonus),
who were serving as such at December 29, 1995, the Company's fiscal year-end
(collectively, the "Named Executive Officers"). There are no former executive
officers who would have been among the four most highly compensated if they had
still been serving as executive officers at 1995 fiscal year-end.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------------------------ -------------------------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(1) COMPENSATION($)(2) AWARDS($)(3) OPTIONS(#) COMPENSATION($)(4)
- ------------------------- ---- ------------ ----------- ------------------ ------------ ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
RYAL R. POPPA............ 1995 $650,001 -0- -- -0- -0- $ 67,124
Chairman of the Board, 1994 617,500 $75,000 -- -0- 62,291 60,248
President and CEO 1993 587,500 -0- $ 68,371(5) -0- 75,833 42,455
DAVID E. WEISS........... 1995 333,943 -0- -- $296,348 71,269 7,729
Executive Vice President 1994 220,230 35,000 -- -0- 13,416 5,520
and Chief Operating
Officer 1993 190,385 -0- -- -0- 19,100 4,121
JOHN V. WILLIAMS......... 1995 275,001 -0- 71,257(7) 191,738 27,341 4,308
Executive Vice President
of 1994 218,673 35,000 68,371(7) -0- 19,040 4,929
Worldwide Field
Operations 1993 198,172 66,629(6) 67,517(7) -0- 18,500 5,124
L. THOMAS GOOCH.......... 1995 255,539 -0- -- 182,673 26,048 13,793
Executive Vice President 1994 237,500 50,000 -- -0- 14,582 8,894
and General Manager of 1993 225,961 -0- -- -0- 19,167 6,301
Network Systems
W. RUSSELL WAYMAN........ 1995 199,424 -0- -- 139,446 11,930 7,432
Corporate Vice President, 1994 175,923 10,000 -- -0- 7,707 4,338
General Counsel and 1993 153,654 -0- -- -0- 9,634 3,428
Secretary
</TABLE>
- ---------------
(1) Salary and bonus are reported in the year earned even if not actually paid
until the following year. Any compensation that was deferred at the Named
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 and certain other specified
benefits. However, perquisite amounts are not required to be reported if
total perquisites for the Named Executive Officer were not more than the
lesser of $50,000 or 10% of the Named Executive Officer's annual salary and
bonus.
(3) Restricted stock awarded in 1995 (11,442 shares to Mr. Weiss; 7,403 shares
to Mr. Williams; 7,053 shares to Mr. Gooch; and 5,384 shares to Mr. Wayman)
vests incrementally: 44% after 12 months, another 28% after 18 months and
the remaining 28% after 24 months from the date of grant, if the executive
officer is continuously employed by the Company. Restricted stock awarded
prior to 1995 vests at the time the executive officer's employment with the
Company ceases at or after the later of attaining age 65, or five years
from the date of the award, provided that the executive officer has been
continuously employed by the Company during such period; or upon retirement
in accordance with the Company's established retirement policy. Vesting may
be accelerated in years three, four and five if, in the Compensation
Committee's view, the Company achieves certain predetermined financial
goals. The executive officer has all the rights of a stockholder with
respect to restricted shares, including the right to receive dividends, if
any, except that the stock and any stock dividends are 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 December 29, 1995 (net of purchase price) were as
follows: Mr. Poppa -- 61,520 shares valued at $1,462,638; Mr.
Weiss -- 14,652 shares valued at $348,351; Mr. Williams -- 14,854 shares
valued at $353,154; Mr. Gooch -- 21,133 shares valued at $502,437; and Mr.
Wayman -- 9,887 shares valued at $235,063.
17
<PAGE> 20
(4) The items reported for 1995 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: Mr. Poppa -- $33,500; Mr. Weiss -- $3,168;
Mr. Williams -- $2,880; Mr. Gooch -- $6,112; and Mr. Wayman -- $5,070; and
(ii) above-market interest earned on deferred compensation as follows: Mr.
Poppa -- $25,927; Mr. Weiss -- $756; Mr. Williams -- $0; Mr.
Gooch -- $4,655; and Mr. Wayman -- $0; and (iii) Company contributions made
for 1995 to the Profit Sharing and Thrift Plan as follows: Mr.
Poppa -- $7,697; Mr. Weiss -- $3,805; Mr. Williams -- $2,362; Mr.
Gooch -- $1,428; and Mr. Wayman -- $3,026.
(5) Includes payments of $57,210 for financial services for Mr. Poppa.
(6) Bonuses for Mr. Williams represent an MBO bonus payment in 1994 and
marketing commissions and an incentive payout, as head of sales and
customer services functions for the Americas Group, in 1993.
(7) Includes payments of $55,249 in 1995, $58,299 in 1994, and $58,301 in 1993
made in lieu of relocation expense reimbursement that was a part of Mr.
Williams' offer of employment.
18
<PAGE> 21
OPTION GRANTS TABLE
The following table sets forth information regarding options granted to the
Named Executive Officers during the fiscal year ended December 29, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTION FAIR ASSUMED ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE MARKET PRICE APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES IN OR BASE VALUE TERM(1)
OPTIONS FISCAL PRICE ON DATE EXPIRATION -----------------------------
NAME GRANTED(#) 1995(2) ($/SH)(3) OF GRANT DATE 5%($) 10%($)
- ---------------------- ----------- ------------ --------- --------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ryal R. Poppa......... -0- -- -- -- -- -- --
David E. Weiss........ 10,000(4) 0.72 $ 22.25 $ 22.25 05/17/05 $ 139,929 $ 354,608
39,771(4) 2.88 30.00 26.00 12/14/05 491,222 1,488,919
21,498(5) 1.55 30.00 26.00 12/14/05 265,527 804,827
John V. Williams...... 17,748(4) 1.28 30.00 26.00 12/14/05 219,210 664,437
9,593(5) 0.69 30.00 26.00 12/14/05 118,486 359,136
L. Thomas Gooch....... 16,908(4) 1.22 30.00 26.00 12/14/05 208,835 632,990
9,140(5) 0.66 30.00 26.00 12/14/05 112,890 342,177
W. Russell Wayman..... 7,744(4) 0.56 30.00 26.00 12/14/05 95,648 289,914
4,186(5) 0.30 30.00 26.00 12/14/05 51,702 156,713
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Increase in market value of the Common Stock for ALL STOCKHOLDERS
(53,308,313 shares as of year-end) at assumed annual rates of
appreciation............................................................ $871,644,226 $2,208,936,566
</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
(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 Named Executive Officer holding the option
through its vesting period and the subsequent exercise of the option by
the Named Executive Officer. At 5% annual appreciation from $26.00 over a
10-year term, the stock price would be $42.351. At 10% annual appreciation
from $26.00 over a 10-year term, the stock price would be $67.437.
(2) Based on options to purchase an aggregate of 1,379,904 shares granted
during fiscal 1995 to all employees under all of the Company's option
plans. Of these options, 578,453 were granted pursuant to an option
exchange plan for non-officer employees.
(3) Options granted with an exercise price of $30.00 per share were granted
above the fair market value of $26.00 per share on the date of grant.
(4) Standard options were granted under the 1995 Equity Participation Plan. The
exercise price is at least 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), or sale of all or
substantially all of the assets of the Company, the number and kind 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 will
accelerate and all restrictions on
19
<PAGE> 22
restricted stock awards will lapse immediately. Options are not
transferable, except upon disability, or upon death by testamentary will or
pursuant to the laws of descent and distribution.
(5) Performance-based options were granted under the 1995 Equity Participation
Plan. The exercise price is at least 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 a
recapitalization, merger, consolidation or reorganization (excluding any
reorganization under the U.S. Bankruptcy Code), or the sale of all or
substantially all of the assets of the Company, the number and kind 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 will
accelerate and all restrictions on outstanding restricted stock awards will
lapse immediately. Options are not transferable, except upon disability, or
upon death by testamentary will or pursuant to the laws of descent and
distribution.
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth information regarding options exercised by
Named Executive Officers during fiscal 1995 and options held by them at fiscal
year-end 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS AT 12/29/95(#): OPTIONS AT 12/29/95($)(1):
EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ryal R. Poppa............. -0- -- 108,093 92,625 $ 251,340 $ -0-
David E. Weiss............ -0- -- 28,823 91,690 14,750 21,375
John V. Williams.......... -0- -- 16,835 51,934 2,007 -0-
L. Thomas Gooch........... -0- -- 25,647 48,027 43,304 -0-
W. Russell Wayman......... -0- -- 12,057 23,136 11,452 -0-
</TABLE>
- ---------------
(1) Only the value of unexercised, in-the-money options is reported. Value is
calculated by (i) subtracting the exercise price per share from the
year-end market value of $23.875 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.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company and Mr. Poppa entered into an agreement in December 1989
concerning the terms of his employment. In October 1991, March 1995 and July
1995, the Company and Mr. Poppa amended the agreement. In July 1995, the term of
the agreement was extended through January 20, 1997. For 1995, Mr. Poppa's base
compensation as determined by the Compensation Committee was $650,000.
Currently, the agreement provides for a Management by Objective ("MBO") bonus
percentage of 60%, subject to change by the Compensation Committee. In the event
of an involuntary termination without cause, the agreement currently provides
for a severance payment equal to the greater of (i) the sum of his annual base
compensation plus 100% of the then-current bonus percentage for the year of
termination, or (ii) the sum of his annual base compensation plus 100% of the
then-current bonus percentage for each year remaining in the employment term. In
the event of a voluntary termination within 24 months after a change in control
(as defined below), Mr. Poppa would receive an amount equal to twice his annual
base salary plus two times 100% of the then-current bonus amount, and his
outstanding stock options and restricted stock would become fully vested. Upon
termination for cause, compensation would 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
20
<PAGE> 23
amounts received under any Company-funded disability benefit plan. In addition,
the agreement provides that, in the event that the payments due under the
agreement would constitute "parachute payments" within the meaning of Section
280G of the Code and would otherwise be subject to the excise tax imposed by
Section 4999 of the Code, the severance benefits shall either be delivered in
full or shall be delivered to such lesser extent as will not result in any such
excise tax, whichever results in the greatest amount of after-tax severance
benefits to Mr. Poppa.
In December 1995, the Company and Mr. Weiss entered into an employment
agreement, which provides for annual base compensation of $425,000 and
participation in the MBO bonus program at a bonus percentage of 60%. In the
event of an involuntary termination without cause, or in the event of death, or
if Mr. Weiss is not appointed as the new chief executive officer and elects to
leave within six months after the appointment of a new chief executive officer,
the agreement provides for a severance payment equal to two times the sum of (i)
his current rate of annual base compensation; and (ii) 100% of the then-current
bonus percentage (whether or not such bonus would have been otherwise payable).
In the event of a change in control followed by voluntary termination within 24
months, Mr. Weiss would receive an amount equal to twice his annual base salary
plus two times 100% of the then-current bonus amount, and his outstanding stock
options and restricted stock would become fully vested. Upon termination for
cause, compensation would be paid only through the date of termination. In
addition, the agreement provides that, in the event that the payments due under
the agreement would constitute "parachute payments" within the meaning of
Section 280G of the Code and would otherwise be subject to the excise tax
imposed by Section 4999 of the Code, the severance benefits shall either be
delivered in full or shall be delivered to such lesser extent as will not result
in any such excise tax, whichever results in the greatest amount of after-tax
severance benefits to Mr. Weiss. The agreement also provides for medical and
life insurance, financial services and an automobile allowance.
In February 1995, the Company entered into employment agreements with
Messrs. Gooch, Williams and Wayman, which provide for annual base compensation
of $250,000, $275,000 and $200,000, respectively, subject to annual adjustment,
and participation in the MBO bonus program at a bonus percentage to be
determined by the Compensation Committee. For 1996, base compensation for
Messrs. Gooch, Williams and Wayman has been set at $262,000, $300,000 and
$210,000, 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 then-current bonus percentage. In the
event of a change in control followed by voluntary termination within 24 months,
the agreements each provide for payment of an amount equal to twice their
respective base salaries plus two times 100% of the on-plan target bonus, and
all outstanding stock options and restricted stock would become fully vested.
The agreements provide that, in the event that the payments due under the
agreements would constitute "parachute payments" within the meaning of Section
280G of the Code and would otherwise be subject to the excise tax imposed by
Section 4999 of the Code, the severance benefits shall either be delivered in
full or shall be delivered to such lesser extent as will not result in any such
excise tax, whichever results in the greatest amount of after-tax severance
benefits. Each agreement also provides for medical and life insurance and an
automobile allowance. No compensation would be paid under the agreements in the
event of a termination for cause.
In December 1995, the Company and Mr. Gooch amended the February 1995
employment agreement (the "February Agreement") in connection with a two-year
assignment to the Company's Network Systems Corporation unit. If agreed-upon
performance goals are met by Mr. Gooch, on December 1, 1997, he will receive a
bonus equal to the sum of one year's salary plus the MBO bonus. During this
two-year assignment, Mr. Gooch will receive a housing allowance and a business
travel allowance of $20,000 per year. If Mr. Gooch's employment is terminated
prior to January 1, 1998, and termination payments are payable under the
February Agreement, he will receive one year's salary in addition to any amounts
payable under the February Agreement. At the end of this two-year assignment, if
no mutually acceptable position is available and, as a result, Mr. Gooch's
employment is terminated, he will receive severance benefits in accordance with
the February Agreement.
For purposes of the foregoing agreements, a "change in control" is deemed
to have occurred in the case of (i) a merger where the Company is not the
surviving corporation or where the Company's stockholders as of immediately
prior to the merger own 50% or less of the Company after the merger; (ii) sale
of all or
21
<PAGE> 24
substantially all of the assets of the Company; or (iii) acquisition of more
than 25% of the Company's outstanding voting stock by another person or group.
For a discussion of the determination by the Compensation Committee of the
salary and bonus amounts for the Named Executive Officers, see "REPORT OF THE
HUMAN RESOURCES AND COMPENSATION COMMITTEE OF THE BOARD ON EXECUTIVE
COMPENSATION" below.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act 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 1995 by its Directors, Officers (as
defined in the rules under Section 16 of the Exchange Act) and 10% stockholders.
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 1995.
22
<PAGE> 25
The information provided below is expressly excluded from incorporation
by reference into any filings under the jurisdiction of the
Securities and Exchange Commission.
REPORT OF THE HUMAN RESOURCES AND COMPENSATION COMMITTEE
OF THE BOARD 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 are Directors Keane (Chair), Albino, Armstrong, Burgin and Lee. 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.
The compensation philosophy and practices at StorageTek have continued to
provide the impact intended during 1995. There is a leveraged package to
emphasize "pay for performance" which, together with a package of base pay,
benefits and perquisites, attracts and retains these key executives.
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. Finally, the
package must provide a tangible link between the expectations of stockholders
and executives, and serve as a means to retain key personnel. The components of
total compensation are salary, bonus, equity grants and other benefits. Each of
these components is valued and together they 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 other benefits) and the Compensation Committee periodically assesses this
mix to ensure that the interests of the executive officers are in line with
those of the Company's stockholders and customers. To determine industry
compensation levels, the Compensation Committee reviews three compensation
surveys of primarily high-technology computer companies, each with data from 20
to 30 companies. The Compensation Committee believes the surveyed companies are
a close reflection of the companies that comprise the S & P Computer Systems
Index.
Total Compensation
Based upon the surveys of the competitive market and advice developed by an
outside compensation consultant, the Compensation Committee reviewed the total
compensation of the Chief Executive Officer ("CEO") and the other executive
officers. The Compensation Committee believes that the CEO's 1995 targeted total
annual compensation, as well as that of the other executive officers, was low,
particularly in the at-risk components of short-term incentive (bonus) and
long-term incentive (equity), given the size, complexity and expected
performance of the Company. As a result, the Compensation Committee increased
all executive officers' total compensation opportunity in 1995, except the CEO.
With these changes, the overall plan is designed so that if the Company's
performance is lesser or greater than the targets for the at-risk components
(bonus and equity), the CEO's total compensation can vary from 33% to 120% of
the targeted competitive total compensation. The 33% value occurs when the bonus
is not earned and the stock price has not grown. The 120% occurs if the bonus is
maximized, and the equity actually adds value at the intended (Black-Scholes
calculated) potential. Equity could add value greater than projected by the
model and, therefore, the total compensation could be higher than 120% of the
competitive target compensation. For that to occur, the stockholders will have
had a benefit of stock price growth of greater than 50%, when measured from the
same market price as that given for the executive officers' options. 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 50% to 120% of the targeted total compensation, while the value for
other executive officers can range from about 60% to 120%.
23
<PAGE> 26
Salary and Bonus
The annual salaries of the Company's executive officer group for 1995 were
measured and projected to be approximately 9% below the competitive market
median. The CEO's salary was not adjusted in 1995. Adjustments were made to the
salaries of some executive officers in order to reduce the disparity between the
competitive market and StorageTek.
For 1995, performance objectives used to determine bonus compensation for
executive officers included quality improvement, net-after-tax income and market
share growth. The threshold for any payout was an earnings per share goal. The
Company's performance in 1995 met operating plan expectations and the target
goals for bonus. However, the threshold measurements were not met, as earnings
per share performance was encumbered by one-time charges for merger costs,
lawsuit settlement costs and restructuring costs. Consequently, the Company did
not pay bonuses for 1995 to the executive officer group. As a result of not
paying bonuses, the total cash compensation of all executives was less than
competitive total cash compensation levels. This position is consistent with the
Company's pay-for-performance strategy. See "Compensation of Executive
Officers -- Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" above, for additional disclosure regarding
certain agreements between the Company and its Named Executive Officers.
The Company has developed variable bonus payouts for 1996 tied to
individual and group performance objectives, which place the CEO and the other
officers in a highly leveraged compensation position. This means that if in 1996
the Company meets all the target measurements controlling the distribution of
bonus and cash, the compensation plan for the officers (including the CEO)
should be competitive with like positions in the set of competitive companies
identified above. This approach is aimed at tying cash compensation directly to
the Company's performance.
Other Benefits
The benefit package offered to Executive Officers is substantially the same
as that for all employees for medical, dental, life and disability insurance,
except 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' salaries (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 4% (CEO), 7% (named officers) and 11% (other
officers) of total target compensation.
Equity Grants
The Committee believes that, through the use of stock options and other
equity grants, executive interests are tied directly to enhancing stockholder
value. The Company uses a modified Black-Scholes model, calculated by a
third-party consultant, to project a value for the Company's stock options and
to compare its stock options to stock options granted by companies within the
competitive market.
Two types of stock options were granted in December 1995 to executive
officers: (i) performance-based options; and (ii) standard options. All of the
options have an exercise price of $30.00 per share, which is $4.00, or 15%,
above the market price at the time of grant, causing the executives to gain only
after the Company's stockholders have experienced a $4.00 per share gain. The
performance-based options, which accounted for approximately 35% of all options
granted in 1995, have a longer-than-normal vesting period of six years. If the
Company's net-after-tax income goals are met in each of the first three years
following the date of grant of the performance option, the vesting period
accelerates to the first, second and third years instead of vesting over the
full six years.
The 1994 and 1995 performance goals for net income were not met, so the
vesting of the first two-thirds of the 1993 granted performance stock options
and the first one-third of the 1994 grant did not accelerate; such installments
will instead vest six years from the date of grant.
24
<PAGE> 27
The remaining 65% of the 1995 stock options granted to executive officers
were standard options that vest solely based upon continued employment and have
a vesting schedule of three years. The grant of such options was approved by the
Compensation Committee as a tool to be used to motivate and retain key
contributors. The options provide 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.
Because the CEO had previously announced a retirement date of January 20,
1997, he did not receive any performance or tenure-based options in 1995.
As executive management determined to undertake the difficult
responsibility of restructuring the Company in 1996 and 1997, it was recognized
that the leadership team needed continuity and needed to be committed to a
minimum of two years of effort required. To ensure continuity and to provide a
strong incentive for managing this difficult task, the executive officers were
granted restricted shares that vest over the estimated period of restructuring
efforts: 44% of the shares vest 12 months after date of grant, another 28% vest
after 18 months and the final 28% vest after two years. The fair market value of
the restricted stock grant was equal to 70% of annual base salary on the date of
grant. Again, the CEO did not participate in this grant of restricted stock. The
restricted stock was also offered to the executive officers with the intention
that the shares will be held by the executive officer for as long as he or she
remains an employee of the Company (some percentage may be sold if required to
pay the taxes due upon vesting). This is an initial step towards having the
executive officers as owners of the Company's stock, as well as stock option
holders, so that their personal net worth is aligned with the stockholders.
In addition to the restricted stock grants, a cash bonus plan was
established to cover a portion of the tax consequences to the executive officers
upon the vesting of the restricted stock. The plan requires that cost savings
goals relating to the restructuring be achieved in order for the cash bonus to
be paid.
Summary
The Compensation Committee continues to monitor legislative and regulatory
changes that may affect the cost to the Company of the various components of
executive compensation. Additional redesigning of the compensation components
will be studied and implemented as appropriate. The Company's cash bonus plan
for executives and its stock option plan are designed to qualify as
"performance-based" plans within the meaning of Section 162(m) of the Code so as
to preserve deductibility by the Company of compensation paid under such plans.
The Compensation Committee believes that the total compensation approach
used by the Company is evidence that performance is an integral part of the
Company's philosophy and practice. It helps ensure that there is a balance
between emphasis on 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.
This report has been provided by the Compensation Committee.
Stephen J. Keane, Chair
Judith E.N. Albino
William L. Armstrong
Robert A. Burgin
Robert E. Lee
25
<PAGE> 28
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, 1995, 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, 1990, 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]
DATA POINTS
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
-------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Storage Technology Corporation 100 185 97 148 135 111
S&P 500 Index 100 130 140 155 157 215
S&P Computer Systems Index 100 89 65 68 87 116
</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 or the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts and is not to be deemed to be
soliciting material.
26
<PAGE> 29
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
proxy card to vote in accordance with their best judgment on such matters. Under
the Company's bylaws, in order to be deemed properly presented, notice must be
delivered to or mailed and received by the Company, not less than 60 days nor
more than 90 days prior to the Annual Meeting; provided, however, if less than
70 days' notice or prior public disclosure of the date of the Annual Meeting has
been given, notice by the stockholder to be timely must be received by the
Company not later than the close of business on the tenth day following the day
on which such notice of the Annual Meeting was mailed or publicly disclosed. The
stockholder's notice must set forth, as to each proposed matter: (a) a brief
description of the business and reason for conducting such business at the
meeting; (b) the name and address as they appear on the Company's books of the
stockholder proposing such business, or the name of the beneficial holder or
other party on whose behalf the proposal is made; (c) the class and number of
shares of the Company owned by the stockholder or beneficial holder or other
party on whose behalf the proposal is made; and (d) any material interest of the
stockholder or beneficial holder or other party on whose behalf the proposal is
made in such business. The presiding officer of the meeting may refuse to
acknowledge any matter not made in compliance with the foregoing procedure.
STOCKHOLDER PROPOSALS
Any proposal that a stockholder may desire to present to the Company's 1997
annual meeting of stockholders must be received in writing by the Secretary of
the Company on or before December 11, 1996, 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 Vice President,
General Counsel and Secretary
April 10, 1996
27
<PAGE> 30
[LOGO]
Printed on recycled paper
<PAGE> 31
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 Meeting of
Stockholders of Storage Technology Corporation to be held on May 30, 1996, and
any adjournment or postponement thereof, as follows:
(To be Signed on Reverse Side)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
For All Nominees Withhold Nominees:
(except as from all Nominees Ryal R. Poppa
indicated below) Judith E. N. Albino
William L. Armstrong
1. Election of Directors. Robert A. Burgin
---------- ---------- Paul Friedman
William R. Hoover
WITHHOLD AUTHORITY to vote for the nominees listed below: Stephen J. Keene
---- Robert E. LaBlanc
--------------------------------------------------------- Robert E. Lee
Harrison Shull
Richard C. Steadman
FOR AGAINST ABSTAIN
2. Ratification of amendments to the 1987 Employee Stock Purchase Plan,
including the reservation of an additional 1,750,000 shares of Common
Stock for issuance to employees thereunder.
------- ------- -------
3. Ratification of amendments to the Stock Option Plan for Nonemployee
Directors, including the reservation of an additional 180,000 shares
of Common Stock for issuance thereunder.
------- ------- -------
4. Ratification of the appointment of Price Waterhouse LLP as the
Company's independent accountants for the current fiscal year.
------- ------- -------
</TABLE>
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 EACH OF THE DIRECTORS INDICATED AND FOR APPROVAL OF EACH OF
THE PROPOSALS PRESENTED. PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED PRE-PAID ENVELOPE.
SIGNATURE(S) DATE
--------------------------------------------- ---------------
Please mark, date and sign this Proxy exactly as your name appears hereon.
(Note: In case of joint ownership, each joint owner should sign.) If you are
acting as a trustee, executor, attorney-in-fact or in some other representative
capacity, please indicate beneath your signature your title and for whom you are
signing this Proxy.
<PAGE> 32
EXHIBIT INDEX
Exhibit
Number Exhibit Description Page
- ------- ------------------- ----
99.1 Storage Technology Corporation Amended and Restated Stock
Option Plan for Non-Employee Directors.
99.2 Tenth Amendment and Restatement of Storage Technology
Corporation 1987 Employee Stock Purchase Plan dated
December 14, 1995.
<PAGE> 1
STORAGE TECHNOLOGY CORPORATION
AMENDED AND RESTATED STOCK OPTION PLAN
FOR NONEMPLOYEE DIRECTORS
RECITALS
A. Pursuant to a resolution dated June 15, 1987, the board of
directors (the "Board") of Storage Technology Corporation, a Delaware
corporation (the "Company"), adopted the Stock Option Plan for NonEmployee
Directors (the "Plan"). The Plan was approved by the stockholders of the
Company at a meeting held October 20, 1987 (the "Original Adoption Date"). The
Plan was thereafter amended (the "First Amendment") by the Board on March 29,
1989 and such amendment was approved by the stockholders of the Company at a
meeting held June 28, 1989, and again amended (the "Second Amendment") by the
Board on November 7, 1990 and such amendment was approved by the stockholders
of the Company at a meeting held May 29, 1991. This Amended and Restated Plan
incorporates the above amendments, and amendments approved by the Board on July
26, 1995 and March 6, 1996.
B. The Board reserved the right to amend the Plan from time to time
with certain restrictions and only with the approval of the stockholders with
respect to certain amendments, all as specified in the Plan. Pursuant to such
authority, the Plan is hereby amended in its entirety as set forth below (the
"Amended Plan"), provided, however, that the amendments made hereby and options
first granted hereby, pursuant to Section 3.2.1.6, are all subject to the
approval of the Company's stockholders at the Company's next annual meeting
following the Board's adoption of this Amended Plan.
C. The purposes of the Plan are to secure for the Company the benefits
arising from capital stock ownership by its current and future nonemployee
directors by providing to such directors added incentive to continue in the
service of the Company and a more direct interest in the future success of the
operations of the Company through the granting to such directors of options
("Option" or "Options") to purchase shares of the $.10 par value common stock
of the Company (the "Stock") subject to the terms and conditions described
below.
ARTICLE I
1 GENERAL
1.1 Definitions. For purposes of this Amended Plan, and as used
herein, a "nonemployee director" is an individual who (a) is a
member of the board of directors of the Company, and (b) is not an
employee of the Company. For purposes of this Amended Plan, an
employee is an individual whose wages are subject to the
withholding of federal income tax under section 3401 of the
Internal Revenue Code of 1986, as amended from time to time (the
"Code").
<PAGE> 2
1.2 Options. The Options granted hereunder shall be options that are
not qualified as incentive stock options under section 422A of the
Code.
ARTICLE II
2 ADMINISTRATION
2.1 The Stock Option Committee. The Amended Plan shall be administered
by the Compensation Committee of the Board ("the Committee"), which
shall be composed in such a manner to satisfy the requirements, if
any, of Rule 16b-3 promulgated under the Securities Exchange Act of
1934 or any successor rule ("Rule 16b-3") with respect to
committees administering formula plans that comply with Rule 16b-3
and in accordance with the General Corporation Law of Delaware.
The persons comprising the Committee shall be appointed by and
serve at the pleasure of the Board. The Committee members shall
all be members of the Board.
2.2 Quorum. A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present at any meeting at
which a quorum is present or participating by the means described
in the last sentence of this section 2.2, or acts approved in
writing by all members of the Committee, shall be the acts of the
Committee. The Committee shall keep minutes of its meetings. One
or more members of the Committee may participate in a meeting of
the Committee by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other.
2.3 Authority of the Committee. The Committee shall have no authority
or discretion or power to select the participants who will receive
Options, to set the number of shares to be covered by each Option,
or to set the exercise price or the period within which the Options
may be exercised or to alter any other terms or conditions
specified herein, except in the sense of administering the Amended
Plan subject to the provisions of the Amended Plan. Subject to the
foregoing limitations, the Committee shall have authority and power
to adopt such rules and regulations and to take such action as it
shall consider necessary or advisable for the administration of the
Amended Plan and to construe, interpret and administer the Amended
Plan and the decisions of the Committee shall be final and binding
upon the Company, the Holders (as defined below) and all other
persons. No member of the Committee shall incur any liability by
reason of any action or determination made in good faith with
respect to the Amended Plan or any stock option agreement.
2
<PAGE> 3
ARTICLE III
3 OPTIONS
3.1 Participation. Each individual who was a nonemployee director of
the Company on the Original Adoption Date or who becomes such
thereafter shall receive Options to purchase Stock under the Plan
on the terms and conditions described herein.
3.2 Stock Option Agreements. Each Option granted under the Amended
Plan shall be evidenced by a written stock option agreement in
substantially the form attached hereto, which shall be entered into
by the Company and the nonemployee director to whom the Options
are granted (the "Holder"), and which shall include or conform to
the following terms and conditions, and which may include such
other terms and conditions, if any, not inconsistent therewith or
with the terms and conditions of this Amended Plan as the Committee
considers appropriate:
3.2.1 Number of Options and Grant Dates. Each nonemployee
director is entitled to receive, under the Plan, Options to
purchase shares of Stock as described below and subject to
adjustment from and after the Original Adoption Date as
provided in section 4.2 hereof.
3.2.1.1 Each nonemployee director who was such on
October 20, 1987, has received an Option,
granted as of October 20, 1987, to purchase
2,500 shares of Stock (after adjustment for the
one-for-ten reverse stock split effected on May
19, 1989) pursuant to the Plan.
3.2.1.2 Each individual who became a nonemployee
director of the Company after March 29, 1989,
and prior to November 7, 1990, has received an
Option, granted as of his or her election date,
to purchase 2,500 shares of Stock pursuant to
the First Amendment.
3.2.1.3 Between October 20, 1987 and November 7, 1990,
each nonemployee director holding an Option
granted under 3.2.1.1 or 3.2.1.2 above who had,
after such grant, been elected to serve on the
Board at two consecutive annual meetings of
stockholders as a nonemployee director after
receipt of the Option granted under 3.2.1.1 or
3.2.1.2 above, has received an additional
Option, granted as of such election date, to
purchase 2,500 shares of Stock.
3.2.1.4 Options granted under 3.2.1.1, 3.2.1.2 and
3.2.1.3 above will hereinafter be collectively
referred to as "Initial Options". All Initial
Options shall continue to be held pursuant to
the terms and conditions of this Amended Plan.
3
<PAGE> 4
3.2.1.5 Each nonemployee director who was such on
November 7, 1990, or who first becomes such
after November 7, 1990, shall receive an Option
(the "New Option"), granted as of the later to
occur of November 7, 1990, or his or her first
election or appointment as a nonemployee
director, to purchase a number of shares of
Stock equal to 25,000 less any shares subject to
the Initial Options granted to such director.
3.2.1.6 Each nonemployee director who was such on July
26, 1995 or is thereafter elected or appointed
shall receive an additional option (the
"Additional Option") granted as of the later to
occur of July 26, 1995 or the third anniversary
of his or her first election or appointment as a
nonemployee director, to purchase 18,000 shares
of Stock.
3.2.1.7 In the event that any grant hereunder would
exceed the number of shares of Stock available
for issuance under the Amended Plan, or is
otherwise subject to stockholder approval, then
each such grant shall be conditioned on and
subject to subsequent stockholder approval to
the extent it exceeds that number of shares
determined by dividing the total number of
shares remaining available for grant under the
Amended Plan on such grant date by the number of
eligible nonemployee directors, or to the
extent that stockholder approval is otherwise
required.
3.2.2 Price. The price at which each share of Stock covered by
an Option may be purchased shall be the greater of 100
percent of the fair market value of such share on the date
of grant of the Option or the par value per share. For
purposes of this determination, "fair market value" means
the closing price of a share of Stock as reported in the
Wall Street Journal for the last business day prior to the
date of the grant. If no such closing price is reported,
then fair market value shall mean the average of the high
and low sale prices (or if no sale prices are reported, the
average of the high and low bid prices) as reported by the
principal regional stock exchange, or if not so reported,
as reported by NASDAQ or a quotation system of general
circulation to brokers and dealers.
3.2.3 Service Required for Exercise.
3.2.3.1 Each Initial Option shall be exercisable in full
six months after the date of grant, or at any
time after November 7, 1990, whichever shall
occur last.
3.2.3.2 Subject to 3.2.3.5 below, for each nonemployee
director who is such on November 7, 1990, such
director's New Option shall become exercisable
as follows: a number of shares equal to 5,000
less any shares subject to Initial Options
granted to such director, shall become
exercisable six months after the grant date, and
the balance shall become exercisable in
4
<PAGE> 5
four equal amounts on the first through fourth
anniversaries of such grant date.
3.2.3.3 Subject to 3.2.3.5 below, for each nonemployee
director who becomes such after November 7,
1990, such director's New Option shall become
exercisable as follows: 5,000 shares shall
become exercisable six months after the grant
date and the balance shall become exercisable in
six equal amounts on the first through the sixth
anniversaries of such grant date (with the first
four years rounded down to the nearest whole
share, and the last two years rounded up).
3.2.3.4 Subject to 3.2.3.5 below, each Additional Option
shall become exercisable as follows: 6,000
shares on each of the first, second, and third
anniversaries of the first date by which all
shares that are subject to New Options held by
such directors have become exercisable.
3.2.3.5 Except as set forth in this Article III, the
Options shall not be exercisable as to any
shares as to which the continuous service
requirement shall not be satisfied, regardless
of the circumstances under which the Holder's
service to the Company shall be terminated. The
number of shares as to which an Option may be
exercised shall be cumulative, so that once an
Option shall become exercisable as to any shares
it shall continue to be exercisable as to such
shares, until expiration or termination of the
Options as provided in the Amended Plan.
3.2.4 Option Period. The period within which each Option may be
exercised shall expire, in all cases, ten years from the
date of grant of the Option (the "Option Period"), unless
terminated sooner pursuant to subsection 3.2.5 below or
fully exercised prior to the end of such period.
3.2.5 Termination of Service. With respect to the exercise of
such Option in the event that the Holder ceases to be a
nonemployee director of the Company for the reasons
described in this 3.2.5:
3.2.5.1 As to all options granted before July 20, 1995,
and as to options granted on or after July 20,
1995, if the option has not been outstanding, as
of the date of the director ceasing to be a
nonemployee director, for at least six years and
such director has not been an outside director
for at least ten years, the vesting of and
expiration of the right to exercise such options
shall occur as follows:
3.2.5.1.1 Disability. If the Holder
terminates his or her service as a
director due to becoming disabled
(within the meaning of section
22(e)(3) of the Code) while in a
directorship of the
5
<PAGE> 6
Company or becomes disabled during
the six-month period after his or
her termination, Options vested as
of the date of termination may be
exercised within twelve months
following the disability (if
otherwise within the Option Period)
but will expire at the end of such
period to the extent they are not
exercised; or
3.2.5.1.2 Death. If the Holder shall die
while in a directorship of the
Company or during the six-month
period after his or her termination
of service as a director, all
Options, including, but not limited
to, Options not otherwise vested
may be exercised within twelve
months following such death (if
otherwise within the Option
Period), but not thereafter, by the
Holder's legal representative or
representatives, or by the person
or persons entitled to do so under
the Holder's last will and
testament, or if the Holder shall
fail to make testamentary
disposition of his or her Options
or shall die intestate, by the
person or persons entitled to
receive said Options under the laws
of descent and distribution; or
3.2.5.1.3 Other. If the directorship of a
Holder is terminated for any reason
prior to such director reaching age
70 (other than the circumstances
specified in 3.2.5.1.1 and
3.2.5.1.2 of this 3.2.5.1) within
the Option Period, the Options
vested as of the date of
termination may be exercised within
six months following the date of
such termination (if otherwise
within the Option Period), but not
thereafter, or
3.2.5.1.4 Retirement. If the directorship of
a Holder is terminated for any
reason after such director reaches
age 70 (other than the
circumstances specified in
3.2.5.1.1 and 3.2.5.1.2) within the
Option Period, all Options,
including, but not limited to,
Options not otherwise vested may be
exercised within six months
following the date of such
termination (if otherwise within
the Option Period), but not
thereafter.
3.2.5.2 As to all Options granted on or after July 20,
1995, if the Option has been outstanding, as of
the date of the director's ceasing to be a
nonemployee director, for at least six years or
such director has been an outside director for
at least ten years, the vesting of and
expiration of the right to exercise such options
shall occur as follows:
3.2.5.2.1 Disability. If the Holder
terminates his or her service as a
director due to becoming disabled
(within the meaning of
6
<PAGE> 7
section 22(e)(3) of the Code) while
in a directorship of the Company,
Options vested as of the date of
termination may be exercised within
the Option Period but will expire
at the end of such period to the
extent they are not exercised; or
3.2.5.2.2 Death. If the Holder shall die
while in a directorship of the
Company all Options, including, but
not limited to, Options not
otherwise vested may be exercised
within the Option Period but not
thereafter, by the Holder's legal
representative or representatives,
or by the person or persons
entitled to do so under the
Holder's last will and testament,
or if the Holder shall fail to make
testamentary disposition of his or
her Options or shall die intestate,
by the person or persons entitled
to receive said Options under the
laws of descent and distribution;
or
3.2.5.2.3 Other. If the directorship of the
Holder is terminated for any reason
prior to such director reaching age
70 (other than the circumstances
specified in 3.2.5.2.1 and
3.2.5.2.2 of this 3.2.5.2) within
the Option Period, the Options
vested as of the date of
termination may be exercised within
the Option Period, but not
thereafter; or
3.2.5.2.4 Retirement. If the directorship of
the Holder is terminated for any
reason after such director reaches
age 70 (other than the
circumstances specified in
3.2.5.2.1 and 3.2.5.2.2) within the
Option Period, all Options,
including, but not limited to,
Options not otherwise vested may be
exercised within the Option Period,
but not thereafter.
3.2.6 Transferability. Each Option granted under the Plan or the
Amended Plan shall not be transferable by the Holder except
(i) by will or pursuant to the laws of descent and
distribution, or (ii) pursuant to a qualified domestic
relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules
thereunder, or (iii) as may otherwise be permitted by
applicable law, including the version of Rule 16b-3 that is
applicable to this Amended Plan at the time of the
transfer. Each Option shall be exercisable during the
Holder's lifetime only by the Holder or by his or her
permitted transferee(s) pursuant to clause (ii) or (iii)
hereof.
3.2.7 Exercise of Option. The method for exercising each Option
granted pursuant to the Plan or the Amended Plan shall be
by delivery to the Company of written notice specifying the
number of shares with respect to which the Options are
being exercised. If requested by the Company, such notice
shall contain the Holder's
7
<PAGE> 8
representation that he or she is purchasing the Stock for
investment purposes only and his or her agreement not to
sell any Stock so purchased in any manner that is in
violation of the Securities Act of 1933, as amended, or
applicable state law. Such restrictions, or notice
thereof, shall be placed on the certificates representing
the Stock so purchased. The purchase of such Stock shall
take place at the principal offices of the Company within
twenty days following delivery of such notice, at which
time the purchase price of the Stock shall be paid in full
in cash, by check payable to the Company's order, by
delivery to the Company of certificates representing the
number of shares of Stock then owned by the exercising
Holder, the fair market value of which, on the date of
exercise, equals the purchase price of the Stock purchased
pursuant to exercise of the Options, properly endorsed for
transfer to the Company, or by a combination of such
methods of payment. A properly executed certificate or
certificates representing the Stock shall be delivered to
the Holder upon payment therefor.
ARTICLE IV
4 AUTHORIZED STOCK
4.1 The Stock. The total number of shares of Stock as to which Options
may be granted pursuant to the Amended Plan shall not exceed
530,000 in the aggregate, except as such number of shares shall be
adjusted from and after July 26, 1995 in accordance with the
provisions of 4.2 hereof. If any outstanding Option granted under
the Plan or the Amended Plan shall expire or be terminated for any
reason before the end of the Option Period, the shares of Stock
allocable to the unexercised portion of such Option shall be
available for grants pursuant to 3.2.1.5 and 3.2.1.6 above.
Fractional shares shall not be distributed and shall remain
unallocated. The Company shall at all times during the life of any
outstanding Options retain as authorized and unissued shares or
treasury shares at least the number of shares from time to time
included in the outstanding Options, or otherwise assure itself of
its ability to perform its obligations under the Amended Plan.
4.2 Adjustment by Stock Split, Stock Dividend, Etc. In the event that
the outstanding shares of Stock of the Company 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, reverse stock split, stock dividend,
combination or subdivision, appropriate adjustment shall be made in
the number and kind of shares available for grant under the Amended
Plan and reserved for issuance under any Options granted under the
Plan or the Amended Plan. Such adjustment to outstanding Options
shall be made without change in the total price applicable to the
unexercised portion of such Options, and a corresponding adjustment
in the applicable exercise price per share shall be made.
8
<PAGE> 9
4.3 Rights as a Stockholder. The holder of an Option shall have no
rights as a stockholder with respect to any shares covered by an
Option until the date of issue of a stock certificate to him or her
for such shares. Except as otherwise expressly provided in the
Amended Plan, 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.
4.4 General Adjustment Rules. No adjustment or substitution provided
for in this Article IV shall require the Company to sell a
fractional share under any stock option agreement and the total
substitution or adjustment with respect to each stock option
agreement shall be limited by deleting any fractional share. In
the case of any such substitution or adjustment, the exercise price
per share in each such stock option agreement shall be equitably
adjusted by the Committee to reflect the greater or lesser number
of shares of Stock or other securities into which the Stock subject
to an Option may have been changed. Adjustments under this Article
IV shall be made by the Committee, whose determination with regard
thereto shall be final and binding.
ARTICLE V
5 REORGANIZATION OR LIQUIDATION
In case the Company is merged or consolidated with another entity and the
stockholders of the Company as of immediately prior to such merger or
consolidation own 50% or less of the voting power of the surviving entity,
or in case all or substantially all of the assets or more than 50% of the
outstanding voting stock of the Company is acquired by any other person or
entity, or in case of a reorganization (other than a reorganization under
federal bankruptcy statutes) or liquidation of the Company that is
approved by the stockholders of the Company (i) any outstanding Options
shall be assumed or substituted on an equitable basis by the merged,
consolidated or otherwise reorganized corporation, person or entity,
provided that no additional benefits shall be conferred upon the Holders
as a result of such assumption or substitution, and the excess of the
aggregate fair market value of the shares subject to the Options
immediately after such assumption or substitution over the purchase price
thereof is not more than the excess of the aggregate fair market value of
the shares subject to the Options immediately before such assumption or
substitution over the purchase price thereof, and (ii) the exercisability
of all outstanding Options shall automatically be accelerated such that
the Options shall become exercisable in full regardless of whether all
conditions of exercise relating to vesting period or length of service of
a director have been satisfied. In the event that the triggering event is
an event that requires approval of the stockholders of the Company prior
to its consummation, then the acceleration of exercisability shall be
effective upon stockholder approval of such triggering event. If the
triggering event does not require stockholder approval (such as the
acquisition by a third party of more than 50% of the outstanding stock of
the Company), then the acceleration of exercisability shall be effective
upon the occurrence of such event.
9
<PAGE> 10
ARTICLE VI
6 GENERAL PROVISIONS
6.1 Expiration. The Amended Plan shall terminate whenever the Board
adopts a resolution to that effect. If not sooner terminated under
the preceding sentence, the Amended Plan shall wholly cease and
expire on March 29, 2010. After termination, no Option shall be
granted under this Amended Plan, but the Company shall continue to
recognize Options previously granted.
6.2 Amendments. The Board may from time to time amend, modify, suspend
or terminate the Amended Plan; provided, however, that the
provisions of the Amended Plan that determine which directors may
be granted Options, the timing of the Option grants and the number
of shares of Stock subject to Options granted hereunder may not be
amended more frequently than is permitted for formula plans by Rule
16b-3. Nevertheless, no such amendment, modification, suspension
or termination shall (a) impair any Option earlier granted under
the Plan or the Amended Plan or deprive any Holder of any shares of
Stock that he or she may have acquired through or as a result of
the Plan or the Amended Plan or (b) be made without the approval of
the stockholders of the Company if such approval is required to
retain the exemption provided by Rule 16b-3 with respect to Options
granted under the Plan or the Amended Plan.
6.3 Treatment of Proceeds. Proceeds from the sale of Stock pursuant to
Options granted under the Plan or the Amended Plan shall constitute
general funds of the Company.
6.4 Effectiveness. The effective date of the Plan was October 20,
1987. The "Effective Date" of this Amended Plan shall be July 26,
1995.
6.5 Paragraph Headings. The paragraph headings are included herein
only for convenience, and they shall have no effect on the
interpretation of the Plan.
ADOPTED by the authority of the Board on March 6, 1996, effective as of
the Effective Date of the Amended Plan.
STORAGE TECHNOLOGY CORPORATION
10
<PAGE> 1
TENTH AMENDMENT AND RESTATEMENT OF
STORAGE TECHNOLOGY CORPORATION
1987 EMPLOYEE STOCK PURCHASE PLAN
DECEMBER 14, 1995
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 base salary (before deduction for contributions to plans
maintained pursuant to Sections 401(k) and 125 of the Code) in effect during
the Offering Period, but EXCLUDING payments for overtime, shift premium,
incentive compensation, bonuses, and other similar payments; or (ii) Employee's
rate of base salary (before deduction for contributions to plans maintained
pursuant to Sections 401(k) and 125 of the Code) in effect during the Offering
Period, EXCLUDING payments for overtime, shift premium, incentive compensation,
bonuses, and other similar payments, but INCLUDING all payments for bonuses,
incentive compensation and various forms of commissions. Base Pay shall also
include payments for short-term disability.
<PAGE> 2
(c) "Committee" means the Compensation Committee of the
Company's Board of Directors or such other committee as is designated by the
Board of Directors to administer the Plan.
(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.
(e) "Offering Commencement Date" shall mean January 1, 1991 and
each following November 1 and May 1 thereafter, unless otherwise specified by
the Committee.
(f) "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. The duration of Offering Periods may be changed pursuant to
Paragraphs 5 and 21 of this Plan.
(g) "Offering Termination Date" shall mean October 31, 1991 and
each following April 30 and October 31 thereafter, unless otherwise specified
by the Committee.
(h) "Segregated Accounts" shall mean the depository accounts
established by the Company and by Subsidiary Corporations for collection of
Employee contributions to the Plan.
(i) "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 prior to the applicable Offering Commencement Date.
(b) Any provision of the Plan to the contrary notwithstanding,
no Employee shall be granted an option 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) if such option would permit his or her rights to
purchase stock under all employee stock purchase plans of the
Company and its Subsidiary Corporations to
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accrue at a rate that 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 4,700,000 shares
of Common Stock (of which 1,750,000 shares are subject to stockholder
approval).
(b) The Plan will be implemented by consecutive Offering
Periods, with a new Offering Period commencing on each Offering Commencement
Date and ending on the next Offering Termination Date, or on such other dates
as the Committee shall determine prior to the commencement of the relevant
Offering Period, and continuing until terminated in accordance with Paragraph
19 hereof. The Committee shall have the power to change the duration of
Offering Periods (including the commencement and termination dates thereof)
with respect to future offerings without stockholder approval if such change is
announced at least five (5) days prior to the scheduled beginning of the first
Offering Period to be affected.
(c) A maximum of 300,000 shares of Common Stock, plus any unsold
balances from earlier Offering Periods, shall be issued during any one Offering
Period. The maximum number of 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.
(d) Participation in any Offering Period under the Plan shall
neither limit, nor require, participation in any other Offering Period (except
as set forth in paragraphs 4(b)(i) and 4(b)(ii) hereof).
6. Participation.
(a) An eligible Employee may become a participant by enrolling
and authorizing payroll deductions on an Interactive Voice Response system
("IVR") in such manner as is prescribed by the Company or, if such Employee
does not have access to IVR, by completing an authorization for payroll
deduction on the form provided by the Company and filing it with the department
designated by the Company or the designated country coordinator by the deadline
established by the Company, which must precede the first day of the Plan for
which the participant enrolls.
(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
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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 enrolls and authorizes payroll
deductions, 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. Deductions can be made at the rate of 1,
2, 3, 4, 5, 6, 7, 8, 9, or 10% of Base Pay.
(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 Paragraph 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 Paragraph 13, below.
(b) The option price per share (hereinafter "Option Price") of
Common Stock purchased with payroll deductions made during each Offering Period
shall be the lesser of:
(i) 85% of the closing price per share of the Common
Stock as quoted in The Wall Street Journal for the applicable
Offering Commencement Date (or on the next business date on which
shares of the Common Stock shall be traded on the New York Stock
Exchange in the event that no shares of the Common Stock shall
have been traded on the Offering Commencement Date); or
(ii) 85% of the closing price per share of the Common
Stock as quoted in The Wall Street Journal for the applicable
Offering Termination Date (or for the next preceding business
date on which shares of the Common Stock shall be traded on the
New York
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Stock Exchange in the event that no shares of the Common Stock
shall have been traded on the Offering Termination Date).
(c) Fractional shares will not be issued under the Plan and any
accumulated payroll deductions that would have been used to purchase fractional
shares, together with any amounts that are in excess of the limitations of
Paragraph 8(a), together with any net income of the Segregated Account
allocable to each participant, shall be returned to each participant promptly
following the termination of an Offering Period.
9. Exercise of Option. Unless a participant withdraws in accordance
with Paragraph 11, his or her option to purchase Common Stock with payroll
deductions made during any Offering Period 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 that the accumulated
payroll deductions will purchase at the applicable Option Price (but not in
excess of the number of shares for which options have been granted to 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 15th day of the month before the applicable
Offering Termination Date, any participant may withdraw payroll deductions and
net earnings thereon credited to the participant by following the procedures
specified by the Company for effecting a withdrawal on the IVR system or, if
the participant does not have access to IVR, by giving written notice of
withdrawal to the department designated by the Company or the designated
country coordinator. As promptly as practical after the participant's
withdrawal, the payment to the participant of all the participant's payroll
deductions credited to his or her account, together with any net earnings of
the Segregated Account allocable to the participant's Account shall be made.
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 that may hereafter be adopted by the Company.
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<PAGE> 6
(c) Upon termination of the participant's employment with the
Company for any reason (including retirement but excluding death or, in certain
cases, disability while in the employ of the Company) 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, however, 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 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 on the Offering
Termination Date for the purchase of the number of full shares of
Common Stock that 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.
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.
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(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 that 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 250,000 shares were purchased during an Offering Period
under the Plan, the shares not purchased will be carried over to the next
succeeding Offering Period so that a maximum of 350,000 shares shall be made
available for purchase during the next Offering Period.) If the total number
of shares subject to options that would otherwise be 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. Participants
in the Plan shall have no rights as stockholders 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 relating to such event, 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
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(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 Committee or 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 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.
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17. Ownership of ESPP Assets. 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 that 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 that
may thereafter be purchased pursuant to such option and the Option Price 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 (including Section 423 of the Code), the Securities and Exchange
Commission (including Rule 16b-3), 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 General Counsel of the Company.
21. Dissolution, Merger or Asset Sale.
(a) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Offering Period shall
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board.
(b) Merger or Asset Sale. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, each option under the Plan shall
be assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Offering Termination Date (the "New Offering Termination Date")
or to cancel each outstanding right to purchase and refund
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all sums collected from participants during the Offering Period then in
progress. If the Board shortens the Offering Period then in progress in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Board shall notify each participant in writing, at least ten (10) business days
prior to the New Termination Date, that the Offering Termination Date for the
option held by the participant has been changed to the New Offering Termination
Date and that such option shall be exercised automatically on the New Offering
Termination Date, unless prior to such date the participant has withdrawn from
the Offering Period as provided in Paragraph 10 hereof. For purposes of this
paragraph, an option granted under the Plan shall be deemed to be assumed if,
following the sale of assets or merger, the option confers the right to
purchase, for each share of option stock subject to the option immediately
prior to the sale of assets or merger, the consideration (whether stock, cash
or other securities or property) received in the sale of assets or merger by
holders of Common Stock for each share of Common Stock held on the effective
date of the transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided, however, that if such
consideration received in the sale of assets or merger was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Board may, with the consent of the successor corporation,
provide for the consideration to be received upon exercise of the option to be
solely common stock of the successor corporation or its parent equal in fair
market value to the per share consideration received by holders of Common Stock
and the sale of assets or merger.
22. Effective Date - Approval of Stockholders. The Plan, as
amended and restated herein, has been adopted on behalf of the Board of
Directors of the Company by the Compensation Committee on December 14, 1995,
and such amendment and restatement is effective as of such date, but such
amendment and restatement to the extent stockholder approval is required under
Paragraph 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.
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